Spire Healthcare hosted its annual meeting yesterday and, as with other companies, the event was closed to shareholders because of the government’s social distancing measures. Investors were able to submit questions ahead of the meeting via email but, given the extraordinary uncertainty hanging over the company, Spire was unlikely to have been in a position to give those seeking greater clarity much beyond its updated statement.
Spire is one of Britain’s biggest private healthcare groups. It operates 39 private hospitals and 8 clinics in England, Wales and Scotland. Spire has partnerships with about 7,300 consultants, and cared for about 810,000 in-patients and day-case patients last year.
In response to the Covid-19 outbreak, its private hospitals have been made available to the NHS in England, Wales and Scotland to provide extra capacity and a range of urgent and critical treatments.
The uncertainty has meant that plans to pay a final dividend of 2½p per share, worth £10 million, were not put forward for shareholder approval at the meeting and Spire said yesterday that it remained unable to provide market guidance for the current financial year.
Since the middle of March, when shares in Spire hit a post-float low of 52½p in the wake of the NHS asking for support, the stock has rallied on greater clarity over what this means in the short term. The shares closed up ½p, or 0.6 per cent, at 91¼p, still well below the 210p at which Cinven, the private equity firm, floated Spire in 2014.
Under its arrangement with NHS England, which lasts until at least June 28, with a one-month notice period to end the contract, Spire will recover the costs for its services and is paid weekly in advance.
It also agreed with its banks for a covenant waiver on its £425 million senior facility for its next two tests at the end of June and December.
In addition, it had said last month that it had an undrawn revolving credit facility of £100 million.
Spire reiterated yesterday that all this means it has sufficient liquidity and financial stability, allowing it to focus on preparing for the return to regular operations when the arrangements with the NHS end.
Analysts at Numis, Spire’s joint house broker, say that Spire had net bank debt/ebitda of three times, against covenants of four times.
There remains, though, considerable uncertainty before and after the NHS arrangements end.
On the positive side, and as Spire said yesterday, the suspension of elective surgery caused by the pandemic has created the potential for an increase in future demand and further lengthening of waiting lists.
And as analysts at RBC noted this week, NHS waiting lists were at record highs going into the crisis and demand from the insured and self-payers is likely to have increased. It could help Spire improve its mix within these groups to boost revenue and margin growth.
But there is uncertainty over the degree of confidence among patients to return to visit hospitals, how quickly Spire will be able to reschedule patients and how increased infection control could reduce efficiencies.
It is also highly uncertain whether this week’s easing of some lockdown restrictions by the government could generate a second wave of infections, potentially leading to the NHS extending access to the independent sector’s capacity.
Shareholders will be watching closely between now and the end of June to see what happens.
Spire said yesterday that it expected to announce its interim results for the six months to the end of June on September 17. In this climate, that feels like a particularly long time away.
Advice Hold
Why Signficant uncertainty but potential pent-up demand. Shares close to post-IPO lows
Watches of Switzerland
How do you make buying a £35,000 watch a luxurious experience when counters of Rolexes are hidden behind plastic sneeze guards? That is the question facing as it contemplates life post-lockdown (Ashley Armstrong writes).
It is Britain’s biggest retailer of Rolex, Cartier, Tag Heuer and Breitling watches, with 104 shops in the UK and a further 23 in the US. Watches of Switzerland defied the gloom that dogged the retail sector last year to float its shares at 270p, valuing it at £647 million. While the shares reached a high of 390p in January, the coronavirus sell-off has dragged the shares below its listing price of 220p.
However, the business is not as vulnerable as the rest of the retail pack because of the quirks of the luxury watch market in which demand continues to outstrip supply. Sales rose by 5.9 per cent to £819.3 million last year, ahead of its boosted guidance.
With most of its stores shut during the lockdown, online sales of expensive watches rose by 82.8 per cent last month, although continue to be a meagre 8 per cent of sales. Brian Duffy, 64, chief executive, also revealed yesterday that waiting lists for new watches were filling up as customers were prepared to put down sizeable deposits to ensure that they would get their desired high-end watch. Rolex counts for a significant part of Watches of Switzerland’s revenues but the brand does not allow online sales of its products anywhere in the world, so Watches of Switzerland cannot take full payment for those watches until it reopens its stores.
Some of its US shops have reopened with safety screens and extra hand sanitiser but Mr Duffy is keen to make sure that its expensive shops don’t “feel like a waiting room for an A&E department”. Instead the company expects customers to book shopping trips in advance, which will also help to manage social distancing requirements. The business has said that it is confident that it has enough liquidity after cutting capital expenditure and entering into a £45 million facility with the government’s coronavirus large business interruption loan scheme.
Advice Hold
Why Online sales surge shows there is still consumer demand during lockdown
