Spire Healthcare swings to profit but warns over second-half revenue

British hospital operator Spire Healthcare cut its profit growth guidance on Friday, blaming a funding crisis in the government-funded National Health Service (NHS) for a drop in referrals to its services.

The possible removal of penalties if waiting lists lengthen also meant there was no urgent need to outsource to the private sector, he said in an interview.

He told Reuters that clinical commissioning groups with links to trusts in a bad financial position had been choosing to send patients to those facilities rather than private sector ones.

We now expect flat NHS revenues in the second half. Adjusted basic earnings per share were 9.4 pence, up from 7.9 pence, last year.

Broker Numis expects to see the momentum of the first quarter continue across the three payer groups – PMI, Sell-Pay and the NHS – when the company posts interims.

“However, 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 PMI and Self-Pay, the opportunity to deliver value to shareholders remains compelling”.

The shares, which floated at 210p just over a year ago, have dropped 51.6p to 350p on the news.

The construction of Spire’s major new cancer radiotherapy centre, next to the Baddow Hospital at the Essex Healthcare Park in Chelmsford, is now well underway with opening scheduled for November.

First half results were weaker than we anticipated, with NHS revenue growth falling short of the 20% growth we expected from the unwinding of pre-election waiting lists.

In March, the company said it expects mid to high single digit revenue growth, an Ebitda margin consistent with 2014, and high single digit growth in earnings per share for 2015. We put our estimates and target price under review.