LONDON (Alliance News) - Spire Healthcare Group PLC on Thursday said its profit fell sharply in 2018 due to an unexpected drop in NHS revenue and planned costs.
The private hospital operator, in which London- and Johannesburg-listed Mediclinic International PLC holds just under a 30% stake, posted pretax profit of GBP8.2 million for the year. This compares with GBP22.7 million profit the year before.
Revenue was broadly flat at GBP931.1 million versus GBP931.7 million in 2017. In addition, the company's cost of sales rose 1.1% to GBP497.6 million from GBP492.2 million and its other operating costs increased 2.1% to GBP404.9 million from GBP396.6 million.
As a result of these factors, Spire's operating profit shrank to GBP28.6 million from GBP42.9 million. Spire attributed the change to "the unexpected reduction in NHS revenue and planned cost increases".
This NHS revenue reduction was caused by cost constraints within the NHS and new management schemes for referrals. Much of this was offset by increased private business growth.
Spire will declare a final dividend of 2.5 pence per share, making the total dividend flat year-to-year at 3.8p per share.
"2018 was a challenging year but we made good strategic and operational progress, especially through our investments in clinical quality. The unprecedented decline in NHS revenue was offset by growth in our private business, which is clear evidence that we are pursuing the right strategy," said Spire Chief Executive Justin Ash.
The company's earnings before interest, taxation, depreciation and amortization sank 20% to GBP119.4 million from GBP150.0 million in the year, a result the company is hoping to improve on going forward.
"We are taking a measured approach to 2019, which will be a year of consolidation. We expect modest revenue growth, and will see the full year effect of investments coming through, whilst we will continue to achieve further efficiencies. We are focused on cash generation and debt reduction, placing Spire in a strong position for future EBITDA growth," Ash said.
In addition, Spire also announced that Deputy Chair & Senior Independent Director Peter Bamford has given notice and will retire at the company's upcoming annual general meeting on May 24. A successor has not yet been named.
Shares in Spire Healthcare were down 2.3% at 124.40 pence on Thursday.
Spire Healthcare (SPI)