The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
We are in a deep hole. No doubt about that.
Let me ask you a question. Imagine you are a senior NHS manger 12 months from now and C-19 patients are still arriving at in need of treatment, which seems very likely. What would you do?
Here, very simplistically are the options :
- Admit them to NHS facilities and in so doing reduce capacity of the NHS to treat other patients, many of whom may have serious conditions. You could move those other patients out to the private sector, but that would not be under the current cost-only C-19 agreement or
- move all C-19 patients automatically into the private hospitals to the limit of capacity there, where they are treated at cost, and use the capacity in the NHS to do other things.
If the second, which I think is the rational choice, then the private hospitals will be absorbing c-19 patients to saturation long after the numbers nationally have started to fall. Only when the number of C-19 patients is less than the number of private hospital beds will the number of C-19 patients in private hospitals begin to fall.
Pokerchips :
Compassion and making a profit are not mutually exclusive. I am sorry if my ability to compartmentalise causes you offence.
Why am I concerned 14 weeks could drift into 14 months. Perhaps read my previous posts and the agreement......
Thanks notout - I think we are closer than it might have first appeared.
My worry is that 14 weeks drifts into 14 months. We will make money on this, I have no doubt. but it looks further off than I could possibly have imagined.
Mediclinic are in an interesting position - on one hand any offer would need to be higher than the current SP might suggest because, I suspect, there are quite a few shares in sticky hands.
But, suppose they were to buy now and undertake restructuring and a transformation programme of some sort. Perhaps they could argue that the costs of that are part of the costs of the business .....and load some or all those onto the price the charge gvt. for the C-19 patients. A complex calculation. But not impossible that even if they paid relatively high by todays SP they could get what would amount to significant investment from gvt. the fact that the agreement with government could go on for a year or more would make that more likely. I would certainly like to think, as a minimum, the current Board were looking aggressively at what changes they could make now and have partially or fully paid for indirectly under the new agreement rather than having to dip into profits or loans.
Hi 100notout,
I sincerely hope i'm wrong and you're right because i am in quite deep here.
I agree it has been oversold and as such there will be some bounceback which we are seeing evidence of this morning. However, I will part company with you when you say ".... Worst case scenario here is that in the next few months they will break even....".
I respectfully disagree. that is, imo, the best possible scenario. The agreement is for a minimum of 14 months, and can be terminated only by gvt it would seem. Imperial College who are doing much of the modelling gvt is depending on has made it clear that C-19 will not be beaten until a vaccine is available and expert opinion puts that at a year or more away. Until then more casdes will be appearing and they will need to go somewhere......including SPI. These patients will be treated on a zero profit basis.
I do hope my comments weren't misinterpreted. I certainly do not think there is a risk to the business. However, I do feel that it is on a ventilator insofar as it's eventual emergence into profit is very likely, but not in any significant way for 12 to 18 months. During that time it will serve the public and NHS well, but as an investor it is, can we agree, an uninspiring option?
Hi Pokerchips :
- CEOs would say yes to having their costs covered only if they thought their free earnings potential is less. Reduction in NHS capacity could only increase demand for profitable elective procedures in the private sector.
- I agree that costs can be hard to define, but it is certainly going to be free of any identifiable margin.
- it isn't the next three months or so. It's for a minimum of 14 weeks or until government chooses to release the hold. Measures to limit spread of the disease could be alternately tightened and relaxed over the next year or more. SPI could be profit free for that or longer depending on whether the NHS chooses to allocate future coronations patients to NHS facilities ahead of taking advantage of private suppliers to soak them up at cost ( notwithstanding your point about that being a slightly fuzzy concept) and and using emerging headroom in NHS for other things.
As I said, good for the NHS and patients. But from a shareholder perspective SPI is now like the patients it will soon be treating - on a ventilator.
I need to check more carefully but my first impression is good for the NHS and patients, but bad I fear for SPI shareholders :
- profitable elective cases reduced
- capacity made available at cost only
- open book accounting to ensure compliance
- for a minimum of 14 weeks and thereafter on a rolling basis with no apparent time limit
- and in an agreement that can be terminated by the NHS but not, it would seem to me, by the provider.
Great contributions from others as always. Thank you.
In my opinion :
- general market and other conditions are now so confused and volatile it is very hard for me to read anything specific into PHD price movements, and more specifically separate those that are a genuine reflection on PHD. To a degree which I cannot estimate we're just been buffeted around.
- there are also too many plausible scenarios for what might be happening and what might happen next. All positive to a greater or lesser degree, so no real urgency to decide anything now.
The bottom line is I really don't feel that I can do more than speculate (in the worst sense of the word) at the moment. Just need more verifiable information. The profits we were all hoping for now look many months rather than weeks away which is a shame but they will, I think, arrive. Going to park this for a while and return later.
noto - we'd agree on a lot. The sums amounts are utterly insignificant (hence my descrioption of it as a snippet and no more) but the message is, I think, well intentioned albeit badly executed. Like, I fear, much of this saga. They do need to get a grip. A potentially promising sale scenario has slipped through their fingers. The current uncertainty favors no one.
Interesting. Lucky coincidence for a buyer if that's what it was.
Interesting that they have chosen to move in sync. Not huge numbers, but symbolic value.
Y_H_a_L is right to remind us that we have no certain knowledge that there us a hostile move developing....though i see this as another snippet consistent with it, and I thinknit's more likely than not.
A very real possibility
likewise, and we might still be ok. Perhaps any hostile buyer is surprised by how many shares are in very sticky hands and how few have moved despite the large drop. the question for them is not just how they get to 30% but how they move forward from there without a large increase in price - maybe much more than they thought they might have to face if more jumped ship quicker. Have their hopes/plans stalled?
T hat would spike the guns of a hostile takeover.
Otherwise, a satisfyingly boring day – no announcements and nothing but a steady trickle of small trades which are down in the noise. A good sign. Everyone back in their tribes negotiating quietly, dealing, back-stabbing and working out how to cut the throats of their rivals. Simultaneously vulgar and gratifying.
DSR-1's post on Wednesday lunchtime points to the largest holders taking around 10% ........but there were also two buys yesterday, each of around £4m/11% either of which is in the right ball park.
fair point!
Interesting RNS - Lombard very much in the game. Driving the takeover or happy to make a tidy sum on the back of it?
Bunco - unusual, but clear. An invitation to major holders to come and talk rather than dump and run.
In addition to speaking with the few I would like the Board to talk to the many, and put some strongly positive messages out to stiffen the resolve of waverers.
Frankly, the current situation would is bad for everyone; the potential hostile buyer(s) who have not yet hit 30%, (and with little floating stock and low volumes today seemingly little chance of making serious advances towards that or a controlling stake), the firm which is now in limbo and us who can do no more than wait. Too little information in the public domain for any meaningful assessment. Can't tell whether it's going to be a game of chess or a game of chicken. Just going to sit tight and wait......