TIDMSPI
RNS Number : 2921Y
Spire Healthcare Group PLC
02 March 2017
Spire Healthcare reports its results
for the year ended 31 December 2016
London, UK, 2 March 2017, Spire Healthcare Group plc (LSE: SPI),
one of the UK's leading independent hospital groups, today
announces its preliminary results for the year ended 31 December
2016.
Summary Group results for the year ended 31 December 2016
Year ended 31 December
========================
Underlying
variance
excluding
Variance disposals
(GBP million) 2016 2015 % % (1)
==================================== =========== =========== ======== ==========
Revenue 926.4 884.8 4.7% 5.4%
Operating profit before exceptional
items 108.2 110.4 (2.0%) (1.7%)
Exceptional items (15.2) (15.7) 3.2%
Operating profit 93.0 94.7 (1.8%) (1.5%)
Profit after tax 53.6 60.0 (10.7%)
EBITDA (2) 162.0 160.1 1.2% 1.4%
Basic earnings per share, pence 13.4 15.0 (10.7%)
Adjusted profit after tax (3) 76.6 73.0 4.9%
Adjusted, basic earnings per
share, pence (4) 19.2 18.3 4.9%
Total dividend paid/proposed
per share, pence (5) 3.8 3.7 2.7%
Net cash from operating activities 177.4 155.3 14.2%
Capital investments 149.5 109.5 36.5%
Net debt at the year end (6) 432.3 419.5 3.1%
==================================== =========== =========== ======== ==========
1. Excludes the impact of Spire St Saviour's Hospital which
closed in September 2015 (referred to as 'Underlying' in this
announcement).
2. Operating profit, adjusted to add back depreciation, profit
and loss arising from the disposal of fixed assets and exceptional
items, referred to hereafter as 'EBITDA'.
3. Adjusted profit is calculated as earnings after tax adjusted
for exceptionals and related tax.
4. Calculated as adjusted profit after tax divided by the
weighted average number of ordinary shares in issue.
5. A final dividend of 2.5 pence per ordinary share will be
proposed at the Company's annual general meeting on 26 May 2017. If
approved, it will be paid on 27 June 2017 to shareholders on the
register of members as at 2 June 2017.
6. Net debt is calculated as total debt (comprising obligations
under finance leases and borrowings), less cash and cash
equivalents.
Group financial highlights
-- Revenue increased by 4.7% to GBP926.4m (2015: GBP884.8m)
-- Underlying revenue, which excludes prior year hospital
closure, increased by 5.4% in the year
-- EBITDA (2) up 1.2% to GBP162.0m (2015: GBP160.1m)
-- Adjusted profit after tax (3) up 4.9% to GBP76.6m (2015: GBP73.0m)
-- Strong cash flow performance with EBITDA conversion to cash flow of 115.0% (2015: 104.1%)
-- Net debt increased to GBP432.3m, with leverage at 2.67 times
EBITDA (2015: GBP419.5m and 2.62 times EBITDA) following
significant capital investment of GBP149.5m (2015: GBP109.5m)
-- Final dividend proposed of 2.5p per share payable on 27 June
2017 (2015: 2.4p). Total dividend paid or proposed for 2016 of 3.8p
per share (2015: 3.7p)
Operating highlights
-- Grew in-patient and daycase admissions by 2.3% (underlying)
to 274,100 cases (2015: 267,900 patients)
-- Opened net five new operating theatres in the year
-- Continued to invest significantly, particularly in the new
Spire Manchester and Spire Nottingham hospitals, and theatre block
development at Spire St Anthony's Hospital
-- Continue to research opportunity to fill our Central London coverage gap
Garry Watts, Executive Chairman of Spire Healthcare, said:
"2016 saw growth in each of Spire's sales, EBITDA and patient
admissions. I am particularly pleased with the excellent
performance shown by our Self-pay and NHS businesses. Within the
NHS business, the proportion of eReferral work versus Local
Contract work rose to nearly 80%, a trend which is positive for
planning, efficient timing and delivery at our hospitals. After
adjusting for St Anthony's, our margin remained stable at an
attractive 18.2%, while our EBITDA conversion to operating cash
flow was a noteworthy 115% before exceptional items & tax.
We made significant progress at Spire St Anthony's Hospital in
2016, having successfully opened a new 6 operating theatre block on
schedule and on budget. Although Group performance has been
impacted temporarily by integration issues at this hospital, we are
confident that we now have the correct plan and management team in
place to resolve these issues during 2017.
In the year we completed building the new Spire hospital in
Manchester, which opened in January 2017. Our new hospital in
Nottingham is also on track to open before Easter. Both of these
hospitals have been designed around our philosophy of
patient-centric care, and integrated clinical care, research and
education to serve the needs of the local populations and beyond.
We are confident they will rank amongst the finest independent
hospitals in the country.
The first half of 2017 will still be a period of recovery at St
Anthony's, and we will also have the start-up costs associated with
our two new hospitals. As such, we expect modest sales growth for
Financial Year 2017 at a slightly reduced margin, to give an EBITDA
in line with 2016.
We are very positive about Spire's prospects overall; its
fundamental business proposition is solid and we remain well placed
to benefit from opportunities arising from the demographics of UK
healthcare and constrained NHS capacity. We expect the Group to
return to mid to high single digit EBITDA growth from Financial
Year 2018 onwards."
For further information please contact:
Spire Healthcare
Antony Mannion, Investor Relations Director
+44 (0)20 7427 9160
Maitland
Tom Eckersley
+44 (0)20 7379 5151
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 38 private hospitals, 10 clinics and two
Specialist Cancer Care Centres across England, Wales and
Scotland.
Spire delivered tailored, personalised care to approximately
274,000 in-patients and daycase patients in 2016, and is the
leading private provider, by volume, of knee and hip operations in
the United Kingdom. Spire is uniquely positioned to capture a
growing share of the rapidly expanding private healthcare market.
The Group's well located and scalable hospitals have earned
reputations as centres of excellence, delivering successful and
award winning clinical outcomes, positioning the Group well with
patients, consultants, the NHS, GPs and Private Medical Insurance
("PMI") providers. Spire 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
practice 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 10.30am
at Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y
1HS.
A live audiocast of the presentation will be available at
10.30am from the Spire website at
http://webcast.openbriefing.com/spire_healthcare_fy_2016/.
Operating Review
Performance
Patient numbers and the value of the care we provided
experienced differing performance among our three payor groups.
Overall revenue increased by 4.7% to GBP926.4 million (2015:
GBP884.8 million), of which our NHS business grew 12.0%, our
Self-pay business grew 9.1%. and our PMI business declined by
1.3%.
Underlying revenue, which excludes the impact of the closure of
Spire St Saviour's Hospital in September 2015, increased by 5.4% in
2016. This has resulted in underlying EBITDA growth of 1.4% to
GBP162.0 million (2015: GBP159.8 million).
In-patient and daycase admissions grew by 2.3% (underlying) to
274,100 cases (2015: 267,900 patients).
During the year, we continued to invest significantly,
particularly in the new Spire Manchester and Spire Nottingham
hospitals, and the new six theatre block development at Spire St
Anthony's Hospital. Despite this, strong working capital management
led to stable year end net indebtedness at 2.67 times EBITDA (2015:
2.62 times).
Market trends
We operate solely in the UK, a healthcare market dominated by
the NHS and government spending, but subject to strong macro growth
drivers. The population is growing and ageing. Acute and chronic
long-term conditions such as cancer, obesity and diabetes are
rising, as are the numbers of older patients with multiple
co-morbidities and higher levels of acuity.
Increasing demand and continuing advances in healthcare mean
that the NHS needs additional funding year on year of around 4%
above inflation. Slow economic growth is constraining government
spending and is likely to impact the NHS's ability to continue to
provide universal healthcare free at the point of use. The NHS's
Five Year Forward View (published in October 2014) assumed
efficiency savings of GBP22bn by 2020/21 - higher than has ever
been achieved by the NHS or indeed any other major health economy.
It is unlikely to be achieved, as demonstrated by the Carter Report
of January 2016.
At the same time, health spending is already much lower than in
many other European countries and, in real-terms, NHS spending per
person in England appears likely to go down based on current
projections. The result is that resources are worked hard and
capacity is always tight, with bed occupancy rates often over 90
per cent due to increasing demand and bed-blocking.
The private sector not only provides capacity for the NHS funded
patients, but outstanding private healthcare for PMI and Self-pay
customers. Because of its scale, reach and quality of care, Spire
Healthcare is ideally positioned to be a leading player in the
independent hospital sector.
Business development
We are refining our strategy through a renewed focus on our
customers.
Our business is built on patient choice. Our four pillar
strategy puts the customer at the heart of everything we do. We aim
to grow our business by attracting the maximum number of patients
for our services, and treating them as efficiently as possible.
Clinical quality
-- Continue to build on clinical experience and expertise to
ensure every one of our hospitals becomes CQC rated 'Good' or
'Excellent'
-- Continue to expand our higher acuity healthcare offer
-- Continue to develop our cancer services
-- Develop our consultant value proposition - helping new, mid
and late career consultants to build, maintain and optimise their
practices and deliver outstanding care for their patients
-- Continue to engage with consultants to explore new services,
developments and innovations to improve the quality and scope of
our offer to patients
Growth engine
-- Drive market share, develop and leverage facilities and
services across all our existing hospitals
-- Expand geographically to cover under-serviced areas
-- Deepen and extend PMI relationships
-- Drive volume growth by continuing to build relationships with patients and GPs
-- Provide training and information to GPs to facilitate referrals
-- Develop own network of GPs to shorten referral pathways
-- Market directly to patients, highlighting the benefits of private hospitals
-- Extend transparent pricing and quality reporting
-- Digitally enable and provide guidance to help customers through their care pathway
Operational excellence
-- Raise average theatre utilisation and increase theatre and
diagnostic capability, optimising throughput
-- Continually refine and develop operational efficiency, procurement and supply chain
-- Minimise impact of likely NHS tariff changes through increased efficiency
-- Optimise patient experience through better use of technology,
delivering care in the most appropriate setting
-- Drive operational synergies across the network
-- Improve and standardise capabilities network-wide
-- Refurbish and upgrade our patient bedrooms, and in-patient and out-patient facilities
Our people
-- Improve clinical staff retention and recruitment strategy
-- Invest in upskilling training to increase value of workforce
-- Develop Spire Healthcare as a compelling career brand to maximise retention
-- Develop programmes to increase supply of clinical professionals
Corporate Governance Review
We are committed to the highest standards of corporate
governance, including an Executive and Non-executive Board
structure built around the separation of the role of the Chairman
from Chief Executive, Chief Operating Officer and Chief Financial
Officer. As previously stated, the Board envisages that the
Executive Chairman's role currently being fulfilled as a result of
Rob Roger's departure at the end of June 2016, will only continue
until we have a suitable CEO and COO in post. In relation to this,
we are pleased that the appointment of Catherine Mason as COO in
December 2016 and the appointment of Andrew White as CEO, once he
has made his recovery from the sustained medical treatment he is
currently undergoing, will open the way to achieving our desired
board structure.
In July we were pleased to announce the appointment of Adèle
Anderson as an independent Non-Executive Director of the Company.
She has a strong financial background and chairs the Company's
Audit and Risk Committee.
We regretfully accepted the resignation of Robert Lerwill as a
Non-Executive Director in June 2016, for personal reasons. Our
Senior Independent Director, John Gildersleeve, has indicated that
he wishes to step down from that role. John originally intended to
leave the end of December 2016 but has agreed to remain until an
appointment has been made, but will not stand for re-election at
the AGM on 26 May 2017. The search to identify a new Senior
Independent Director is ongoing and we hope to make a further
announcement on an appointment in due course.
Regulation and Governance
During the year under review the CQC completed their initial
inspections of the majority of our hospitals and while we await the
final reports we are pleased to report that our overall performance
- based on the 20 final reports published so far on the CQC website
- is in line with the rest of the private sector and far exceeds
the NHS average. However, there are of course areas for
improvement. We address all such areas as a matter of urgency and
ensure that these improvements are carried out in a timely
fashion.
Outlook
Management expects continued growth in Self-pay and NHS patient
volumes in the underlying business in 2017. However expectations
for trading results for the year ending 31 December 2017 are
influenced by the following factors:
-- The impact of the 3.9% reduction in NHS tariff applicable to
the basket of services delivered by Spire to the NHS. This price
reduction will be applicable from April 2017 and is expected to
cost the Group approximately GBP7 million in the year.
-- The recovery from loss to profitability of Spire St Anthony's
Hospital over the course of 2017 as the restructuring plan is
delivered.
-- The contribution to revenue and earnings of the new site
openings in Manchester (January 2017) and Nottingham (April 2017).
In line with previous guidance, we do not expect Spire Nottingham
Hospital to reach EBITDA breakeven within its first year of
operation.
Overall, management anticipates for the 2017 financial year as a
whole:
-- Revenue growth of 3% - 5% over 2016;
-- EBITDA to be in line with 2016 at GBP162 million;
-- Capital expenditure of between GBP140 million - GBP165
million, which includes GBP40 million of carried over expenditure
from 2016 committed capital schemes; and
-- Net debt of approximately 3.0 times EBITDA at the 2017 year
end.
Financial review
Selected financial information
Year ended 31 December
======================================================================
2016 2015
================================== ==================================
Variance
(on
total
Total Total after
before Exceptional before Exceptional exceptional Underlying
exceptional and exceptional and and variance
and other and other other excluding
other items other items items) disposals
(GBP million) items (5) Total items (5) Total % % (1)
=============== ============ =========== ======= ============ =========== ======= ============ ==========
Revenue 926.4 - 926.4 884.8 - 884.8 4.7% 5.4%
Cost of sales (485.9) - (485.9) (460.0) - (460.0) (5.6%) (6.6%)
================ ============ =========== ======= ============ =========== ======= ============ ==========
Gross profit 440.5 - 440.5 424.8 - 424.8 3.7% 4.1%
Other operating
costs (332.3) (15.2) (347.5) (314.4) (15.7) (330.1) (5.3%) (5.7%)
================ ============ =========== ======= ============ =========== ======= ============ ==========
Operating profit 108.2 (15.2) 93.0 110.4 (15.7) 94.7 (1.8%) (1.5%)
Net finance
costs (19.8) - (19.8) (21.1) - (21.1) 6.2%
================ ============ =========== ======= ============ =========== ======= ============ ==========
Profit before
taxation 88.4 (15.2) 73.2 89.3 (15.7) 73.6 (0.5%)
Taxation (11.8) (7.8) (19.6) (16.3) 2.7 (13.6) (44.1%)
================ ============ =========== ======= ============ =========== ======= ============ ==========
Profit for
the year 76.6 (23.0) 53.6 73.0 (13.0) 60.0 (10.7%)
================ ============ =========== ======= ============ =========== ======= ============ ==========
EBITDA (2) 162.0 160.1 1.2% 1.4%
Basic earnings
per share,
pence 19.2 (5.8) 13.4 18.3 (3.3) 15.0 (10.7%)
Total dividend
paid/proposed
per share,
pence (3) 3.8 3.7 2.7%
Net cash from
operating
activities 183.9 (6.5) 177.4 159.8 (4.5) 155.3 14.2%
Capital
investments 149.5 109.5 36.5%
Net debt at
the year end
(4) 432.3 419.5 3.1%
================ ============ =========== ======= ============ =========== ======= ============ ==========
1. Excludes the impact of Spire St Saviour's Hospital which
closed in September 2015 (referred to as 'Underlying' in this
announcement).
2. Operating profit, adjusted to add back depreciation, profit
and loss arising from the disposal of fixed assets and exceptional
items, referred to hereafter as 'EBITDA'.
3. A final dividend of 2.5 pence per ordinary share will be
proposed at the Company's annual general meeting on 26 May 2017. If
approved, it will be paid on 27 June 2017 to shareholders on the
register of members as 2 June 2017.
4. Net debt is calculated as total debt (comprising obligations
under finance leases and borrowings), less cash and cash
equivalents.
5. Exceptional and other items includes the before and after
taxation impact of exceptional operating expenditure in each year
and the Group's review of its deferred tax approach on freehold
properties giving rise to a material taxation charge in 2016 of
GBP8.4 million (2015: GBPnil).
Year ended 31 December
========================
Underlying
variance
excluding
Variance disposals
(GBP million) 2016 2015 % % (1)
==================================== =========== =========== ======== ==========
Total revenue 926.4 884.8 4.7% 5.4%
Of which:
PMI 429.3 434.8 (1.3%) (0.9%)
NHS 293.4 262.0 12.0% 13.5%
Self-pay 170.4 156.2 9.1% 9.4%
Other (2) 33.3 31.8 4.7% 5.7%
==================================== =========== =========== ======== ==========
926.4 884.8 4.7% 5.4%
==================================== =========== =========== ======== ==========
Of which:
In-patient/daycase 629.9 598.3 5.3% 5.8%
Out-patient 263.2 254.7 3.3% 4.4%
Other 33.3 31.8 4.7% 5.0%
==================================== =========== =========== ======== ==========
926.4 884.8 4.7% 5.4%
==================================== =========== =========== ======== ==========
Number ('000s)
Total in-patient/daycase admissions 274.1 270.0 1.5% 2.3%
Of which:
PMI volumes 123.5 126.4 (2.3%) (1.9%)
NHS volumes 104.2 100.2 4.0% 5.4%
Self-pay volumes 46.4 43.4 6.9% 7.4%
==================================== =========== =========== ======== ==========
1. Excludes the impact of Spire St Saviour's Hospital which
closed in September 2015 (referred to as 'Underlying' in this
announcement).
2. Other revenue includes consultant revenue, third-party
revenue streams (e.g. pathology services), secretarial services and
commissioning for quality and innovation payments (earned for
meeting quality targets on NHS work) ('CQUIN').
Growing revenue
In-patient/daycase In-patient/daycase
(GBP million) 2015 volume rate Out-patient Other 2016 Growth
=============== ===== ================== ================== =========== ===== ===== ======
Underlying
total revenue 879.0 14.7 19.8 11.1 1.8 926.4 5.4%
Disposals 5.8 -
===== =====
Total revenue 884.8 926.4 4.7%
=============== ===== ================== ================== =========== ===== ===== ======
Revenue for the year ended 31 December 2016 increased by GBP41.6
million, or 4.7%, to GBP926.4 million (2015: GBP884.8 million).
Underlying growth, excluding revenue of GBPnil (2015: GBP5.8
million) relating to Spire St Saviour's Hospital which was closed
in September 2015, was 5.4%.
Of the underlying revenue growth of 5.4%:
-- an increase of 2.3% in the volume of in-patient and daycase
admissions accounted for a 1.7% increase in revenue in the year,
with admissions growth in both NHS and Self-pay activity
compensating for a small volume decline in PMI business;
-- the Group reported a 3.5% increase in the rate for in-patient
and daycase admissions (average revenue per case) equivalent to an
increase to total revenue of 2.3%. This was the result of growth in
average revenue per case across all payor groups, most particularly
in NHS and Self-pay activity in the year; and
-- out-patient activities increased with the volume of
admissions and this accounted for a further 1.3% growth in
underlying revenue in the year.
PMI
In-patient/daycase In-patient/daycase
(GBP million) 2015 volume rate Out-patient 2016 Growth
======================= ===== ================== ================== =========== ===== ======
Underlying PMI revenue 433.2 (5.4) 0.4 1.1 429.3 (0.9%)
Disposals 1.6 -
===== =====
Total PMI revenue 434.8 429.3 (1.3%)
======================= ===== ================== ================== =========== ===== ======
PMI revenue for the year ended 31 December 2016 decreased by
GBP5.5 million to GBP429.3 million (2015: GBP434.8 million).
Underlying revenue, excluding revenue relating to Spire St
Saviour's Hospital, declined by 0.9%.
Of the underlying decline in PMI revenue of 0.9%:
-- a decrease of 1.9% in the volume of in-patient and daycase
admissions accounted for a 1.2% reduction in PMI revenue in the
year;
-- overall, the proportion of lower yielding PMI daycase
admissions remained comparable to that in 2015 (having increased
significantly between 2014 and 2015). Case mix complexity in
in-patient admissions was slightly inferior to that in 2015 but was
offset by an increase in rate on daycase admissions. Overall these
offsetting effects resulted in a net positive rate increase of 0.3%
over 2015 which contributed to growth of 0.1% in underlying PMI
revenue; and
-- notwithstanding the decline in in-patient and daycase
admissions activity, out-patient revenue grew in the year and
contributed growth of 0.2% in underlying PMI revenue. The Group
continues to invest in the expansion of its diagnostic capability
and outpatient capacity.
NHS
In-patient/daycase In-patient/daycase
(GBP million) 2015 volume rate Out-patient 2016 Growth
======================= ===== ================== ================== =========== ===== ======
Underlying NHS revenue 258.6 12.2 14.8 7.8 293.4 13.5%
Disposals 3.4 -
===== =====
Total NHS revenue 262.0 293.4 12.0%
======================= ===== ================== ================== =========== ===== ======
NHS revenue for the year ended 31 December 2016 increased by
GBP31.4 million, or 12.0%, to GBP293.4 million (2015: GBP262.0
million). Underlying growth, excluding revenue relating to Spire St
Saviour's Hospital, was 13.5%.
Of the underlying growth in NHS revenue of 13.5%:
-- an increase of 5.4% in the volume of in-patient and daycase
admissions accounted for a 4.7% increase in NHS revenue in the
year;
-- against the backdrop of a weighted increase to NHS tariff for
the Group of 0.6% for the financial year, the average revenue per
case for NHS admissions increased by 7.0% over 2015. This was the
result of a further concentration of case mix to higher yielding
procedures (notably in orthopaedics) which supplemented the loss of
lower yielding NHS local contract revenue. Growth in in-patient and
daycase rate contributed 5.7% to underlying NHS revenue growth in
the year; and
-- outpatient revenue increased both as a consequence of the
increase in NHS admissions and the bias in growth towards NHS
eReferrals relative to NHS local contract work. Most NHS local
contract work does not include an out-patient element as the focus
is often on access to Spire surgical capacity. Growth in
out-patients revenue contributed 3.1% to underlying NHS revenue
growth in the year.
The underlying revenue growth in NHS revenues is split as
follows:
-- eReferral (previously NHS Choose and Book) revenue grew by
16.9% in the year ended 31 December 2016; and
-- NHS local revenue grew by 1.5% in the same period. Management
had expected NHS local contract revenue to stabilise in 2016
following the decline experienced in 2015; and
-- eReferrals revenue account for 79.8% of underlying NHS
revenue in the year ended 31 December 2016, up from 77.4% in the
prior year.
Self-pay
In-patient/ In-patient/
daycase daycase
(GBP million) 2015 volume rate Out-patient 2016 Growth
======================= ===== =========== =========== =========== ===== ======
Underlying Self-pay
revenue 155.7 7.9 4.6 2.2 170.4 9.4%
Disposals 0.5 -
===== =====
Total Self-pay revenue 156.2 170.4 9.1%
======================== ===== =========== =========== =========== ===== ======
Self-pay revenue for the year ended 31 December 2016 increased
by GBP14.2 million, or 9.1%, to GBP170.4 million (2015: GBP156.2
million). Underlying growth, excluding revenue relating to Spire St
Saviour's Hospital, was 9.4%.
Of the underlying growth in Self-pay revenue of 9.4%:
-- an increase of 7.4% in the volume of in-patient and daycase
admissions accounted for a 5.0% increase in Self-pay revenue in the
year;
-- the average revenue per case for Self-pay in-patient and
daycase admissions grew by 4.6% over the prior year, contributing
3.0% to the increase in Self-pay revenue in the year. Price
increases in 2016 were largely inflationary, with the balance of
the increase in average rate per case arising from improved case
mix complexity; and
-- outpatient activities in 2016 grew in line with admissions
while, price increases were tempered in an attempt to drive demand.
Overall the increase in Self-pay outpatient revenue drove 1.4% of
the 9.4% increase in underlying Self-pay revenue for the year.
Other revenue
Other revenue, which 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), increased by GBP1.5
million, or 4.7%, in the year, to GBP33.3 million (2015: GBP31.8
million).
Cost of sales and gross profit
Cost of sales increased in the year by GBP25.9 million, or 5.6%,
to GBP485.9 million (2015: GBP460.0 million). Underlying cost of
sales (excluding Spire
St Saviour's Hospital) increased in the year by GBP29.9 million,
or 6.6%.
Underlying gross margin for the year of 2016 was 47.6%, compared
to 48.1% in 2015.
On an underlying basis, and as a percentage of relevant
revenue:
Year ended 31 December
========================
2016 2015
=============== =========== ===========
Clinical staff 18.9% 18.9%
Direct costs 22.3% 21.6%
Medical fees 11.3% 11.4%
Cost of sales 52.5% 51.9%
=============== =========== ===========
Trading losses for the year at Spire St Anthony's Hospital had a
significant impact on overall cost of sales for the underlying
Group. Excluding Spire St Anthony's Hospital from the analysis
provides the following comparison on an adjusted underlying basis
and as a percentage of relevant revenue:
Year ended 31 December
========================
2016 2015
=============== =========== ===========
Clinical staff 18.3% 18.3%
Direct costs 22.1% 21.7%
Medical fees 11.4% 11.6%
Cost of sales 51.8% 51.6%
=============== =========== ===========
Overall the Group has substantially mitigated the impact on
gross margin arising from the increase in the proportion of revenue
derived from the NHS which has increased to 31.7% of total revenue
in 2016 from 29.6% in 2015.
Despite supply-side constraints of nursing resource, clinical
staff costs as a percentage of revenue were in line with the prior
year. Management is focused on continuous improvement of
recruitment, training and development process in the business as
well as rostering and productivity improvements designed to limit
use of agency staff.
The impact on direct costs arising from the improvements in case
mix complexity in 2016, which has driven growth in average revenue
per case in both NHS and Self-pay revenue, has been largely offset
by supply chain cost management initiatives.
Other operating costs
Other operating costs for the year ended 31 December 2016
increased by GBP17.4 million, or 5.3%, to GBP347.5 million (2015:
GBP330.1 million). Excluding exceptional items, other operating
costs for the year increased by GBP17.9 million, or 5.7%, to
GBP332.3 million.
Underlying other operating costs (excluding Spire St Saviour's
Hospital) increased in the year by GBP18.8 million, or 5.7%, to
GBP347.5 million (2015: GBP328.7 million). Excluding exceptional
items, underlying other operating costs for the year increased by
GBP19.3 million, or 6.2%, to GBP332.3 million.
Depreciation
Excluding depreciation relating to Spire St Saviour's Hospital,
the underlying depreciation charge for the year increased by GBP3.6
million, or 7.5%, to GBP51.9 million (2015: GBP48.3 million).
Rent
Rent of land and buildings for the year decreased by GBP0.2
million, or 0.3%, to GBP62.7 million (2015: GBP62.9 million). The
decrease is mainly due to low inflationary uplifts in relation to
annual rent indexation in line with RPI and the closure of two
clinics during the year.
Share-based payments
During the year, grants were made to Executive Directors
(excluding the Executive Chairman) and members of the Senior
Leadership Team under the Company's Long Term Incentive Plan. For
the year ended 31 December 2016, the charge to the income statement
was GBP0.4 million (2015: GBP0.7 million), or GBP0.6 million
inclusive of national insurance (2015: GBP0.8 million). Further
details are contained in note 19 of this announcement.
Exceptional items
Year ended 31 December
========================
(GBP million) 2016 2015
=============================================== ============= =========
Business reorganisation 4.8 3.1
Write-off of intangible assets 1.3 -
Hospitals set up costs 1.0 -
Hospital (reversal of)/impairment on property,
plant and equipment (1.9) 5.7
Hospital closure 0.1 6.9
Corporate restructuring 0.5 -
Loss on disposal of property, plant and
equipment (also referred to as the Asset
Swap Transaction) 8.9 -
Other 0.5 -
=============================================== ============= =========
15.2 15.7
=============================================== ============= =========
In the year ended 31 December 2016, business reorganisation
costs mainly comprised staff restructuring costs and the closure
costs relating to an onerous contract. In the year, the Group's
goodwill in relation to the Lifescan business was written-off
following a strategic review and the closure of this operation.
Hospitals set up costs refer to pre-opening costs for the new
Manchester and Nottingham hospitals. The reversal of the impairment
is the result of the extension of the lives of medical and other
equipment following the relocation of the assets from the previous
Spire Manchester Hospital to the new hospital facility and other
Group hospitals following its closure.
On 31 August 2016, as a result of the development of a new
hospital facility in Manchester and the closure of the previous
Spire Manchester Hospital (previously held under an operating
lease), the freehold interest in Spire Wirral Hospital with a net
book value of GBP11.5 million was disposed of, and leased back in a
sale and leaseback transaction. The consideration for the sale was
realised in the form of a non-cash asset, being the freehold of the
previous Spire Manchester Hospital, which was simultaneously
acquired by the Group (the "Asset Swap Transaction"). The overall
loss on these transactions was GBP7.7 million before sale costs of
GBP1.2 million.
Full details of exceptional items are disclosed in note 7 of
this announcement.
EBITDA and underlying EBITDA
EBITDA for the year ended 31 December 2016 increased by GBP1.9
million, or 1.2%, to GBP162.0 million (2015: GBP160.1 million).
Excluding the results of Spire St Saviour Hospital in 2015,
underlying EBITDA increased by 1.4%, from GBP159.8 million to
GBP162.0 million. Within underlying EBITDA, Spire St Anthony's
Hospital contributed an EBITDA profit of GBP5.0 million in 2015 and
an EBITDA loss of GBP1.2 million in 2016, in part as a result of
the significant physical reconfiguration of the site and the
establishment of a new six theatre block in September 2016. After
adjusting for the performance of Spire St Anthony's Hospital, the
balance of the underlying Group reported growth in EBITDA of 5.4%,
from GBP154.8 million in 2015 to GBP163.2 million on comparable
revenue growth of 5.8%.
Net finance costs
Net finance costs decreased by 6.2% to GBP19.8 million (2015:
GBP21.1 million) principally as a result of increased finance costs
capitalised in the year in relation to the Group's development of
the new Spire Manchester and Spire Nottingham hospitals.
Taxation
The taxation charge for the year ended 31 December 2016
consisted of a GBP2.5 million charge for corporation tax and a
charge of GBP17.1 million for deferred tax. The effective tax rate
for the year ended 31 December 2016 was 26.8% (before exceptional
and other items 13.3%). The effective tax rate of 13.3% is mainly
due to the UK government's announcement of a further decrease in
the future UK corporation tax rate from 18% to 17% from April 2020.
This change has resulted in a deferred tax credit arising from the
reduction in the balance sheet carrying value of deferred tax
liabilities to reflect the anticipated rate of tax at which those
liabilities are expected to reverse in the future. The difference
in the effective tax rates is mainly due to the Group's review of
its deferred tax approach on freehold properties discussed further
below.
The taxation charge for the year ended 31 December 2015
consisted of a GBP7.9 million charge for corporation tax and a
charge of GBP5.7 million for deferred tax. The effective tax rate
for the year ended 31 December 2015 was 18.5% (before exceptional
costs 18.3%).
Year ended 31 December
========================
(GBP million) 2016 2015
============================================== ============= =========
Tax on profit before tax 19.6 13.6
Tax on exceptional items 0.6 2.7
Reassessment of property timing differences (8.4) -
Adjusted tax charge on the profit for the
year 11.8 16.3
============================================== ============= =========
During the year, the Group considered it to be appropriate to
reassess the basis for calculating deferred tax on the property
portfolio and has now based the assessment on solely held-in-use
basis. This gives rise to a material tax charge and is excluded
from tax on underlying profit.
Profit after taxation
The profit after taxation for the year ended 31 December 2016
was GBP53.6 million (2015: GBP60.0 million).
Cash flows analysis for the year
Year ended 31 December
========================
(GBP million) 2016 2015
============================================= =========== ===========
Opening cash balance 78.9 74.5
============================================= =========== ===========
Operating cash flows before exceptional
items and income tax paid 186.3 166.7
Exceptional items (5.9) (4.5)
Net income tax paid (3.0) (6.9)
============================================= =========== ===========
Operating cash flows after exceptional items
and income tax paid 177.4 155.3
Net cash used in investing activities (149.9) (109.6)
Net cash used in financing activities (38.5) (41.3)
============================================= =========== ===========
Closing cash balance 67.9 78.9
============================================= =========== ===========
Closing net indebtedness 432.3 419.5
============================================= =========== ===========
Operating cash flows before exceptional items and income tax
paid
The cash inflow from operating activities before exceptional
items and income tax paid for the year was GBP186.3 million, which
constitutes a cash conversion rate from EBITDA for the year of
115.0% (2015: GBP166.7 million or 104.1%). The net cash inflow from
movements in working capital in the year was GBP24.4 million (2015:
GBP5.9 million), a significant improvement on that reported for the
prior year.
Investing and financing cash flows
Net cash used in investing activities for the year was GBP149.9
million. Capital expenditure for the purchase of property, plant
and equipment in the year totalled GBP149.5 million, which included
the development of the new Spire Manchester and Spire Nottingham
hospitals, and theatre development at Spire St Anthony's
Hospital.
Net cash used in investing activities for the prior year ended
31 December 2015 was GBP109.6 million. Capital expenditure for the
purchase of property, plant and equipment totalled GBP109.5
million, which included the development of the Manchester and
Nottingham hospitals, the Spire Specialist Cancer Care Centre in
Baddow and theatre developments at Spire St Anthony's and Spire
Elland hospitals.
Net cash used in financing activities for the year ended 31
December 2016 was GBP38.5 million, including interest paid of
GBP21.5 million and dividend paid to shareholders of GBP14.8
million.
Net cash used in financing activities for the year ended 31
December 2015 was GBP41.3 million, including interest paid of
GBP21.4 million, purchase of shares held in the Company's Employee
Benefit Trust of GBP5.6 million and dividend paid to shareholders
of GBP12.4 million.
As at 31 December 2016, net indebtedness was 2.67 times EBITDA
(2015: 2.62 times).
Dividend
Subject to shareholder approval, the Company will pay a final
dividend in respect of the financial year ended 31 December 2016 of
2.5 pence
(2015: 2.4 pence) per ordinary share.
Principal risks
The principal risk factors faced by the Group are identified in
the 'Principal Risks' section.
Principal risks
There are a number of risks facing the business in the
forthcoming financial year. The table below details the principal
risks and how the Group mitigates these risks:
Risk Mitigation of risk
================================== ====================================
Availability of key medical The Board focuses on staff
staff retention, evidenced by very
high levels of staff satisfaction
and, hence, low staff turnover.
Clinical care The Group continually monitors
its clinical standards, policies
and procedures through the
Board's Clinical Governance
and Safety Committee.
Macroeconomic conditions The Board regularly reviews
market conditions and economic
indicators to assess whether
actions are required.
Government policy The Board continually monitors
government policy, NHS requirements
and associated tariff structures
to consider the need for
cost and/or investment reduction,
whether in the short, medium
or long term.
Compliance with laws, regulations The Group continues to strengthen
and other applicable requirements its Group-wide risk management
framework (and associated
policies and procedures)
to ensure that risks are
mitigated as far as possible.
Competitor challenge The 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.
Insurance The Group holds third-party
liability insurance to partially
cover patient, third-party
and employee personal injury
claims, and is partially
self-insured up to predetermined
levels, above which its third-party
liability insurance applies.
The Group reviews and maintains
insurance adequacy of cover
annually with the Group's
brokers.
Cybersecurity Spire IT's technical teams
continually monitor these
developments as a business
as usual activity. Working
with a number of specialists,
the Group has created multiple
layers of business protection.
Business processes are also
kept under review and user
education regularly carried
out to minimise the possibility
of ransomware incidents.
Regular third party penetration
testing is regularly performed
on Spire's core IT systems.
Concentration of the private The Group works hard to maintain
medical insurance ('PMI') good relationships and a
market 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 Board believes
continuing to invest in its
well-placed portfolio of
hospitals should provide
a natural fit to the local
requirements of all the PMI
providers.
Investment plans and execution The Group conducts a detailed
financial and operational
appraisal process to evaluate
the expected returns on capital
during the evaluation phase
of the project. Regular reporting
of all significant projects
to the executive sponsor
and the Board is provided.
Liquidity and covenant risk The Group actively monitors
and manages its liquid asset
position, its financial liabilities
falling due and the cover
against its loan covenants.
================================== ====================================
Directors' responsibilities statement
Each of the Directors confirms that, to the best of their
knowledge:
-- the preliminary financial information, which has been
prepared in accordance with International Financial Reporting
Standards as adopted by the European Union ('IFRS'), 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
Garry Watts Simon Gordon
Chief Financial
Executive Chairman Officer
1 March 2017
Consolidated income statement
For the year ended 31 December 2016
2016 2015
================================== ==================================
Total Exceptional Total Exceptional
before and before and
exceptional other exceptional other
and items and items
other (note other (note
(GBP million) Notes items 7) Total items 7) Total
=================== ===== ============ =========== ======= ============ =========== =======
Revenue 6 926.4 - 926.4 884.8 - 884.8
Cost of sales (485.9) - (485.9) (460.0) - (460.0)
=================== ===== ============ =========== ======= ============ =========== =======
Gross profit 440.5 - 440.5 424.8 - 424.8
Other operating
costs (332.3) (15.2) (347.5) (314.4) (15.7) (330.1)
=================== ===== ============ =========== ======= ============ =========== =======
Operating profit 5 108.2 (15.2) 93.0 110.4 (15.7) 94.7
Interest income 0.2 - 0.2 0.3 - 0.3
Finance costs 8 (20.0) - (20.0) (21.4) - (21.4)
=================== ===== ============ =========== ======= ============ =========== =======
Profit before
taxation 88.4 (15.2) 73.2 89.3 (15.7) 73.6
Taxation 9 (11.8) (7.8) (19.6) (16.3) 2.7 (13.6)
=================== ===== ============ =========== ======= ============ =========== =======
Profit for the
year 76.6 (23.0) 53.6 73.0 (13.0) 60.0
=================== ===== ============ =========== ======= ============ =========== =======
Profit for the
year attributable
to owners of
the Parent 76.6 (23.0) 53.6 73.0 (13.0) 60.0
=================== ===== ============ =========== ======= ============ =========== =======
Earnings per
share (in pence
per share)
* basic 11 19.2 (5.8) 13.4 18.3 (3.3) 15.0
* diluted 11 19.1 (5.8) 13.3 18.2 (3.3) 14.9
=================== ===== ============ =========== ======= ============ =========== =======
Consolidated statement of comprehensive income
For the year ended 31 December 2016
(GBP million) 2016 2015
======================================== ==== ====
Profit for the year 53.6 60.0
======================================== ==== ====
Other comprehensive income for the year - -
======================================== ==== ====
Total comprehensive income for the year
attributable to owners of the Parent 53.6 60.0
======================================== ==== ====
Consolidated statement of changes in equity
For the year ended 31 December 2016
EBT
Share Share Capital share Retained Total
(GBP million) Notes capital premium reserves reserves earnings equity
=============================== ===== ======== ======== ========= ========= ========= =======
As at 1 January 2015 4.0 826.9 376.1 - (252.0) 955.0
Profit for the year - - - - 60.0 60.0
Other comprehensive income
for the year - - - - - -
Share-based payments 19 - - - - 0.7 0.7
Deferred tax on share-based
payments - - - - (0.1) (0.1)
Purchase of shares held
in the Employee Benefit
Trust ('EBT') - - - (5.6) - (5.6)
Dividend paid 10 - - - - (12.4) (12.4)
=============================== ===== ======== ======== ========= ========= ========= =======
As at 1 January 2016 4.0 826.9 376.1 (5.6) (203.8) 997.6
Profit for the year - - - - 53.6 53.6
Other comprehensive income
for the year - - - - - -
Share-based payments 19 - - - - 0.4 0.4
Deferred tax on share-based
payments - - - - (0.3) (0.3)
Corporation tax on share-based
payments - - - - 0.6 0.6
Purchase of shares held
in the EBT - - - (1.8) - (1.8)
Utilisation of EBT shares
for Directors' Share
Bonus Award - - - 5.2 (5.2) -
Dividend paid 10 - - - - (14.8) (14.8)
=============================== ===== ======== ======== ========= ========= ========= =======
Balance at 31 December
2016 4.0 826.9 376.1 (2.2) (169.5) 1,035.3
=============================== ===== ======== ======== ========= ========= ========= =======
Consolidated balance sheet
As at 31 December 2016
(GBP million) Notes 2016 2015
===================================== ===== ======= =======
ASSETS
Non-current assets
Intangible assets 517.8 519.1
Property, plant and equipment 13 991.5 895.5
1,509.3 1,414.6
===================================== ===== ======= =======
Current assets
Inventories 28.1 29.0
Trade and other receivables 14 119.1 134.7
Cash and cash equivalents 67.9 78.9
===================================== ===== ======= =======
215.1 242.6
===================================== ===== ======= =======
Total assets 1,724.4 1,657.2
===================================== ===== ======= =======
EQUITY AND LIABILITIES
Equity
Share capital 18 4.0 4.0
Share premium 826.9 826.9
Capital reserves 18 376.1 376.1
EBT share reserves 18 (2.2) (5.6)
Retained earnings (169.5) (203.8)
===================================== ===== ======= =======
Equity attributable to owners of the
Parent 1,035.3 997.6
Non-controlling interests - -
===================================== ===== ======= =======
Total equity 1,035.3 997.6
===================================== ===== ======= =======
Non-current liabilities
Borrowings 15 495.7 493.5
Deferred tax liability 71.2 53.6
===================================== ===== ======= =======
566.9 547.1
===================================== ===== ======= =======
Current liabilities
Provisions 16 16.7 15.6
Borrowings 15 4.5 4.9
Trade and other payables 17 100.3 90.3
Income tax payable 0.7 1.7
===================================== ===== ======= =======
122.2 112.5
===================================== ===== ======= =======
Total liabilities 689.1 659.6
===================================== ===== ======= =======
Total equity and liabilities 1,724.4 1,657.2
===================================== ===== ======= =======
Consolidated statement of cash flows
For the year ended 31 December 2016
(GBP million) Notes 2016 2015
========================================== ===== ======= =======
Cash flows from operating activities
Profit before taxation 73.2 73.6
Adjustments for:
Depreciation 5 51.9 48.9
Impairment of property, plant and
equipment 5 0.5 11.2
Reversal of impairment on property,
plant and equipment 5 (1.9) -
Write-off of intangible assets 5, 12 1.3 -
Share-based payments 19 0.4 0.7
Loss on disposal of property, plant
and equipment 5 10.8 0.8
Interest income (0.2) (0.3)
Finance costs 8 20.0 21.4
========================================== ===== ======= =======
156.0 156.3
Movements in working capital:
Decrease in trade and other receivables 15.6 11.7
Decrease/(increase) in inventories 0.9 (3.0)
Increase/(decrease) in trade and other
payables 6.8 (4.4)
Increase in provisions 1.1 1.6
Cash generated from operations 180.4 162.2
Income tax received 1.4 -
Income tax paid (4.4) (6.9)
Net cash from operating activities 177.4 155.3
Cash flows from investing activities
Purchase of property, plant and equipment (149.5) (109.5)
Costs of disposal of property, plant
and equipment (0.6) (0.4)
Interest received 0.2 0.3
Net cash used in investing activities (149.9) (109.6)
Cash flows from financing activities
Payment of share issue costs relating
to 2014 IPO - (1.1)
Interest paid (21.5) (21.4)
Repayment of borrowings (0.4) (0.8)
Purchase of shares held in the EBT (1.8) (5.6)
Dividend paid to equity holders of
the Parent (14.8) (12.4)
========================================== ===== ======= =======
Net cash used in financing activities (38.5) (41.3)
========================================== ===== ======= =======
Net (decrease)/increase in cash and
cash equivalents (11.0) 4.4
Cash and cash equivalents at beginning
of year 78.9 74.5
========================================== ===== ======= =======
Cash and cash equivalents at end of
year 67.9 78.9
========================================== ===== ======= =======
Exceptional costs
Exceptional costs paid included in
the cash flow (5.9) (4.5)
Total exceptional costs 7 (15.2) (15.7)
========================================== ===== ======= =======
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 Company is a public limited company, which is listed on the
London Stock Exchange, incorporated, registered and domiciled in
the England (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 2016 included in this report was approved by the Board on
1 March 2017. The financial information set out here does not
constitute the Company's statutory accounts for the year ended 31
December 2016, but is derived from those accounts. Statutory
accounts for 2016 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
The Group is financed by a bank loan facility that matures in
2019. The Directors have considered the Group's forecasts and
projections, and the risks associated with their delivery, and are
satisfied that the Group will be able to operate within the
covenants imposed by the bank loan facility for the foreseeable
future. In relation to available cash resources, the Directors have
had regard to both cash at bank and a GBP100.0 million committed
undrawn revolving credit facility. Accordingly, they have adopted
the going concern basis in preparing this preliminary
announcement.
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 2015, a copy of which can be found on the
Company's website at www.spirehealthcare.com.
The auditors have reported on those accounts. Their reports were
not qualified and did not contain any emphasis of matter
paragraph.
New and amended standards and interpretations
The following amendments to existing standards and
interpretations were effective for the Group from 1 January 2016,
but either they were not applicable to or did not have a material
impact on the Group:
-- Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations
-- Amendments to IAS 16 and IAS 38: Clarification of Acceptable
Methods of Depreciation and Amortisation
-- Amendments to IAS 27: Equity Method in Separate Financial Statements
-- Amendments to IAS 1: Disclosure Initiative
-- Annual Improvements to IFRSs 2012-2014 Cycle
-- Amendments to IFRS 10, IFRS 12 and IAS 28: Investment
Entities: Applying Consolidation Exception
The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective on 1
January 2016.
Standards and interpretations issued but not yet applied
The following new and amended standards and interpretations in
issue are applicable to the Group but not yet effective and have
not been applied by the Group:
Effective
date*
==================================================== =========
Amendment to IAS 7 Statement of Cash Flows: 1 January
Changes in Financing Liabilities 2017
1 January
Annual Improvements to IFRSs 2014-2016 Cycle 2017/18
IAS 12 (Income taxes) Recognition of Deferred 1 January
Tax Assets for Unrealised Losses 2017
1 January
IFRS 9 Financial Instruments 2018
1 January
IFRS 15 Revenue from Contracts with Customers 2018
Clarifications to IFRS 15 Revenue from Contracts 1 January
with Customers 2018
Amendments to IFRS 2: Classification and Measurement 1 January
of Share-based Payment Transactions 2018
1 January
IFRS 16 Leases 2019
==================================================== =========
* 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
adopted by the European Union (EU), the application of new
standards and interpretations will be subject to their having been
endorsed for use in the EU via the EU Endorsement mechanism. In the
majority of cases this will result in an effective date consistent
with that given in the original standard or interpretation but the
need for endorsement restricts the Group's discretion to early
adopt standards.
At the date of authorisation of these financial statements,
these standards and interpretation have not yet been endorsed or
adopted by the EU.
The Directors do not expect the adoption of these standards and
interpretations to have a material impact on the Consolidated or
Parent Company financial statements in the period of initial
application, except for IFRS 16 Leases. The impact of this standard
will be evaluated during 2017.
3. Accounting policies continued
IFRS 15 Revenue from Contracts with Customers
IFRS 15 will be effective for annual periods beginning on or
after 1 January 2018 with early adoption permitted. The standard
establishes a five-step principle-based approach for revenue
recognition and is based on the concept of recognising an amount
that reflects the consideration for performance obligations only
when they are satisfied and the control of goods or services is
transferred. It applies to all contracts with customers, except
those in the scope of other standards. It replaces the separate
models or goods, services and construction contracts under the
current accounting standards.
During 2016, the Group performed an impact assessment of IFRS 15
and concluded that the adoption of IFRS 15 will have a minimal
impact on its consolidated results. The Group is in the business of
providing healthcare services. Approximately, 70% of the Group's
revenue is derived from in-patient and daycase admissions which are
billed as an integrated service. In addition, services are
typically provided over a short time frame, that is, one to three
days.
Out-patient cases, which generally do not involve surgical
procedures, are billed at an individual component basis when
performance obligations are satisfied. Similarly, other revenue,
which includes consultant revenue and other third-party revenue
streams, is recognised when performance obligations are satisfied
and the control of goods or services is transferred.
4. Significant 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 2015, except for the following
estimate:
Deferred tax
The Group owns a portfolio of freehold and leasehold property
interests. In previous years, the Group had recognised a deferred
tax liability
in its financial statements in respect of capital gains tax and
other taxes based on the assumption that a proportion of the
freehold properties would have been disposed of in future years,
whilst the remaining properties were realised through use. This
calculation previously required judgement about the timing and
number of the related property disposals, which was potentially
impacted by changes to plans made by the business over time and, in
particular, changes in business plans in respect of the holding or
disposing of properties.
During the year, the Group considered it to be appropriate to
reassess the basis for calculating deferred tax on the property
portfolio and has now based the assessment on solely held-in-use
basis. This gives rise to a material tax charge of GBP8.4 million
(refer to notes 9).
5. Operating profit
Operating profit has been arrived at after
charging/(crediting):
(GBP million) 2016 2015
=========================================== ===== =====
Rent of land and buildings under operating
leases 62.7 62.9
Depreciation of property, plant and
equipment 51.9 48.9
Impairment of property, plant and
equipment 0.5 11.2
Reversal of impairment on property,
plant and equipment (1.9) -
Write-off of intangible assets 1.3 -
Loss on disposal of property, plant
and equipment 10.8 0.8
Staff costs 268.0 253.0
============================================ ===== =====
Impairment losses and reversals of impairment are included in
other operating costs.
6. Segmental reporting
In determining the Group's operating segment, management has
primarily considered the financial information in the internal
reports that are reviewed and used by the executive management team
and the Board of Directors (in aggregate the chief operating
decision maker) 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.
Revenue by wider customer (payor) group is shown below:
(GBP million) 2016 2015
============== ===== =====
Insured 429.3 434.8
NHS 293.4 262.0
Self-pay 170.4 156.2
Other 33.3 31.8
============== ===== =====
Total 926.4 884.8
============== ===== =====
7. Exceptional items
(GBP million) 2016 2015
=============================================== ===== =====
Business reorganisation 4.8 3.1
Write-off of intangible assets 1.3 -
Hospitals set up costs 1.0 -
Hospital (reversal of)/impairment on property,
plant and equipment (1.9) 5.7
Hospital closure 0.1 6.9
Corporate restructuring 0.5 -
Loss on disposal of property, plant and
equipment (also referred to as the Asset
Swap Transaction) 8.9 -
Other (1) 0.5 -
=============================================== ===== =====
Total exceptional costs 15.2 15.7
=============================================== ===== =====
Income tax credit on exceptional items (0.6) (2.7)
=============================================== ===== =====
Total post-tax exceptional costs 14.6 13.0
=============================================== ===== =====
1. Other exceptional items primarily relate to National
Insurance on Directors' Share Bonus Award granted at the time of
the IPO.
In the year ended 31 December 2016, business reorganisation
mainly comprised staff restructuring costs and the closure costs
relating to an onerous contract. In the year, the Group's goodwill
in relation to the Lifescan business was written-off following a
strategic review and the closure of this operation. Hospitals set
up costs refer to pre-opening costs for the new Manchester and
Nottingham hospitals. The reversal of the impairment is the result
of the reassessment of the lives of medical and other equipment
following the relocation of the assets from the previous Spire
Manchester Hospital to the new hospital facility and other Group
hospitals following its closure. Hospital closure costs relate to
the decommissioning of the assets related to the previous Spire
Manchester Hospital. Corporate restructuring related to an internal
group reorganisation and transaction costs relating to the Asset
Swap Transaction as described below. Except for the corporate
restructuring costs, which were capital in nature, and write-off of
intangible assets, all other exceptional costs are expected to be
tax deductible.
On 31 August 2016, as a result of the development of a new
hospital facility in Manchester and the closure of the previous
Spire Manchester Hospital (previously held under an operating
lease), the freehold interest in Spire Wirral Hospital with a net
book value of GBP11.7 million was disposed of, and leased back in a
sale and leaseback transaction. The consideration for the sale was
realised in the form of a non-cash asset, being the freehold of the
previous Spire Manchester Hospital, which was simultaneously
acquired by the Group (the "Asset Swap Transaction"). The overall
loss on these transactions was GBP7.7 million before sale costs of
GBP1.2 million.
In the year ended 31 December 2015, business reorganisation
costs mainly comprised staff restructuring costs. Hospital
impairment relates
to an impairment charge of GBP5.7 million on leasehold
improvements and equipment associated with the previous Spire
Manchester Hospital,
as a result of the development of a new hospital facility in
West Didsbury, South Manchester. Hospital closure costs relate to
the closure of the Spire St Saviour's Hospital announced in June
2015 and includes an impairment charge on freehold property and
equipment of GBP5.5 million.
Included in business reorganisations, hospital set up costs,
hospital closure, other and corporate restructuring costs are
GBP3.7 million (2015: GBP2.6 million) in respect of wages, salaries
and social security costs.
8. Finance costs
(GBP million) 2016 2015
============================================= ===== =====
Interest on bank facilities 12.7 13.2
Finance charges payable under finance leases 9.1 8.5
============================================= ===== =====
21.8 21.7
Finance costs capitalised in the year (1.8) (0.3)
============================================= ===== =====
Total finance costs 20.0 21.4
============================================= ===== =====
Finance costs capitalised during the year were calculated based
on a weighted cost of borrowing of 3.5% (2015: 3.6%).
9. Taxation
(GBP million) 2016 2015
==================================================== ===== =====
Current tax
UK Corporation tax expense 2.1 8.1
Adjustments in respect of prior years 0.4 (0.2)
==================================================== ===== =====
Total current tax 2.5 7.9
==================================================== ===== =====
Deferred tax
Origination and reversal of temporary differences 16.3 9.4
Effects of change in tax rate (5.2) (5.8)
Reassessment of property timing differences
(note 4) 8.4 -
Adjustments in respect of prior years (2.4) 2.1
==================================================== ===== =====
Total deferred tax 17.1 5.7
==================================================== ===== =====
Total tax expense 19.6 13.6
==================================================== ===== =====
Corporation tax is calculated at 20.00% (2015: 20.25%) of the
estimated taxable profit or loss for the year. The effective tax
rate on profit before taxation for the year was 26.8% (2015:
18.5%).
During the year, the Group considered it to be appropriate to
reassess the basis for calculating deferred tax on the property
portfolio and has now based the assessment on solely held-in-use
basis (see note 4). This gives rise to a material tax charge and is
excluded from tax on underlying profit.
10. Dividends
(GBP million) 2016 2015
============================================================= ==== ====
Amounts recognised as distributions to equity
holders in the year:
* final dividend for the year ended 31 December 2015 of
2.4 pence per share (2015: 1.8 pence) 9.6 7.2
* interim dividend for the year ended 31 December 2016
of 1.3 pence per share (2015: 1.3 pence) 5.2 5.2
============================================================= ==== ====
14.8 12.4
============================================================= ==== ====
A final dividend of 2.5 pence per share, amounting to a total
final dividend of approximately GBP10.1 million, is to be proposed
at the Company's annual general meeting on 26 May 2017. In
accordance with IAS 10 Events After the Balance Sheet Date,
dividend declared after the balance sheet date is not recognised as
a liability in these financial statements.
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.
2016 2015
============================================== =========== ===========
Profit for the year attributable to owners
of the Parent (GBP million) 53.6 60.0
============================================== =========== ===========
Weighted average number of ordinary shares 401,081,391 401,081,391
Adjustment for weighted average number of
shares held in the EBT (1,085,956) (1,195,844)
============================================== =========== ===========
Weighted average number of ordinary shares
in issue (No.) 399,995,435 399,885,547
============================================== =========== ===========
Basic earnings per share (in pence per share) 13.4 15.0
============================================== =========== ===========
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.
2016 2015
============================================= =========== ===========
Profit for the period attributable to owners
of the Parent (GBP million) 53.6 60.0
============================================= =========== ===========
Weighted average number of ordinary shares
in issue 399,995,435 399,885,547
Adjustment for weighted average number of
contingently issuable shares 1,576,430 2,052,534
============================================= =========== ===========
Diluted weighted average number of ordinary
shares in issue (No.) 401,571,865 401,938,081
============================================= =========== ===========
Diluted earnings per share (in pence per
share) 13.3 14.9
============================================= =========== ===========
12. Intangible assets
(GBP million) Goodwill
============================== ========
Cost
============================== ========
At 1 January 2016 520.1
Written-off (1.3)
============================== ========
At 31 December 2016 518.8
============================== ========
Impairment
============================== ========
At 1 January/31 December 2016 1.0
============================== ========
Net book value
At 31 December 2016 517.8
============================== ========
At 31 December 2015 519.1
============================== ========
The goodwill arising on acquisitions is reviewed annually for
impairment or when there is an event that may indicate impairment.
In the year, the Group's goodwill in relation to the Lifescan
business was written-off following a strategic review and the
closure of the operation. The Directors do not believe that any
further impairment is required in the current financial year.
13. Property, plant and equipment
Assets in
Freehold Long leasehold the course
(GBP million) property property Equipment of construction Total
================================= ========= ============== ========= ================ =======
Cost
At 1 January 2015 (as previously
stated) 623.9 174.0 263.1 1.4 1,062.4
Reclassification 28.3 (28.3) - - -
================================= ========= ============== ========= ================ =======
At 1 January 2015 (as restated) 652.2 145.7 263.1 1.4 1,062.4
Additions 21.8 13.5 37.4 37.1 109.8
Disposals - (0.7) (2.2) - (2.9)
Reclassification (0.7) - 0.6 0.1 -
================================= ========= ============== ========= ================ =======
At 1 January 2016 673.3 158.5 298.9 38.6 1,169.3
Additions 9.7 14.2 32.6 103.9 160.4
Disposals (15.3) (2.3) (25.7) - (43.3)
Transfers 18.7 6.4 2.6 (27.7) -
At 31 December 2016 686.4 176.8 308.4 114.8 1,286.4
================================= ========= ============== ========= ================ =======
Depreciation
At 1 January 2015 83.9 34.2 97.7 - 215.8
Charge for the year 11.3 5.4 32.2 - 48.9
Impairment 4.9 2.7 3.6 - 11.2
Disposals - (0.6) (1.5) - (2.1)
Reclassification (5.4) (1.0) 6.4 - -
================================= ========= ============== ========= ================ =======
At 1 January 2016 94.7 40.7 138.4 - 273.8
Charge for the year 11.7 4.7 35.5 - 51.9
Impairment - 0.4 0.1 - 0.5
Reversal of impairment - - (1.9) - (1.9)
Disposals (3.0) (2.0) (24.4) - (29.4)
At 31 December 2016 103.4 43.8 147.7 - 294.9
================================= ========= ============== ========= ================ =======
Net book value
At 31 December 2016 583.0 133.0 160.7 114.8 991.5
================================= ========= ============== ========= ================ =======
At 31 December 2015 (as
restated) 578.6 117.8 160.5 38.6 895.5
================================= ========= ============== ========= ================ =======
On 31 August 2016, as a result of the development of a new
hospital facility in Manchester and the closure of the previous
Spire Manchester Hospital (previously held under an operating
lease), the freehold interest in Spire Wirral Hospital with a net
book value of GBP11.5 million was disposed of, and leased back in a
sale and leaseback transaction. The consideration for the sale was
realised in the form of a non-cash asset, being the freehold of the
previous Spire Manchester Hospital, which was simultaneously
acquired by the Group (the "Asset Swap Transaction"). Refer to note
7.
The reversal of the impairment in 2016 is the result of the
reassessment of the lives of medical and other equipment following
the relocation of the assets from the previous Spire Manchester
Hospital to the new hospital facility and other Group hospitals
following its closure.
As at 31 December 2016, included in the net book value of
property, plant and equipment above is GBP21.7 million (2015:
GBP22.5 million) relating
to assets held under finance leases on which there was a
depreciation charge of GBP1.2 million in the year (2015: GBP1.1
million). Also included in property, plant and equipment with a net
book value of GBP4.0 million (2015: GBPnil) in respect of the
previous Spire Manchester Hospital with has been retired from
active use.
The amount of borrowing costs capitalised during the year ended
31 December 2016 was GBP1.8 million (2015: GBP0.3 million). The
rate used to determine the amount of borrowing costs eligible for
capitalisation was 3.5% (2015: 3.6%) which is calculated on a
weighted cost of borrowing.
14. Trade and other receivables
(GBP million) 2016 2015
===================================== ===== =====
Amounts falling due within one year:
Trade receivables - net 58.0 71.3
Other receivables 11.1 10.2
Prepayments 27.2 28.8
Accrued income 22.8 24.4
119.1 134.7
===================================== ===== =====
Trade receivables comprise amounts due from private medical
insurers, the NHS, patients, and consultants and other third
parties who use the Group's facilities. Invoices to customers fall
due within 60 days of the date of issue. 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.
The ageing of trade receivables is shown below and shows amounts
that are past due at the reporting date. A provision for doubtful
receivables has been recognised at the reporting date through
consideration of the ageing profile of the Group's receivables and
the perceived credit quality of its customers. The carrying amount
of trade receivables is considered to be an approximation to its
fair value.
The ageing of trade receivables at the reporting date was:
(GBP million) 2016 2015
======================================== ==== ====
Not past due and not impaired 38.3 32.7
Past due 0-30 days, and not impaired 8.0 17.0
Past due 31-90 days, and not impaired 6.7 9.2
Past due and more than 91 days, and not
impaired 5.0 12.4
Total 58.0 71.3
======================================== ==== ====
Trade receivables comprise the following wider customer/payor
groups:
(GBP million) 2016 2015
========================= ==== ====
Private medical insurers 34.0 41.4
NHS 10.8 14.4
Patient debt 4.9 2.8
Other 8.3 12.7
Total 58.0 71.3
========================= ==== ====
15. Borrowings
(GBP million) 2016 2015
================================= ===== =====
Secured borrowings
Bank loans 424.1 423.1
Obligations under finance leases 76.1 75.3
500.2 498.4
================================= ===== =====
The bank loans and finance leases are secured on fixed and
floating charges over both the present and future assets of
material subsidiaries of the Group.
Total borrowings (measured at amortised cost)
(GBP million) 2016 2015
=========================================== ===== =====
Amount due for settlement within 12 months 4.5 4.9
Amount due for settlement after 12 months 495.7 493.5
500.2 498.4
=========================================== ===== =====
15. Borrowings continued
Obligations under finance leases
The Group has finance leases in respect of three hospital
properties and medical equipment. Future minimum lease payments
under finance leases are as follows:
2016 2015
=============================== ===============================
Present value Present value
(GBP million) Minimum payments of payments Minimum payments of payments
================================== ================ ============= ================ =============
Within one year 8.7 7.0 8.5 7.5
After one year but not more
than five years 35.8 21.2 35.2 23.6
More than five years 229.8 47.9 239.1 44.2
================================== ================ ============= ================ =============
Total minimum lease payments 274.3 76.1 282.8 75.3
Less amounts representing finance
charges (198.2) - (207.5) -
Present value of minimum lease
payments 76.1 76.1 75.3 75.3
================================== ================ ============= ================ =============
Property leases, with a present value liability of GBP75.4
million (2015: GBP74.2 million), expire in 2040 and carry an
implicit interest rate of 12.9% (2015: 12.9%). Rent is reviewed
annually with reference to RPI, subject to a floor of 3.0% and a
cap at 5.0%.
Terms and debt repayment schedule
The maturity date is the date on which the relevant bank loans
are due to be fully repaid, as at the balance sheet date.
The carrying amounts drawn (after issue costs and including
interest accrued) under facilities in place at the balance sheet
date were as follows:
Margin over
(GBP million) Maturity LIBOR 2016 2015
=================================== ========== =========== ===== =====
Senior finance facility July 2019 2.00% 424.1 423.1
=================================== ========== =========== ===== =====
Revolving credit facility (undrawn
committed facility) 100.0 100.0
=============================================== =========== ===== =====
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, GBP425.0 million term loan and a five-year GBP100.0
million revolving facility. The loan is non-amortising and carries
interest at a margin of 2.00% over LIBOR
(2015: 2.00% over LIBOR).
16. Provisions
The movement for the year in the provisions is as follows:
Business
Medical restructuring
(GBP million) malpractice and other Total
============================= ============ ============== =====
At 1 January 2015 4.8 1.3 6.1
Utilised (2.8) (0.7) (3.5)
Additions 7.9 0.6 8.5
Cash received for settlement
of claims 4.5 - 4.5
=============================== ============ ============== =====
At 1 January 2016 14.4 1.2 15.6
Utilised (2.2) (0.3) (2.5)
Additions 2.1 1.5 3.6
At 31 December 2016 14.3 2.4 16.7
=============================== ============ ============== =====
Medical Malpractice relates to commitments to patients in
respect of the removal or replacement of the PIP brand of breast
implants, and estimated liabilities arising from claims for damages
in respect of services previously supplied to patients. Amounts are
shown gross of insured liabilities. Any such insurance recoveries
are recognised in other receivables.
Business restructuring and other includes staff restructuring
costs and the closure costs relating to an onerous contract.
The provisions are shown gross of any expected reimbursement
from insurers of the related risks. The reimbursement is recognised
as a separate receivable when receipt of it is judged sufficiently
probable. The amount included in other receivables in that respect
was GBP6.7 million (2015: GBP6.2 million).
Provisions as at 31 December 2016 are expected to be utilised
within three years.
The Group has received claims and notifications from patients of
a consultant, who previously had practising privileges at Spire
Healthcare.
The patients are claiming against the consultant and other
involved parties including the Group. Court hearings are scheduled
for a limited number of claims in October 2017 through which
precedent will be established regarding how future claims will be
treated. The Group is defending such claims and the legal process
is expected to take place over a period of several years. There is
significant uncertainty regarding the number of claims, the outcome
of the claims, any amounts to be awarded to each claimant and the
apportionment of damages between the parties. It is, therefore, not
possible to reliably estimate any liability of the Group. The Group
maintains comprehensive medical malpractice insurance, and in the
event that the Group is found liable, the Directors consider that
insurers will meet any such liabilities, subject to certain terms
and excess limitations.
17. Trade and other payables
(GBP million) 2016 2015
=================================== ===== ====
Trade payables 49.7 46.8
Other payables 8.8 7.1
Other taxation and social security 3.5 4.2
Accruals 38.3 32.2
Total 100.3 90.3
=================================== ===== ====
18. Share capital and reserves
GBP0.01 ordinary shares
=========================
Shares GBP'000
====================== =============== ========
Issued and fully paid
At 31 December 2016 401,081,391 4,010
=============== ========
At 31 December 2015 401,081,391 4,010
====================== =============== ========
Capital reserves
This reserve represents the loans of GBP376.1 million 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 2016, the Employee Benefit Trust (EBT) purchased 561,860
shares at an average price of GBP3.18 per share (2015: 1,692,242
shares acquired at an average price per share of GBP3.31 per
share).
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 2016,
670,559 shares (2015: 1,692,242) were held by the EBT in
relation to the Directors' share bonus award and long term
incentive plan.
At 1 January 2016, the EBT held 1,692,242 shares. On 1 April
2016, 801,825 number of shares were exercised in Tranche 1 of the
Directors' Share Bonus Award and in August 2016, 781,718 shares
were exercised for Tranche 2. A purchase of 561,860 shares was made
in July 2016 for an average price of GBP3.18 per share; and at 31
December 2016, the EBT held 670,559 shares.
The EBT share reserve represents the consideration paid when the
EBT purchases the Company's equity share capital, until the
shares
are reissued.
19. 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 recognised in
the income statement was GBP0.4 million in the year ended 31
December 2016 (2015: GBP0.7 million). Employer's National Insurance
is being accrued, where applicable, at the rate of 13.8%, 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 GBP0.2
million (2015: GBP0.1 million).
The following table analyses the total cost between each of the
relevant schemes, together with the number of options
outstanding:
2016 2015
==================================== ====================================
Charge Number of Charge Number of
(GBP million) options (thousands) (GBP million) options (thousands)
========================= ============== ==================== ============== ====================
Long Term Incentive Plan 0.4 950 0.7 944
Deferred Bonus Plan - - - 29
0.4 950 0.7 973
========================= ============== ==================== ============== ====================
A summary of the main features of the schemes are shown
below:
Directors' Share Bonus Award
At the time of the IPO on 23 July 2014, the Company granted nil
cost share options to Executive Directors to reflect their
contribution prior to Admission. The maximum number of shares
underlying the awards total 1,671,200. Each award was divided into
two equal tranches, the first of which vested on 23 July 2015 and
the second tranche vested on 23 July 2016. The number of options
that vested depended on conditions relating to share price on the
relevant date. The second tranche, which vested on 23 July 2016,
resulted in 781,718 options (23 July 2015: 801,824 options) being
issued. All qualifying options relating to the Directors' Share
Bonus Award were exercised during the year.
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.
Deferred Bonus Plan
The Deferred 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.
20. Commitments
Operating leases
The Group had future minimum lease payments under
non-cancellable operating leases, based on rents prevailing at the
year end, as set out below:
2016 2015
================= =================
Land and Land and
(GBP million) buildings Other buildings Other
================================= ========== ===== ========== =====
Not later than one year 63.1 1.1 62.9 0.9
Less than one year and not later
than five years 249.7 2.2 250.1 1.7
Later than five years 1,282.9 - 1,334.2 -
1,595.7 3.3 1,647.2 2.6
================================= ========== ===== ========== =====
The Group has a number of long-term institutional lease
arrangements. These include leases over 12 properties with a term
up to December 2042, subject to renewal or extension over each of
the 12 properties. The leases include key terms such as annual
rental covenants and minimum levels of capital expenditure invested
by the Group. Rent is indexed annually in line with RPI, upwards
only and subject to a cap of 5.0%. The capital expenditure
covenants measured on an average basis over each five-year period
during the term of the leases, require the Group to incur, in
total, GBP5.0 million of maintenance capital expenditure and GBP3.0
million of additional capital expenditure each year, such being
subject to indexation in line with RPI.
Other operating leases are in respect of vehicles and medical
transportation.
Capital expenditure commitments
Capital commitments comprise amounts payable under capital
contracts which are duly authorised and in progress at the 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:
(GBP million) 2016 2015
================================ ==== ====
Contracted but not provided for 63.8 39.4
================================ ==== ====
21. Contingent liabilities
The Group had the following guarantees at 31 December 2016:
-- The bankers to Spire Healthcare Limited have issued a letter
of credit in the maximum amount of GBP1.5 million (2015: GBP1.5
million) 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.
-- See note 16 for details of a contingent liability in respect of Medical Malpractice.
22. Events after the reporting period
2016 final dividend
For 2016, the Board has recommended a final dividend of 2.5
pence per share, amounting to approximately GBP10.1 million, to be
paid on 27 June 2017 to shareholders on the register at the close
of business on 2 June 2017.
Spire Manchester Hospital
The new Spire Manchester Hospital in Didsbury was opened on 23
January 2017.
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 (0)20 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
2017 Annual General
Meeting (London) 26 May 2017
Ex-div date for 2016
final dividend 1 June 2017
Record date for 2016
final dividend 2 June 2017
Payment date for 2016
final dividend 27 June 2017
Announcement of 2017
half year results September 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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March 02, 2017 02:00 ET (07:00 GMT)
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