Annual Report and Accounts
For the year ended 31 December 2022
Making a positive
difference to people’s
lives through outstanding
personalised care
Contents
Overview
Strategic report
9
Chief executive officer’s strategic review
12
Our market and business model
18
Our strategy
33
Our key performance indicators
36
Engagement with stakeholders
42
Sustainability
60
TCFD report
66
Risk management and internal control
77
Compliance reports
78
Chief financial officer’s review
79
Financial review
Governance report
84
Chairman’s governance letter
85
Corporate governance report
91
Board of directors
95
Executive committee
96
Nomination committee report
98
Clinical governance and safety
committee report
101
Audit and risk committee report
107
Remuneration committee report
110
Remuneration policy report
112
Annual report on remuneration
120
Directors’ report
123
Statement of directors’ responsibilities
Financial statements
124
Independent auditor’s report
132
Consolidated financial statements
137
Notes to the financial statements
163
Parent company financial statements
Other information
168
Shareholder information
170
Alternative performance measures definitions
171
Glossary and forward-looking statements
02
09
84
2
Contents
3
Our purpose
4
About us
5
Highlights of 2022
6
High-quality patient care
8
History and progress
124
Our strategy
1
Driving hospital performance
2
Build on quality
3
Invest in our workforce
4
Champion sustainability
5
Expand our proposition
Website
spirehealthcare.com
Social media
LinkedIn:
linkedin.com/company
spire-healthcare
Twitter:
twitter.com/
spirehealthcare
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
2
Overview
Contents
Back / Forward
Where we operate
About us
Our values
Driving clinical excellence
We stretch ourselves to achieve
fantastic results
Doing the right thing
We make sound and considered
judgements
Caring is our passion
We put patients at the heart of
everything we do
Keeping it simple
We make complex things easier
Delivering on our promises
People can trust us to do what
we say we’ll do
Succeeding and celebrating
together
We work together, learn from
each other and celebrate success
Map key
Spire Healthcare
clinical locations
Who we are
One of Britain’s largest independent healthcare
companies, operating across England, Wales
and Scotland
What we do
–
Primary care: one of the largest network of independent GPs
– Diagnostics
–
Treatment and surgery: from orthopaedics to cancer and
complex care
–
Physiotherapy, recovery and rehabilitation
–
Occupational health
–
Developing care at home for people with chronic conditions
Spire in numbers
39
Hospitals
8,760
Consultants with
whom we work
in partnership
128
GPs
33
Clinics and
consulting rooms
5
Critical care units
700
Corporate occupational
health clients
14,500
Colleagues
15
Macmillan accredited
cancer centres
926,500
Self-pay, insured and
NHS patients cared for
in 2022
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
4
Overview
Contents
Back / Forward
*Refer to page 81 for a reconciation of non-GAAP
financial measures.
Highlights of 2022
Acquired The Doctors Clinic Group, including two
occupational health businesses, getting the nation
back to health
Launched diabetes service to empower patients
98%
of inspected hospitals and clinics rated Good,
Outstanding (or the equivalent) by regulators,
up from 90% in 2021 and 69% in 2016
27,091
tCO
2
e carbon emissions down 6% from 2021
£1,198.5m
revenue up 8.3% from 2021
926,500
patients cared for, up from 869,400 in 2021
23%
of dry mixed waste recycled, up from 11% in 2021
£203.5m
adjusted EBITDA* up 14.2% from 2021
180
nurse apprentices, 177 in 2021
5%
of our colleagues are now apprentices, supporting the
talent pipeline, level with 2021
£95.4m
operating profit up 9.7% from 2021
£90.1m
invested in upgrading and maintaining our estate,
up from £77.1m in 2021
£20,000
fundraised and donated to
British Red Cross Ukraine Appeal
Refreshed our strategy and purpose
Named ‘Hospital Group of the Year’
by LaingBuisson
*Refer to page 81 for a reconciliation of non-GAAP
financial measures.
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
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Overview
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Back / Forward
High-quality patient care
“Staff were caring, efficient and
explained things when I was worried.
The physiotherapy sessions were supportive,
my room was comfortable, and the food
was incredible.”
January 2022
“A well-organised system of admission and
pre-operation communication. Helpful,
motivated nursing staff, and top-class
surgical staff. All extremely friendly and
state-of-the-art facilities. I’m extremely
glad I chose Spire.”
May 2022
“Every aspect of the visit was dealt with
totally professionally. It was for my father
who is elderly and has dementia; he was
treated with the utmost respect.”
June 2022
“A wonderful surgeon and team who couldn’t
have done more or made me feel more
welcome. The entire journey was meticulous
and reassuring. I have never experienced
such high-quality care.”
February 2022
“The hospital was clean and all the staff
were very attentive and accommodating.
The physio was patient and clear about the
exercises I needed to do and why. I had
fantastic support.”
April 2022
“I was very nervous going in but I was
made to feel at ease every step of the way.
Nothing I asked was too much and that
was appreciated.”
March 2022
Strategic report
Governance report
Financial statements
Other information
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Annual Report and Accounts 2022
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Overview
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High-quality patient care
continued
“Right from the moment I walked into the
hospital I felt so welcome. The level of care
is above and beyond.”
July 2022
“I was treated very well, from the moment of
my first consultation through to treatment.
I have no hesitation in recommending Spire
– it is a cut above the rest.”
November 2022
“A marvellous team, always caring,
always attentive, I couldn’t have asked
for better, really.”
December 2022
“The care was exemplary, and every staff
member I met was friendly, patient and
genuinely caring. I can honestly say that
my time at Spire Healthcare was a very
enjoyable experience.”
August 2022
“I found the whole experience quietly
reassuring. I found that I had nothing to
worry about, as it was all done and dusted
within a very short amount of time.”
October 2022
“The medical team were exceptional, as were
the care staff and receptionists. Thank you
all for a five star excellent service.”
September 2022
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
7
Overview
Contents
Back / Forward
2007
–
Spire Healthcare founded with
the acquisition and rebranding
of 25 former Bupa Hospitals
sites by the European private
equity firm Cinven
2008
–
Acquired further hospitals and
clinics, including Thames Valley
Hospital in Buckinghamshire,
and Classic Hospitals Group
around North and South East
of England
–
Adding Classic Hospitals’ 10
hospitals saw the group
become the second largest
hospital provider to private
patients in the UK
2014
–
Acquired historic St Anthony’s
Hospital in Greater London from
Daughters of the Cross, a holy
order of nuns who had run the
hospital for more than 100 years
–
Cinven floated Spire Healthcare
on the London Stock Exchange,
setting its initial price at 210
pence a share, with a valuation
of £842 million
2020
–
Hospitals and resources dedicated to
the NHS to support the fight against
the pandemic. Colleagues worked
with local NHS trusts to support
patients with COVID-19, and to deliver
other urgent operations and cancer
treatments
–
An Independent Inquiry published its
report on Ian Paterson, who practised
in two Spire Healthcare hospitals, as
well as the NHS. Spire Healthcare
accepted its recommendations in full
2021
–
Launched one of the largest
nurse degree apprenticeship
programme in the sector,
run in partnership with the
University of Sunderland
–
Acquired an 87% stake
in Sheffield’s Claremont
Private Hospital from Aspen
Healthcare, partnering with
local consultants who took
a 13% stake in the hospital
2022
–
Long-term investments in
quality, estate and people have
delivered quality patient care
and high levels of patient
satisfaction
–
Increased stake in Claremont
hospital to 100%
–
98% of inspected hospitals
and clinics now rated as ‘Good’
or ‘Outstanding’ by the CQC
or its equivalent in Scotland
and Wales
–
Acquired The Doctors Clinic
Group, which operates
22 private GP clinics, and two
businesses in the fast-growing
occupational health sector
2017
–
Opened new purpose-built,
state-of-the-art hospitals in
Manchester and Nottingham,
a total investment in excess of
£120 million
Spire Healthcare –
from hospitals to
integrated healthcare
2023 onwards
Future investment
Expanding GP and occupational health services
Chronic disease support
History and progress
Future investment
will support the delivery
of a broader range of
healthcare services
that complement
existing services and
develop a network of
10 new clinics.
Development of new offering for patients with
Type 2 diabetes, with plans for similar services
for people with other chronic diseases, combining
the benefits of innovative, user-friendly mobile
technology with face-to-face clinical support.
The group will further
expand GP services,
offer minor treatments,
such as ophthalmology,
dermatology and
gynaecology, through
new treatment clinics
and develop the
occupational health
offering.
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
8
Overview
Contents
Back / Forward
“Our colleagues have worked
hard to create a strong
platform for growth, with
safety and quality at the
heart of everything we do.
More than ever before,
personalised quality care
is our daily responsibility,
delivered by our talented,
committed hospital teams,
nurses and allied
professionals, and of course,
our consultant partners.”
Justin Ash
Chief Executive Officer
Robust growth
potential across the
healthcare sector
I am delighted to say that 2022 has been a year of
strong performance across the group. We maintained
the high-quality care our people work so hard to
achieve, we have evolved our purpose and strategy to
take account of the changing demands and dynamics
of our market, and we not only delivered a solid
financial performance, but also have moved the
business forward in our sustainability agenda and
in expanding our offering.
Safety and quality care
Naturally, patient safety remains our top priority at
Spire Healthcare, allied to our ongoing investments
in quality, which are vital to our aim to lead this area.
This year, we have embedded our new Quality
Improvement strategy, and in our latest survey 96%
of patients rated their experience as ‘Good’ or ‘Very
Good’, unchanged from 2021. We also produce an
integrated clinical governance report every month,
for review by the board and the executive team.
I was pleased that all 10 hospitals inspected this year
were rated ‘Good’ or ‘Outstanding’ by the CQC, or the
equivalent in Scotland or Wales, with Manchester
re-rated as ‘Outstanding’ for a second time, South
Bank uprated to ‘Good’, Cardiff receiving excellent
feedback and Murrayfield Edinburgh rated ‘Good’.
98% of our inspected hospitals and clinics have now
achieved these ratings, an improvement from 90%
at the end of 2021, one of the strongest offerings in
the independent sector and a competitive advantage.
Increasing demand for private healthcare
Demand for private healthcare remained strong
in 2022, with patients seeking prompt, safe and
effective diagnosis and treatment amidst increasing
NHS waiting lists. We saw continued growth in
demand from self-paying patients, and strong
rebound in our private medical insurance (PMI)
business. This reflects changing market dynamics,
as people turn to private care to meet their
treatment needs.
Overall revenue was £1,198.5 million, up 8.3%
compared to 2021, while adjusted EBITDA was £203.5
million, up 14.2% on last year, despite inflationary
pressure and the impact of COVID-19 on cancellations
and colleague and consultant sickness that reduced
income and increased costs at times through the year.
Supporting the NHS
2022 saw growth in our NHS work and, by the end
of the year, we were seeing more NHS patients than
pre-pandemic. We were pleased to support the NHS
in caring for those patients who had been waiting the
longest, helping to treat patients waiting more than
two years and reducing the number of people waiting
more than a year and a half. In December, I was
delighted to join the launch, with the Prime Minister,
of the government’s Elective Recovery Taskforce for
England. I hope this will result in a long-term
partnership between the NHS and the independent
sector, where the sector is part of the solution for
reducing the backlog in care. In particular, I hope it
will result in a greater promotion of patients’ right
to choose a provider offering shorter wait times.
Broadening our purpose
The increased demand for healthcare is not only
seen in hospital care but also in out-of-hospital,
primary and community healthcare, and we have
broadened our purpose and strategy to maximise the
opportunities this creates. We are in a strong position
to do this now because of the journey we have been
on in recent years, focusing internally on quality and
patient safety, and building the clinical and financial
position we have today. We have turned risks into
strengths, and developed the flexibility to respond
quickly to the external environment.
Our purpose has changed from making a positive
difference to ‘patients’ lives’ to ‘people’s lives’,
broadening our offer of outstanding personalised
care to more people in a wider range of settings.
We aim to be involved in people’s healthcare across
both pre- and post-hospital care, responding to the
demand we know is out there. After all, it’s in our
name, Spire Healthcare.
Chief executive officer’s strategic review
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
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Overview
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A strategy to meet Britain’s healthcare needs
To deliver on this new purpose, we have refreshed our
strategy. We aim to help meet Britain’s health needs
by running great hospitals and developing new
services. The new strategy contains five key pillars:
1.
We will
drive hospital performance
, by continuing
to grow our existing hospital estate with increasing
margins
2.
We will
build on quality
and patient safety to make
it a competitive advantage in all our activities
3.
We will continue to
invest in our workforce
through strong recruitment, retention, and
development programmes
4.
We will
champion sustainability
, as we aim to be
recognised as a leader in our sector
5.
We will
expand our proposition
through selective
investments in new services that will attract new
patients by meeting more of their healthcare
needs
All this will help us focus on delivering a
strong
financial performance
with a particular emphasis
on cash generation, improving our return on capital,
and delivering strong shareholder returns. You can
read more about our plans in our strategy section
on page 18.
Expanding our healthcare proposition
Spire Healthcare is now working towards becoming
an integrated healthcare provider, with services in
primary care, diagnosis, occupational health and
long-term condition management. While our desire
to expand our proposition is not new, including it as a
key pillar of our strategy gives our efforts in this area
a new energy, and I believe this can play a significant
part in taking our business forward. Our primary care
services, Spire GP, are now present at most of our
hospitals, and we are getting strong support from
other GPs who want to work with us. This private GP
service grew by 46% in 2022, reflecting the desire of
an increasing number of patients for fast access to
longer face-to-face appointments with a GP. Our
acquisition of The Doctors Clinic Group in December
2022 adds further capacity to our GP offering as well
as entering the fast-growing occupational health
sector, with the acquisition of Maitland Medical
and Soma Health as part of the same transaction.
This aligns with our plans to target 10 new clinics
to meet the growing healthcare needs in our
communities, as well as digital services we seek
to offer patients in the future.
Supporting and developing our workforce
One of the biggest challenges for our sector is the
shortage of skilled healthcare staff in the UK and
internationally. This places pressure on our costs,
especially when it comes to agency usage, and can
limit capacity. This is why investing in our workforce
is also a vital part of our strategy. As a people
business, we recognise our key role in addressing
this shortage, and work hard to recruit and retain
talented people, offering colleagues genuine
opportunities to grow and develop their careers
with us and in the NHS.
One of the group’s most successful initiatives –
our nurse degree apprenticeship programme,
run in partnership with the University of Sunderland
– is aimed at building a talent pipeline for our
business and the broader healthcare sector.
This sector-leading programme continues to grow.
Across a broader range of clinical and non-clinical
roles, I am delighted that we now have around 550
apprentices in all, representing some 5% of our total
permanent workforce.
Chief executive officer’s strategic review
continued
Spire Healthcare:
people and
community
It is important to me that Spire Healthcare and
its people make a difference. Not only do we
maintain ongoing investments in delivering
high-quality care, but also we want to play an
active part in our communities and society at large.
We are keen to treat long-waiting NHS patients
and seek a long-term partnership between the
NHS and the independent sector. We are committed
to training and retaining the best people through
our apprenticeship and development programmes,
and we aim to lead the sector in an early bid to be
carbon neutral by 2030. We want to champion
social, sustainability and environment issues at
all levels of the business and are opening new clinics
to provide care beyond hospitals. Our clinics and
hospitals are forging relationships with local
communities and fundraising for local charities.
Every year, Spire Healthcare takes on company-wide
charity challenges, such as a charity cycle day, and
other community initiatives, such as supporting
local foodbanks, raising thousands for good causes.
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Justin Ash visiting
Spire Liverpool
We continue to focus on colleagues’ learning and
development with more than 1,000 colleagues on
professional and other development programmes.
We also have around 520 overseas nurses across the
business. We are committed to ethical recruitment –
only recruiting actively from ‘green’ countries under
the World Health Organization definition. Of course,
we provide training and development opportunities
for them so that, if they wish, these nurses can take
home a range of new skills and opportunities. We
supported colleagues with a 5% pay rise in September
2022, following on from continued pay rises over
the last few years, with up to 16% for lower paid
colleagues, and less for senior managers.
Sustainability
Alongside integrating sustainability into our business
strategy, we have developed and articulated our
sustainability strategy this year and I was delighted
that we were highly commended in the
BusinessGreen Leaders Awards this year, for Net Zero
Strategy of the Year. We have made it clear how
championing the environment, social and governance
issues, and sustainability as a whole, is integral to the
way we operate, and our aim is to lead the sector.
During the year, we established our waste
management strategy, helping us to increase
recycling rates, and mitigating, where possible, the
waste we send to landfill.
We remain on target to reach net zero carbon by
2030, though our trajectory has been slower this year
due to a shortage of electricity from green sources.
We will aim to buy more green energy in the future,
and are replacing gas-powered boilers, and installing
electric vehicle charging points.
More efficient organisation
Our efficiency programmes are well underway, with
£15 million in savings delivered in 2022, and a further
£15 million in 2023/24. As a result of this and actions
taken previously to lock in some supplier pricing for
the medium term, we remain positive about our
ability to manage reasonable levels of inflationary
risk, and were pleased to expand margins during the
year. We remain wary of the economic environment
and are taking a range of actions to offset inflationary
pressures. These include implementing price rises
where appropriate, managing our mix of services, and
being more selective in the choice of products we
use. Despite the various efficiency programmes
across the business, the inflationary environment,
especially as regards wages, may slow the pace of
margin improvement in 2023.
Success recognised internally and externally
I’d like to thank my management team, all our leaders
out in the business, and all our hospital teams and
support services for their continued efforts to achieve
such an impressive performance in a challenging
operating environment. I would also like to thank
warmly, Alison Dickinson, Group Clinical Director,
as she retires for her dedicated service to Spire
Healthcare, her focus on clinical quality and her
commitment to patient safety. I would also like to
recognise Shelley Thomas, Group HR Director, for
her work on learning and development and on our
apprenticeship programme. Rachel King has replaced
Shelley and I look forward to welcoming Lisa Grant to
replace Alison in 2023.
What has made me especially proud this year is
that these efforts have been recognised outside
the business too. I was delighted to see that Spire
Healthcare won both the ‘Hospital Group of the
Year’ and ‘Nursing Practice’ awards at the annual
LaingBuisson awards in November. The latter award
acknowledged the success of our excellent Electronic
Pre-Operative Assessment programme, which has
provided a better patient experience, while driving
efficiency by freeing up nursing time and hospital
consulting rooms.
Ready to meet the healthcare challenges of the
mid-2020s
Overall, demand remains very good, not just for
hospital care, but for out-of-hospital care. With
the development of new propositions as part of
our strategy, the business is now well placed to help
meet that demand. We remain conscious of the
potential risk to demand from the economic
environment, but while some self-pay patients may
be affected, our target audience tends to be more
insulated owing to their income or age profile.
Chief executive officer’s strategic review
continued
Inflation is clearly a current factor for all businesses,
and we can’t pretend it will not be a factor for Spire
Healthcare, with our biggest exposure on workforce.
However, we have plenty of efficiency opportunities,
both in procurement and in our operations to help
deal with that, our financial position is positive, and
we have the potential to flex to accommodate NHS
commissions as they arise. As a business, our unique
mix of self-pay, PMI and NHS provides a degree of
hedge against changing economic circumstances.
I believe we are well positioned to navigate
uncertain times for the healthcare sector – be that
due to workforce pressures, the macro-economic
environment, or the ongoing impact of COVID-19
on the health of the nation that we will continue
to manage.
Quality will always remain at the heart of what we
do and, as a business, we look forwards with real
confidence. I believe we have the right priorities
and strategy, and are powered by a thoughtful and
engaged team, equipped with the tools we need to
succeed in the years ahead.
Justin Ash
Chief Executive Officer
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Our market
The constraints due to COVID-19 eased during the
year for our business, people and patients. However,
providing safe patient pathways and access to
high-quality personalised care remain our core
business drivers.
Demand for private healthcare remained strong
in 2022, with patients seeking prompt, safe and
effective diagnosis and treatment amidst increasing
NHS waiting lists. We saw continued growth in
demand from self-paying patients, and growth in our
private medical insurance (PMI) business. This reflects
changing market dynamics, as people turn to private
care to meet their treatment needs.
There is strong demand for healthcare
in a post COVID-19 environment and
numerous healthcare opportunities
across the wider sector.
More people are seeking the services
we can provide, but many haven’t had
experience of private healthcare before.
We want to help patients make informed
choices and let them know how the
process works. We have focused on
making self-pay easy and accessible.
Ageing population with complex healthcare
needs
The growing and ageing population and greater
prevalence of long-term conditions continue to be
the underlying factor putting pressure on the UK’s
healthcare resources.
Treatment and care for people with long-term
conditions typically accounts for around 70% of
total health and social care expenditure. People
with long-term health conditions account for
around half of GP appointments, 64% of outpatient
appointments and more than 70% of inpatient
bed days.
Long-term conditions
70%
People with long-term conditions account for
70% of expenditure
Source: Department of Health 2012 report ‘Long-term
conditions compendium of information’ 3rd edition
Long-term global trend
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Our market
continued
1. Growing NHS waiting lists
NHS waiting lists were already long before the
pandemic, with 4.4 million people on the list in
December 2019. With so much elective care
suspended during the pandemic, NHS waiting lists
have increased to record levels. At the end of 2021,
waiting lists stood at 6.1 million, and by the end of
2022, they had risen to 7.2 million. In many months
during 2022, the list grew by around 100,000 per
month. The problem is not only the length of the list,
but also the length of time people are waiting for
diagnoses and treatments. In 2019, there were
around 1,600 people waiting longer than a year for a
procedure. Today, this number is in excess of 400,000.
400,000+
patients waiting over a year, up from over
300,000 in November 2021
Source: NHS waiting times data for December 2022,
published February 2023
7.2m
patients waiting, up from 6.1 million in 2021
Source: NHS waiting times data for December 2022,
published February 2023
57%
of Spire Healthcare target consumers would be
more likely to consider using a private hospital,
given growing waiting lists
Source: Proprietary Spire Healthcare research conducted
with 2,892 target consumers during October and
November 2022 up from 53% in 2020
Key trends that affect our market today
2. Growing private market
Growing demand has driven robust growth in
demand for self-pay healthcare in 2021, particularly in
our core specialties of hip and knee surgery, and this
continued into 2022. The private medical insurance
(PMI) sector also recovered strongly in 2022, as
corporates look to extend cover to more employees,
as a defence against long NHS waiting lists.
We have seen growth in our target customer base –
the number of people considering private healthcare
in the areas in which we operate – to around seven
million people in 2022 from around five million in
2019. The profile of our customers has remained
similar in terms of age and wealth profile, but we
are seeing more of those who previously might
have defaulted to the NHS before the pandemic.
There have also been longer waits for people to see
their NHS GPs. This is a key driver in Spire Healthcare
increasing the size of its GP and ‘out of hospital’
business (see ‘Expanding our proposition’ on page 31).
3. Shortage of skilled healthcare professionals
The UK healthcare sector continues to face a severe
skills shortage, with a large number of healthcare
professionals leaving the industry each year. In figures
published by NHS Digital, there were 47,496 vacancies,
or 11%, within the registered nursing staff group
in NHS England in September 2022. Against this
backdrop, attracting and retaining the best people
is a challenge for all healthcare providers, both public
and private. Rates for agency staff are also rising,
presenting further challenge.
The combination of inflation and labour shortages
means businesses like ours have to be competitive
in the reward that we offer colleagues, in order to
attract and retain the best people.
11.9%
vacancy rate for nurses in NHS England
(September 2022)
Source: NHS Digital
At Spire Healthcare, we run a range of
apprenticeship schemes and overseas
recruitment programmes.
Read more on pages 26 and 51.
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Our market
continued
4. Inflationary economic environment
2022 saw sharp rises in inflation in the UK and around
the world, with various consequences. Rises in the
cost of living have affected people’s disposal income.
Although this has the potential to temper the growth
rate we see in the market, we have some resilience to
these pressures in the private healthcare sector, as
many in our target audience are in higher income
brackets and so are less affected. Demand for
orthopaedic work, for example, is largely unchanged.
Despite this resilience, those among the periphery
of our target audience are not unaffected.
Energy prices could also present a threat to our
business, but we have energy prices locked until
autumn 2024. We are making plans on how we
mitigate the impact from 2024 onwards.
Inflation also puts pressures on our supply chain,
costs and margins, although in 2022 we have
been able to respond well to this (see page 9
chief executive officer review).
Key trends that affect our market today
In 2022, we responded to these changing market
dynamics by evolving our strategy. You can read
more about this in the following pages.
We are driving performance in our hospitals so
we’re best placed to respond to the backlog in care,
focusing on quality to differentiate ourselves to
build competitive advantage. We’re investing in
our workforce so that we’re well-placed in a market
where skilled people are at a premium, and
championing sustainability so that we are a net
contributor to society. Lastly, we’re responding
to increasing demand for out-of-hospital care
by expanding our proposition.
How Spire Healthcare is
responding to these trends
UK inflation rate
10.5%
in December 2022
5.4%
in December 2021
Source: UK Consumer Price Index (CPI), ONS
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Our business model
What drives us
Our purpose – ‘Making a positive
difference to people’s lives through
outstanding personalised care’ – drives
how we do business.
Our vision is to be the go-to healthcare
brand, famous for the clinical quality
and care we deliver.
What we do
We own and run hospitals and clinics across the
country, serving a diversified patient mix. Offering
hundreds of different tests and treatments, some
of which can only be accessed privately, we provide
diagnostics, inpatient, daycase and outpatient care
in areas including orthopaedics, gynaecology,
cardiology, neurology, oncology and general surgery.
We are also broadening our ‘out of hospital’ provision,
to respond to changing demands in the market, with
our GP service, occupational health and a long-term
condition management offering in development.
What drives us
How we generate revenue
The value we create
39
Hospitals
5
Critical care units
33
Clinics and consulting rooms
128
Spire GPs
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Our business model
continued
1. Private patients
We offer treatments for patients who have private
health insurance or wish to pay for their own
treatment. We offer them a choice of when and
where they are treated, in hospitals that combine
excellent clinical outcomes and levels of infection
control with ‘hotel-style’ levels of service.
PMI
We have long-term relationships with all the major
private medical insurance providers, with Aviva, AXA,
Bupa and VitalityHealth having combined market
share estimated at over 85%.
Self-pay
We enable patients to take control of their own
health by directly booking appointments with
consultants without the need for a GP referral
or an appointment with one of our private GPs.
2. NHS
Spire Healthcare offers the NHS capacity, capability
and flexibility.
We perform high volumes of routine elective surgery,
including a proportion of complex surgery. As we take
most work directly from GPs this prevents patients
sitting on NHS waiting lists and, in addition, we take
thousands of patients off waiting lists nationally. The
activity is at the same tariff prices as local NHS Trusts
and the capital we invest in our sites, at no charge
to the NHS, allows us to increase capacity through
expanded clinical teams, theatre time and bed
availability. This means we can increase capacity
aligned to NHS commissioning requirements.
Most NHS work comes from NHS GPs via the
Electronic Referral System (eRS) which allows
patients to book appointments with providers
with the shortest waits.
How we generate revenue
How we work
We have an unwavering commitment to the highest
standards of safety, quality and care and effective
consultant oversight
Patients, consultants and GPs trust Spire Healthcare
to deliver high-quality care. We have a proactive
approach to quality improvement through our
Quality Improvement strategy, and a strong
ward-to-board governance framework to ensure we
maintain the highest standards, and each hospital
director is focused on safety and quality. At the
year-end, 98% of our inspected hospitals and clinics
were rated ‘Good’ or ‘Outstanding’ by the CQC or the
equivalent in Scotland and Wales. All of our hospitals
have on-site resident doctors at all times. The
resident doctors work closely with our consultants
and nursing teams to ensure safe and effective care.
We have a highly motivated and skilled team
We employ a wide range of well-trained and
dedicated clinical and non-clinical people, whose
flexibility and resilience is vital to us maintaining
high standards of personalised care. Our culture is
based on respect, inclusion and collaboration, and
we all share the values of the business.
We work closely with GPs
People are usually referred to us by their own
NHS GP. We work with GPs to facilitate speedy,
convenient and fully informed referrals, and have
business development teams who build links with
their local GP communities. Once referred, we aim to
see patients quickly, and following the initial contact,
we can usually offer them the opportunity to select
the consultant and hospital with which they are
most comfortable.
We aim to make Spire Healthcare the first choice
for consultants
Consultants are independent of the group. They
are granted privileges to practise in our hospitals,
operating according to our policies and procedures.
They are integral to providing high levels of medical
care to our patients, so we want to be their first
choice as a place to work. That’s why we engage with
local consultants at a hospital level, both those with
practising privileges and those in the wider consultant
community. We aim to build on our close working
partnerships and offer them the facilities and support
they need to establish a practice at our sites. Some
Spire GPs operate in a similar way, independent of
the group; others are directly employed.
We invest in the business
We have invested £90.1 million in our estate and
the latest medical facilities and equipment in 2022.
Building on our digital infrastructure remains a key
business priority, as centralised processes not only
make the lives of our patients and colleagues easier,
but digital and telephone options for pre-assessments
and even diagnosis enable us to deliver our services
more quickly and safely.
What drives us
How we generate revenue
The value we create
2. Self-pay 28.8%
1. PMI 46.0%
3. NHS 25.2%
2. Self-pay 27.0%
1. PMI 43.9%
3. NHS 29.1%
2. Self-pay 15.0%
1. PMI 37.4%
3. NHS 47.6%
2. Self-pay 18.7%
1. PMI 51.4%
3. NHS 29.9%
3
2
1
2022
3
2
1
2021
3
2
1
2020
3
2
1
2019
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Our business model
continued
The value we create
We provide fast access to high-quality,
personalised clinical care with
world-class experts.
We aim to provide our colleagues
with high job satisfaction, a competitive
reward and recognition framework, and
the chance to learn, develop and grow
through a wide range of apprenticeships
and development opportunities.
We invest in the best people,
facilities and equipment to make
Spire Healthcare the partner of choice
for our consultants.
We help the NHS reduce waiting lists,
ease capacity constraints and work
closely with the NHS centrally and in
local communities, with commissioners
and trusts.
926,500
all patients seen in 2022
2021: 869,400
96% say their experience of our
service was ‘Very Good’ or ‘Good’
2021: 96%
8,760
expert consultants we worked
with in 2022
2021: 8,150
14,500
colleagues
2021: 15,100
182,000
NHS patients seen in 2022
2021: 191,000
We aim to create value through total
shareholder returns.
Patients
Colleagues
Consultants
NHS
Shareholders
During the three-year period 2020-22,
Spire Healthcare’s share price rose
by 60.6% and outperformed the FTSE
All-Share Index by 63.5 percentage
points. Our total shareholder return
for the same period was 60.6%
During the year ended 31 December
2022, Spire Healthcare’s share price
advanced by 8.8%.
What drives us
How we generate revenue
The value we create
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Our strategy
We’re helping to meet
Britain’s healthcare
needs by running great
hospitals and developing
new services
At Spire Healthcare, quality and patient safety
always come first. Our strategy has served the
business well over the past few years, helping us to
build the clinical and financial platforms we needed
to deliver for our patients to consultants, and our
colleagues to investors. But demand has increased
significantly in the wake of the pandemic, both inside
and outside hospital. That’s why we have refreshed
our strategy this year to focus on five strategic pillars
that will not only enable us to meet this demand and
fulfil our purpose as a company, but also will continue
to underpin the long-term financial performance and
strength of the group.
Our purpose drives our strategy
Our purpose is ‘Making a positive difference to
people’s lives through outstanding personalised care’.
That’s why we need a strategy that helps us to
meet Britain’s healthcare needs, not just by running
great hospitals, but also by developing new services.
A strategy that focuses on quality and safety at its
core, champions sustainability throughout the
organisation, recognises the vital role our people
play in all of this, and delivers a strong financial
performance for shareholders while generating
value for all our stakeholders.
“Our purpose has moved on from
making a positive difference to
‘patients’ lives’ to ‘people’s lives’,
broadening our offer of outstanding
personalised care to more people in a
wider range of settings. We aim to be
involved in people’s healthcare across
both pre- and post-hospital care. After
all, it’s in our name, Spire Healthcare.
We are more than just our hospitals.”
Justin Ash
Chief Executive Officer
Our key performance indicators (KPIs)
are explained in detail
page 33-35
Read about our engagement
with stakeholders
page 36-41
Read about our alignment to the United
Nations Sustainable Goals (UN SDGs)
page 42-59
01
Driving hospital
performance
page 19-21
02
Building on
quality
page 22-24
03
Investing in our
workforce
page 25-27
04
Championing
sustainability
page 28-30
05
Expand our
proposition
page 31-32
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Our strategy
continued
01
Drive hospital
performance
Continue to grow across our existing
hospital estate with increasing margins
As a preferred provider and partner, we aim to offer
an outstanding patient experience in our hospitals,
and ensure we are easy to do business with.
Maximising our capacity
As we evolve our strategy, the core of our business
remains running great hospitals. With demand for
healthcare at record levels, the biggest focus for our
hospital directors, directors of clinical services and
other hospital leaders has been on making the best
possible use of our capacity to meet that demand.
This has tested our teams’ flexibility, and our ability to
back-fill cancelled appointments where patients had
to cancel because they were unwell or had decided
to delay their procedure for another reason. We have
also been more creative with the space we have –
redesignating administration areas as clinical space,
and trialling weekend appointments and surgeries.
Making sure we always have patients who can come
in for their treatment at short notice has helped us
reduce ‘lost’ capacity, although one of the biggest
challenges to scheduling and maintaining lists in the
face of the COVID waves this year has been ensuring
we have the workforce available.
The challenge of COVID
While COVID-19 restrictions have eased during the
year, we started 2022 with the Omicron variant at its
peak, so following all NHS, government and UKHSA
guidance was of the utmost importance. The agility
and resourcefulness of our people remained vital, as
we continued to face challenges and pressures, due to
employee and patient illness or changing rules. We
responded carefully to these challenges, with the
support and guidance of our Medical Advisory
Committees, while keeping our colleagues, consultants
and patients safe at all times, focused on the highest
quality standards. Illness among our own teams, and
people trying to catch up with holidays that have
been accrued during the pandemic, have made
resource planning a very high priority.
Highlights
Patients say their experience
of our service was ‘Very Good’
or ‘Good’
96%
2021: 96%
Source: Patient Discharge Survey
Private inpatient revenue
growth 2022
£335m
2021: £285.9m up 14.7%
Private new outpatient
consultations 2022
+7.8%
581,981 in 2022 vs 539,018
in 2021
Self-pay outpatient
consultations 2022
+3.9%
284,692 in 2022 vs 274,130
in 2021
Our goals
–
Provide people with rapid access to diagnosis
and treatment
–
Provide market-leading offer to private patients,
with targeted growth in NHS treatments
–
Outperform the UK’s overall hospital market
growth
–
Improve our hospital margins and maximise
opportunities
Our performance
Progress during 2022
–
Marketing activity, including television advertising,
further increased brand awareness
–
Increased private inpatient revenue by 14.7% to
£335.3 million from £285.9 million
–
£90.1 million investment including major projects
at Spire Alexandra Hospital and new facilities at
Spire Shawfair Park
–
Won both the ‘Hospital Group of the Year’
and ‘Nursing Practice’ awards at the annual
LaingBuisson awards
Priorities for 2023
–
Continue to increase private revenue
–
Continued investment as part of the five-year
investment plan
–
Continue to deliver services under the NHS
Increasing Capacity Framework and work with
NHS partners to address waiting lists
–
Expand the use of digital technology to further
improve the patient experience
Relevant UN SDGs
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01 Drive hospital performance
continued
Better patient experience
We have made efforts to deliver an enhanced patient
experience, while offering patients both electronic
bookings and electronic pre-operative assessments
(ePOA). We have great teams working in partnership
with our consultants, with whom they have developed
excellent relationships. The success of our ePOA
programme, which was fully rolled out last year, was
recognised with an award for ‘Nursing Practice’ at the
annual LaingBuisson awards. We are leveraging the
programme, which provides real time data, shorter
processing times, and a better patient experience,
while freeing up both nurses’ time and our hospital
consulting rooms. Patients access their pre-operative
assessment questionnaires via MySpire – our secure
online patient portal – and 242,740 electronic
pre-operative assessment questionnaires were sent
to patients in 2022, up from 75,000 last year.
Our website and customer experience was further
enhanced by the addition of live chat for patients
seeking appointments, advice or answers to their
questions.
Focus on efficiencies to improve margin and profit
We have identified numerous opportunities to
improve efficiency, with £15 million savings delivered
this year, and significant potential savings identified
for the next two years. Our procurement team has
worked hard to lock in some supplier pricing for the
medium term, securing the best value for Spire
Healthcare’s third-party expenditure. We mitigate
supplier inflation through our annual savings
delivery plan and strategic procurement, with the
team handling around 5,000 high volume clinical
consumables each week, delivered directly
to our hospitals.
This success is despite having to deal with further
shortages this year, such as the Amber blood alert
in the NHS. Fortunately, our experiences during the
pandemic taught us how to deal with uncertainties,
and we respond to them calmly and with control.
The energy crisis could also represent a threat to our
hospitals during the winter, but we have made winter
plans to deal with power shortages and any other
supply shortages that may arise, and have energy
prices locked in until autumn 2024.
Investing in our estate
We continued our investments in quality, our core
estate and digital systems in 2022, as part of our
ongoing five-year investment plan, accounting for
an overall capital expenditure of £90.1 million. This
included five MRI and CT scanner replacements,
accounting for a total investment of £6.6 million. We
have already approved an investment of £6.5 million
for a further five units to be replaced in 2023, with
another nine units identified for consideration
after that.
A further investment of around £10 million across
the estate was made in 13 x-ray/fluoroscopy rooms,
12 mobile x-ray machines, two mammography units
(with five to be completed in 2023), four C-arm
medical imaging devices, and six ultrasound units.
In addition to all this, further significant investments
are planned for 2023 on anaesthetic machines and
monitoring, camera stacks, and flexible endoscopy.
500,000
over 500,000 NHS patients treated since
March 2020
New care suite
at Spire Alexandra
Hospital
In October 2022, we opened a new care suite at
Spire Alexandra Hospital in Chatham, Kent, to treat
patients with chronic pain. The suite, which will
treat up to 60,000 patients a year, represents a
six-month, £250,000 infrastructure development
project, which will expand the range of healthcare
services we provide at the hospital to both NHS
and private patients alike.
The suite will allow colleagues at Spire Alexandra
Hospital to treat patients who need minor
procedures without a general anaesthetic. This
means more patients can receive their treatment
and return home on the same day. Our initial focus
was to ease pressure on NHS waiting lists in the
Kent and Medway area, treating patients suffering
from chronic pain, although from 2023 Spire
Alexandra will seek to further expand its own
daycase services within the new suite.
Our strategy
continued
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These investments in state-of-the-art technology will
benefit both our patients and hospitals, and provide
the best environment for consultants to work with
us, while ensuring Spire Healthcare achieves the best
value by fully leveraging the group’s volume. Major
projects have included:
–
An £11 million development by Spire Yale Hospital
to convert administrative buildings into an
outpatient centre, which is due to complete in
early 2023. This will create a more comfortable
environment where people can receive much-
needed diagnoses – making use of a new MRI
scanner that will enable more patients to be
scanned for cardiac disease, urological, orthopaedic
and other conditions than ever before.
–
An £8.5 million investment at Spire Shawfair Park
in Edinburgh which has enabled it to accommodate
overnight patients for the first time. This has
been accompanied by additional recovery and
new ambulatory care and daycase facilities,
and a new operating theatre.
–
Further investments have been made at a number
of other hospitals in the group, such as Spire
Norwich (£1.7 million), Spire Cambridge (£1.3
million), and Spire Tunbridge Wells (£1.2 million).
Forging strong PMI partnerships
We aim to establish and maintain long-term
market-leading partnerships with all private medical
insurers (PMI), agreeing value-based contracts based
on price, clinical quality and patient experience. By
building these strong partnerships, and through
effective operational performance and collaborative
initiatives, we aim to make market share gains. During
2022, we agreed new arrangements with three of our
main four PMI providers, Bupa, Aviva and Vitality,
with AXA already being in a long-term contract.
Attracting self-pay patients
We continue to optimise our multi-channel marketing
strategy, building on our successful TV advertising
campaigns, with the aim of enhancing our position as
one of the UK’s go-to private healthcare brands. We
ran two bursts of our TV campaign in the spring and
autumn which continue to drive brand performance.
Pricing clarity
We continue to strengthen our pricing governance,
structures and reporting, through the use of our
market-leading pricing engine, which supports our
revenue management. The pricing engine enables
us to adjust many prices quickly and respond much
more flexibly to rapid changes in the market to
remain competitive, and protect our margin in
the face of rising inflation.
Our partnership with the NHS
The independent sector can help to tackle the
backlog in elective care by the working in partnership
with the NHS. Our volume of NHS work increased
during 2022; by the end of the year, we were treating
more NHS patients than prior to the pandemic and
the flow of patients through the electronic referral
system was strong. We also helped the NHS to treat
patients who had been waiting longer than two
years, nearly reducing to zero the numbers of people
waiting this long. We have now treated over 500,000
NHS patients since the start of the pandemic in
March 2020. We look forward to continuing to
support the NHS through the outcomes of the
Elective Recovery Taskforce (see chief executive
officer introduction on page 8).
Our strategy
continued
Working with Integrated Care Systems
2022 saw the formation of Integrated Care Systems
(ICS) that support the NHS. ICSs are partnerships that
bring together providers and commissioners of health
and care services across a geographical area, and we
are involved in discussion around decision-making.
This relationship also means that we have access to
GPs’ summary care records – so from a patient safety
perspective we can view critical information that
ensures we treat people safely. Our new hub hospital
director roles are a great opportunity to work directly
with ICSs, giving a single point of contact across the
ICS geography, allowing us to place work where it fits
best. We will continue to engage closely with ICSs
during 2023 as they further develop their plans for
the future.
Services for children and young people
Spire Healthcare is a prominent provider of treatment
for children and young people, offering a full range
of paediatric services from initial consultation and
diagnosis through to treatment and surgery, including
dermatology, gastroenterology and ear, nose and
throat services with the latter the busiest service.
We provide paediatric outpatient care to children
from birth, and inpatient theatre procedures from
12 months in Manchester and Leeds and from three
years in all other sites. We have 14 hubs providing
inpatient services for children and an additional
17 spoke sites with an outpatient facility. In 2022
we saw over 35,000 children in our outpatient
departments and nursed over 4,500 on our inpatient
wards. Children at Spire Nottingham can travel to
theatre in a toy electric car to ease their nerves.
01 Drive hospital performance
continued
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02
Build on quality
Maintain strong quality and safety
credentials for patients and as a
competitive advantage
With a proven integrated governance model
and a strong quality improvement culture,
we remain fully focused on quality and patient
safety across the organisation.
Outstanding clinical quality
Quality underpins everything we do. It is an essential
part of delivering on our purpose to make a positive
difference to people’s lives through outstanding
personalised care. At a clinical level, we are committed
to matching, then exceeding best in class, with ‘Good’
or ‘Outstanding’ CQC ratings (or equivalent in
Scotland and Wales) across all our sites and a focus on
consistently good patient engagement and feedback.
98% of our inspected hospitals and clinics – including
10 hospitals inspected this year – have now achieved
‘Good’ or ‘Outstanding’ from CQC or the equivalent
in Scotland and Wales.
We have processes in place to support our hospitals
when they face challenges, with shared learning
across the group that helps us to achieve consistently
high quality standards. We are also uncompromising
on patient safety, and aspire to have high levels of
incident reporting, but the lowest level of patient
harm incidents in the sector – we work hard to ensure
our colleagues and consultants have the skills and
support they need to improve patient safety in the
entire system.
A framework for continuous improvement
We speak with patients every day to better
understand their experience with us. We want to
know about their experience of care, their outcomes,
what they thought of the discharge process, and their
broader patient experience before and after they
came into our care.
We use online feedback and patient forums with
a direct loop to our hospitals so we can learn across
all parts of the patient pathway and national best
practice.
Highlights
Regulatory inspections
(Hospital inspection reports
published during the year)
10
2021: 10 inspection reports
Inspected hospitals and clinics
rated ‘Good’ or ‘Outstanding’
by the CQC and its equivalents
in Wales and Scotland
98%
2021: 90%
Patients say they ‘felt in safe
hands’ when receiving care
at Spire Healthcare
97.0%
2021: 97.3%
Source: Patient Discharge Survey
Relevant UN SDGs
Our strategy
continued
Our goals
–
100% of our inspected locations achieve ‘Good’
or ‘Outstanding’ ratings from CQC (or equivalent
in Scotland and Wales)
–
Sector leading patient satisfaction
–
Above average patient reported outcomes
Our performance
Progress during 2022
–
Embedding our new Quality Improvement strategy
–
Introduced the role of Surgical Care Nurse
Practitioners to enhance patient experience
–
Continued to strengthen all of our governance
standards
–
Launched our new Nursing and Allied Health
Professional (AHP) Strategy Framework
Priorities for 2023
–
Implement the Patient Safety Incident Response
Framework
–
Continue to strengthen our clinical governance
and learning frameworks
–
Prepare for changing CQC assessment
–
Roll out surgical care practitioner nursing role
more widely and plan to introduce new clinical
apprenticeship roles
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02 Build on quality
continued
All senior leaders, including all hospital directors,
attend a Monday ‘10@10’ meeting – 10 minutes at
10am to share key developments and safety issues,
followed by a written briefing for cascade. This
ensures vital information is shared for safety and
continuous improvement.
We recognise that much of a patient’s journey will
be affected directly by the nursing and allied health
professional care they receive. That’s why we have
launched our new Nursing and Allied Health
Professional (AHP) Strategy Framework this year.
The framework sets requirements to continually
improve our services, and is focused on:
–
Making sure we have the right colleagues and
the right skills, in the right place at the right time
–
Quality Improvement (QI)
–
Having a team structure to deliver high-quality care
–
Investing in clinical education
–
Providing excellence in care
We aim for the framework to increase further
our focus on quality and the care we provide.
We also want to encourage the best national
and international nurses and AHPs to join Spire
Healthcare, and work with us to improve the
patient experience.
New surgical care practitioner roles
We are also introducing more advanced nursing roles
across the organisation. The first of these are the
two new Surgical Care Practitioners (SCP) we have
recruited at Spire Cambridge Lea and Spire Bushey
in Watford. Both are nurses with advanced
qualifications who can support consultants’ practice
at our hospitals. They will help with continuity
across the patient pathway – support in all areas,
including clinics.
An SCP is all about improving patient care and
experience, improving efficiency and effectiveness
in theatres and making it easier for consultants to
do business with us, and so far we have received
good patient and consultant feedback on
these appointments.
Getting reporting right, getting assurance right
We continue to strengthen all of our governance
standards, having improved our reporting processes
on quality to streamline ward-to-board assurance.
Our integrated Quality Assurance Framework
includes a suite of key performance indicators (KPIs)
that is reported monthly to the board. Our Quality
Assurance Framework is based on the NHS National
Quality Board framework, with KPIs grouped under
safe, effective, experience, well led, and money
and people.
The report is carefully constructed to provide
information, not just data, giving board members
context, so that they can focus on conversations
around assurance rather than seeking data.
Treating higher acuity conditions
Enhancing our ability to treat patients with higher
acuity conditions is an important aspect of our
strategy. Greater capacity to carry out more complex
operations in our hospitals opens up new areas of
care we can provide, and makes Spire Healthcare
more self-supporting, by ensuring that we need to
do fewer transfers out where critical care needs arise.
We continue to validate our quality standards, and
have now earned JAG accreditation, which is awarded
by the Royal College of Physicians’ Joint Advisory
Group on Gastrointestinal Endoscopy, for our
endoscopy services at 12 sites. In addition, 15 of
our 17 chemotherapy sites have Macmillan Quality
Environment Mark (MOEM) accreditation, which
champions cancer environments that go above
and beyond to create welcoming and friendly
spaces for patients.
Recognising,
diagnosing and
treating
hyponatraemia
Hyponatraemia occurs when the concentration of
sodium in a patient’s blood is abnormally low and
can cause a range of symptoms, some of which
can be severe. When we noticed a slight increase
in hyponatraemia in patients after their operations,
we gathered colleagues from two of our hospitals,
Spire Alexandra in Kent and Spire Washington in
north east England, along with central clinical
colleagues, to understand why this was happening
and what we could do to improve this trend and
raise quality. As a result, we created a new clinical
guideline, Clinical Policy 24, and supporting
information to help our people recognise, diagnose
and treat hyponatremia urgently. Early indications
show that incidences have been reduced, and
treatment plans are improving. We are participating
in the development of a project run by the National
Confidential Enquiry into Patient Outcome and
Death, looking at the safe treatment of acute
highs and lows of sodium in hospitals.
Our strategy
continued
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Overview
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Quality improvement
Our Quality Improvement (QI) Strategy, developed
and launched in 2021, is designed to build on the
progress on safety and quality we have made in
recent years, and has introduced a standard QI
methodology across the business to enhance our
quality improvement culture.
The strategy is underpinned by Spire Healthcare’s
QI principles:
–
Pursue value and quality as defined by our
customers and our stakeholders
–
Understand through observation – go, look,
see and measure
–
Remove waste – work or systems and processes
that add no value and increase workload
–
Create flow – optimise efficiency in all that we do
–
Make it visible so you can see what is happening
–
Standardise, document and continuously
improve operations
Projects have included an initiative to improve the
flow through an imaging department, which has
reduced waiting times from 20 minutes to just five
minutes, delivering a better patient experience and a
more efficient process. Elsewhere, with knee and hip
replacements, we have been working to reduce a
patient’s need to stay in hospital – achieving small
but significant reductions of 0.4 days for knees and
0.25 days for hips on average. We are also running a
six-month project to complete joint replacements
within 23 hours from admission to discharge in a pilot
at six hospitals – with the benefits of a lower risk of
deep vein thrombosis, less muscle loss, and better
recovery times and outcomes for patients.
Now that our QI Strategy is embedded across
the organisation, each hospital runs its own QI
programme. To date, we have run more than 120
QI projects, not only to improve patient outcomes
and their experiences in our care, but also to drive
efficiency and reduce waste.
As part of the strategy, we set up a QI Academy,
aiming to train all our colleagues in QI methodology.
To date, more than 11,000 colleagues have accessed
the QI training, either virtually or in face-to-face
sessions, and we now have more than 150 QI
trained practitioners. We have also delivered bespoke
QI training to our medical advisory committee
chairs, business unit directors, directors of clinical
services, finance managers, and Freedom to
Speak Up Guardians.
Implementing the recommendations of the
Paterson Inquiry
During the year, we continued to work with the
Department of Health and Social Care, NHS England,
IHPN, the CQC and others to implement the
recommendations of the Independent Inquiry into
Ian Paterson. As part of this work, we led jointly a
project involving these stakeholders in 2021 to
develop a national toolkit for patient reviews and
recalls. The work was completed in 2022, and the
toolkit was adopted across the healthcare sector and
published by the National Quality Board. Meanwhile,
during 2022, we continued to take steps to ensure
that there were no outstanding patients of Ian
Paterson who had not been contacted and offered
support, and we completed a complex analysis of
historic legacy IT systems that were in use at the start
of Paterson’s practice, over 20 years ago. This resulted
in the identification of around 1,500 patients, and
these patients were contacted after year end.
Our strategy
continued
02 Build on quality
continued
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03
Invest in
our workforce
With the shortage of clinical staff
across the healthcare sector, we aspire
to attract, retain and develop the most
talented people to our business.
Positive working environment
Making a positive difference to people’s lives is
what we’re here for at Spire Healthcare. Not just
as a company, but every one of us, from our nurses,
theatre teams and allied health professionals, to
our non-clinical support teams and bank colleagues.
And that principle extends to the way we look after
our people. We recognise that none of us have
experienced the combination of factors we all face
today – COVID-19, recession, political turmoil, and
societal unrest. The need for wellbeing, inclusion,
and a positive, rewarding working environment
has never been greater.
That’s why we work hard to share a welcoming
culture that is characterised by openness, respect,
collaborative working, a focus on clinical safety,
and a spirit of continuous improvement. Attracting,
retaining and developing great people is a high
priority for us, and we can only do this if colleagues
feel valued, rewarded, motivated, and supported
by clearly defined career paths.
‘Be your brilliant self’
Resourcing remains a challenge in the current
healthcare market, and is the most significant barrier
to building capacity across our services. We have
developed our own in-house resourcing service to
help us attract talented people to our teams, alongside
actively recruiting people to new roles from within
Spire Healthcare. Bank staff recruitment will also
move in house in 2023.
Our recruitment branding ‘Be your brilliant self’
is based around authenticity, personal culture, and a
personable employment experience. We will continue
to build on our employer brand next year in full
alignment with the work we are doing to build
awareness and recognition of the Spire Healthcare
brand through television advertising and other media
channels, including with our 50,000+ followers on
LinkedIn, and a refreshed recruitment website with
better functionality.
Highlights
Colleagues proud to work for
Spire Healthcare
80%
2021: 84%
Spire Healthcare annual survey 2022
Overseas nurses
520
2021: 545
Spire Healthcare recruitment data
Colleagues who get satisfaction
from their work
84%
2021: 85%
Spire Healthcare annual survey 2022
Our goals
–
Sector-leading colleague satisfaction
–
Sector-leading consultant satisfaction
–
Sector-leading private hospital apprenticeship
scheme
Our performance
Progress during 2022
–
Launched our new Equity, Diversity and Inclusion
Strategy
–
Continued to build on our sector-leading
apprenticeship programmes, including new
apprenticeship in cardio physiology
–
Developing our own in-house resourcing service
to attract talented people
–
Launched our Helping Hands initiative for
colleagues
Priorities for 2023
–
Launch our new Reward Framework
–
Further develop our employer brand and refresh
our recruitment website
–
Work with innovative technology partners
to support our resourcing team
–
Promote allyship across our hospitals and
central functions
Relevant UN SDGs
Our strategy
continued
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03 Invest in our workforce
continued
Valuing and rewarding colleagues
We’re committed to supporting colleagues as they
develop and grow with us, while ensuring that
everyone is fairly rewarded for their contribution.
We made an exceptional annual salary award for
permanent, eligible colleagues from September this
year with up to 16% for the lowest paid. These rises
were in addition to the £100 thank you payment paid
to colleagues in March, recognising work done during
the pandemic, and the increases more than 4,000
colleagues received in April. All colleagues are
now paid at least the Real Living Wage.
We have also been working on a new Reward
Framework, which will define new job levels and job
families for all roles, with competitive target salaries,
and provide greater transparency to our permanent
colleagues. Once these have been introduced in 2023,
we will work towards recognising individual
contribution and performance with further
salary improvements.
Spotlight on engagement
We want our colleagues to have a successful and
rewarding experience working at Spire Healthcare,
where they feel engaged and can perform at their best.
We use a range of two-way communications channels
to communicate and engage with colleagues. These
channels include our Ryalto colleague communications
tool, which is used to build employee communities,
publish key information and videos to colleagues from
our chief executive officer, Justin Ash, and members
of the executive committee every month.
We launched our ‘Little book of making a positive
difference: spotlight on engagement’ in September.
This provides practical ideas to improve engagement
at Spire Healthcare. The aim is to capture better our
‘colleague needs’, and embed a culture of growth
relevant to each individual.
We have also refitted our London headquarters at
3 Dorset Rise – creating a venue where people can
come together again, but one that also facilitates
hybrid working. We remain flexible, and colleagues
are very pleased to be back together.
Colleague surveys
We also used Ryalto to hold a mid-year temperature
check on colleague engagement, which was followed
up by our full annual survey in October 2022.
The overall response rate was 77%, with 80% of
colleagues proud to work for Spire Healthcare (-4%
from 2021, level with 2020) and 84% of colleagues
get personal satisfaction from the work they do. 83%
of colleagues would be happy if their friends or family
needed treatment at Spire Healthcare and 72% would
recommend it as a place to work. Following these
results, teams across the business are developing
action plans collaboratively to drive improvements.
Our new equity, diversity and inclusion strategy
Diversity and inclusion is core to everything that
we do, and we are committed to delivering an
environment where everyone is respected and cared
for, and where difference is celebrated. That makes
us stronger as a team and as an organisation, and it is
only by ensuring all of our colleagues feel confident to
bring their whole selves to work that we can be truly
successful as a business.
Everyone’s job is to create a working environment
in which our people are able to realise their potential
in a workplace where they feel comfortable to share
their views and experiences. That’s why we have
launched our Equity, Diversity and Inclusion Strategy
around four commitments that ensure that: (i) we
recognise the value of diversity, (ii) we understand
how it will help us deliver our purpose, (iii) we respect
and appreciate each other for who we are, and (iv) we
include diverse colleagues in our problem solving to
make better, faster decisions.
Investing in apprenticeships
We now have around 550 apprentices across the
business in a wide range of clinical areas such as
biomedical science, physiotherapy, medical laboratory
technicians, as well as non-clinical disciplines. In 2022,
we introduced a new apprenticeship in cardiac
physiology, and are looking at other expansion options.
Our most significant scheme is our nurse degree
apprenticeship programme in England, with 180 nurses
apprentices on the programme. Read more on page 51.
Our strategy
continued
Two Spire Healthcare
medical technicians
featured at the
Science Museum
We were proud to see that Georgia Godwin,
a medical laboratory technician from Spire
Southampton, and Kelly Greaney, a radiology
practitioner from Spire Leicester, were chosen
to feature in the new Technicians’ Gallery at
London’s Science Museum. The gallery is aimed at
encouraging 11-16 year olds to consider a scientific
or technical career. Young people who visit can
‘have-a go’ at being a technician and learn about
exciting technician opportunities.
QR codes around the gallery direct people to
a special website, where they can learn about
Georgia’s and Kelly’s stories and those of the other
technicians featured. Having studied forensics,
Georgia now works in the pathology laboratory
at Spire Southampton, analysing blood and other
samples from patients who come for diagnosis
and treatment at the hospital. Kelly was an
administrator in Spire Leicester’s radiology
department, where she was encouraged by
her manager to take on more patient-facing
duties, and has now qualified as a radiology
assistant practitioner.
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Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
0
70
140
210
280
350
Leavers
Starters
Turnover
Jan
0
2
4
6
8
10
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Other
COVID-19
Average absence
5.5%
International nurses programme making a lasting
difference to people’s lives
The recruitment of overseas nurses has also proven
highly beneficial to Spire Healthcare – not just adding
valuable colleagues and capacity, but also broadening
the cultures of our clinical colleagues. It has proved
popular with our nurses joining from other countries,
with many commenting on the welcoming
experience of working with clinicians in our hospitals.
By the end of the year, we had 520 international
colleagues working in the business.
We are committed to ethical recruitment. This means
that we only recruit actively from ’green’ countries
under the World Health Organization definition.
Overseas colleagues are supported to connect with
others making the journey. Each new colleague goes
for Objective Standard Clinical Examination (OSCE)
training and is individually welcomed, and we provide
them with access to support teams 24/7.
Mental health and wellbeing
We continue to build on the wide range of practical
and emotional support we put in place for colleagues
in 2020, with Mental Health First Aiders (MHFAs)
at all of our sites, and access to support networks.
We also offer a comprehensive Employee Assistance
Programme providing confidential advice and
support online and via a free helpline, available
24 hours a day, 365 days a year.
While ordinarily mental health and wellbeing is not
typically recognised as a diversity strand, it is such
a huge and important workforce issue that we have
included it in our new Equity, Diversity and Inclusion
Strategy. This focus will further bolster our support
for colleagues, and we will create a new network for
all of our MHFAs to support them in what they do.
We will also continue with wellbeing 1:1s to ensure
that managers are having regular conversations with
all colleagues about their wellbeing, and understand
more about their experiences.
Freedom to Speak Up
We want all colleagues to feel confident and
empowered to raise any issues, concerns or quality
our teams. Our absence rates show a reduction in
2022 as the pressures of COVID-19 started to ease.
The overall rate of absence was 5.6% compared to
6.3% in 2021. The cost of absences also reduced by
over £1m across the group in hours lost to sickness
Our monthly turnover rate, while higher than 2021,
reduced on average in Q4, suggesting that the recent
pay award and increased development opportunities
have had a positive impact on retention. The highest
recorded reason for leaving has changed from pay
and benefits to career progression, and our focus
moving forward will continue to be on career
development and talent. The market for talented
improvement suggestions they may have. This is part
of a healthy culture in which concerns are identified
and speaking up is not only encouraged, but also
embedded across all areas of the business. All
colleagues can submit a Freedom to Speak Up (FTSU)
concern via a dedicated module on Datix, our risk
management software. The handler for the concern
is a trained guardian. We have a dedicated FTSU
month each October which raises the profile of
speaking up and of the guardians at our sites,
together with further support and training to ensure
colleagues know who they are and how to contact
them. Colleagues also have access to a confidential
whistleblowing helpline, managed by an independent
third-party provider, enabling them to raise any
concerns anonymously. We now submit regular
data to the National Guardian’s Office.
Making a positive difference to each other
With the pressures of the past few years compounded
by the cost of living, high inflation, and recession in
the economy, supporting our colleagues’ health and
wellbeing is a top priority. We launched our Helping
Hand initiative in September with bespoke notice
boards now available at all sites where our people
can ask for help, or share what they can help their
colleagues with, from donating or loaning useful
items to offering their skills and time to help.
To support colleagues with the rising cost of living,
we launched affordable take home meals across all
hospitals – with nutritionally balanced frozen foods
available at cost price, ready for colleagues to cook
at home. We also offer supermarket savings via our
online colleague support network Spire for You, and
have promoted Blue Light cards, which provide more
than 15,000 discounts from national retailers to local
businesses on holidays, cars, days out, fashion,
insurance, phones, and more.
Absence and turnover
Managing absence and turnover is key to
understanding colleagues and ensuring they are
valued and rewarded. We use sickness absence and
employee turnover data to flex our workforce and
ensure we have sufficient capacity and resilience in
people remains highly competitive, with the demand
for nurses particularly high. We are pleased however
to see sustained and improving recruitment, and next
year we will bring this in-house to further improve the
recruitment experience for new joiners.
Read more about diversity networks, allyship and
data in our sustainability section on
page 52.
Read more about apprentices in our sustainability
section on
page 51.
Our strategy
continued
03 Invest in our workforce
continued
Employee absence, 2022
Total sickness absence in hours as a % of total employed hours
Employee turnover, 2022
Starters and leavers by month for employed colleagues
and 12 month rolling turnover rate as a % of total headcount
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Sustainability is core to Spire Healthcare
Championing sustainability is a core pillar of the
group’s strategy and fundamental to our success
and future. By managing sustainability successfully,
we aim to create lasting social economic value.
2022 saw Spire Healthcare develop its first ever
sustainability strategy. The strategy is a progressive
journey in which the group is evolving from risk
management to providing social value and driving
opportunities for sustainable growth. We actively
collaborate with our stakeholders, including patients,
colleagues, consultants, local communities and
partners, to enrich lives and be a net contributor
to society, not just through the services we provide,
but in everything we do.
Our sustainability strategy
We are positioning ourselves to better understand
and predict people’s healthcare needs while
maximising our contribution to both the communities
we serve and wider society. We’re looking to drive
positive change in the workplace, our local
communities and the environment, as we challenge
our workforce to factor sustainability into all aspects
of their work.
Our sustainability strategy is characterised as follows:
Highlights
Reduction in GHG emissions
6%
2021: 8%
Report on emissions by Inenco Group
Ltd for Spire Healthcare
Dry mixed recycling rate
23%
2021: 11%
Source: Spire Healthcare waste report
2022
Female representation at
executive committee and board
level combined
37%
2021: 37%
Source: Spire Healthcare data
Our goals
–
Leading the sector in delivering carbon neutral
by 2030
–
Net contributor to the UK’s healthcare workforce
and a diverse employer
–
Protect and manage all sensitive data
–
Reduction in waste and improved recycling
Our performance
Progress during 2022
–
6% reduction in greenhouse gas (GHG) emissions
to 27,091 tCO
2
e (8% in 2021)
–
23% of dry mixed waste is recycled, up from 11%
in 2021
–
37% female representation at board and executive
committee level combined at end 2022, up from
25% at end 2018
–
17.3% of colleagues classify themselves as
non-white by ethnicity, up from 16.5% in 2021
Priorities for 2023
–
Continue to seek opportunities for carbon
reduction at all Spire Healthcare sites
–
Strengthen security measures governing the
storage of and accessibility of sensitive data
–
Further increase female representation at board
and executive committee level in pursuit of 40%
target by 2025
–
Continue to encourage the recycling of cardboard,
plastic, polystyrene, face masks, tray wrap and
disposable curtains
Relevant UN SDGs
Our strategy
continued
Principles
Strategy
To become recognised as a
sustainability leader within our industry
Ambition
Respect the
environment
Engage our
people and
communities
Operate
responsibly
Sustainability
framework
– Growing a profitable, successful, robust and, ultimately,
sustainable company, and being a net contributor
to society are not mutually exclusive goals
– Need for a clear sense of purpose, consistent values
and a persistent desire to engage with and deliver
for a broad set of stakeholders
04
Champion
sustainability
Become recognised as a leader in
environmental, social and governance (ESG)
in our industry
Spire Healthcare’s purpose, strategy and
sustainability ambition are integrally linked to each
other. By managing sustainability successfully, we
aim to create lasting economic and social value.
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04 Champion sustainability
continued
Respect the environment
We continually seek ways to reduce our impact
on the environment. We are reducing our carbon
emissions, focusing our efforts on waste and
recycling, including reducing the use of single-use
plastics, while working with our suppliers to align
goals to develop healthcare in sympathy with a
sustainable planet.
In 2022, we made good progress towards our aim of
becoming net zero carbon by 2030 and were highly
commended in the BusinessGreen awards for Net
Zero Strategy of the Year this summer. During the
year, we installed 15 electric vehicle chargers, and
replaced gas-fired boilers with more efficient steam
boilers in four hospitals. We increased the amount of
dry mixed waste we recycled – more than doubling
since 2021 – and began a project to reduce piped
nitrous oxide from our hospitals, removing it in
almost one quarter of the estate.
Engage our people and communities
Having a dedicated and engaged workforce is
fundamental to the delivery of our purpose. We
celebrate having a large number of long-standing
colleagues who bring experience and dedication.
We’re continuing to invest in our workforce through
strong recruitment, retention and development
programmes. Our aim is to provide a stimulating,
diverse, inclusive and healthy working environment
within which colleagues can thrive and achieve their
career goals and aspirations.
We have narrowed our overall median gender pay
gap in Spire Healthcare Limited from 7.1% in 2021
to 6.2% in 2022.
A key way we ensure the sustainability of our
business is through our award-winning learning and
development programmes. Our sector-leading nurse
apprenticeship scheme continues to grow, as do our
other apprenticeship programmes for both clinical
and non-clinical colleagues. In 2022 we introduced a
new apprenticeship in cardio physiology. 5% of our
permanent workforce are now apprentices. These
schemes also contribute to the sustainability of the
whole healthcare sector, because many of the
graduates from the programmes will go on to careers
in the NHS and elsewhere – something we encourage.
Further investment has been through our new equity,
diversity and inclusion strategy. We are developing
networks across six diversity strands – ethnicity,
sexuality, age, gender, disability, and mental health
and wellbeing – and will work with these diversity
network groups to improve the way we attract, recruit,
develop and promote diverse, talented colleagues.
Closely linked is the way we engage with the
communities in which we operate. As well as
expanding to provide services in the community, we
also fundraise to support charities in the areas around
our hospitals. In the summer, we held a week-long
charity challenge, in which colleagues cycled, baked,
and organised raffles, competitions and other
fundraising endeavours to support the British Red
Cross Ukraine Appeal.
Read more about our diversity and learning and
development initiatives in our sustainability section
on pages 51 to 55.
Removal of piped
nitrous oxide
In 2022, we made significant progress towards our
carbon reduction targets by beginning to move away
from using nitrous oxide. Following consultation and
engagement with appropriate stakeholders in
early 2022, business approval was given to begin
disconnecting piped nitrous oxide from the estate.
At the end of 2022, seven hospitals are complete,
nine are ready and awaiting disconnection, and a
further five hospitals have approved authorisation
and await anaesthetic machine modifications.
Disconnection of supplies to the remaining hospitals
is a key part of our carbon reduction plan for 2023.
Once implemented, this will reduce our carbon
emissions by up to 4,000 tonnes per year. It will also
bring benefits such as lowering exposure risk to the
gas for patients and colleagues, reducing manual
handling of cylinders and mitigating the security
risk from organised criminals who may engage in
attempted break-ins to manifold rooms and steal
cylinders. We have also agreed to begin removal
of desflurane, another climate change gas.
Our strategy
continued
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Operate responsibly
Ethical and responsible behaviour is borne out of a
culture that is based on core values. Spire Healthcare’s
values are:
–
Driving clinical excellence
–
Doing the right thing
–
Caring is our passion
–
Keeping it simple
–
Delivering on our promises
–
Succeeding and celebrating together
We have a relentless focus on delivering the highest
standards of healthcare and prioritising patient
safety at all times. We aim to maintain robust
standards of clinical and corporate governance
in line with best practice while promoting an open
and learning culture for all colleagues. Operating
responsibly also requires strict compliance with the
law. We continue to monitor all aspects of the group’s
operations to ensure compliance with all applicable
laws, including competition law, anti-bribery law,
anti-tax evasion facilitation law, healthcare
regulations and data protection law.
Strengthening information and data security
Security can never be risk free, but Spire Healthcare
has demonstrated commitment and support for
continual improvement through investment in
people, processes and technology to mitigate against
cyber risk. Spire Healthcare has invested time,
attention and capital to reduce risk and strengthen
the group’s information governance and data security
position. Read more on page 59.
Sustainability-linked financing
During the first quarter of 2022, we successfully
re-financed the group’s existing bank funding
facilities, taking the opportunity to pay down £100
million to leave a Senior Loan Facility of £325 million
and an undrawn Revolving Credit Facility of £100
million. The new facilities include a sustainability-
linked element connected to environmental and
quality factors, the first of its kind amongst UK
independent hospital providers. Embedding
sustainability targets in the group’s debt facilities
provides evidence of Spire Healthcare’s commitment
to sustainability.
Read more about sustainability and our goals,
progress and KPIs in our sustainability section
on page 42.
04 Champion sustainability
continued
Our strategy
continued
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05
Expand our
proposition
Selectively invest to attract patients and
meet more of their healthcare needs
Expanding our proposition enables us to
meet changing demands for healthcare,
reach a wider target market, and provide
a broader service to patients and the public.
Broadening our impact
In the aftermath of the pandemic, increased waiting
times and growing demand for healthcare aren’t just
affecting people with conditions that need treating
in hospital. More and more, it’s affecting people
wanting to understand if they have a problem, and
what they can do about it with the right medical
support in an appropriate setting.
That’s why, at the same time as we are building
capacity at our hospitals, we are actively seeking
innovative ways to broaden our impact in the
communities we serve. That means supporting the
delivery of a broader range of healthcare services
which complement our existing offer to patients, and
taking a more proactive role in their care before and
after a stay in hospital. The key principle is that we
want to be with our patients throughout their whole
healthcare journey.
Building on the success of Spire GP
The majority of the work we do begins with a GP
referral and our Spire GP service, which is available
through almost all of our hospitals, was set up
primarily to provide people with a fast and convenient
way to access the diagnoses and treatments we can
offer. We saw another significant increase in the
demand for Spire GP this year, driven by perceived
or experienced difficulties for people accessing
NHS primary care, with around 32,900 Spire GP
appointments, compared to 23,000 in 2021.
As demand for our Spire GP service grows, it is
becoming more of a revenue generator for the
business, and we are building on the premium GP
service we provide. Patients can choose between
varying length consultations as long as 30 minutes,
face-to-face, and discuss multiple symptoms at a
single visit if they wish. As part of Spire Healthcare’s
strategy to expand our proposition, we will look to
grow Spire GP, both organically and by further
acquisition where appropriate.
Highlights
Occupational health
700
New corporate clients through
The Doctors Clinic Group acquisition
Spire GP visits
32,900
2021: 23,000
Spire Healthcare data
GPs
128
2021: 90
Spire Healthcare data
Our goals
–
Develop Spire Healthcare as an innovative
healthcare business
–
Build new revenue and profit streams by building
and acquiring new services, as well as partnering
to expand our proposition
Our performance
Progress during 2022
–
Significant growth in Spire GP appointments
–
Commenced plans for new diagnostic and
outpatient clinics
–
Acquired The Doctors Clinic Group, a provider
of occupational health and private GP services
–
Started a nurse-led diabetes care pilot working
with the Leicester Diabetes Centre
Priorities for 2023
–
Continue to expand our national footprint of clinics
–
Build further on the success of Spire GP and
integrate, and grow, our occupational health
services
–
Explore new services to support long-term
conditions
–
Explore the potential for supporting female health
Relevant UN SDGs
Our strategy
continued
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Our strategy
continued
05 Expand our proposition
continued
Acquisition of The Doctors Clinic Group
We acquired The Doctors Clinic Group (DCG), an
integrated provider of occupational health and
private GP services, for a total consideration of
£12 million, in December 2022. This increased the
number of locations where we provide GP services
to 58 and means we now have 128 GPs, making
ours one of the largest networks of GPs in the
independent sector. DCG has a strong presence in
central London, establishing a footprint for the
group as a whole in that market for the first time.
DCG provides occupational health services to more
than 700 corporate clients, and the acquisition will
provide us with a strong platform to enter and
expand in this fast-growing sector.
Treatment clinics
An important part of expanding our footprint will
be opening new clinics that offer GP and outpatient
consultations, and where we can carry out minor
treatments, in particular ophthalmology,
dermatology and gynaecology. The clinics will not
be diagnostic centres, but will focus on surgery that
doesn’t require a general anaesthetic. We will offer
ambulatory care, but through daycase units only,
with no beds. This approach means we can build
in efficiencies from the start, which is not possible
when running a full hospital.
The first of our new clinics in Abergele, North Wales,
is due to open in late 2023, and our ambition is to
open a second clinic and have a further two clinics
in development by the end of 2023. Some will be
outreach clinics close to existing hospitals, which is
a model we use already, allowing us to move some
of our outpatient functions and minor treatments
out of our hospitals. Others will be in completely
new parts of the country where we don’t currently
have a presence, enabling us to meet the healthcare
needs of more people, and to build relationships
with new consultants.
Chronic condition management
With many people struggling with a general
deterioration in their health since the start of the
pandemic, this is leading to more acute and chronic
conditions over time. When we speak with these
patients, they tell us that they find it difficult to get a
joined-up service in many parts of the country, so we
are looking to improve this by offering paid-for services
that help people to manage long-term conditions.
We are piloting the first of these services for patients
with Type 2 diabetes. It’s a nurse-led subscription
service, using digital technology for home monitoring
with 1:1 support from a diabetes support nurse.
The next step may be to offer similar services for
other conditions, offering digital care supported by
1:1 personalised care, as we recognise that, for most
patients, access to an app is more valuable with
a clinician to respond and support.
Supporting female health
There are a number of other areas where we think
we can build healthcare services that better support
people on an ongoing basis and we believe that female
health is one of these. While many discussions around
female health may centre on specific issues such as the
menopause or fertility, the need for ongoing support
and fast access to appropriate treatment and care for
women is far broader. For example, more women are
likely than men to die or be misdiagnosed after a heart
attack, and more women than men have strokes. In
dermatology, many skin diseases are more prevalent
in females. And conditions like endometriosis and
polycystic ovary syndrome can go undiagnosed for
years. In our early stages of discovery we are pleased to
be engaging with specialists and charities to explore
how we can better support women and their health.
Spire Diabetes Care
As part of our plans to develop new services to
support the management of long-term conditions,
we are piloting a subscription-based, nurse-led
service for people with Type 2 diabetes. Spire
Diabetes Care combines digital innovation and
physical consultations, giving patients use of an app
and platform provided by InHealthcare to help them
manage their conditions remotely, supported by
clinicians. Patients will have a virtual appointment
with a Spire GP twice a year to review the results of
blood tests and discuss any recommended changes
to their medication, and both virtual and face-to-
face appointments with a diabetes support nurse.
During the face-to-face appointments they will have
a blood test and foot check. We are delighted to be
working with the Leicester Diabetes Centre, a Centre
of Excellence for diabetes care, which will support
our pilot with nurse training and mentoring, and
evaluate the service throughout 2023. We will
publish a paper detailing this evaluation in March
2024, with a view to offering Spire Diabetes Care
as a service on a commercial basis.
Making a positive
difference to Britain’s
working population
The addition of occupational health to our group
extends our services into the workplace, providing
support for companies to keep their employees
in work, protected, supported and healthy. Our
ambition is to be a leading provider in this space and
we believe the combination of the skills in Maitland
and Soma (part of The Doctors Clinic Group)
combined with Spire Healthcare give us a unique
advantage. We will extend the offering to include
rapid access to diagnostics and treatment to more
than 700 corporate clients. These integrated services
will help our clients reduce absence, improve
productivity, recruit and retain a talented workforce,
meet their legal obligations and provide exceptional
corporate wellbeing offerings, delivering real and
tangible business benefits.
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Our key performance indicators
Non-financial KPIs
We use a range of financial and non-financial metrics
to measure group performance. These metrics have
updated for 2022, to align with our new strategy and
to deliver strong financial performance
Colleague engagement index
>80%
100% CQC/HIS/HIW
Good or Outstanding
>75 net promoter score
among admitted patients
Apprentices constitute 5% of
our workforce
80%
2021: 84%
98%
2021: 90%
81
2021: 81
5%
2021: 5%
Why is this a KPI?
We are a people business. Having engaged
colleagues is not only important for their own
wellbeing, but also helps them in daily efforts
to provide high-quality care to our patients.
Why is this a KPI?
Providing personalised quality care is our daily
responsibility and a key business driver. We seek
to reach 100% Good or Outstanding ratings from
the CQC or the equivalent in Scotland and Wales.
Why is this a KPI?
Our net promoter score (NPS) metric measures
admitted patients’ likelihood to recommend Spire
Healthcare to friends or family in need of similar
treatment. This is a key indicator of customer
satisfaction and the quality we are delivering to
our patients.
Why is this a KPI?
There is a shortage of clinicians in the UK and
worldwide. We are committed to building up
the talent pipeline for our business and for the
UK healthcare sector more widely.
Performance
We are achieving high levels of colleague
engagement – 80% of colleagues said they
felt proud to work for Spire Healthcare.
Performance
98% of inspected hospitals and clinics are rated
Good or Outstanding or the equivalent. One
hospital is awaiting re-inspection by CQC.
Performance
We continue to achieve high levels of private
patient recommendation. NPS among admitted
patients in 2022 was 81, the same score as seen in
2021. We continue to monitor all patient feedback
to drive continuous improvement.
Performance
We now have around 550 clinical and non-clinical
apprentices in Spire Healthcare which is 5% of our
total workforce.
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Our key performance indicators
continued
Non-financial KPIs
continued
Net zero carbon emissions
(tCO
2
e) by 2030
Year-on-year reductions
in gender pay gap
40% female membership
of board and executive team
by 2025
27,091
2021: 28,805, down 6%
6.2%
2021: 7.1%
37%
2021: 37%
Why is this a KPI?
We continually seek ways to reduce our impact
on the environment. We are reducing our carbon
emissions, focusing our efforts on waste and
recycling, including reducing the use of single-use
plastics, while working with our suppliers to align
goals to develop healthcare in sympathy with
a sustainable planet.
Why is this a KPI?
Our purpose is to make a positive difference
to people’s lives and that includes fairness for
all our employees. The gender pay gap measures
the median difference between pay for males
and females.
Why is this a KPI?
Spire Healthcare wants to support women to
become leaders within the business. More diverse
boards are more effective; diversity drives
innovation and better decision-making, and
is reflective of the group and its employees.
Performance
We delivered a reduction in tCO
2
e of 27,091, down
6% on 2021 and are in line to hit our 2030 target.
Performance
In 2022, the overall median gender pay gap in
Spire Healthcare Limited was 6.2% (2021: 7.1%).
We are taking steps to reduce the gender pay gap
and ensure the fair treatment of females across
our business. We are developing our job framework
to allow colleagues to better understand their
roles and support progression by recognising
contribution, performance, learning and
development.
Performance
The combined executive committee and board
demographic in 2022 is 37% female. Our executive
committee demographic is now 43% female,
compared to 75% male just four years ago.
Spire Healthcare is supporting women to become
leaders within the business and by May 2023 we
will have five women on our board, moving the
board’s gender balance from 33% to 45% women.
Please see the Sustainability section
for more information.
page 42
Risks – for more
information see
pages 66 and 101
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Our key performance indicators
continued
Financial KPIs
All three financial KPIs described below align
with Spire Healthcare’s refreshed strategy and
the long-term financial objectives outlined at
the group’s Capital Markets Day event in June 2022
Revenue CAGR c5%
by 2025
Adjusted EBITDA* margin
>21% by 2025
ROCE* >10%
by 2025
Why is this a KPI?
Monitoring revenue provides a measure of Spire
Healthcare’s growth.
Why is this a KPI?
The margin we achieve is a reflection of the group’s
efficiency in generating shareholder returns. An
increasing margin makes the profit more resilient
to adverse effects and demonstrates the group’s
strategy for managing cost and targeting private
payors is the right one.
Why is this a KPI?
ROCE is an important metric and measures
how well the group’s capital is being deployed
to generate returns. Adopting ROCE as a KPI
influences future investment strategy by the
business to ensure that available capital this
is directed towards generating improving
shareholder return.
Performance
Overall revenue was £1,198.5 million, up 8.3%
compared to 2021.
Performance
Adjusted EBITDA was £203.5 million, up 14.2%
on 2021, despite the impact of COVID-19 on
cancellations, and colleague and consultant
sickness which reduced income and increased
costs at times through the year. Adjusted EBITDA
margin was 17.0%, up from 16.1% in 2021.
Performance
Spire Healthcare seeks financial discipline with
a clear capital allocation policy and targeted
investment. We have improved operational
effectiveness with our efficiency programmes
which delivered more than £15 million savings in the
year. We have also implemented price rises where
appropriate, managed our mix of services and been
more selective in the choice of products we use.
The strong operational performance in the period
resulted in Adjusted EBIT climbing by 30.2% to
£105.6 million, leading to a material improvement
in ROCE, up by 1.3 percentage points to 6.2%.
Risks – for more
information see
page 66 and 101
Read more in our
financial review
page 79
2022
2021
2020
17.0%
16.1%
17.5%
2019
2018
19.3%
12.8%
2022
2021
2020
6.2%
4.9%
4.0%
2019
2018
5.1%
4.9%
2022
2021
2020
£1,198.5m
£1,106.2m
£919.9m
2019
2018
£980.8m
£931.1m
8.3%
20.3%
-6.2%
5.3%
-0.1%
CAGR
*Refer to page 81 for a
reconciliation of non-GAAP
financial measures.
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Engagement with our stakeholders is critical to our
success and delivering on our purpose, strategy and
objectives. Their input informs our strategic and
everyday business-level decisions, and the board
is provided with an overview of any relevant
stakeholder feedback.
Patients
Engagement with stakeholders
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
We treat a wide variety of patients who self-pay, use private
medical insurance or are referred to us by the NHS.
Why they are important to us
Providing the highest quality, safe, personalised care is at the
core of everything we do.
What is important to them
Rapid access to high-quality healthcare, both diagnosis and
treatment, at a price they can afford.
How we engage
We engage continuously with patients before, during and
after their treatment and seek to involve them in all key
decisions about their care.
We use a framework of customer and patient surveys,
including questions mandated by regulation (eg Private
Healthcare Information Network) or contracts (eg NHS).
These cover our major touchpoints with patients, whether
they receive admitted care or come to us as outpatients.
We work closely with patients, with the support of the
Patients Association, on a range of projects, to understand
their experience of care with us, and we use their feedback
to further shape and refine our processes. We run hospital
patient forums and conduct regular director and board level
site visits.
Board engagement
While we review the feedback from our patient engagement
locally in our hospitals and as part of our operational reviews,
we also do this through the board’s clinical governance and
safety committee. This helps us develop and continuously
improve the services we provide to patients, as well as define
our annual quality priorities, which we set out in our annual
Quality Account.
Increased demand
for patient care,
in and out of
hospital due
to longer NHS
waiting times
–
Care provided for over
926,500 patients (NHS and
private) in the year
–
Expansion of care for
private patients seeking
to avoid NHS waiting lists
–
Government elective
recovery initiatives, in
which Spire Healthcare is
participating
–
Expansion of Spire GP and
other new propositions to
meet demand
–
Relationships with GPs to
enable patient choice
Chief executive
officer’s review,
page 9
Need to provide
safe and efficient
patient pathways
–
Increasing use of digital
technology, offering
in-person and virtual
consultations and
assessments, online
brochures and
appointment booking
Strategy:
build on quality,
page 22
Responsible executive owner
Group clinical director
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Colleagues
Consultants
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
We have 14,500 colleagues; nurses, theatre teams, allied
health professionals, non-clinical support (such as reception
staff and porters), head office teams, and bank colleagues.
Why they are important to us
Our colleagues interact with thousands of patients every day
and play a crucial role in delivering the highest quality care
and outcomes.
What is important to them
A fulfilling career with an organisation that offers
opportunities for development, the chance to make
a difference, and appropriate rewards and recognition
for their efforts.
How we engage
We value what our colleagues do, engage closely with them,
and support them in terms of their personal health and
wellbeing, as well as in their professional life and career
aspirations. We gain feedback from colleagues through
regular surveys and engagement and a full annual survey
took place during 2022.
Board engagement
The feedback we receive is analysed by the full board,
remuneration committee and executive committee,
with action plans put in place to respond to the findings.
Continued focus
on colleagues’
health and
wellbeing
–
Increased investment in
wellbeing support,
including mental health
support
–
Ran sessions with expert
speakers
Strategy:
Invest in our
workforce,
page 25
National shortage
of healthcare
professionals
across the UK,
increasing
pressure on
existing
workforce
–
Nursing and other
apprenticeship schemes,
addressing future as well
as current requirements
–
Recruiting, integrating and
training overseas nurses
Continued focus
on issues from
feedback such as
vacancies, volume
of work
–
Strong recruitment,
retention, and
development programmes
–
Surveys during the year
eg online pulse surveys,
new joiner surveys, exit
interviews, full annual
survey
–
Chief executive officer
and executive committee
member forums on visits
–
Regular all-hands calls and
online sessions, ‘askJustin’
email address
–
Consultation with
selected colleagues on
key initiatives
–
Listening sessions with
board members and
hospital teams
–
Fortnightly listening calls
with chief operating officer
for hospital directors
Responsible executive owner
Group human resources director
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
We work with 8,760 consultants, who operate as self-
employed practitioners in our business. They are experts
in their fields, drawn from all medical disciplines, who are
granted privileges to practise in our hospitals, in line with
our stringent medical governance procedures.
Why they are important to us
Our consultants are integral to providing high levels of
medical care to our patients.
What is important to them
High-quality facilities, continuity of trained, committed
employees providing support to establish and develop an
efficient practice at our sites, and the quality of care that
we provide to patients.
How we engage
We meet with consultants to plan individual procedures,
understand their future needs and horizon scan for
developing clinical innovation. They are invited to complete
an annual feedback survey.
In addition, each hospital has its own medical advisory
committee (MAC) to advise the hospital director, the director
of clinical services on any matter relating to the proper, safe,
efficient and ethical medical and dental use of the hospital;
they meet quarterly. Each medical specialty is represented.
Topics including clinical quality, learning from concerns,
incidents and complaints are discussed, plus feedback from
members about matters concerning consultants. MACs are
governed by standard terms of reference, and all discuss the
same key items using a standard agenda. The medical
director and associate medical directors attend MACs
at hospitals, with the aim of attending all MACs at least
annually. In addition, hospitals hold an AGM for their whole
medical society, to which all consultants are invited.
Board engagement
Feedback from our annual consultant survey is reviewed
by the board’s clinical governance and safety committee and
we use this to enhance the offer we provide to consultants.
Board and executive committee members visit regularly to
listen, learn and guide and there are biannual reviews with
hospital directors.
Desire for
improved digital
solutions to
reduce paperwork
–
Digital solutions,
equipment and marketing
support, which create
an improved patient
experience and ultimately
make it easier for
consultants to do business
with Spire Healthcare
–
Improved feedback
from consultants on the
high-quality service we
provide
Our market,
page 12
Ongoing need for
open and regular
dialogue with our
consultants
–
Fortnightly ‘Two Minute
Times’ connects
consultants with each
other and with Spire
Healthcare with a mix of
national and local news
–
MAC chairs meet regularly
with board members and
executive committee
–
Continued close working
with our MAC Chairs
–
Continued rigorous
oversight of all aspects of
consultant clinical practice
Responsible executive owner
Group medical director
Engagement with stakeholders
continued
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Suppliers
Private Medical Insurers (PMI)
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
In the prevailing volatile environment, with high levels
of inflation and ongoing supply challenges, the continued
existence of a reliable and efficient supply chain has been
important to us throughout 2022.
Why they are important to us
In an increasingly volatile environment, resulting from rising
inflation and Russia’s invasion of Ukraine, the existence of a
reliable and effective supply chain has been particularly
important during 2022.
What is important to them
Clear policies, contracts and a strong relationship to ensure
long-term and mutually beneficial commercial
arrangements.
How we engage
We hold performance evaluation sessions with our existing
suppliers, with the frequency determined by the nature of
purchase and the risk profile of the goods or services
supplied. Spire Healthcare’s procurement team undertake
detailed supplier assessments as part of tender evaluation
processes in order to ensure a supplier’s capabilities are
aligned to the group’s business requirements. We ensure
they are compliant on key issues, including modern slavery.
Board engagement
The audit and risk committee reviews all relevant risks in our
supply chain as part of its annual risk assessments.
Global logistics
issues which
challenged our
procurement
teams
–
Centralised supply chain
with a centre maintaining
an average of eight weeks
supply
–
Continuity in
our supply chain
a) Inflation
b) Temporary
cessation of
supply of
renewable
sourced
electricity
–
Work with supply chain
to mitigate detrimental
impacts from global
product recalls, supply
issues and supply chain
friction
a) Work with suppliers
and internal
stakeholders to
minimise impact
of inflation through
effective use of
demand and supply
levers
b) rephrasing of trajectory
to reflect impact until
end of 2024 and
consideration of
acceleration of other
measures to reduce
emissions impact
Responsible executive owner
Chief operating officer
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
Private Medical Insurers (PMI) provide medical insurance
cover for both employees and individual members.
Why they are important to us
PMIs are a core part of our referral network, as in a normal
year, approximately 50% of our revenue comes from PMIs.
What is important to them
The need to provide their members with access to leading
consultants, facilities and clinical teams with a strong track
record on safety, quality and patient satisfaction.
How we engage
Regular commercial and clinical review meetings are held
with insurers, covering contract performance, clinical and
financial governance, member satisfaction and operational
and clinical KPIs. We also work to agree and action strategic
joint projects. This is a key part of the relationship
management of our payors and therefore is conducted
quarterly.
We have opened a number of Breast Cancer Specialist
centres accredited by, and in partnership with, Bupa. We
have a rolling plan to launch in more locations and to work
on further cancer pathways together such as prostate and
bowel cancer care.
All our hospitals are providing fast access to imaging and
pathology services to support AXA’s primary care virtual GP
service and onward hospital referrals.
Board engagement
The board supports management as needed in their
relationships with leading PMIs.
Seeking
information to
support their
understanding
of recovery in
PMI activity
Regular proactive
and real-time, open
communications with
the insurers:
–
Daily reporting at an
individual hospital and
service level of available
care for private patients
–
Regular meetings with the
PMI medical governance
and operational leads
–
PMIs kept abreast of key
variations to the NHS
England contract through
the Independent
Healthcare Providers
Network and the
Association of British
Insurers
–
Ensure rapid access to the
best quality clinical care,
and develop our
propositions in partnership
Our market,
page 12
Responsible executive owner
Chief commercial officer
Engagement with stakeholders
continued
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NHS
GPs
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
Our hospitals liaise closely with local NHS trusts and clinical
commissioning groups (and the equivalent in Scotland and
Wales).
Why they are important to us
In 2022 we treated 182,000 NHS patients.
What is important to them
Our ability to provide elective care for their patients, helping
them to address waiting lists and relieving pressure on their
hospitals.
How we engage
Our local leadership teams have maintained their
well-established relationships with their NHS counterparts
as we have exited the pandemic. As well as holding regular
meetings, local NHS leaders visit our hospitals to ensure they
understand the capability we have and the services we offer.
Our national leadership team holds relationships with the
NHS central team in England, Scotland and Wales.
Board engagement
Our board and executive committee liaise with their NHS
counterparts to agree the contractual support we provide
them in meeting the UK’s demand for healthcare.
National request
for assistance in
the light of rise in
Omicron variant
in early 2022
–
National contract with
the independent sector
in place
Chief executive
officer’s review,
page 9
Local and national
request for
assistance to
address elective
care backlog and
104 and
78-week-long
waiters
–
Re-contracted with
local commissioners for all
Spire Healthcare sites and
recovered volumes
in eReferrals
–
Elective Recovery Taskforce
established by the Prime
Minister in December
2022, with Spire
Healthcare participating
Responsible executive owner
Chief executive officer
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
GPs treat all common medical conditions and refer patients
to hospitals and other medical services for urgent and
specialist treatment.
Why they are important to us
GPs are critical parts of our referral network, as most
patients are referred to us by their GP. For that reason,
we seek to liaise closely with NHS GPs.
We also offer our own private GP service (Spire GP), using a
network of 128 GPs, who are granted privileges to practise,
in the same way as consultants, or are directly employed by
Spire Healthcare.
What is important to them
An understanding of our business and services, to make it
easier for them to refer patients to us.
How we engage
Our hospitals offer regular educational events which support
the continuing professional development of GPs. Hospital
colleagues also provide educational events on site at GP
practices. We use the feedback that we receive from GPs
to organise future events that are tailored to their
ongoing needs.
Board engagement
Some of our board members are experienced medical
practitioners, and liaise with GPs through medical forums
and conferences.
Omicron issues
–
Events and consultations
continued virtually and
returned to in person
format
Business model,
page 15
Referrals and
choice
–
Close relations with NHS
GPs and electronic referral
system (eRS) as a major
form of referrals
Responsible executive owner
Group medical director
Group commercial director
Engagement with stakeholders
continued
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Regulators
Investors/lenders
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
We are required to engage with a range of financial, clinical,
health and safety, and competition and market regulators.
The principal healthcare regulators we engage with are the
Care Quality Commission (CQC), the Healthcare Inspectorate
Wales (HIW) and Healthcare Improvement Scotland (HIS).
Why they are important to us
Each of our hospitals is required to be registered with
the relevant national healthcare regulator in order to
be authorised to offer services to patients.
What is important to them
Compliance with the law and all relevant regulations.
How we engage
We have regular dialogue with the healthcare regulators,
with local relationships at hospital level and a national
relationship with the group clinical director. Our hospitals
have focused contact with inspection teams pre, during and
post formal inspections. Individual hospitals draw up and
implement improvement plans on the basis of feedback
from regulators. Our hospital directors are integral to these
relationships.
Centrally we also have regular calls with CQC, HIW and HIS,
to understand the changing face of regulation, and to
provide assurance to the regulators of action being taken
to improve safety and quality, and share good practice.
For other regulators, such as the Competition and Markets
Authority, we have a dedicated legal team who, with
external counsel, monitor and advise the group on legal
and regulatory developments.
Board engagement
CQC have attended our executive Safety, Quality and Risk
(SQR) Committee meeting to assure themselves of effective
ward-to-board governance processes.
The SQR Committee reviews collated feedback from
regulators to identify trends and drive responses.
CQC is changing
its regulatory
model during
2023
–
We have worked with
CQC to understand the
proposed changes and
their impact on our
business
–
Training for staff
on changes
Strategy:
build on quality,
page 22
Responsible executive owner
Group clinical director
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
Shareholders, potential shareholders, analysts and lenders.
Our largest investor is Mediclinic, which holds a 29% stake
in Spire Healthcare and has a seat on the board.
Why they are important to us
Our investors and lenders help to ensure we have access to
the resources, support and finances we need to develop and
grow the business.
Our aim is to reduce covenant leverage over time through
robust cash management and conservation.
What is important to them
Investors and lenders are looking for sustainable returns
from any capital outlaid and are keen to understand our
work with the NHS, how we are building our private
business, expansion into new areas of healthcare and
how we work sustainably and support the community.
How we engage
Our director of investor relations engages with shareholders
and analysts. We also maintain regular contact with the
banks and keep them informed on all major issues affecting
the business. At the end of June 2022, we held a Capital
Markets Day for professional investors and analysts, at which
we outlined the group’s refreshed strategy. Our interim
results were presented as a webinar, while our full-year
results presentation was a hybrid event. All presentations
were well attended. We regularly gather feedback after each
results roadshow and use this to guide our future investor
relations strategy.
The chief executive officer and chief financial officer
regularly meet with investors, and our major shareholder,
Mediclinic, is on the board.
Board engagement
Our chairman, senior independent director and executive
directors meet with institutional investors at individual
meetings and analyst presentations, as well as at results
roadshows.
Impact of
COVID-19 on the
business
–
Regular updates to the
market
Recovery of our
private self-pay
business has a
critical impact on
Return on Capital
Employed and
other measures
–
Presentations to investors
and analysts
Our strategy,
page 18
and financial
review,
page 79
Environmental,
social and
governance (ESG)
impacts
–
Net carbon zero target
by 2030
–
ESG targets in
remuneration
–
Sustainability working
group established
–
Sustainability strategy
developed and
communicated at Capital
Markets Day event in June
2022
Our strategy,
page 28 and
Sustainability,
page 42
Effect on the
business of
operating in a
high inflationary
environment
–
Through our efficiency
programmes, we have
delivered more than £15
million of cost savings and
are targeting a further £15
million savings across
2023-24. Further self-help
actions taken include
implementing price rises
where appropriate,
managing our mix of
services and being more
selective in the choice of
products we use
Chief executive
officer review,
page 9
Capital allocation
– use of surplus
cash generated
–
We balance use of surplus
cash between a number of
areas including reduction
of leverage, payment of
dividends to our
shareholders and M&A
opportunities
Our strategy,
page 18
Responsible executive owner
Chief executive officer
Chief financial officer
Engagement with stakeholders
continued
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Community
Who they are and how we engage
Issues raised
Actions/outcomes
Read more
Who they are
Our business plays an important part in the communities
in which we operate.
Why they are important to us
We have a duty to give back to these areas and contribute
to their greater wellbeing. We also have a duty of care to
the environment and are committed to becoming net zero
carbon by 2030.
What is important to them
A strategy that focuses on the ethical, social, environmental,
cultural, and economic dimensions of doing business.
How we engage
Local hospitals forge relationships with community
organisations in their locality and liaise with local authorities
and other local groups when investment projects are
planned which may cause disruption to residents. Many
hospitals also undertake fundraising initiatives for local
causes and charities. Nationally, Spire Healthcare undertakes
company-wide charity challenges and other community
initiatives. We are engaged in environmental projects to
reduce greenhouse gas emissions and manage our waste
effectively. Engagement with Integrated Care Systems,
including local authorities and community services can
provide closer links with local health and social care
communities around our hospitals and clinics.
Board engagement
The board reviews our sustainability and environmental
ambitions on a regular basis.
–
Our 2022 company-wide
charity challenge
supported the British Red
Cross Ukraine appeal with
monies raised matched by
the business
–
As a business we support
several major fundraising
and awareness events
such as Macmillan’s coffee
morning and Breast Cancer
Now’s wear it pink.’
Chief executive
officer review,
page 9 and
Sustainability,
page 55
Responsible executive owner
Chief executive officer
Engagement with stakeholders
continued
Strategic report
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Sustainability
We want to become recognised as a leader
in sustainability in our industry. That’s why our
sustainability strategy seeks to drive positive
change in the workplace, our local communities
and the environment.
Read more about our sustainability
strategy and how it links to our
purpose and business strategy
page 28
The United Nations Agenda 2030 is underpinned
by 17 Sustainable Development Goals (SDGs)
that were ratified by UN Member Countries
in September 2015. The SDGs together form a
roadmap for global prosperity that can only be
achieved with a concerted global effort led by
national governments and supported by non-
governmental organisations, civil society and
business enterprises. The achievement of the
SDGs, including SDG 3 (Good Health and Well-
Being), depends upon the efforts of many,
including governments, non-governmental
organisations, multilateral groups, the private
sector and others. As a leading corporation in UK
healthcare, Spire Healthcare is committed to the
UN’s SDGs and, where possible, we map our
sustainability activities to the SDGs.
The long-term success of Spire Healthcare depends
on responding to the needs of all our stakeholders
and the world around us. We have developed our
sustainability strategy to address the critical
environmental, social and governance issues for
our business. We have mapped our sustainability
strategy and targets against the 17 SDGs. The
SDGs have helped us understand how our
objectives and targets align to the broader global
issues and have shown us where we can make a
positive impact on society. We are committed to
applying our expertise, skills and ambition to drive
the group’s contribution towards the achievement
of those SDGs where we can provide the greatest
impact to society.
How we support the United Nations
Sustainable Development Goals
Overall, Spire Healthcare’s sustainability strategy
supports eight SDGs, as follows:
Respect the environment
Engage our people and communities
Operate responsibly
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This section shows Spire Healthcare’s current and
high priority sustainability-related goals, together
with relevant timelines and KPIs where appropriate.
Goal
SDG
Page
1
Attain net zero carbon status by the end
of 2030
7 13
44
2
Manage our waste more efficiently
while minimising detrimental effects
to our planet
12
48
3
Undertake a comprehensive review
of climate risk across our operations
13
49
4
Identify opportunities to reduce use
of single-use plastics
12
50
5
Identify and act on water-saving
opportunities
12
50
Goal
SDG
Page
6
Be a net contributor to the UK’s healthcare
workforce through innovative schemes
4
51
7
Take action to ensure that the ethnic
diversity of Spire Healthcare’s leadership
programmes reflects, or is ahead of, the
overall ethnic diversity of the business
as a whole
4 5
52
8
Achieve a gender balance of at least
40% female representation at board and
executive committee level by 2025
5
53
9
Further reduce gender pay gap amongst
Spire Healthcare colleagues
5
54
10
Maintain an overall colleague engagement
score of at least 80%
8
55
11
Build strong connections between Spire
Healthcare hospitals and local communities
3
55
Goal
SDG
Page
12
Target ‘Good’/’Outstanding’ CQC (or
equivalent) scores across all inspected sites
3
56
13
Target all Spire Healthcare sites to achieve
a rating of at least 80% across:
–
Colleague experience
–
Patient experience
–
Consultant experience
3 8
56
14
Maintain robust standards of clinical
and corporate governance in line with
best practice
3 16
57
15
Promote an open and learning culture
5 8
57
16
Further develop our approach to controls
around Modern Slavery
16
58
17
Maintain and strengthen information
governance and data security
16
59
Our sustainability goals, timelines and KPIs
Engage our people and communities
Operate responsibly
Respect the environment
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Our sustainability goals, timelines and KPIs
continued
1. Attain net zero carbon status by the end of 2030
Timeline
End 2030
KPI
tCO
2
e emissions in line with our decarbonisation
plan
Our net zero target includes full Scope 1 and 2
emissions and Scope 3 emissions from air and rail
travel. Our emissions in 2022, measured against
our net zero target were 25,854tCO
2
e, against
a target of 28,163tCO
2
e (8% less). This excludes
Scope 3 emissions included in our 2022 green
house gas emissions data shown on page 46 from
electricity transmission (1,056tCO2e), waste
(106tCO
2
e), and Hotels (75tCO2e).
Initiatives
–
Continuing LED replacements
–
Optimisation of Building Management Systems
(BMS)
–
Replacement of the remaining gas-powered
primary steam boilers in the estate at
Claremont
–
Removal of the remaining piped nitrous oxide
across the estate
–
Further PV installations and thermal upgrades
as part of roofing replacements
–
Completion of the EV charging point roll-out
across the estate
–
Use of electric vehicles in the group’s fleet
Our 10-year carbon reduction target
Our work continues to reduce the harmful impact
on our planet of climate change through a robust
decarbonisation strategy and delivery programme
that is designed to achieve net zero carbon emissions
by 31 December 2030. We were the first large
independent sector hospital provider to make such
a commitment, along with a dedicated investment
of £16.0 million to help achieve this aim by 2030.
Our strategy continues to prioritise a targeted
approach to reduction from the greatest carbon
emission sources for example, installing LED lighting
throughout all our buildings, removal of old inefficient
gas-powered primary steam boilers and piped nitrous
oxide across the estate, optimising the use of our
buildings, fixed plant and equipment to ensure we
maximise both energy and operational efficiencies.
We continue to engage, empower and support our
appointed carbon champions at each of our hospitals
who play a key role in meeting our net zero objective
by promoting, coordinating and delivering carbon
management improvement at a local level. Through
implementation of their audits and action plans,
further efficiencies are realised which collectively
across the group support our carbon reduction
targets and strategy together with operational
savings objectives.
Measuring our performance
We use the intensity metric of carbon emissions
per £ revenue, which increases in proportion to the
growth in our business. Our values are based on
providing excellence in clinical quality and innovation
to our patients. As a consequence of continuing to
meet these values, we will continue to grow, treat
more patients, provide more treatments and offer
the latest technology.
While the business continues to see positive revenue
growth, our intensity figures from 2018 to date have
reduced year-on-year (cumulatively 45% since 2018,
see roadmap on page 45) which demonstrates that
we continue to become a less carbon reliant company
as we grow.
Our carbon reduction roadmap
We have mapped out our carbon reduction plans to
net zero in 2030, using 2019 as our reference base year.
The projected timeline has changed this year from
that originally set in 2020 to reflect the unanticipated
reversion to brown electricity tariff between April
2022 and October 2024 as a consequence of our
energy supplier reneging upon its commitment to
supply renewable electricity. The overall reduction
target remains unchanged and we continue to
reduce our carbon emissions in line with target.
The reduction to date has been achieved through:
–
Monitoring and targeting utility benchmarking
reports which are issued monthly to our sites
–
Reviewing half hourly energy consumption data
and heat maps for each of our hospitals to identify
energy efficiency and cost saving opportunities
–
Targeted and informed investment in low carbon
infrastructure and heat recovery, including LED
lighting and solar PV technology across the estate
–
End of life replacement of fixed engineering and
building services, plant and equipment with the
most efficient technology available
Looking at our progress against our original plan,
excluding electrical emissions we are 8% ahead of
target which is a great achievement by all involved
and provides confidence in our plan.
Progress in 2022
We have a duty of care to the environment around us,
as well as to our patients. We want to make sure we
look after people more broadly, and this includes our
commitment to the environment
Respect the Environment
Engage our People and Communities
Operate Responsibly
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1. Attain net zero carbon status by the end of 2030
continued
Energy monitoring
Business utility and sustainability consultancy Inenco
produce quarterly performance reports that chart our
results against our carbon reduction targets. We also
separately monitor our hospitals on a monthly basis,
and issue energy reports detailing their utilities
consumption and benchmark them against similar-
sized hospitals within the group. The reports include
dashboards at site and group level detailing year-on-
year performance. Our regional engineering team
audits and monitors our hospitals’ carbon reduction
action plans as part of our annual compliance
auditing programme.
Capital investment in low carbon infrastructure
We continue to invest in our estate and engineering
infrastructure to improve our energy efficiencies.
Key projects this year included:
–
Replacing gas-powered primary steam boilers with
more efficient electrically powered equipment at
Spire Cardiff, Clare Park in Farnham, Little Aston in
Sutton Coldfield and Edinburgh Murrayfield
–
Introducing high efficiency heating, cooling
and ventilation – through the upgrade of critical
ventilation systems at Cambridge, replacement
of chiller plant at Spire Wellesley in Southend
and Spire Cambridge incorporating heat recovery
systems and optimised BMS systems at Spire Leeds
and Cheshire
–
Continuing to replace the remaining older lighting
across the estate with LED fittings that are 50% to
60% more energy efficient
–
Planning and design is in the advanced stages for
installing roof and ground-mounted photo-voltaic
(PV) solar panels at Spire Wirral that will generate
up to 12% of the hospital’s electricity
–
Installation of EV charging points to two-thirds of
our hospitals with the remainder planned for 2023
–
Improving insulation in our buildings at Liverpool
Penny Lane and Wirral hospital as part of planned
roof replacement works
–
Removal of R22 refrigerant gases from old air
conditioning systems
–
Pipework and ducting insulation upgrades and
replacement of old inefficient single glazed
windows requested via carbon champions at
Spire Hull, Little Aston, Bristol, Leicester
Alongside these investments, all of our carbon
champions continue to receive training and guidance
to help them produce local action plans and identify
opportunities for operational improvements and
efficiencies. Their action plans are reviewed twice
yearly to monitor and track progress.
Legislation
Since becoming a publicly listed company in 2014,
Spire Healthcare has discharged its responsibilities
under the government’s CRC Energy Efficiency
Scheme, and we will continue to report on our
energy consumption in line with the requirements
of the upcoming Streamlined Energy and Carbon
Reporting legislation.
Spire Healthcare was invited to participate in the CDP
(formerly Carbon Disclosure Project) again in 2022.
We made our eighth annual submission to the CDP
and received a ‘B’ grading, improving on previous ‘C’
rating for 2021 placing Spire Healthcare well above
the market sector average of ‘D’, and demonstrating
our knowledge and understanding of our impact on
climate change issues.
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
The roadmap to carbon net zero
Finalise roll-out and use carbon
offsets for other emissions
Complete heat
pump projects
and carbon offset
Heat pump rollout
Energy Efficiency
+ enabling works
Rolling programme of updates
to heat and DHW systems
All replacement and
refurbishment work to
consider displacement of gas
Longer payback projects
such as chiller heat recovery
LED lighting, controls,
insulation, high efficiency
replacement of end-of-life
equipment
Procurement of 100%
renewable electricity
Update of our carbon and environmental
policy and energy awareness campaign,
develop appropriate delivery and
governance arrangements.
Sustainability
planning
—Investment
and end of
life projects
Energy Efficiency Projects
— best paybacks first
Actions/progress
Targets
Carbon Emissions (tCO
2
e)
34,730
30,422
28,163
27,750
2019
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Carbon Net Zero
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Notes to the table:
a. Scope 2/purchased electricity emissions reporting
The figure for emissions from purchased electricity
above reflects our investment in a zero-carbon
electricity tariff across all of our sites from October
2021. We have calculated emissions for the period
January to March following the market-based
method and for April to December following the
location-based method (to reflect our zero-carbon
tariff only applied for first 3 months of the year).
If we apply the location-based method for the full
12 months, our emissions from purchased electricity
were 12,604 tCO
2
e.
b. Footprint boundary
An operational control approach has been used to
define the GHG emissions boundary, as defined in the
Department for Environment, Food and Rural Affairs’
latest environmental reporting guidelines: “Your
organisation has operational control over an
operation if it, or one of its subsidiaries, has the full
authority to introduce and implement its operating
policies at the operation.” For Spire Healthcare, this
captures emissions associated with the operation of
all our hospitals and other buildings such as clinics,
offices and our National Distribution Centre, plus
company-owned and leased transport. As Spire
Healthcare has no overseas operations, all emissions
refer to UK operations only.
c. Emission sources
All material Scope 1 and Scope 2 emissions are
included, plus Scope 3 electricity transmission
and distribution losses. These include emissions
associated with:
–
Fuel combustion: stationary (natural gas and
red diesel for backup generators) and mobile
(vehicle fuel)
–
Purchased electricity
–
Fugitive emissions (refrigerants, medical gases)
Total greenhouse gas (GHG) emissions for Spire
Healthcare for January to December 2022 were
27,091 tCO
2
e, down 6% on 2021. The table below
shows this, broken down by emissions source.
Greenhouse gas emissions in 2022
This section provides the emissions data and
supporting information required by the Companies
Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 and the Companies (Directors’
Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018.
d. Methodology and emissions factors
This information was collected and reported in line
with the methodology set out in the UK government’s
Environmental Reporting Guidelines, 2019.
Emissions factors are taken from the Department
for Business, Energy and Industrial Strategy emissions
factor update published in 2022. There are no notable
omissions from the mandatory Scope 1 and 2
emissions. Approximately 1.9% of emissions are
based on estimated data.
e. Fugitive emissions
These are attributable to the use of refrigerants
and medical gases (eg carbon dioxide, nitrous oxide
and Entonox).
27,091
tCO
2
e Total GHG emissions for 2022
12,604
tCO
2
e emissions from purchased electricity in 2022
6%
Emissions reduction in GHG
Our sustainability goals, timelines and KPIs
continued
1. Attain net zero carbon status by the end of 2030
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Emissions source
2018
2019
2020
2021
2022
Share %
YoY %
change
Fuel combustion: stationary
12,917
12,098
11,590
12,539
10,943
40%
–13%
Fuel combustion: mobile
1,145
1,209
1,447
1,325
1,346
5%
2%
Fugitive emissions
6,936
5,895
5,018
5,139
4,703
17%
–8%
Purchased electricity
17,151
15,193
13,330
9,802
9,837
36%
<1%
Air travel
40
<1%
Rail travel
40
<1%
Hotel
75
<1%
Waste
106
<1%
Total emissions (tCO
2
e)
38,148
34,395
31,384
28,805
27,091
100%
–6%
Revenue £m
931.1
980.8
919.9
1,106.2
1,198.5
8%
Intensity: (tCO
2
e per £m)
41.0
35.1
34.1
26.0
22.6
–13%
Energy consumption by year (MWh)
2018
2019
2020
2021
2022
Share %
YoY %
change
Natural gas
69,462
65,285
63,032
67,766
59,648
48%
–12%
Electricity
55,829
54,788
52,647
54,704
59,717
48%
9%
Transport fuel
4,622
4,883
5,386
5,363
5,407
4%
1%
Gas oil
503
374
369
384
212
<1%
–45%
Total
130,416
125,330
121,434
128,217
124,984
100%
–3%
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Looking ahead
In the year ahead we will continue to prioritise our
approach to carbon reduction and energy saving
to effect the required target emission savings
concentrating on those projects that will offer
the greatest reduction opportunity including
but not limited to the following:
–
Continuing LED replacements
–
Optimisation of building management systems
(BMS)
–
Replacement of the remaining gas-powered
primary steam boilers in the estate at Spire
Claremont in Sheffield
–
Removal of the remaining piped nitrous oxide
across the estate
–
Further PV installations and thermal upgrades
as part of roofing replacements
–
Completion of the EV charging point roll out
across the estate
Engineering governance and compliance
To support the group’s quality and patient safety
agenda, the estate in which we operate must be
monitored, maintained and developed appropriately
to satisfy our goals and remain fit for purpose. Our
property portfolio, engineering and health and safety
governance sit under a common leadership provided
by the supply chain and procurement directorate.
The identification, publication and management
of risk associated with our estate and its operation
is managed though annual audit alongside our
clinical team. These audits are used to make this
risk transparent, enabling a prioritised approach
to risk mitigation. The resultant risk profile informs
the business of future capital requirements, gives
confidence that this capital is managed on a true
risk basis and is targeted in the most efficient and
effective way. The central estates team supplements
the formal annual audits with regular routine visits
that ensure our governance system is dynamic, with
continual addition, closure and re-assessment of risk.
This in turn future-proofs the business.
Our sustainability goals, timelines and KPIs
continued
1. Attain net zero carbon status by the end of 2030
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
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KPI
–
Overall recycling target end 2022: 25%
–
achieved 30%
–
Dry mixed recycling target end 2022: 20%
–
achieved 23%
–
Offensive waste target for end 2023: 40% –
below target: 23% achieved during 2022 as a
whole, but since December 2022, exceeding
40% on a monthly basis
Initiatives
–
Waste strategy established
–
Increase recycling rates through further
segregation of waste and hazardous materials
–
Mitigate wherever possible waste going to
landfill sites
–
Ensure all sites have offensive waste stream in
place and work to increase their percentage of
waste segregated into this waste stream
As a business, we generate a considerable amount
of general waste – largely a combination of ‘domestic
waste’, most of which generates renewable energy,
and dry mixed recycling, which can be re-used or
re-purposed. We are now recycling at 44 sites, up
from 30 in 2021 and 23 in 2020.
Spire Healthcare has increased its overall recycling
significantly over the last three years:
30%
overall waste recycled in 2022
up from 27% in 2021
23%
dry mixed waste recycled,
up from 11% in 2021
The group also disposes of clinical, infectious and
offensive healthcare waste that requires specialist
treatment, incineration or disposal through the
renewable energy system. The challenge of managing
and sorting such complex waste streams is unique to
the healthcare sector.
During 2022, we successfully implemented new
initiatives to improve our dry mixed recycling and
food waste disposal. For example, our sites are now
sending large cardboard, plastic packaging and
polystyrene back to our national distribution centre,
so that it can be baled and sent off to be reused
resulting in a overall recycling figure of 30%. Not only
does this significantly reduce the waste we need to
dispose of from our sites, but we also receive rebates
for the materials returned.
Dry Mixed Recycling (DMR) and food waste has been
rolled out across the business (which includes plastic
bottles, Vegiware cups and food trays, cans, etc)
resulting in a DMR recycling figure of 23.0%.
Our waste leads also worked hard in 2022 to
complete the roll-out of ‘offensive waste’ segregation
to all our sites during the year. Offensive waste, as
bad as it sounds, is actually 60% cheaper to dispose
of, and a more environmentally friendly waste
disposal process to use than clinical waste or
infectious waste. It does not need to go for
incineration. Instead, it goes to a special materials
recovery facility, where it generates renewable
energy, without releasing any harmful substances
into the atmosphere.
To help reduce Spire Healthcare’s carbon footprint,
the Sharps Bio System, designed by Stericycle, our
waste partner, is also being rolled out across the
estate. Stericycle’s containers are reusable UN-
approved puncture-resistant containers that can be
used up to 600 times after washing and disinfection,
as opposed to the single-use sharps containers that
are disposed of after just one use. This is having a
positive impact on Spire Healthcare’s CO
2
reduction
programme and progress towards our 2030 carbon
neutral target.
2. Manage our waste more efficiently while minimising detrimental effects to
our planet
Progress in 2022
Ensuring that we manage our waste properly,
and recycle what we can, is vitally important for a
business like ours in the healthcare sector. It is all
about doing the right thing, contributing to our
carbon reduction programme, protecting the
environment, and ultimately reducing costs.
In 2022, Spire Healthcare’s waste management
initiatives saved approximately 296 tonnes of CO
2
.
This is the equivalent of:
–
1,020 trees planted each year
– 111 cars off the road or
–
180 houses powered each year
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
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The differences between clinical, infectious and
offensive waste are as follows:
–
Clinical waste is any waste that consists wholly
or partly of human or animal tissue, or is
contaminated with biologically active
pharmaceutical agents
–
Infectious healthcare waste can be a particularly
complex waste stream to manage, because of the
risks it poses to people who may come into contact
with it. This waste is any soft waste that is not
contaminated with chemicals or pharmaceuticals
but may be potentially infectious waste
–
Offensive waste is the term for items soiled by
body fluids or bad odour that may be considered
unpleasant. This does not include items
contaminated by infection, medicine or chemicals
Implementing this new waste initiative across Spire
Healthcare has been an in-depth process, as any
failure to classify our waste correctly could have
serious implications with environmental health
agencies. We have been supported in this by
Stericycle, which offers world-class specialist
waste management and compliance solutions.
We believe that a shift towards a 20-40-40 waste
model (20% clinical, 40% offensive, and 40%
infectious) across the group will not only deliver
significant environmental benefits, but could also
save the business money.
Each hospital has a waste lead, and they are
appropriately trained to ensure they carry out their
responsibilities as efficiently as possible. Local waste
audits are carried out with the waste leads, working
alongside the pre-acceptance waste audits
completed by Stericycle. The aim of these audits
is to ensure all waste is properly segregated and
stored securely before it goes off site.
“In 2022, Spire Healthcare’s waste
management initiatives saved
approximately 296 tonnes of CO
2
.
This is the equivalent of 1,020 trees
planted each year, 111 cars off the
road or 180 houses powered each year.”
Our sustainability goals, timelines and KPIs
continued
2. Manage our waste more efficiently while minimising detrimental effects to our planet
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Timeline
End 2023
Initiatives
–
Undertake scenario analysis of future climate
warming scenarios as set out in our TCFD
reporting on page 60
Please see TCFD section
page 60
3. Undertake a comprehensive review of climate
risk across our operations
Progress in 2022
In our TCFD disclosures, we set out the risks we have
identified from climate change. We consider risks
arising from transitioning to a carbon neutral economy
as well as physical risks, both chronic and acute, that
the changing weather patterns will bring. We also
carried out specific site-by-site risk assessments
against the risks of flash flooding and wildfires.
In 2023, we will supplement our risk analysis to date
with scenario analysis of future climate warming
scenarios as described in our TCFD disclosures across
short-to-long-term time horizons on page 60.
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KPI
Target to be determined
Initiatives
–
Plastic packaging, large cardboard and polystyrene is
returned to Spire Healthcare’s National Distribution Centre
for baling and recycling
–
Dry mixed recycling (DMR) and food waste management
has been rolled out across the business (which includes
plastic bottles, Vegiware cups and food trays, cans, etc)
–
Plastic spoons and cutlery have been replaced with metal
reusable or wooden disposable items
–
Working with waste treatment supplier to develop recycle
initiative for single-use oxygen face masks and tubing
The use of plastics is a major environmental issue
across the healthcare industry in the UK and globally.
Plastic is a very versatile product for keeping medical
equipment sterile, storage of clinically related
products (eg drugs) and as an infection control
barrier. It will take concerted effort across the global
healthcare industry to develop new products that
can replace the versatility of plastic over the medium
to long term.
We are examining what steps we can take as a single
entity to reduce single use plastics (for example we
have reduced the use of single use sharp bins as
described on page 48-49), but we recognise that we
will need to work with other healthcare providers
and our supply chain collaboratively to affect
significant change.
4. Identify opportunities to reduce use of
single-use plastics
Progress in 2022
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
KPI
Target of consumption m
3
to be determined
Initiatives
–
Rolling out automatic meter reading
–
Analysing consumption per site to identify
outliers
–
Encouraging local initiatives through net zero
project to reduce consumption
5. Identify and act on water-saving opportunities
Water consumption monitoring is in development
and we plan to form a strategic water management
plan setting out achievable targets.
Possible areas might include:
–
Reviewing the application of latest technologies to
our fixtures, fittings and equipment requirements
to ensure appropriate use of eco fittings
–
Monitoring water consumption to identify any
potential leaks or high use
–
Optimising building management control systems
–
Identifying efficient practice in kitchens, catering,
housekeeping and cleaning
Progress in 2022
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Initiatives
–
Learning and development strategy;
apprenticeship programmes including one of
the largest nurse apprenticeship programmes
in England
6. Be a net contributor to the UK’s healthcare workforce
through innovative schemes
Alongside a range of training opportunities, we have
several initiatives in place to help new and existing
colleagues develop the professional and leadership
skills they need to further their careers. Our GROW
learning framework includes LEAP, for new managers,
or leaders coming into a leadership role; our Step Up
Leadership Programme for our talented future
leaders; our Stretch Leadership Programme, an
advanced programme for senior leaders; and our
Theatre Managers Leadership Programme.
The framework is moving us towards more self-directed
learning – digital learning where colleagues monitor
their own development and make time for it, alongside
more formal classroom or webinar sessions. Together,
they offer a virtual leadership journey, and are designed
to ensure we have a strong succession pipeline across
the organisation and a range of disciplines.
Investing in apprenticeships
Making full use of the government’s apprenticeship
levy, we now have around 550 apprentices across
the business in a wide range of clinical areas such as
biomedical science, physiotherapy, medical laboratory
technicians, as well as non-clinical disciplines such as
marketing, human resources, engineering and
business administration. In 2022, we introduced a
new apprenticeship in cardiac physiology, and we
have been reviewing development options within
pharmacy, which will pave the way to increasing the
number of places available on these programmes.
Our most significant scheme is our nurse degree
apprenticeship programme in England, which we
expanded last year in response to the national
shortage of nursing staff. The programme is run
in partnership with the University of Sunderland,
and combines study and assessments with on-site
placements to gain practical knowledge. Apprentices
gain a BSc degree on completion, and the programme
is open to applicants at all stages of life, including
school leavers, university graduates, working parents
and part-qualified nurse associates.
Currently, there are 180 nurse apprentices on the
programme (177 in 2021), making it one of the largest
nurse apprenticeship programmes run by a single
organisation in England. The nurses we train will
benefit the entire healthcare system as they could
go on to work in the NHS, either at the end of their
apprenticeship or later in their career.
Progress in 2022
Investing in talented people, for us and the wider
system, continues to be a major focus.
180
colleagues on our nurse apprenticeship
programme
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Please see TCFD section
Read more in ‘Invest in our workforce’
section page 25
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Initiatives
–
Consider ethnic diversity balance when
constructing Spire Healthcare’s leadership
programmes
–
Broad range of Let’s Talk Networks including
mental health and wellbeing support, LGBTQ+,
Race Equality Network
7. Take action to ensure that the ethnic diversity of Spire Healthcare’s leadership programmes
reflects, or is ahead of, the overall ethnic diversity of the business as a whole
Each strand is supported by a member of the
executive committee, and has its own chair and
deputy chair so that we can give each network the
focus and impetus we need to make a difference.
We will work with these diversity network groups to
understand and improve how we attract, recruit, and
develop talented colleagues and promote diversity
by encouraging colleagues to share their challenges,
share insights and promote ‘fresh thinking’.
We now have an active Race Equality network and
LGBTQ+ network that promote and celebrate key
diversity and inclusion awareness dates eg Race
Equality Week and Pride month, engage with our
colleagues and hold a number of educational
‘lunch and learns’ on diversity and inclusion.
Headcount by ethnicity
We will continue to promote allyship across all the
diversity strands and the organisation – an ally is
someone who is not a member of a marginalised
group but wants to support and take action to help
others in that group.
Their role will be to support all colleagues to
understand the different communities at Spire
Healthcare.
We will provide them with a toolkit to help them
achieve this effectively and feel supported
themselves.
Of those colleagues who disclose their ethnicity,
17.3% report having a non-white background, up
from 16.5% in 2021. 21.9% of new starters in 2022
who reported their ethnicity to us are non-white.
Progress in 2022
To support our new equity, diversity and inclusion
strategy, we are developing networks across six
diversity strands, all of which overlap and do not sit
independently of each other – The strands include
ethnicity, sexuality, age, gender, disability, and mental
health and wellbeing.
Read more about our EDI strategy
in ‘Invest in our workforce’ section
page 25
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Black
Chinese
Mixed
White
Other
Not stated
Asian
1,302
490
69
211
10,526
123
1,834
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2
1
2
1
Timeline
End 2025
KPI
Proportion of female representation
Initiatives
–
FT Diversity Index top 850 company
–
Board – agreed targets of minimum of 33%
by the next AGM 2023 and 40% by 2025
8. Achieve a balance of at least 40% female representation at board and executive committee level by 2025
The combined executive committee and board
demographic in 2022 is 37% female.
Our executive committee demographic is 43% female
in 2022, compared to 75% male just four years ago.
By May 2023, we will have five women on our group
board, moving the balance from 33% female in 2022
to 45% in 2023, reflecting our commitment to driving
fair representation across the wider business.
Our board members monitor diversity regularly
through data reviews, recruitment decisions and
discussions in their board meetings. Diversity is
also regularly reviewed as part of the workforce
demographics by the remuneration committee
and executive committee.
Progress in 2022
Spire Healthcare is committed to diversity and
inclusion, which includes supporting women to
become leaders within the business.
Please see ‘Invest in our workforce’
strategy section page 25, KPIs section
page 33 and gender pay gap page 54
Combined gender balance of board and executive
committee
1. Male 63%
2. Female 37%
1. Male 75%
2. Female 25%
2018
2022
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
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Timeline
End 2025
KPI
Gender pay gap: achieved, year-on-year reduction
Initiatives
–
New workforce and sustainability board to
speed up the decision-making process
–
Inclusive approach to training and development
–
Talent and succession planning to support
development of female leaders
9. Further reduce gender pay gap amongst Spire Healthcare colleagues
Our mean gender bonus gap is 70.2%, and our
median gender bonus gap is 0.0%, the same as 2021
at 0.0%. In 2022, 82.2% of males received a bonus (up
from 73.8% in 2021) compared to 83.7% of females
(up from 77.1% in 2021).
Responding to the gender pay gap
We are taking a number of positive steps to reduce
the gender pay gap and ensure the fair treatment of
females across our business. Our newly established
workforce and sustainability committee has been
put in place to speed up the decision-making process
for colleague focused activity.
Progress in 2022
We are required to report gender pay gap figures for
our main employing entity – Spire Healthcare Limited
– covering 96% of all reportable employees of Spire
Healthcare Group.
In the interests of full transparency, we have
supplemented the statutory disclosure requirements
with additional data that captures relevant
employees across the Spire Healthcare Group.
The gender pay gap required by the Gender Pay
Gap Regulations represents an average figure. This
is distinct from ‘equal pay’, which considers whether
men and women are paid the same for carrying out
the same work, or work of equal value.
In 2022, the overall median gender pay gap in Spire
Healthcare Limited was 6.2% (2021: 7.1%), with the
Spire Healthcare Group at 6.1% (2021: 6.6%), which
is considerably lower than the Office for National
Statistics provisional national average of 14.9%
(October 2022).
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Employee table
Entity
Spire Healthcare Limited
Spire Healthcare Group plc
1
Number of employees (includes bank workers)
2
12,408
12,889
Women’s hourly rate is:
Mean
17.1% lower
16.6% lower
Median
6.2% lower
6.1% lower
Pay quartiles:
Men
Women
Men
Women
Top quartile
25.7%
74.3%
25.7%
74.3%
Upper middle quartile
17.8%
82.2%
17.7%
82.3%
Lower middle quartile
20.1%
79.9%
20.4%
79.6%
Lower quartile
17.9%
82.1%
18.2%
81.8%
Women’s bonus pay is:
Mean
70.2% lower
69.4% lower
Median
0.0%
0.0%
Who received a bonus?
Men
82.2%
82.4%
Women
83.7%
83.9%
1.
Including Spire Healthcare Limited, Montefiore House Limited and Claremont.
2.
In line with government reporting requirements, the number of employees stated in the table above is the number of colleagues
who received full pay in the pay period April 2022.
We have an inclusive approach to training and
development and twice a year we undertake talent
and succession planning where we look to create
opportunities and support the development of
female leaders. We are developing our job framework
to allow colleagues to better understand their roles
and support progression by recognising contribution,
performance, learning and development.
Gender breakdown
Employees
Male
Female
Overall employees
3,100
11,858
Senior managers
51
108
Executive committee members
4
3
Board members
8
4
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Initiatives
–
Community programmes including supporting
local foodbanks
KPI
–
Colleague engagement score: achieved – 80%
say proud to work for Spire Healthcare
10. Maintain an overall colleague engagement
score of at least 80%
Please see ‘Invest in our workforce’
strategy section and KPIs section
page 25 and 33
11. Build strong connections between
Spire hospitals and local communities
At Spire Healthcare, we take a responsible approach
to everything we do, and this goes beyond the
high-quality personalised care we provide for our
patients.
Contributing to our communities
Colleagues across our business play an important
part in their communities, and we recognise the duty
we have to give back to people in these areas and
contribute to the greater wellbeing, especially during
the ongoing health crisis.
Supporting the British Red Cross Ukraine Appeal
As every year, hospitals continued to support local
charities and causes throughout the year. Following a
break owing to COVID-19 restrictions, we were able to
hold a large company-wide charity event in June. This
included a range of activities including raffles, bake
sales, competitions and cycle challenges, along with a
showcase cycle ride visiting three hospitals in Yorkshire
and a cycle track in Leeds. The ride was led by Justin
Ash, Chief Executive Officer, and included many
colleagues and consultants, raising over £10,000
for the British Red Cross Ukraine Appeal, matched
by Spire Healthcare, making a £20,000 total.
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Progress in 2022
Progress in 2022
We held a mid-year temperature check on colleague
engagement, followed up by a full annual survey in
October 2022. The overall response rate for the full
survey was 77%, with 80% of colleagues proud to
work for Spire Healthcare (-4% in 2021, level with
2020) and 84% of colleagues get personal satisfaction
from the work they do. 83% of colleagues would be
happy if their friends or family needed treatment
at Spire Healthcare and 72% would recommend it
as a place to work. Teams across the business are
developing action plans to drive improvements.
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KPI
% of employees stating they are proud to work
for Spire Healthcare
% of private patients rating their overall
experience as ‘very good’
% of consultants who rate the care given to their
patients by Spire as either ‘excellent’ or ‘very good’
–
In 2022, seven hospitals met all three of these
criteria, 31 hospitals met at least one and
16 met at least two
KPI
Currently 98% of inspected sites rated ‘Good’
or ‘Outstanding’ by the CQC (or the equivalent
in Scotland and Wales)
Initiatives
–
More information in Build on quality on
pages 22-24.
12. Target ‘Good’/’Outstanding’ CQC scores across
all our hospitals (or equivalent)
Please see ‘Build on quality’
strategy section
page 22
Please see strategy sections ‘Drive
hospital performance’, ‘Build on
quality’ and ‘Invest in our workforce’
page 18 and No 10 on page 55.
13. Target all Spire Healthcare sites to achieve
a rating of at least 80% across:
–
Colleague experience
–
Patient experience
–
Consultant experience
We seek to offer our patients rapid access to
high-quality, compassionate, personalised healthcare,
with expert clinicians, at a price they can afford.
We aim to make Spire Healthcare the first choice for
consultants, and invest in the best people, facilities
and equipment to achieve this.
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Progress in 2022
Progress in 2022
Quality underpins everything we do. We have
robust ward-to-board governance and internal audit
procedures and members of the board and executive
committee regularly visit and meet with hospital
leaders, colleagues, consultants and medical
advisory committees.
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Initiatives
–
Freedom To Speak Up Guardians appointed
at all sites
Initiatives
–
See ‘Build on quality’ pages 22-24
14. Maintain robust standards of clinical and
corporate governance in line with best practice
Please see ‘Invest in our workforce’
strategy section page 25 and Clinical
governance and safety committee
report page 98
15. Promote an open and learning culture
Quality continues to be at the centre of Spire
Healthcare’s culture and everything we do. It is a key
pillar of our updated business strategy, and our Quality
Improvement (QI) strategy has strengthened in 2022.
Non-executive directors regularly visit and meet with
hospital leadership and attend local medical advisory
boards and national conferences.
We work hard to share a welcoming culture that is
characterised by openness, respect, collaborative
working, a focus on clinical safety, and a spirit of
continuous improvement. Attracting, retaining
and developing great people is a high priority for us,
and we can only do this if colleagues feel valued,
rewarded, motivated, and supported by clearly
defined career paths. We have Freedom to Speak Up
Guardians in all sites.
Please see ‘Build on quality’
strategy section page 22 and Clinical
governance and safety committee
report page 98
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Progress in 2022
Progress in 2022
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Initiatives
–
Review the level of performance and risk
of our key suppliers across a range of areas
including the environment, labour and human
rights, fair business practices, ethics and
sustainable procurement
16. Further develop our approach to controls around modern slavery
We are committed to act ethically and with integrity
in all our relationships in line with our value of ‘Doing
the right thing’. Our approach to tackling the risk of
modern slavery continues to evolve under the
oversight of our multi-department modern slavery
working group.
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Progress in 2022
Our two main areas of focus are at front-line level,
to safeguard patients and others who come through
our facilities, and in our supply chain. In our business
operations, we believe practitioners and our staff are
well placed to identify and deal with modern slavery
through the training and protections in place to
protect patients. The safeguarding system trains
those practitioners and other colleagues (clinical and
non-clinical) to recognise and report signs of abuse.
We believe the rigour of this system mitigates the risk
of modern slavery from either going undetected or
being inadequately dealt with at front-line level. This
risk is further controlled by the support, training and
infrastructure in place for all colleagues to be able to
raise concerns through our network of local ‘Freedom
to Speak Up Guardians’, or other available channels.
In 2022, we maintained our modern slavery due
diligence process for all new suppliers with an annual
spend of more than £1m; there were no issues
identified through this process. In addition, we started
an assessment exercise of third-party management
systems to provide robust evaluation of the level of
performance and risk of key suppliers across a range
of areas including labour and human rights. We plan
to conclude this assessment exercise during 2023.
A copy of our latest Modern Slavery
Act statement can be found
on our website at
investors.spirehealthcare.com
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KPI
NIST Cyber Security Maturity Score
Initiatives
–
Ensure our NIST Cyber Security Maturity Score
moves towards 3
–
Conduct an independent annual cyber maturity
assessment (CMA) review, using the NIST
cybersecurity framework (CSF). This assesses
security posture and compares against the
previous year’s maturity. In 2020 Spire Healthcare
received an overall maturity level of Partial (1.6).
In January 2022 we received a level of Risk
Informed (2.4), and are on target for a level
of Repeatable (3.0)
–
Make an accelerated investment in security to
move us towards an overall rating of 3.0 and
improve productivity
Spire Healthcare’s cybersecurity sustainability
strategy covers three key pillars: people, process and
technology, with a view to investing time, attention
and capital to reduce risk and strengthen the group’s
information governance and data security position.
With ever changing security landscapes, risks and
threats, Spire Healthcare engages with security
partners to conduct independent reviews and audits.
Spire Healthcare maintains industry-recognised
security certifications such as ISO27001:2013, Cyber
Essentials and regulatory compliance for contracts
such as the NHS Data Security and Protection toolkit.
In addition, Spire Healthcare has adopted the National
Institute of Standards and Technology (NIST) score
for continual security improvements and is annually
benchmarked against peers in the healthcare industry.
sIn 2022, Spire Healthcare’s security benchmark
improved significantly, and was deemed to be a
leading organisation in the healthcare sector for
cyber security maturity.
Additional external technical security assessments
with the Council for Registered Ethical Security
Testers are conducted, such as penetration tests, red
teaming exercises and incident simulation exercises.
Spire Healthcare receives regular threat intelligence
from a number of sources and agencies for additional
further advisories and guidance. Considerable security
and technology advances were made in 2022 in
network security, identity and access management,
incident response, processes and procedures.
Security can never be risk free, but Spire Healthcare’s
board has demonstrated commitment and support
for continual improvement in the form of investment,
technology and practices to mitigate against cyber risk.
17. Maintain and strengthen information governance and data security
Our sustainability goals, timelines and KPIs
continued
Respect the Environment
Engage our People and Communities
Operate Responsibly
Progress in 2022
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The board makes its statement of compliance with TCFD disclosures as required by Listing Rule (LR 9.8.6 R(8)) below.
Governance
Strategy
Risk management
Metrics and targets
Disclose the organisation’s governance around climate-related
risks and opportunities.
Disclose the actual and potential impacts of climate-related
risks and opportunities on the organisation’s businesses,
strategy, and financial planning where such information
is material.
Disclose how the organisation identifies, assesses and
manages climate-related risks.
Disclose the metrics and targets used to assess and manage
relevant climate-related risks and opportunities where such
information is material.
Recommended disclosures
Status
Recommended disclosures
Status
Recommended disclosures
Status
Recommended disclosures
Status
a) Describe the board’s
oversight of climate-related
risks and opportunities.
– see page 61
a) Describe the climate-
related risks and opportunities
the organisation has
identified over the short,
medium, and long term.
– see page 62
a) Describe the organisation’s
processes for identifying and
assessing climate-related risks.
– see page 64
a) Disclose the metrics used
by the organisation to assess
climate-related risks and
opportunities In line with
its strategy and risk
management process.
– see page 65
b) Describe management’s
role in assessing and
managing climate-related
risks and opportunities.
– see page 61
b) Describe the impact of
climate-related risks and
opportunities on the
organisation’s businesses,
strategy, and financial
planning.
– see page 63
b) Describe the organisation’s
processes for managing
climate-related risks.
– see page 64
b) Disclose Scope 1, Scope 2,
and, if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the related risks.
– see page 65
c) Describe the resilience of
the organisation’s strategy,
taking into consideration
different climate-related
scenarios, including a 2°C or
lower scenario.
Complete scenario analysis
– see page 64
c) Describe how processes for
identifying, assessing and
managing climate-related
risks are integrated into the
organisation’s overall risk
management.
– see page 65
c) Describe the targets used
by the organisation to manage
climate-related risks and
opportunities and
performance against targets.
– see page 65
Compliant
Partial compliance
Non-compliant
Sustainability
continued
Task Force on Climate-Related Financial Disclosures (TCFD) Report
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Governance
a) The board’s oversight of climate-related risks and opportunities
Our board has ultimate oversight of climate-related risks and opportunities facing us. It exercises that
oversight through:
–
Annual review of our corporate strategy, that includes championing sustainability as one of its five pillars as
described on pages 18 to 32
–
Review of major strategic climate and environmental-related initiatives as put to the board by the executive
management team in line with the corporate strategy eg the environmental, social and governance strategy
explained on pages 42 to 59 in 2022 and the net zero strategy as explained on pages 44 to 47 in 2022
–
Quarterly key performance indicator report on the corporate strategic objectives, including progress against
the sustainability development goals and the net zero strategy. The major strategic initiatives have milestones
and targets. The management information presented to the board shows progress against those targets.
For example, the board was made aware by executive management that our energy supplier unilaterally
switched our supply from entirely green energy sources to brown sources effective from 1 April 2022
following the energy price shocks in quarter 1 of 2022. For 2022, and going forwards into 2023, this means
we cannot meet our CO
2
reduction targets without buying cost prohibitive REGO’s, until we are able to
switch back to green energy sources.
–
Receiving reports from board sub-committees following their meetings, eg the audit and risk committee
(ARC) that reviews the principal risks on behalf of the board and oversees our risk management processes,
that includes climate-related risks, as explained on pages 101 to 106.
–
Annual review of emerging risks with the executive management team through the audit and risk
committee
As the board also retains the authority to approve all capital projects over £5 million under its delegated
levels of authority, in doing so, it reviews all major capital expenditure projects that affect sustainability.
b) Management’s role in assessing and managing climate-related risks and opportunities
The executive committee retains overall responsibility for assessing climate-related risks and opportunities.
The committee is chaired by Justin Ash, our CEO, and comprises his direct reports.
The committee receives a quarterly report from the director of audit, risk and compliance on the principal
risks and the overall risk profile of the group prior to reporting to the ARC. The principal risk report analyses
the principal risks in a number of ways, from individual assessment of their probability and impact, their
interrelationships, and detail on the individual current and planned risk mitigations and sources of assurance.
It is through that assessment, in conjunction with other management information, that the executive
committee understands and acts on its assessment of climate-related risks.
The committee also reviews global trends for emerging risks on an annual basis, and submits a report to
the ARC on emerging risks it sees from those global trends. It was through this process that the executive
committee initially recognised climate change as an emerging risk area and then, in 2021, recommended
to the board that climate change be considered a principal risk of the group.
Sustainability
continued
Task Force on Climate-Related Financial Disclosures (TCFD) Report
continued
The executive committee receives data and information from various functional management teams to help it
collate its overall view of the climate-related risk and opportunities facing the group. In 2021, it received reports
from a sustainability working group, and then in 2022 it decided to create a formal sub-committee to the
executive committee, the workforce and sustainability committee; more details are given below.
The majority of the detailed climate-related risks and opportunities, to date, have been identified in the
physical assets of the estate as explained on page 62. The executive committee directly monitors progress
against our net zero strategy as it receives a quarterly report from our retained environmental engineers
on the levels of CO
2
emissions. As the detailed risk assessments from flash flooding and wild fire (climate-
related risks) principally affect our ability to operate our hospitals safely, the health and safety committee
(a sub-committee of the executive committee) has taken oversight of the management of those specific risk
areas as described below.
Workforce and sustainability committee
During the second quarter of 2022, we established the Workforce and Sustainability Committee (WSC) which
is charged with making material decisions on behalf of the group’s executive committee in relation to Spire
Healthcare’s sustainability strategy.
The WSC is a delegated committee of the executive committee with a remit to provide assurance on:
–
The delivery of Spire Healthcare’s sustainability strategy, as approved by the board and presented to
investors, and compliance with the overall sustainability framework agreed by the board
–
Meeting Spire Healthcare’s legislative responsibilities in relation to its people and that the people function
prioritises and supports the strategic direction of the organisation within integrated HR and sustainability
frameworks
–
Spire Healthcare’s progress towards the ambition to be net zero carbon by 2030 and the effectiveness of
plans for achieving this
Specifically, the WSC is positioned to:
–
Oversee the agreed sustainability framework and the delivery of key steps within Spire Healthcare’s
sustainability strategy
–
Take decisions to resolve issues or mitigate risks escalated from any relevant project and work streams
–
Oversee key elements of the HR strategy, principles and oversight of all remuneration policies and decisions
below the executive level
–
Review how the company is performing against its commitment to respect the environment
–
Ensure appropriate measurement and reporting of key sustainability deliverables
The executive committee communicates with the board through two main reports from the chief executive
officer and chief financial officer, and reports from the chief operating officer. The executive committee also
presents reports to the board through specific topics that are on the agenda for the board, eg the executive
committee’s proposed ESG strategy that the board approved in 2022.
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Strategy
a) Climate-related risks and opportunities the organisation has identified over the short, medium
and long term
Timeframes
The board recognises that climate-related risks and opportunities would emerge over very long timeframes,
and well outside the normal five-year strategic planning horizon. Its review of going concern and viability are
conducted over 12 months, and three years, from the date of reporting respectively. The board conducts these
reviews every six months before publication of the interim and annual financial statements, and while they
model the impact of a near-term climate event in line with the principal risks, do not capture longer-term
impacts from climate change.
In 2021, we stated that we will look at climate-related risk and opportunities over:
–
Short term 1-3 years
–
Medium term 3-10 years
–
Long term 10 years+
The periods above support the more immediate responses to impacts of transitional risks and opportunities
(for example our net zero strategy for 2030 and initiatives on waste management as described on pages 44
to 49). For physical risks, we have engaged a third party to consider the physical impacts of climate change
over a longer term because the effects of climate change will be more material over the longer time horizon.
Therefore, the scenario analysis will assess the impacts to physical risks from climate change over the following
time horizons:
–
Short term – to 2030
–
Medium term 2030-2050
–
Long term 2050-2100
Relative importance of physical risks and transitional risks to the business
From a climate change perspective, the board considers our operations as one business unit because all of our
operations are within the UK, and similar in nature. We have done an initial exercise to identify physical and
transitional risks as part of our emerging risk process and incorporated the more immediate near-term risks
into our principal risk (see page 66). In 2022, we conducted further detailed risk analysis in two physical risk
areas being flash floods and wild fires. These risk analyses have concentrated on the risk as of today. In 2023,
we will conduct scenario analysis to build out the risk assessments over the longer periods above from:
–
Chronic heat-stress
–
Chronic drought-stress
–
River flood
–
Sea level rise
–
Tropical cyclone
–
Chronic precipitation-stress
–
Wildfire weather index
Sustainability
continued
The board will also review the transitional risks identified to date as part of the scenario analysis. The physical
risks we have identified could impact upon our operations in the short term (1-3) years. The transition risks we
have identified are likely to materialise over a longer timeframe (up to the next ten years). The main transition
risk we have identified is a failure to move to net zero carbon emissions. That is why we adopted the net zero
strategy as explained on pages 44 to 47. This is also an opportunity for us to reduce our energy costs by a
reduction in absolute levels of consumption, and to position ourselves positively in the market as our strategy
seeks to achieve. Below we describe the physical and transitional risks we have identified.
Physical risks – initial assessment
Risk title
Description
Potential impact(s)
Timeframe
Acute weather event
Risk of damage to physical
assets from acute weather
events eg flooding
Per the Met Office climate
change model for the UK, the
UK is likely to incur higher, more
intense rainfall and stronger
winds, especially in the north
west. This may cause damage
to our hospitals in the worst
affected regions.
Short to long term
Chronic weather event
Risk of operational disruption
from chronic weather events
– eg sustained heatwaves
Per the Met office climate
change model for the UK, the
UK is likely to incur longer and
dry and hot spells, especially in
the south east. This may cause
interruption to our hospitals in
the worst affected regions
because of the operating
theatres and wards being too
hot to provide safe service.
Medium to long term
Acute water events
Severe storm weather – high winds and rain can cause major disruption to our sites. We consider this a
short-term risk, with recognition that the likelihood will increase over the longer term because of more storm
events per year. For example, in 2021, heavy rain and wind caused damage to the roof of one of our hospitals,
leading to internal flooding and operational disruption. Such disruption has been minor to date, but does result
in higher capital costs.
Increased storm events also raise the risk of floods at our buildings due to blocked drains and rising water levels
in local water bodies. Water ingress would affect medical equipment and risks the hygiene of our premises
and the safety of our patients. While we have not yet had to cancel treatment for patients, we recognise that
increasingly patients may elect to cancel on-site treatment due to their inability to travel, which may disrupt
revenue flow in the longer term. It also generates the risk that staff are unable to access sites and disrupts our
supply chains.
Task Force on Climate-Related Financial Disclosures (TCFD) Report
continued
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Chronic weather events
Prolonged spells of extreme temperatures are considered a long-term risk. While we are witnessing the impact
of these in the shorter term, eg where the temperature in the UK reached 29°C for eight consecutive days and
hit a high of 35.3°C in 2018. In 2022, although the heatwave was shorter, recorded temperatures exceeded
40°C for the first time in the UK.
The 2018 heatwave caused little disruption to the group’s operations but did raise awareness of the need to
consider adaptation strategies. This is because we anticipate that instances of prolonged heat will increase
and our buildings must be capable of adjusting to these temperatures (eg in July 2022 the Met Office issued
the first ever ‘red’ warning for exceptional heat). In the longer term we recognise that high temperatures could
lead to existing critical heating, ventilation, and air-conditioning systems (HVAC) being unable to cope and may
cause cancellation of procedures and operations. Following the heatwave in 2018, we conducted an estate
wide review of the HVACs. Those deemed at risk of failing were registered on the facilities risk register and
a managed replacement or upgrade programme put in place for those HVACs most at risk.
We recognise that intense storm events, flooding, fire and heavy snow may increasingly affect the business
and have implemented strategies to mitigate the risk.
Transitional risks
Energy costs – Providing healthcare services is a relatively energy intensive industry. We are vulnerable in the
short term to fluctuations in energy prices driven by political events and in the longer term by rising carbon
costs imposed on power generators, as well as through increasing taxation at the point of consumption.
New technologies – A strategy in our decarbonisation plan requires removal of a high emission energy source
with a lower emission source, replacing our gas-fired heating and hot water with what is, currently, a more
expensive energy source, electricity. There is a cost and risk associated with transitioning to lower emission
technology. There is also a risk of obsolescence of other assets or increased cost from technological
developments to combat climate change eg the combustion engine and replacement of the use of plastics
in clinical processes. We have identified and addressed under our waste management strategy that we must
adapt to new materials used in clinical procedures that are more environmentally friendly.
Market risk – This is the risk of a change in market dynamics because of climate change. We will need to
develop the capability to treat different health conditions that may present themselves in order to remain
competitive.
Reputation risk – Increasingly the business is operating in an environment of consumer awareness around
climate change, which risks damage to Spire Healthcare’s reputation if we contribute to, or do not avoid,
climate change. While our assessment is that consumers are focused on healthcare quality, we envisage that,
increasingly, they will choose more sustainable companies. This is a significant reason behind our rationale to
become net zero at a much earlier date than the UK’s goal. We see this reputational aspect as an opportunity
to inform our customers of our ambitious objective, which we hope will ensure additional reasons for them
to select our services.
Sustainability
continued
Legal and regulatory – This type of risk is relevant to us due to the potential cost of compliance with new
legislation, potential financial impact of litigation as well as the reputational impact of non-compliance, which
could result in negative impacts to earnings potential. As a listed company, we are open to scrutiny in these
areas from regulators and our other stakeholders as described on page 36. We are at risk of penalties and legal
action due to non-compliance with legislation such as SECR, ESOS, MCBP and MEES. Other regulatory drivers
include PPN 06/21: which sets out how, if we wish to remain a supplier to the NHS, we must provide detail of
our carbon reduction plans and commitment to net zero. We anticipate that regulation will continue to
strengthen in this area, increasing the cost of compliance in the longer term.
Impact on climate-related risk and opportunities on the financial statements
To date, the board has not identified any climate-related risks or opportunities that would have a material
impact on the assets or liabilities of the group, and therefore has not adjusted financial balances for climate-
related risks or opportunities.
Opportunities
We have an opportunity to turn some of the risks to opportunities, especially communicating our
environmental credentials more prominently, including our carbon reduction strategy, as a differentiator from
our competitors in the private healthcare sector, placing us in a better competitive position.
There are predictions that climate change disruptions will affect health to include increased respiratory and
cardiovascular disease, injuries and illness related to extreme weather events, changes in the prevalence and
geographical distribution of food and water-borne illnesses and other infectious diseases, and threats to
mental health. As a business, we recognise this and are committed to reducing our impact on climate change,
but we are also in a position to support the UK to prepare for the health impacts of climate change and to
ensure we continue to adapt and deliver quality healthcare services that meet changing needs in the market.
b) Impact of climate-related risks and opportunities on Spire Healthcare’s businesses, strategy,
and financial planning
Financial impact of climate change risks and opportunities
We have focused on the near-term financial impacts for the purposes of the going concern and viability
modelling. The outcomes of that modelling are reported in the statement on viability on page 77. We have
previously announced that the net zero strategy represents a cash investment of £16 million up to 2030.
Capital expenditure for routine upgrades of hospital infrastructure, where we build in the latest design
tolerances for future climate change, has been within our normal capital expenditure programme, the total
quantum of which was £90.1 million in 2022.
In our five-year strategic plan, other than the allocation of capital to the net zero strategy, and except for
energy costs or potential losses from major disruption from an adverse weather event as modelled in our
viability testing, we do not consider that other climate-related risks and opportunities will have a material
impact on our revenues, operating costs, acquisitions, divestments and access to capital over that time horizon.
In relation to energy costs, we have energy price hedging in place until October 2024. Thereafter, we are
exposed to future energy prices. We are already reviewing future hedging strategies to reduce our level of
exposure from price volatility post October 2024.
We will consider the output from our scenario analysis, which will take a much longer-term horizon, whether,
that implies there will be material financial impacts.
Task Force on Climate-Related Financial Disclosures (TCFD) Report
continued
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Other impacts on our business, strategy and financial planning
Our net zero strategy does not rely on unproven technology. Details of the net zero strategy are on pages 44 to 49.
We are aware that technological developments are occurring at pace, for example looking at the electrification
of HGVs. They may have an impact on our strategy before 2030 if they become commercially viable.
While we have strengthened our governance in 2022 as described on page 61, there has been no significant
change in 2022 to our approach of identifying climate-related risks and opportunities, or our mitigation
strategies against the risks we have identified. The process of risk management described on pages 66 to 68
utilises well-established methodologies to prioritise risks by assessing their impact and probability. We will
continue to review our mitigations through:
–
Our normal risk management process
–
The scenario analysis we will carry out in 2023
–
Taking advantage of opportunities as we identify them and they arise
c) Resilience of Spire Healthcare’s strategy, including a 2°C or lower scenario
We will conduct a scenario analysis in 2023, the scope of the physical risks and the timescales as described
above. The primary objective is to undertake a physical climate risk assessment of our portfolio of hospitals
based on current climate conditions as well as projections of climate change impact in the long-term. The
assessment will also consider a range of different climate scenarios in line with the recommendations of the
TCFD. From this, the assessment will identify exposed locations and assets most at risk in the form of a physical
climate risk exposure matrix and additional deep dive quantification of impact for highly exposed assets.
The assessment will rely on the use of our third-party’s climate diagnostic model, which uses underlying
climate data provided by Munich Re’s new climate change hazard layers. The layers utilise data from the
European Centre for Medium-Range Weather Forecasts (ECMWF), UKCP18, JBA Global Flood Model and the
Met Office. The flood model provides a view of the risk based on an underlying digital terrain model, which
provides a robust view of buildings and physical assets being exposed.
Climate Scenarios and corresponding average global warming we will model are based on the Inter-
Governmental Panel for Climate Change’s scenarios:
–
RCP2.6 (1.5°C)
–
RCP4.5 (2-3°C)
–
RCP8.5 (4°C+)
Sustainability
continued
Risk management
a) Spire Healthcare’s processes for identifying and assessing climate-related risks
On pages 66 to 68 we describe our risk management process and its governance. We use the same process to
identify and assess climate-related risks augmented by specific deeper dive risk assessments where appropriate,
for example, the risk assessment into each of our properties exposure to wild fires as discussed above. The
relative importance of climate-related risks are established through the same method of estimating the range
of potential impacts and the likelihood. As risk management is looking to the future, there is always a degree of
uncertainty over probability and impact measures, especially with climate change, given the climate is dynamic
and the changes are complex to model. Page 67 shows the relative importance we judge climate change risk to
have compared to other principal risks (which are fully described on pages 69 to 76). We have set out on page
62 and 63 what we believe are the climate-related risks that are specific to our circumstances. The scenario
analysis we will carry out in 2023 will further deepen our understanding of the potential longer-term risks
we may face from climate change.
b) Spire Healthcare’s processes for managing climate-related risks
On page 61 we describe the governance of climate-related risks and opportunities including the role the WSC
will have going forward. Our governance structure results in three levels of management of our climate-related
risks and opportunities depending on the materiality of the activity as shown in the figure below.
Board and executive committee
Strategic direction, including approval of large-scale investment programmes
reserved as a matter for the board
Functional leadership
Group-wide tactical management
Site level leadership
Local strategies and tactical implementation
The structure shown above reflects the type of actions we have taken to manage our climate-related risks,
for example:
–
Major strategic initiatives sponsored by the board, eg the net zero strategy
–
The pragmatic management of risk assessed and prioritised activities such as the replacement of ageing
HVAC systems, the installation of energy saving technologies from new building management software,
solar panels and energy efficient lighting led by functional leadership reporting into the executive
committee
–
As described on page 45 local carbon champions working with their local leadership teams have developed
site specific action plans that have been fundamental in making site level changes that are saving energy,
reducing CO
2
emissions and improving waste disposal on a daily basis
Task Force on Climate-Related Financial Disclosures (TCFD) Report
continued
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c) How processes for identifying, assessing and managing climate-related risks are integrated into Spire
Healthcare’s overall risk management
As the responsibility for identifying and managing risks, including climate-related risks, as set out on pages 66
to 68 is with the board, the executive committee and then through functional and local leadership, management
of climate-related risks is entirely integrated in our normal management processes. We have not built a separate
management process to manage climate change related risks and opportunities.
Whilst various committees look at specific aspects of climate-related risks as described on pages 62 to 63,
reporting on the sustainability pillar of the corporate strategy is embedded in the quarterly KPI report with
all other strategic KPI’s. From there, the identification, assessment and management of more detailed
climate-related risk management activity is embedded within our established management systems,
whether that be the recording of specific risk assessments within our risk management system, or the
review and decision-making by established committees and local management teams.
Metrics
a) Our metrics used to assess climate-related risks and opportunities
In our risk management process, we assess all risks against a range of impacts including financial, reputational,
patient safety amongst others.
In relation to climate change, the main strategic risk and opportunity that we have developed metrics for is
the decarbonisation of our operations in line with our net zero strategy. We use the following metrics to track
progress towards achieving our net zero targets:
–
Gas and electricity consumption against targets plus associated carbon emissions quarterly, to include
Scope 3, twice yearly
–
Carbon intensity against revenue
–
Electricity generated by solar PV
–
Waste to landfill/energy-from-waste/recycling
–
Water consumption
–
Financial losses due to climate-related incidents
We report Scope 1 and 2 emissions in full, and some of the Scope 3 emissions being grey fleet, air and rail
travel, hotel and waste. We do anticipate carbon pricing to impact our net zero strategy until 2030 when the
residual unmitigated emissions will be offset.
We have separate metrics to measure our performance of our waste management. Our metrics are described
on page 48.
The net zero targets are built into the relevant management rewards structures. In 2022, management met
the performance targets.
Sustainability
continued
b) Our Scope 1, Scope 2 and, Scope 3 greenhouse gas (GHG) emissions, and their related risks
We disclose our GHG emissions, methodology and footprint boundary on page 46 in accordance with the
methodology set out in the UK government’s Environmental Reporting Guidelines, 2019. There has been no
change to the methodology applied to calculate our emissions in 2022. As we use an independent third party
to calculate our emissions and only 1.9% of our emissions data is based on estimated data, we believe the risk
of material error in our data is low.
We express our energy intensity ratio as a tCO
2
e per £m. This ratio provides a consistent year-on-year basis to
measure the energy required to deliver our operational activities. We track and disclose the change in intensity
ratio over the last five years as disclosed on page 46. Our intensity ratio has fallen by 45% between 2018 and
2022.
We assess Scope 3 emissions to be material to our operations. Those we have been able to measure to date
(grey fleet, air and rail travel, hotel and waste), we include in our emissions data on page 46. Our supply chain
will make up a material portion of our Scope 3 emissions.
c) Our targets to manage climate-related risks and opportunities and performance against targets.
The net zero target is measured as Net Zero CO
2
e (carbon dioxide equivalent) emissions, ie that CO
2
e emissions
taking 2019 as our baseline, will be fully mitigated or offset. Our plan anticipates that we will mitigate over 85%
of our 2019 CO
2
e levels by the end of calendar year 2030, with the remainder offset.
We have an annual target as set out in our net zero strategy and waste management strategy to reduce our
GHG emissions until 2030. As described above, our net zero target includes elements of Scope 3 emissions, but
it does not include Scope 3 emissions from our supply chain, including energy transmission, hotels and waste.
We start measuring our supply chain emissions in 2023. We report our progress and the initiatives to deliver
against those targets on page 45. Our targets for net zero and waste management are actively pursued and
included in our business plans.
Task Force on Climate-Related Financial Disclosures (TCFD) Report
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The board has a consolidated view of key risks from across Spire Healthcare. Our risk management and internal
control processes are managed through the audit and risk committee in association with the clinical
governance and safety committee (CGSC).
Risk management
The risk management framework is designed to identify, evaluate and mitigate the risks that we face at all
levels. All significant risks are recorded on Spire Healthcare’s risk management system.
We have reviewed a range of potential emerging risks and their possible impact on Spire Healthcare, using
internal and external sources of emerging risk information, for example:
–
The University of Cambridge Judge Business School Centre for Risk Studies’ taxonomy of business risk
–
The UK government’s national risk register
–
The World Economic Forum’s annual risk assessment
We use the risk register to manage all significant risks facing Spire Healthcare by assessing risk in terms of
consequence and likelihood. Our risk management methodology captures the assessment of risk on a “current”
or “net” basis, after existing controls are considered. The detailed registers also include management actions
to further reduce risk exposures where considered necessary. In the case of the principal risks, sources of
assurance over mitigation of the risks are also reported to the audit and risk committee. Reporting of risk
within our management information (eg to the executive committee and audit and risk committee), is on a
current basis, and the importance of each risk as presented in this report is on the current basis. The relative
exposures from the principal risks to Spire Healthcare are shown on page 67.
All risks have an identified risk lead in charge of monitoring and mitigating the risk. Management reviews risk
registers in line with the risk management policy at intervals of one, three or six months or when there is
imminent change in the risk environment such as legislation.
Current risk environment
2022 was a highly volatile year in our external risk environment, primarily because of the invasion of Ukraine
by Russia but also because of the changes in government within the UK. We have had to respond to a number
of changing risks and threats to our operations on our supply side. We have been able to mitigate much of the
impact as described in our individual principal risks. Through high levels of demand for our services, we have
been able to offset much of the inflationary risk we faced. We expect that there is a high chance of further
volatility in our external risk environment in 2023. We continue to review our risk profile and challenge
ourselves on whether we are taking all reasonable steps to mitigate our principal risks.
Risk appetite
Whilst Spire Healthcare makes every effort to ensure that all risks are as low as reasonably achievable, it is
not possible to reduce all risks to zero because there is no such thing as clinically neutral care. Decisions must
therefore be made as to whether the benefits and best use of resources outweigh the risks.
We define our risk appetite as the amount of risk we are prepared to accept, tolerate or be exposed to at any
particular time. We are committed to doing everything reasonably possible to reduce risk for all patients and
to deliver high-quality, efficient and effective care. We are uncompromising on patient safety relating to our
clinical service delivery. The lowest risk appetite applies to all safety and compliance objectives, including
preventable patient harm, public and employee health and safety. We have a marginally higher risk appetite
for the pursuit of innovation and our strategic and operational objectives. This means meeting legal and other
regulatory obligations will take priority over other business objectives.
We apply the following definitions to our risk appetite for the strategic principal risks:
VL
Very low: A high level of risk mitigation or risk avoidance representing the safest strategic route available.
L
Low: Seeking to integrate sufficient control and mitigation methods in order to accommodate a low level
of risk.
B
Balanced: An approach that brings a high chance for success, considering the risks, along with reasonable
rewards, economic and otherwise.
H
High: Willing to consider bolder opportunities with higher levels of risk in exchange for increased business
payoffs.
VH
Very high: Pursuing high-risk, unproven options that carry with them the potential for high-level rewards.
The risk appetite for each principal risk is shown on pages 69 to 76 in the detailed risk descriptions.
Principal risks outside of risk appetite
One principal risk falls outside of our risk appetite.
Workforce – (reported as outside of appetite in 2021) because there is a long-term structural shortage
of clinical and medical staff in the UK, which has been the case since before the COVID-19 pandemic, and
now even more so. We are working to recruit and retain colleagues in a highly competitive global market
for healthcare workers. Given the scale and range of external factors that cause the risk, and especially the
dominant role that the NHS plays in attracting, recruiting and training clinical and medical staff in the UK,
the mitigations available to the board are unlikely to mitigate the risk fully in the near to medium term.
Material change to our risk profile from 2021
As reported in our interim financial statements, the board decided that greater emphasis needs to be given
to external risks facing the organisation. The board no longer considers four risks reported in the 2021 annual
report and accounts as being principal risks, being: liquidity and covenants; insurance and indemnity;
transformation; and, compliance and regulation. Four new principal risks have been added: diversification and
disintermediation; major infrastructure failure; antimicrobial resistance and a pandemic from a new pathogen.
The new risks are described in detail below.
“Responsibility for risk management and
internal control systems lies with the board
of directors”
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Inter-relationships of principal risks
We recognise the strong inter-relationships between the principal risks. The risks that would have the most
material affect other principal risks are:
–
Government and NHS policy
–
Major infrastructure failure
–
Patient safety
–
Information governance and security
– Workforce
Emerging risks
The board considers emerging risks to be those with the following characteristics:
–
Any manifestation of the risk is most likely outside of the normal strategic planning horizon of five years
–
Are risks for which we have little or no prior experience because of their novelty or highly uncertain nature
–
There are no practical control measures that can be taken now but a longer-term strategic response may
be appropriate
The emerging risk process is as follows:
–
The executive committee prepares an annual analysis of long-term global trends that may lead to emerging
risks and opportunities
–
It then recommends specific long-term risks to be added to an emerging risk register for monitoring and
consideration in our strategic planning process
–
The board, via the audit and risk committee, reviews and approves the potential emerging risks and
opportunities that the executive committee is monitoring
Through the emerging risk process in 2022, we have not added any new emerging risks to our register.
Our assessment of climate change risk in the short term is described below; further details of our assessment
of climate change risk are provided in our TCFD disclosures on pages 60 to 65.
Internal controls
1) Standard policies and procedures
We have documented policies and standard procedures in place covering all significant activities and areas of
risk, which are subject to regular review and update by the policy approval committee (PAC) comprising a cross
functional membership of subject matter experts. The PAC reports into the safety, quality and risk committee.
The PAC meets eleven times a year and publishes updates to policies on our intranet. All policies are required to
follow a standard process for creation and review. There is a standard structure for procedures and guidelines
to provide our employees and consultants with further operational detail for policies where required. The
default review period once a policy is approved is three years but can be shorter if required. There are certain
policies that the board reserves the right to approve, for example treasury management, raising concerns and
risk management policies.
Principal risks
The diagram shows the principal risks of the group. Further detail on the individual risks is provided on
pages 69 to 76.
Ranked by likelihood
Category
1
Workforce
People
2
Macroeconomic
Financial
3
Climate change
Environment
4
Competitor
challenge
Financial
5
Information
governance and
security
Technology
6
COVID-19 new
variants
Social
7
Brand reputation
Social
8
Supply chain
disruption
Geopolitical
9
Government and
NHS policy
Geopolitical
10
Pandemic from
new pathogen
Social
11
Diversification and
disintermediation
Governance
12
Patient safety and
clinical quality
Clinical and
patient safety
13
PMI market
dynamics
Financial
14
Major
infrastructure
failure
Technology
15
Antimicrobial
resistance
Social
The principal risks fall under
the following categories:
4
3
7
15
10
6
9
8
12
14
1
2
13
11
Likelihood
Consequence
Low
Medium
Low
Medium
High
High
Movement
since 2021
Risk management and internal control
continued
5
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2) Assurance over clinical delivery and clinical regulatory compliance risks
As a provider of clinical services to patients, we face a specific set of non-financial risks associated with such
provision. We have strong control structures as described below.
–
The group medical director oversees the governance of the medical professional standards of 8,760
consultants through the medical professional standards committee, the management of patient reviews
and recalls, the approval of practicing privileges and setting medical governance policy
–
The central clinical team oversaw a national programme of clinical audits including testing according to the
approach taken at regulatory inspections. From 2023, the national clinical audit programme will move under
the integrated quality governance team that reports into the group medical director
–
The central clinical team also oversees the drafting, communication and training of a comprehensive
set of clinical policies and procedures for Spire Healthcare. These form part of the overall framework
for clinical safety governance and quality, to ensure that clinical risk and clinical regulatory compliance is
managed effectively across all registered sites. The governance activities are monitored by the integrated
quality governance team and are reported regularly to the safety, quality and risk committee, the
executive committee and the CGSC
–
Each hospital has a risk register through which clinical and medical risks are managed, mitigated and
escalated
–
Comprehensive, non-financial management information on clinical performance including safety, clinical
effectiveness and patient experience is produced and reviewed monthly against pre-agreed standards by
the corporate integrated quality governance/clinical services teams, hospital directors, directors of clinical
services, divisional directors, the executive committee and reported to the CGSC quarterly. Specific KPI
measures drawn from this management information are given on page 33
–
We are subject to substantial levels of external inspection and review, both by the range of national
healthcare regulators (CQC/HIW/HIS) and through invited assurance inspections such as the rolling
programme of health and safety inspections carried out by third-party specialists. The executive committee
and the CGSC review the outcomes of these activities. In 2022, we had a total of 10 CQC and HIW/HIS
inspections, all producing ‘Good’, ‘Outstanding, or equivalent performance assessments
–
We have maintained throughout 2022 the structures and processes to provide the level of evidence and
assurance required to monitor clinical regulatory compliance
3) Financial and operational controls
Our design of our finance function splits resources across on-site finance directors at each hospital, supported
by a central finance function based in Reading.
We received regular fraud updates from the NHS Counter Fraud Authority during the year and, where relevant,
disseminated the fraud alerts to relevant colleagues. We are subject to daily direct and indirect subject to
cyber-attacks during the year. We have preprepared response plans to cyber-attacks utilising both in-house
and third party experts. After any incident, we undertake a full incident review and reflected learnings into
our cyber security environment.
The fundamental financial controls as reported in 2021 remained in place during 2022, namely:
–
The annual process of preparing business plans and budgets, followed up by close monitoring of operational
performance by the executive committee and the board
–
Weekly forecasting to drive corrective action
–
Monthly monitoring of actual results, compared to budgets, forecasts and the previous year
–
All material capital projects are subject to an investment evaluation and authorisation procedure including
board approval when the forecast capital expenditure exceeds the level of delegated authority
–
Common accounting policies and procedures
–
Our treasury position and forecast liquidity are kept under review to ensure that borrowings are aligned with
our growth and are in compliance with banking covenants.
In anticipation of future legislation, our finance team undertook an exercise to review our key computer-based
and manual financial controls to confirm we could evidence their operational effectiveness.
Other non-financial operational risks are managed by means of the application of best practice, as defined by
group policies and standard procedures, in areas such as project management, human resources management
and IT security and delivery, supported by detailed performance monitoring of outputs and issues.
4) Internal Audit
An in-house director of internal audit, supported by a dedicated team from KPMG who provide co-source
internal audit resource, provides our internal audit services. The activities of internal audit are reported in the
audit and risk committee report on pages 101 to 106.
Continuous learning
Our process of continuous improvement through events, knowledge and awareness will help us to make
progress. We recognise this unequivocally and its importance in driving outstanding quality. No matter how
robust and reliable, internal control systems and risk management cannot guarantee to remove all error or loss.
We take all instances of incidents (including near misses), complaints, control failures, regulatory non-compliance
or other risk events seriously. As such, we have a detailed process in place to understand the cause and identify
learning to minimise the chances of reoccurrence.
We actively promote an open culture to positively encourage the reporting of all risk events and other issues
arising. Hospital management, the executive committee, the audit and risk committee, and the CGSC closely
monitor the number and nature of events arising, and the operation of incident management processes.
We offer various channels through which colleagues can report any issues or concerns. The main channel
for raising concerns is the Freedom to Speak Up Guardians (FTSUGs) that were introduced into every Spire
Healthcare hospital and corporate team in 2018. Other channels include a central raising concerns team,
members of the executive team and board, and, an independent whistleblowing helpline to facilitate
anonymous reporting of issues or concerns that they are unwilling to raise via any other channel. We have
an independent national corporate guardian who oversees and supports the FTSUGs (see Engagement with
stakeholders section for further details on page 36).
Risk management and internal control
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Risk management and internal control
continued
Principal risk
1. Workforce
Executive owner(s)
Group people director
Link to strategy
–
Drive hospital performance
–
Build on quality
–
Invest in our workforce
–
Champion sustainability
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
B
Risk movement in 2021
Risk movement in 2022
Risk description
There is both a UK and global shortage of nursing and healthcare practitioners. As a private healthcare provider, we are subject
to competition for staff from both the NHS, other independent healthcare providers, and international demand.
Our ability to attract and retain clinical and non-clinical colleagues has been affected recently by:
–
Growth of NHS waiting lists requiring more clinicians in the NHS/independent sector. The NHS has targeted securing the
available flexible resource, reducing our access to bank and agency workers
–
Increasingly, permanent colleagues are looking for more flexibility in their work environment
–
The cost of living increase is affecting all our employees. Those on the lower salary levels are more sensitive to inflationary
pressures and may move to marginally higher payers, both within or outside of healthcare
–
Short-term sickness absence is higher than historical norms
–
During the pandemic, employees have accrued substantial unused annual leave balances that can result in staff shortages at key
holiday periods
Risk impact
In the short term, we are able to provide safe patient care only with delays to treatment because of scarce resources.
Over the medium- to long-term, wage inflation and resource scarcity could result in a decline in our profits and affect expected
revenue growth from more complex surgical procedures and treatment of higher-risk patients.
Risk mitigation
We seek to retain colleagues through:
–
A common purpose and a positive workplace culture
–
Competitive pay and reward benefits. In 2022, we announced a competitive pay award that focused in particular on the 4,000
lowest paid colleagues in Spire Healthcare. We announced the creation in 2023 of a national reward framework. We are piloting
other new benefits eg providing subsidised prepared meals for employees to take home.
–
Offering greater flexibility in employees’ roles, including encouraging them to move to our staff bank roles if they are to
leaving permanent employment
–
Responding to key employee metrics, for example rolling out a network of trainer mental health first aiders
–
Continuous investment in our equipment, facilities and services to retain high-quality clinicians
We seek to recruit colleagues through:
–
A centralised recruitment process
–
An overseas recruitment capability to secure skilled healthcare workers from outside the EU where necessary
–
Offering apprenticeship programmes to support the development of clinical and non-clinical teams across the business
–
Building of local bank staff pools
The group manages immediate staff shortages using agency and bank workers.
Principal risk
2. Macroeconomics
Executive owner(s)
Chief commercial officer
Link to strategy
–
Drive hospital performance
–
Invest in our workforce
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
B
Risk movement in 2021
Risk movement in 2022
Risk description
The wider economic outlook for the UK remains volatile. The Bank of England (BoE) is forecasting inflation reducing materially
from recent levels (c10%-11% on the CPI measure) in H2 2023 but is still expected to raise interest rates to c4%-5% during 2023.
The BoE is also forecasting the UK economy to decline from late 2022 and throughout 2023. The war in Ukraine initially increased
the volatility of food and energy prices, and increased supply chain disruption, but both prices and supply chains are adapting.
After the turbulence of UK economic policy in 2022, there now appears greater consistency.
COVID-19 remains a disrupter to global supply chains, especially with the Chinese government suddenly dropping its zero
COVID-19 policy in face of public unrest meaning that they are now experiencing high levels of infection.
Despite these macroeconomic headwinds, the expectation is that the primary growth drivers for healthcare will remain medium
term, namely record NHS waiting lists, growing PMI lives covered and a self-pay market that has expanded since 2019.
Risk impact
Erosion of profit margin from input inflation.
Reduction of private patients and associated revenue and profit contributions.
Risk mitigation
The COVID-19 pandemic has left high levels of pent up demand for our services.
We understand that private medical insurance policy renewals and sales are seeing growth, and we have seen strong activity
growth in 2021-22. Self-pay enquiries remain at record levels despite growing impact of the economy on people’s ability to afford
treatment largely because of record waiting lists.
NHS referrals continue to recover with record levels of orthopaedics through 2022.
In response to macro inflationary pressure we will continue to benefit from a range of inflation mechanisms built into the PMI
contracts and will benefit from our ability to change self-pay pricing quickly via our new pricing engine. Our conversion rate from
outpatient appointment to inpatient procedure remains stable. Procurement maintains a constant review of pricing and seeks
opportunities to mitigate inflationary increases. A significant pricing mitigation has been our energy price hedges that we have
in place until October 2024.
In addition, we continue to respond to changing economic circumstances by optimising our private and NHS funded work
ensuring we are not over-reliant on one income source, supported by an efficient cost base. We are also expanding our proposition
into GP, daycase clinic, digital and occupational health areas to meet changing demand, notably the acquisition of The Doctors
Clinic Group in late 2022.
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Risk management and internal control
continued
Principal risk
3. Climate change
Executive owner(s)
Chief operating officer
Link to strategy
–
Drive hospital performance
–
Champion sustainability
–
Deliver strong financial
performance
Risk appetite
B
Risk movement in 2021
Risk movement in 2022
Risk description
Climate-related risks have been identified through the emerging risk process.
Our climate-related risks include:
–
Severe storm weather events eg damage to roofs or flooding
–
Prolonged spells of extreme ambient temperatures
–
Energy price fluctuation (Decarbonisation requires changing our energy sources: moving to more expensive zero-carbon
electricity tariffs and replacing gas-fired heat sources with more expensive electricity)
–
Changes to laws and regulation, including failure to meet net zero targets and obligations (eg in financial covenants)
Risk impact
Severe storm weather has the potential to cause major damage and disruption to our sites. Storm events raise the risk of floods
at our buildings due to rising external water levels, such as from river run-off and the sea. Our hospitals would be badly affected
by flooding should it occur, as water ingress would affect medical equipment and risk the hygiene of our premises and safety of
our patients.
Extreme weather events will also disrupt our patients’, colleagues’ and consultants’ ability to attend our facilities.
Prolonged spells of extreme ambient temperatures could lead to an inability of existing critical heating, ventilation and air
conditioning (HVAC) systems to cope with required cooling and potentially cause cancellation of procedures and operations.
Providing healthcare services is a relatively energy intensive business. We are vulnerable to fluctuations in energy prices driven
by rising carbon costs imposed on power generators as well as through increasing taxation at the point of consumption.
Risk mitigation
An estate-wide condition assessment of roofs completed in 2021 has informed a prioritised approach to capital investment
to manage storm damage risk.
Flood risk mitigation includes a continued periodic review of our estate in relation to existing and predicted flood risk zones.
Extreme ambient temperature risk mitigation includes an informed investment plan for upgrade of failing and vulnerable plant.
Design of the replacement and upgrade would account for the predicted increase in ambient temperature profiles expected
within the lifespan of the plant eg 15 years. Further mitigation measures include extreme weather warning protocol and business
continuity plans to provide emergency loan HVAC plant.
Energy price risk mitigation includes energy efficiency measures to reduce consumption and our energy hedging strategy that
has seen all our current energy requirements secured until October 2024.
Net zero targets form part of the remuneration of the executive directors.
Principal risk
4. Competitor challenge
Executive owner(s)
Chief commercial officer
Link to strategy
–
Drive hospital performance
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
B
Risk movement in 2021
Risk movement in 2022
Risk description
We operate in a competitive market. New or existing competitors may enter the market of one or more of our existing hospitals,
or offer new services.
In the current economic environment, there is a risk that the pressures on competitors results in irrational market behaviour
manifesting itself in low pricing on tenders or self-pay.
Risk impact
The potential impact would be the loss of market share due to aggressive competitor activity, a new competitor and reduced
profitability and cash flow.
Risk mitigation
We maintain a watching brief on new and existing competitor activity and retain the ability to react quickly to changes in patient
and market demand.
We consider that a partial mitigation of the impact of competitor activity is ensured by providing patients with high-quality
clinical care and by maintaining good working relationships with GPs and consultants.
We continue to invest in the brand and deliver an effective acquisition capability both directly and via our partners in order to
protect our market position. We have also strengthened our pricing and tendering capabilities.
Despite the COVID-19 pandemic, we have maintained investment into the estate and clinical equipment to differentiate our
proposition.
We monitor the market for opportunities, should they arise, to acquire or open facilities in specific geographies or services
creating incremental volume.
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Risk management and internal control
continued
Principal Risk
5. Information governance and security
Executive owner(s)
Chief operating officer
Link to strategy
–
Drive hospital performance
–
Build on quality
–
Invest in our workforce
–
Deliver strong financial
performance
Risk appetite
B
Risk movement in 2021
Risk movement in 2022
Risk description
We have to maintain and manage a range of physical and digital data assets including patient records, commercial information
and colleague data.
Personal data has to be managed in compliance with the principles set out in the Data Protection Act 2018 and the General Data
Protection Regulations (GDPR).
The level of risk to our IT architecture and systems continues to grow as the volume of cyber security threats are increasing and
becoming more sophisticated.
Healthcare and pharmaceutical organisations saw increased hostile cyber activity in 2020-22 because of the COVID-19 pandemic,
especially ransomware attacks. We anticipate that the healthcare sector will remain a higher risk sector from cyber-attacks.
Risk impact
Our business could be disrupted if our information systems fail, are breached, destroyed or damaged.
Colleague and patient data could be stolen or compromised.
We could also be subject to litigation by third parties and law enforcement agencies.
A successful cyber-attack and a breach of data security could result in:
–
Material costs to recover operations
–
Material financial penalties for breaches of Data Protection law
–
Compensation for patients or colleagues if personal data is compromised
–
Reputational damage
Risk mitigation
We have a governance structure, with board oversight, that monitors the risk and mitigations for information governance.
To support the governance structure we have a range of policies and practices covering information governance. All colleagues
have to complete annual mandatory training on information governance and data protection.
Our IT team have a cyber-security strategy for continuous improvement based on industry standards. It covers the processes
from identifying specific risks, to protecting physical and digital data assets through to recovery in the event of a successful
cyber-attack.
We work with a number of industry-leading technical partners to provide:
–
Multiple layers of business protection through the use of advanced detection and protection systems
–
Regular third-party penetration testing on new and existing IT systems
Principal Risk
6. COVID-19 new variants
Executive owner(s)
The whole executive
committee, led by the chief
executive officer
Link to strategy
–
Drive hospital performance
–
Build on quality
–
Invest in our workforce
–
Deliver strong financial
performance
Risk appetite
L
Risk movement in 2021
Risk movement in 2022
Risk description
Repeated waves of infection occur from current or future variants of COVID-19 resulting in high levels of patient and colleague
sickness in all areas of healthcare in the UK.
Risk impact
Further waves of infection could adversely impact Spire Healthcare’s operations and our profitability by:
–
Reducing the amount of elective procedures hospitals can carry out because of cancellations from patient illness and colleague
absence
–
Spire Healthcare hospitals could be required to support local NHS trusts that declare surge, preventing them from treating
private patients
–
Consultants and anaesthetists could be required to support their NHS trusts to treat COVID-19 patients or the backlog in waiting
lists, reducing their availability to undertake work in Spire Healthcare facilities
Risk mitigation
We followed the UK Health and Security Agency’s (UKHSA) guidance throughout the pandemic as well as the Infection Prevention
Controls (IPC) set out in the NHSE’s IPC Board Assurance Framework regarding COVID-19. IPC performance indicators are reported
to the executive committee and board on a regular basis.
We follow UKHSA guidance on screening patients pre-admission before inpatient procedures, and local sites have outbreak
guidance in the event of a COVID-19 outbreak.
We offered all clinical colleagues COVID-19 booster jabs and flu vaccinations in Q4 2022. We continue to educate and encourage
all our employees to have all the COVID-19 vaccinations they are entitled to, and will encourage all employees to participate in
future COVID-19 and flu national vaccination programmes.
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Risk management and internal control
continued
Principal Risk
7. Brand reputation
Executive owner(s)
Chief commercial officer
Link to strategy
–
Drive hospital performance
–
Build on quality
–
Invest in our workforce
–
Champion sustainability
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
B
Risk movement in 2021
Risk movement in 2022
Risk description
The COVID-19 pandemic has resulted in a substantial amount of positive media coverage for Spire Healthcare.
Our brand presence among consumers remains at higher levels than pre-pandemic.
Our brand reputation is interconnected with a number of other principal risks, eg clinical quality and patient safety, information
governance and security.
Our future growth depends upon our ability to maintain, and continue to enhance, our reputation amongst patients, clinicians
and other stakeholders.
As our brand presence grows, the risk increases that adverse events such as:
–
Patient notifications and recalls
–
Mishandling of patient data
–
A breach of law or regulation
will have a more material impact on us.
Risk impact
If we fail to protect or grow the brand it may harm our ability:
–
To maintain or grow income
–
To attract and retain the best colleagues and consultants
–
To win new contracts
–
To raise capital at competitive rates
–
To meet our regulatory obligations
Risk mitigation
Our primary mitigations against damage to our brand reputation is through the good management of our principal risks,
in particular:
–
Patient safety and clinical quality
–
Cyber security and data protection
– Workforce
In addition, we continue to invest in the awareness and health of the brand through national advertising, public relations and
centrally coordinated social media. We also continue to build our reputation amongst analysts and public commentators.
Principal Risk
8. Supply chain disruption
Executive owner(s)
Chief operating officer
Link to strategy
–
Drive hospital performance
–
Champion sustainability
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
L
Risk movement in 2021
Risk movement in 2022
Risk description
Disruption in the global and UK supply chains because of a variety of factors could lead to shortages of critical components or
products within:
– Medicines
– Consumables
– Prostheses
– Food
–
Green energy supply
–
Medical gases
Risk impact
Spire Healthcare hospitals are reliant on a wide range of products in order to be able to conduct operations and procedures.
Shortfalls in order fulfilment of fresh food for example, could result in hospitals having to cancel inpatient operations and
procedures.
We are heavily reliant on medical consumables that in turn are heavily reliant on the availability of plastics, to carry out even the
most basic procedures (eg taking blood samples). Shortages in raw materials or disruption in the supply chain from the
manufacturer could result in hospitals having to cancel operations and procedures.
Risk mitigation
We run a centralised supply chain with a national distribution centre (NDC) and our own vehicle and driver fleet. This allows us to
maintain stock at a group level and source where the need is greatest. Medical consumables are held at the NDC with an average
of eight weeks’ supply; medicines and prostheses are held at hospital sites.
In 2021, and into 2022, we have had to respond to a number of product shortages and global recalls, and we have seen some
minor shortfalls in order fulfilment. In all cases, our centralised procurement function has been able, with the support of a
permanent presence from the clinical team, to find alternative supplies to maintain hospitals’ activities.
Fresh food is supplied through a national food distributor which has its own delivery fleet and directly employs its HGV drivers.
Order fulfilment has remained in the high 90 percentile. Because of the group’s Brexit planning, it does have contingency menu
plans in case of fresh food shortages.
NHS Supply Chain manages any national shortages in critical medicines and medical gases. We receive allocations based on our
activity.
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Risk management and internal control
continued
Principal Risk
9. Government and NHS policy
Executive owner(s)
Chief commercial officer
Link to strategy
–
Drive hospital performance
–
Build on quality
–
Invest in our workforce
–
Champion sustainability
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
B
Risk movement in 2021
Risk movement in 2022
Risk description
Historically, the levels of NHS referrals have been subject to sudden and unpredictable changes dependent on national political
priorities, or local NHS financial constraints.
There is a risk that wider government policy is unfavourable to the healthcare sector as a whole, eg future economic or
employment policy.
Risk impact
Changes to NHS commissioning models, if adverse, could lead to reduced access to patients, reduced tariffs, or reduced prices
adversely affecting revenues and/or margins.
A reduction in patient volumes could lead to a reduction in the operational efficiency of our existing hospital network.
Changes in government fiscal policy or spending policy towards corporate organisations, or the healthcare sector in particular,
could materially affect our profitability.
Risk mitigation
Historically, we have derived 70% of our revenues from PMI and self-pay patients that provided a natural protection against
a change in government and NHS policy. Post-pandemic, we are seeing strong private revenues that are expected to continue
medium term.
Through the COVID-19 pandemic, we strengthened our relationships with the Department of Health and Social Care (DHSC), and
NHS England. Meanwhile hospitals have also strengthened their relationships with their local NHS commissioners. The Integrated
Care Systems (ICSs) are all established and starting to commission referrals effectively. The impact on NHS referrals has been
minimal.
From a contract perspective we have now signed effective contracts with all ICSs.
Our chief executive officer attended the launch of the government’s Elective Recovery Taskforce, aimed at reducing waiting lists.
Principal Risk
10. Pandemic from new pathogen
Executive owner(s)
Group medical director
Link to strategy
–
Drive hospital performance
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
B
Risk movement in 2021
N/A
Risk movement in 2022
Risk description
The emergence of new biological pathogens leads to an uncontrollable global pandemic resulting in increased demand for
Spire Healthcare to assist in efforts and/or disruption/staff shortages.
Risk impact
As seen in the COVID-19 pandemic eg:
–
Cessation of elective activity
–
Contract with NHS to provide capacity for an extended period of time
–
Colleagues, patients and consultants impacted by pandemic illness
–
Increase in waiting lists for elective surgery
–
Increase in complexities of patient cases
Risk mitigation
–
We maintain awareness of early warnings of potential pandemics from organisations like the WHO, DHSC, NHS England
–
We have a developed emergency response plan in line with the NHS and our experience of managing the COVID-19 pandemic
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Risk management and internal control
continued
Principal risk
12. Patient safety and clinical quality
Executive owner(s)
–
Group clinical director
–
Group medical director
Link to Strategy
–
Drive hospital performance
–
Build on quality
–
Invest in our workforce
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
VL
Risk movement in 2021
Risk movement in 2022
Risk description
There is a risk to the provision of high-quality patient care due to:
–
A shortage of skilled workforce
–
Clinical and non-clinical staff and consultants failing to follow guidelines, standards and policies, resulting in avoidable patient
harm
–
Failing to learn from incidents, complaints, mortality reviews, patient feedback and patient notification exercises in a timely
manner which may result in further patient harm.
–
Failure to act on findings from audits, clinical outcome measures (including registry data), peer reviews and external inspections
–
Nosocomial COVID-19 infection
Risk impact
Reputational and financial loss could occur if we fail to adequately address issues identified by incidents, audits, complaints,
PROMs, national registries, raising concerns, workforce feedback and the internal patient safety quality reviews and Care
Quality Commission.
Risk mitigation
We maintain the following controls to mitigate against a failure of patient safety and clinical quality:
–
A reporting culture of openness and shared learning from ward to board, with a FTSUG at each site
–
Timely Incident reporting via a database with central oversight and development of actions to ensure learning.
–
Continually monitoring clinical standards, reporting progress via the board’s CGSC
–
Integrated quality reporting based on a quality assurance framework with a standard set of KPIs
–
Development of a board assurance framework to assess risks against clinical and medical strategic objectives
–
A schedule of robust and regular hospital audits including the patient safety and quality reviews, with an action plan
for improvement that is monitored
–
Standard operating procedure for patient notification exercises that includes learning and continuous improvement
methodologies
–
Colleague induction, clinical competencies requirements and mandated training
–
Reporting on clinical outcomes with workforce and consultants including the chairs of hospital medical advisory committees
with a view to driving up safety and performance
Principal Risk
11. Diversification and disintermediation
Executive owner(s)
Chief commercial officer
Link to strategy
Risk appetite
H
Risk movement in 2021
N/A
Risk movement in 2022
Risk description
There is a risk that we will not be able to launch and scale new propositions or services at sufficient pace to diversify and mitigate
the risk of disintermediation from new service providers or new technologies. In addition, new digital healthcare services deliver
lower margins and therefore contribution to existing services.
Risk impact
We fail to grow the revenues, generate cash and provide a return on investment to investors of the group in line with the board’s
five-year strategic plan. We become disintermediated by new or specialist service providers.
Risk mitigation
We have:
–
An innovation board bringing together the chief executive officer and executive committee members of the medical, clinical,
commercial and finance functions to identify healthcare trends and opportunities to develop new services
–
A dedicated director of innovation and proposition development, sourcing specific opportunities to support the group strategy,
leading on new service development, supported with dedicated IT and project resource
–
A dedicated director sourcing suitable target acquisitions supported by an expert external financial and tax adviser
–
A property lead to handle the assessment and acquisition of new physical assets with the support of retained property advisors
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Risk management and internal control
continued
Principal Risk
14. Major infrastructure failure
Executive owner(s)
Chief operating officer
Link to strategy
–
Drive hospital performance
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
B
Risk movement in 2021
N/A
Risk movement in 2022
Risk description
There is a risk that there is a failure of national infrastructure, eg:
–
The national electricity grid
–
Import channels for our UK-based suppliers
–
Fuel distribution
–
Access to NHS
from a variety of causes including lack of resilience in national infrastructure, strike action, terrorist activity and action by state
governments wishing to harm the UK.
Risk impact
Our hospitals are reliant on the provision of electricity from the National Grid. Main power outages result in the immediate
cancellation of procedures under general anaesthetic.
Failure of logistic channels is covered in supply chain failure risk.
In very rare cases, patients have to be transferred to the NHS for further treatment. If local NHS trust hospitals are overburdened,
or suffering strike action, there could be delays in transferring patients.
Risk mitigation
All our hospitals have a backup power source provided by diesel powered generators that operate major circuits of a hospital, but
some key equipment is not covered, eg MRI scanners. Battery powered uninterrupted power is provided into specific equipment
in theatres to ensure patients remain safe in the event of a generator failure. These backup power sources are designed to keep
patients in the hospital safe, but are not a complete substitute for mains power.
Our national distribution fleet refuel on a daily basis at the end of their shifts to ensure resilient operational capability.
In theory, NHS hospitals will still have to take emergency transfers so Trusts should not withdraw SLAs but there may be increased
frequency of delays to emergency transfers. Mitigation plans are in place and being rehearsed at hospitals as delays are being
experienced occasionally because of the overstretched ambulance service across the UK. The chief operating officer is chairing
a regular multi-disciplinary winter planning meeting to coordinate response activities to any infrastructure failures.
Principal risk
13. PMI market dynamics
Executive owner(s)
Chief commercial officer
Link to strategy
–
Drive hospital performance
–
Build on quality
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
L
Risk movement in 2021
Risk movement in 2022
Risk description
The PMI market remains concentrated, with the top four companies (Aviva, AXA, Bupa and VitalityHealth) having a market share
estimated at over 85%.
We have individual contractual relationships for the provision of our services with all the major PMI providers. These contracts
come up for renewal on a recurring basis. There is a risk that renewal of contract terms cannot be secured on historical terms.
Service line tenders and the introduction of triage services are expected to continue medium term as PMIs look to reduce costs.
We also expect an increase in directional networks.
Risk impact
Loss of, or renewal at lower tariffs, of an existing contractual relationship with any of the key insurers could significantly reduce
our revenue and profit.
Risk mitigation
We work hard to maintain good relationships and a 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.
We ensure we have long-term contracts in place with our PMI partners that avoid co-termination of contractual arrangements.
We believe continuing to invest in our well-placed portfolio of hospitals provides a natural fit to the local requirements of all the
PMI providers long term.
We continue to invest in efficiency programmes to ensure that we can offer the best combination of high-quality patient care
at competitive prices.
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Risk management and internal control
continued
Principal Risk
15. Antimicrobial resistance
Executive owner(s)
Group medical director
Link to strategy
–
Drive hospital performance
–
Build on quality
–
Invest in our workforce
–
Champion sustainability
–
Expand our proposition
–
Deliver strong financial
performance
Risk appetite
L
Risk movement in 2021
N/A
Risk movement in 2022
Risk description
Antimicrobial resistance (AMR) is a global health and development threat.
The World Health Organization has declared that AMR is one of the top 10 global public health threats facing humanity.
Misuse and overuse of antimicrobials are the main drivers in the development of drug-resistant pathogens.
The cost of AMR to the economy is significant. In addition to death and disability, prolonged illness results in longer hospital stays,
the need for more expensive medicines and financial challenges for those impacted.
Without effective antimicrobials, the success of modern medicine in treating infections, including during major surgery and
cancer chemotherapy, would be at increased risk.
Source: World Health Organization
Risk impact
If AMR becomes prevalent in the UK, the ability for consultants to carry out routine elective surgery could become too dangerous.
This would mean the current business model of Spire Healthcare would become unviable.
New antibiotic costs may increase substantially.
Risk mitigation
–
Executive level awareness of the government’s five-year AMR strategy
–
Participation in, and collaboration with, government monitoring of AMR outbreaks
–
Require clinicians to follow national guidelines on the prescribing of antibiotics in line with government guidelines
–
Access to up-to-date antimicrobial prescribing via online systems and access to microbiologists at all sites
–
Appropriate investigations of post-surgery infections including review of antibiotics.
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Compliance statements
Viability
Assessment of prospects
In accordance with the 2018 UK Corporate Governance Code, the directors assessed the viability of the
group and have maintained a period of three years for their assessment. Although longer periods are used
when making significant strategic decisions, three years has been used as it is considered the longest period
of time over which suitable certainty for key assumptions in the current climate can be made. The assessment
conducted considered the group’s current financial position and forecasted revenue, EBITDA, cash flows, risk
management controls and loan covenants over the three-year period (which is consistent with the approach
for prior years).
Assessment of viability
Further detail on both macroeconomic-related risk and COVID-19 is provided in the risk management and
internal control section on pages 66 and 76.
Other specific scenarios covered by our testing were as follows:
–
The group is subject to temporary suspension of trade, with a temporary adverse impact on revenue,
for example, as a result of a successful cyber-attack on key business systems
–
The downside modelling of a number of risks which result in a decline in earnings, including the loss of a
contractual relationship with a key insurer
–
Significant change in government policy resulting in consultants going on payroll
–
Short-term disruption to trade at a sub-set of hospitals owing to an extreme weather event
Management’s approach also included testing for a specific combination of these risks. This testing entailed
modelling for the potential impact if, although considered highly remote, the three risks which individually
give rise to the largest adverse financial impact were to take place in combination.
This review included the following key assumptions:
–
No change in capital structure given the group has since the 2022 year end refinanced its existing senior
finance facility and revolving credit facility
–
The government will not make significant change to its existing policy towards utilising private provision
of healthcare services to supplement the NHS
Based on the results of this analysis, the directors confirm that they have a reasonable expectation that the
group will be able to continue in operation and meet its liabilities as they fall due over the next three years.
Going concern
The group has undertaken extensive activity to identify plausible risks which may arise and mitigating actions.
Further information on these is provided in the section on viability above. Based on the current assessment of
the likelihood of these risks arising by 31 March 2024, together with their assessment of the planned mitigating
actions being successful, the directors have concluded that it is appropriate to prepare the accounts on a going
concern basis. See note 2 – Basis of Preparation in the Financial Statements for more detail.
Non-financial information statement
The Companies Act 2006 requires the company to disclose certain non-financial reporting information
within the annual report and accounts. Accordingly, the disclosures required in the company’s non-financial
information statement can be found on the following pages in the strategic report (or are incorporated into
the strategic report by reference for these purposes from the pages noted):
–
Information on our employees (page 25)
–
Information on diversity (pages 26 and 52)
–
Information on our anti-bribery and corruption policy (page 30)
–
Information on our approach to raising concerns (whistleblowing) and Freedom to Speak Up (pages 27, 57,
68, 90, 99 and 101)
–
Information on our approach to human rights (page 58)
–
Information on social matters (pages 42 to 59)
–
Information on our environment policy (pages 42 to 59)
Section 172 (1) statement
The directors are required to act in a way they consider, in good faith, would most likely promote the success of
the company for the benefit of its members as a whole, taking into account the factors as listed in section 172
of the Companies Act 2006.
Details of how the directors have had regard to their Section 172 duty can be found throughout the strategic
and governance reports. We set out on pages 36 to 41 details of who we consider to be our main stakeholders,
how we have engaged with them during the year and the outcomes of the process. Further details on how the
directors’ duties are discharged and the oversight of these duties are included in the governance section on
pages 85 to 94. The principal decisions of the board during the year are shown on page 85.
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“We had our best adjusted
EBITDA and EBIT for five
years, and expect to make
further good progress and
continued delivery of the
group’s strategy.”
Jitesh Sodha
Chief Financial Officer
Dear shareholder,
2022 was an extraordinary year. On a personal level,
the year started with me suffering a serious cycling
accident. After a period of recovery and recuperation,
I returned to the business later in the year. I would like
to thank Harbant Samra, deputy chief financial
officer, in particular, and the whole finance team and
other colleagues, for stepping up and stepping in
while I was away.
It was also an extraordinary year for the business.
We faced inflation, interest rate increases, supply
chain disruption, and wage and recruitment
pressures. I am pleased with how well we have
performed in this environment, delivering a positive
financial performance with revenue, earnings and
margins improving on 2021.
Revenue was £1,198.5 million, up 8.3% compared to
2021, driven by continued growth in demand from
self-pay patients and a rebound in our PMI business.
Private revenue rose by 14.5% to £876.7 million during
2022, compared to 2021.
We expanded our GP services and entered the
occupational health sector through the £12 million
acquisition of The Doctors Clinic Group.
We had our best adjusted EBITDA and EBIT for five
years. Adjusted EBITDA rose year on year by 14.2%
to £203.5 million while adjusted EBIT increased 30.2%
to £105.6 million. Adjusted EBITDA margin improved
to 17% from 16.1% in 2021, in line with our ongoing
programme to raise margins while delivering high
quality care, through revenue growth and over £15
million of efficiency savings. Our continued strategic
progress to a more complex treatment mix and
appropriate price rises led to average revenue per
case during 2022 rising to £3,179, up 10.2% (£2,883
in 2021).
Pricing changes vary between our customer groups.
We actively manage self-pay pricing regularly while
PMI and NHS pricing is reset annually. These annual
changes tend to impact upon our business from Q2
the following year, meaning that cost increases affect
us before our prices rise to account for these costs.
Margin improvement was tempered by the disruption
from COVID-19, and increased sickness and absence,
resulting in higher staffing and agency costs. Late
patient cancellations were in excess of pre-pandemic
run-rates for the same reasons, which, taken with the
testing costs, amounted to total COVID-related costs
of £42.9 million. COVID-19 and raised sickness levels
continue to persist, though we have become adept in
managing these.
The group’s leverage ratio continued to reduce,
resulting in a net bank debt/adjusted EBITDA
covenant ratio of 2.2x as at end 2022, down from 2.3x
at the end of FY21. This represents the lowest level of
leverage since 2016. During 2022, we refinanced our
bank debt from £425 million to £325 million, paying
down £100 million of bank debt. The refinanced debt
is extended until 2026.
We invested in our estate and also improved
capabilities with capital investment in 2022 of
£90.1 million. Our strong operational performance
and increase in adjusted EBIT led to an improvement
in ROCE, up by 1.3 percentage points to 6.2%.
The directors have recommended the payment
of a final dividend of 0.5 pence per share for the year
ending 31 December 2022. This represents the first
dividend payment since we suspended dividends due
to COVID-19 uncertainties in April 2020, and reflects
confidence in our ongoing performance.
We continue to face uncertainties around workforce,
inflation and sickness, but believe demand for
independent healthcare will remain strong in 2023
and beyond. Our flexible business model enables us
to mitigate these impacts, and our strong balance
sheet supports continuing investment and expansion
of our service offering. We expect to make further
good progress and continued delivery of the group’s
strategy in 2023.
Jitesh Sodha
Chief Financial Officer
Chief financial officer’s review
Positive financial
performance in
an extraordinary
year
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Selected financial information
Year ended 31 December 2022
Year ended 31 December 2021
(£m)
Total before
Adjusting
items
Adjusting
items
(note 9)
Total
Total before
Adjusting
items
Adjusting
items
(note 9)
Total
Revenue
1,198.5
1,198.5
1,106.2
–
1,106.2
Cost of sales
(660.1)
(660.1)
(615.0)
–
(615.0)
Gross profit
538.4
538.4
491.2
–
491.2
Other operating costs
(435.8)
(10.2)
(446.0)
(411.2)
(17.4)
(428.6)
Other income
3.0
3.0
1.1
23.3
24.4
Operating profit (EBIT)
105.6
(10.2)
95.4
81.1
5.9
87.0
Net finance costs
(91.5)
(91.5)
(88.1)
(0.8)
(88.9)
Profit/(loss) before taxation
14.1
(10.2)
3.9
(7.0)
5.1
(1.9)
Taxation
2.5
1.8
4.3
(20.8)
13.8
(7.0)
Profit/(loss) for the period
(1)
16.6
(8.4)
8.2
(27.8)
18.9
(8.9)
Profit/(loss) for the year attributable
to owners of the Parent
17.0
(8.4)
8.6
(28.6)
18.9
(9.7)
Profit for the year attributable
to non-controlling interest
(0.4)
–
(0.4)
0.8
–
0.8
Adjusted EBITDA
(2)
203.5
178.2
Basic earnings/(loss) per share, pence
2.1
(2.4)
Adjusted FCF
(3)
28.0
12.0
Net cash from operating activities
180.1
183.8
Net bank debt
(4)
250.1
224.9
1.
Profit/(loss) for the period is stated after a revision to useful lives and residual values applied to certain freehold property assets.
See page 143 for more information.
2.
Adjusted EBITDA is calculated as Operating Profit, adjusted to add back depreciation, and adjusting items, referred to hereafter
as ‘Adjusted EBITDA’. For EBITDA for covenant purposes, refer to note 22.
3.
Adjusted FCF (Free Cash Flow) is calculated as Adjusted EBITDA, less rent, capital expenditure cash flows and changes in working
capital after adjusting for one-off items which are not related to the normal trading activity of the business. Rent cash flows are
defined as interest on, and payment of, lease liabilities. Capital expenditure cash flows are defined as the purchase of plant,
property and equipment.
4.
Net bank debt is defined as bank borrowings less cash and cash equivalents.
Financial review
continued
Revenue
Group revenues increased 8.3% to £1,198.5 million (2021: £1,106.2 million). The increase in revenue is due
to the increased demand for private treatment with the continued growth in self-pay seen during the prior
period, but also the recovery by PMI patients. NHS revenue of £295.4 million includes £3.5 million (2021: £314.5
million and £58.1 million respectively) revenue from specific COVID-19 contracts. In Q1 2021 the group
operated under an NHS volume-based contract with a minimum income guarantee, included in the £58.1
million below was £47.4 million reflecting the ‘top up’ to minimum income guaranteed under the contract.
Revenue by location and payor
(£m)
2022
2021
Variance %
(2022-2021)
Total revenue
1,198.5
1,106.2
8.3%
Of which:
Inpatient
487.5
414.2
17.7%
Daycase
348.0
307.0
13.3%
Outpatient
333.1
300.9
10.7%
Other
26.4
26.0
1.4%
NHS – COVID-19
3.5
58.1
(93.9%)
Total revenue
1,198.5
1,106.2
8.3%
Of which:
PMI
538.7
473.7
13.7%
Self-pay
338.0
292.0
15.8%
Total private
876.7
765.7
14.5%
Total NHS
295.4
314.5
(6.1%)
Other
26.4
26.0
1.5%
Total revenue
1,198.5
1,106.2
8.3%
Cost of sales and gross profit
Gross margin for the year is 44.9% compared to 2021 levels of 44.4%. Cost of sales increased in the period by
£45.1 million or 7.3% (2021: £150.9 million, 32.5%) to £660.1 million (2021: £615.0 million) on revenues that
increased by 8.3% (2021: 20.3%). Increased costs are due to inflationary pressures, increased agency costs and
continued wage rate expansion. Increased agency spend is due to managing short notice absences caused by
the peaks of COVID-19 during the year. The margin was higher in 2022 as a result of increased private volumes,
and good cost management against the inflationary backdrop.
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Financial review
continued
Cost of sales is broken down, and presented as a percentage of relevant revenue, as follows:
Year ended 31 December 2022
Year ended 31 December 2021
£m
% of revenue
£m
% of revenue
Clinical staff
275.3
23.0%
260.8
23.6%
Direct costs
280.3
23.4%
263.4
23.8%
Medical fees
104.5
8.7%
90.8
8.2%
Cost of sales
660.1
55.1%
615.0
55.6%
Gross profit
538.4
44.9%
491.2
44.4%
Other operating costs
Excluding adjusting items, other operating costs have increased by £24.6 million, or 6.0% to £435.8 million
(2021: £411.2 million), the main driver is increased staff costs due to continued wage rate expansion and other
inflationary pressures. Depreciation for the year was £97.9 million (2021: £97.1 million). The depreciation charge
in 2022 benefits from a reduction in charge of £2.9 million as a consequence of a revision of the useful life and
residual value policy in respect of freehold properties so that it more closely aligns with external benchmark
information. The useful life has been extended from a maximum of 50 years to a maximum of 60 years, and
the group has set the residual value equal to 20% of cost (previously nil). This change is anticipated to result
in a reduction in depreciation of approximately £5.8 million in 2023.
Adjusting items included in operating costs decreased by £7.2 million versus 2021 mainly due to £11.4 million
of charges relating to remediation of regulatory compliance and malpractice costs in the prior year versus £1.1
million in the current year with an increase of £4.5 million in the current year due to business reorganisation
and restructuring costs. Other operating costs including adjusting items for the year ended 31 December 2022
increased by £17.4 million or 4.1% to £446.0 million (2021: £428.6 million).
Operating margin for the year ended 31 December 2022 is 8.0% (2021: 7.9%) in 2021. Excluding adjusting items,
operating margin is 8.8%, up from 7.3% at 2021.
Adjusted EBITDA
Adjusted EBITDA for the group has increased by 14.2% in the period from £178.2 million to £203.5 million for
2022. The increase is due to continued growth in private revenue and good cost management.
Share-based payments
During the period, grants were made to executive directors and other employees under the company’s Long
Term Incentive Plan. For the year ended 31 December 2022, the charge to the income statement is £2.3 million
(2021: £2.8 million), or £2.6 million inclusive of National Insurance (2021: £3.2 million). In addition, the group
has a Sharesave scheme which was launched in 2022. Further details are contained in note 27 of the annual
report and accounts.
Adjusting items
Year ended 31 December
(£m)
2022
2021
Business reorganisation and corporate restructuring costs
4.5
1.2
Costs related to/(income from) asset disposals and aborted projects
4.3
4.5
Remediation of regulatory compliance or malpractice costs
1.1
11.4
Hospitals set up and closure costs
0.3
0.3
Income from asset disposals
–
(23.3)
Total adjusting items in operating costs
10.2
(5.9)
Interest payable on adjusting items
–
0.8
Total pre-tax adjusting items
10.2
(5.1)
Income tax (credit)/charge on adjusting items
(1.8)
(13.8)
Total post-tax adjusting items
8.4
(18.9)
Adjusting items comprise those matters where the directors believe the financial effect should be adjusted for,
due to their nature, size or incidence, in order to provide a more accurate comparison of the group’s underlying
performance.
During H2 2021, the group announced a strategic, group-wide initiative that impacts the operating model of
the group to allow a more efficient governance and reporting structure, as well as a drive on digital
functionality. This initiative will be implemented over several phases. In the period, £4.5 million (2021: £1.2
million) has been incurred. The initial phase of the initiative was completed in 2022, the estimated time frame
to overall completion being the end of 2024.
Asset acquisitions, disposals, impairment and aborted project costs of £4.3 million mainly comprise costs in
respect of the acquisition of The Doctors Clinic Group, and the acquisition of the minority interest in
The Claremont, as well as its integration with the group. In the prior year costs incurred by the group relating
to Merger and Acquisition (M&A) costs, related to the attempted takeover bid by Ramsay Health Care, and
the acquisition and integration of Claremont.
In December 2022, the group acquired 100% of the share capital in The Doctors Clinic Group Limited for
£12 million as part of its strategic investment in its broader healthcare offering. The costs of acquisition
of £1.8 million have been incurred in the period. Costs for integration are expected to continue into FY23.
Following the acquisition of Claremont Hospital in November 2021, the group has incurred costs of £0.5 million
for integration alongside some transitional services in the period. In addition, on 31 March 2022, the group
acquired the remaining minority interest for £2.7 million, of which £1.9 million had been provided for in FY21.
Therefore, £0.8 million is included in adjusting items. Other costs incurred mainly relate to the final business
transfer of the Sussex Hospital to the NHS Trust which completed on 31 March 2022, as announced during
FY21. In addition, integration costs of £0.5 million were incurred in the period.
In December 2022, the group completed on the sale of St Saviours, an asset held for sale, for £3.2 million,
following a write down in value reported at H1 2022 of £0.5 million.
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Adjusting items
continued
In the prior period, the group agreed the sale and leaseback of Spire Cheshire for consideration of £89 million.
A gain on disposal of £23.5 million has been recognised, offset by £0.2 million of costs to sell.
Remediation of regulatory compliance or malpractice costs includes amounts paid to the insurer following
the Court of Appeal hearing. £13.0 million was provided in FY21, with £13.3 million being settled in FY22.
The £0.3 million recognised in the period reflects this additional amount. In the prior year, and in response
to the Public Inquiry the group commenced a detailed patient review initiative; during the year the group has
re-evaluated the expected cost of completing this complex project, and its associated settlement of claims.
As a result, the group has increased its provision by £0.9 million for the project. In the prior year, a credit of
£0.4 million was recognised following the settlement of costs to Spire Healthcare from its insurer following
the original judgment finding in favour of the group in FY20.
Hospital set-up and closure costs mainly relate to the maintenance costs of non-operational sites.
Net finance costs
Net finance costs increased by 2.9% to £91.5 million (2021: £88.9 million). The increase is due to a one-off
charge of £3.1 million in respect of unamortised fees which were recognised in full following the refinancing
of the senior loan facility in Q1 2022 as well as increased finance costs related to additional lease liabilities.
In the prior year adjusting items of £0.8 million costs relates to the interest repayment on the Court of Appeal
judgment in respect of an insurer.
Taxation
The effective tax rate assessed for the year, all of which arises in the UK, differs from the standard weighted
rate of corporation tax in the UK. The reconciliation of the actual tax charge to that at the domestic
corporation tax rate is as follows:
Year ended 31 December
(£m)
2022
2021
(Loss)/profit before taxation
3.9
(1.9)
Tax at the standard rate
0.7
(0.4)
Effects of:
Expenses and income not deductible or taxable
8.2
4.5
Tax adjustment for the super-deduction allowance
(2.6)
(2.2)
Tax adjustment in respect of sale and leaseback
–
(16.0)
Impairment charge in respect of held for sale assets (not tax deductible)
0.1
–
One-off impact of revision to useful economic life and residual value of freehold
property portfolio
(9.0)
–
Adjustments to prior year
(1.8)
3.5
Difference in tax rates
0.1
17.7
Deferred tax not previously recognised
–
(0.1)
Total tax charge
(4.3)
7.0
Corporation tax is calculated at 19.0% (2021: 19.0%) of the estimated taxable profit or loss for the year. The
effective tax rate on profit before taxation for the year was not meaningful (2021: not meaningful) as a result
of prior year adjustments and movements on deferred tax which are not directly linked to profit. As noted on
page 79, during the period, the group has revised the useful life and residual value of its freehold property
portfolio so that it more closely aligns with external benchmark information. This revision results in a one-off
deferred tax credit of £9.0 million in 2022. The prior year deferred tax charge was largely driven by the effects
of revaluing deferred tax assets and liabilities from 19% to 25% due in April 2023, and the deferred tax
movement as a result of the sale and leaseback of Spire Cheshire.
Profit after taxation
The profit after taxation for the year ended 31 December 2022 was £8.2 million (2021: Loss £8.9 million).
This is stated after the impact of adjusting the useful life and residual value of freehold properties, including
the £9.0 million credit to deferred tax as set out above.
Adjusted financial information
This statement was prepared for illustrative purposes only and did not represent the group’s actual earnings.
The information was prepared as described in the notes set out below.
Non-GAAP financial measures
We have provided in this release financial information that has not been prepared in accordance with IFRS. We
use these non-GAAP financial measures internally in analysing our financial results and believe they are useful
to investors, as a supplement to IFRS measures, in evaluating our ongoing operational performance. We believe
that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating
ongoing operating results and trends in comparing our financial results with other companies in the industry,
many of which present similar non-GAAP financial measures to investors.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial
information prepared in accordance with IFRS. Investors are encouraged to review the reconciliation of these
non-GAAP financial measures to their most directly comparable IFRS financial measures provided in the
financial statements table in the press release.
Adjusted EBITDA and Adjusted EBIT
Year ended 31 December
(£m)
2022
2021
Operating profit
95.4
87.0
Remove effects of:
Adjusting items before interest and tax
(1)
10.2
(5.9)
Adjusted EBIT
105.6
81.1
Depreciation
97.9
97.1
Adjusted EBITDA
203.5
178.2
1.
In the prior year adjusting items before tax total £5.1 million including the £0.8 million interest payable on the Court of Appeal
judgement in respect of an insurer which was previously awarded to Spire Healthcare. Interest payable is not included in Adjusted
EBIT or Adjusted EBITDA.
Financial review
continued
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Adjusted profit after tax and adjusted earnings per share
Adjustments have been made to remove the impact of a number of non-recurring items.
Year ended 31 December
(£m)
2022
2021
Profit/(loss) before tax
3.9
(1.9)
Adjustments for:
Adjusting Items – operating costs/(income)
10.2
(5.9)
Adjusting items – interest payable
–
0.8
Adjusted profit/(loss) before tax
14.1
(7.0)
Taxation
(1)
2.5
(20.8)
Adjusted profit/(loss) after tax
16.6
(27.8)
Profit/(loss) for the year attributable to owners of the parent
17.0
(28.6)
(Loss)/profit for the year attributable to non-controlling interests
(0.4)
0.8
Weighted average number of ordinary shares in issue (No.)
402,679,296
400,848,264
Adjusted earnings/(loss) per share (pence) attributable to the parent
4.2
(7.1)
1.
Reported tax charge for the period adjusted for the tax effect of adjusting Items.
Return on capital employed
Return on capital employed (‘ROCE’) is the ratio of the group’s adjusted EBIT to total assets less cash, capital
investments made in the last 12 months and current liabilities. The calculation of return on capital employed
is shown below:
Year ended 31 December
(£m)
2022
2021
Adjusted EBIT
105.6
81.1
Total assets
2,159.8
2,237.4
Less: Cash and cash equivalents
(74.2)
(202.6)
Less: Capital investments
(90.1)
(77.1)
Less: Current Liabilities
(283.4)
(302.1)
Capital employed
1,712.1
1,655.6
Return on capital employed %
6.2%
4.9%
Adjusted free cash flow
Adjusted FCF (Free Cash Flow) is calculated as adjusted EBITDA, less rent, capital expenditure cash flows
and changes in working capital after adjusting for one-off items which are not related to the normal trading
activity of the business. Rent cash flows are defined as interest on, and payment of, lease liabilities. Capital
expenditure cash flows are defined as the purchase of plant, property and equipment. The calculation of
readjusted free cash flow is shown below:
Year ended 31 December
(£m)
2022
2021
Adjusted EBITDA
203.5
178.2
Less: Rental payments
(93.7)
(81.5)
Less: Cash flow for the purchase of property, plant and equipment
(87.7)
(69.3)
Less: Working capital movement
(15.0)
11.4
Less: Adjustments for non-recurring items
20.9
(26.8)
Adjusted free cash flow
28.0
12.0
Cash flow analysis for the period
Year ended 31 December
(£m)
2022
2021
Opening cash balance
202.6
106.3
Operating cash flows before adjusting Items and income tax paid
186.5
189.0
Net cash flow from adjusting Items (included in operating cash flows)
(6.4)
(5.2)
Income tax received/(paid)
(0.1)
–
Operating cash flows after operating adjusting Items and income tax
180.0
183.8
Net cash flow from adjusting Items (included in investing cash flows)
3.2
35.2
Net cash in investing activities
(87.2)
(68.8)
Cash outflow for acquisition of subsidiary
(11.4)
(14.7)
Investing cash flows after investing adjusting Items
(95.4)
(48.3)
Net cash flow from adjusting Items (included in financing cash flows)
(2.7)
55.5
Net cash in financing activities
(210.3)
(94.7)
Financing cash flows after financing adjusting Items
(213.0)
(39.2)
Closing cash balance
74.2
202.6
Financial review
continued
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Closing cash balance
The group’s year end cash balance stood at £74.2 million, which reflects a reduction of £128.4 million against
the prior year balance of £202.6 million. This movement contains three significant one-off items: repayment
of £100 million of the group’s senior finance facility as part of the refinancing agreement; a net cash outflow
of £11.4 million paid for the acquisition of The Doctors Clinic Group; and a payment of £13 million paid to an
insurer following the outcome of a Court of Appeal hearing in late 2021. Further detailed information on the
cash flow during the period is set out in the following sections.
Operating cash flows before adjusting items
The cash inflow from operating activities before tax and adjusting items was £186.5 million (2021: £189.0
million), which constitutes a cash conversion rate from £203.5 million adjusted EBITDA of 92% (2021: 106%
conversion of £178.2 million adjusted EBITDA). The net cash outflow from movements in working capital
in the period was £16.6 million (2021: £11.4 inflow). The movement is largely driven amounts by paid to
the insurer following the Court of Appeal hearing of £13.0 million which was provided for in 2021.
Investing and financing cash flows
Net cash outflow in investing activities for the period was £95.4 million (2021: £48.3 million). The cash outflow
relates to the consideration paid for the acquisition of The Doctors Clinic Group of £11.4 million net of cash
acquired and the purchase of plant, property and equipment in the period totalled £87.7 million (2021: £69.3
million), relating to the completed major refurbishment at Spire Shawfair Park in Edinburgh and the ongoing
major developments at Spire Yale in Wrexham, it also covers further investment in patient care and digital
transformation and the replacement of nine X-ray rooms. The total capital investment in the year in respect
of additions of plant, property and equipment amounted to £90.1 million (2021: £77.1 million). This was
offset by an inflow of £3.2 million from the sale of St Saviours which was classified as held for sale.
Net cash used in financing activities for the period was £213.0 million (2021: £39.2 million) Cash outflows
include the repayment of £100.0 million of the group’s senior finance facility as part of the refinancing
agreement, and including interest paid and other financing costs of £94.6 million (2021: £80.0 million),
and £18.5 million (2021: £14.7 million) of lease liability payments. During the year the group acquired the
remaining non-controlling interest in Claremont Hospital LLP for £2.7 million and dividends of £0.3 million have
been paid to non-controlling interests of Didsbury MSK Limited (2021: nil).
Borrowings
At 31 December 2022, the group has bank borrowings (inclusive of IFRS 9 adjustments) of £324.3 million
(2021: £427.5 million), drawn under facilities which mature in February 2026.
Year ended 31 December
(£m)
2022
2021
Cash
74.2
202.6
Bank borrowings
324.3
427.5
Bank borrowings less cash and cash equivalents
250.1
224.9
As announced by the group on 25 February 2022, the group entered into an agreement on 24 February 2022
to refinance its Senior Loan Facilities. As part of this exercise, and in recognition of the fact that the group had
substantial cash reserves at 31 December 2021, the group repaid £100 million of the Senior Loan Facility. As a
consequence, the revised Senior Loan Facility was set at £325.0 million and the group continued to have access
to an undrawn Revolving Credit Facility of £100.0 million. This new arrangement has a maturity of 4 years, with
the group having the option to extend by a further year. The financial covenants relating to this new agreement
are unchanged with leverage to be below 4.0x and interest cover to be in excess of 4.0x. As at 31 December
2022 the leverage measure stood at 2.2x and interest cover of 8.5x (2021:4.5x).
As at 31 December 2022 lease liabilities were £866.5 million (2021: £837.8 million).
Dividend
The directors of Spire Healthcare Group plc have recommended the payment of a final dividend of 0.5 pence
per share for the year ending 31 December 2022. Subject to shareholder approval at the forthcoming annual
general meeting on 11 May 2023.
Related party transactions
There were no significant related party transactions during the period under review.
Financial review
continued
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“With the gradual easing of the
pandemic, we have seen a
rebound in demand for private
healthcare and our teams
across Spire Healthcare have
worked incredibly hard this
year to position the business
to meet this demand, while
delivering on the high quality
personalised care for which we
have become renowned. The
board was delighted to see yet
another increase in our quality
scores, with a record 98% of
our hospitals now rated as
‘Good’ or ‘Outstanding’ by
the CQC, or its equivalent
in Scotland and Wales.”
Sir Ian Cheshire
Chairman
Meeting demand
and delivering
on quality
Dear shareholder,
Demand for self-funded and insurance-backed
private healthcare remained strong in 2022,
against a backdrop of increasing NHS waiting lists.
Once again, our teams across Spire Healthcare
have worked incredibly hard in 2022 to position the
business to meet this demand, while delivering on
the high-quality personalised care we have become
renowned for. The board was delighted to see
yet another increase in our quality scores, with a
record 98% of our inspected hospitals and clinics
now rated as ‘Good’ or ‘Outstanding’ by the CQC,
or the equivalent in Scotland and Wales.
We also welcomed the successful launch of Spire
Healthcare’s updated purpose and strategy, both
of which are outlined in detail on pages 18 to 32 of
this report. While we remain a key partner to the NHS
in its mission to care for the nation, we are also
broadening our own approach to seeing more private
patients in the community. We are opening new,
smaller clinics, and offering a range of new services
that can be delivered remotely or in person within
or outside a hospital setting.
Our acquisition of The Doctors Clinic Group, in late
2022, supports this element of our new strategy,
bolstering our GP services, and adding new clinics
and corporate clients to our portfolio. Overall, the
broadening of our approach is an exciting
development for the group, and one that I believe
will see us grow beyond our existing parameters
to become a true healthcare partner to many
more people across Britain in the years ahead.
The board and our management team are committed
to building on the solid platform we have created in
recent years to drive the business forward. We were
pleased to see another increase in capital investment
during the year, while the group has maintained a
tight grip on cost control to ensure a healthy level
of liquidity in the business.
In recognition of our business performance in 2022,
the board is proposing a final dividend this year for
the first time since the start of the pandemic.
As the business evolves, we also announced a
number of changes to the board in 2022. I would like
to thank Adèle Anderson, Tony Bourne and Simon
Rowlands for their considerable contribution to Spire
Healthcare over a combined 20 years on the board.
All three will be greatly missed when they step down
at the company’s annual general meeting in May
2023. I wish them well for the future.
At the same time, I am delighted that Paula Bobbett,
Debbie White and Natalie Ceeney have agreed to
join the board. Paula has significant retail and digital
expertise, Debbie is an experienced PLC director,
and Natalie brings us her experience in digitalisation,
transformation and regulation. The breadth of their
expertise and experience will be a highly valuable
addition to both the board and the company.
Martin Angle will step down from his role as senior
independent director after the annual general
meeting, with Debbie White taking on that role.
The board is grateful to Martin for stepping aside
from this role to allow the company to meet the
Listing Rule changes brought about by the FCA’s
policy statement on diversity and inclusion on boards.
Martin Angle will remain as the company’s deputy
chairman and take over as chair of the audit and risk
committee from 1 May 2023. Natalie Ceeney will
become a member of the remuneration committee
on her appointment to the board on 1 May 2023 and
will chair the committee from 12 May 2023.
Looking ahead, expanding our proposition and
building capacity will continue to be our major focus,
as the demand for high-quality private healthcare
rises. However, the board recognises the importance
of maintaining and building on our relationship with
government and the NHS – we have shown that we
can be an important partner in a time of crisis, and
now we are determined to demonstrate that we can
help deliver the care Britain needs to recover from
the pandemic and its impact on the nation’s health.
Sir Ian Cheshire
Chairman
1 March 2023
Chairman’s governance letter
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Corporate governance report
Compliance with the UK Corporate Governance Code in 2022
The 2018 UK Corporate Governance Code (the ‘Code’) provides the
standard for corporate governance in the UK. The Financial Conduct
Authority requires listed companies to disclose whether they have
complied with the provisions of the Code throughout the financial year
under review.
The company has complied with the principles and provisions of the
Code, throughout the year except as shown in the following table.
Code
provision
How has the company
not complied with the
provisions of the UK
Code?
The board’s response
38
The pension
contribution rates for
executive directors
are not aligned with
those available to the
workforce
The remuneration committee agreed in 2020
that for new executive directors, the nature and
value of any retirement benefits provided will
be set by reference to the rate received by the
majority of the workforce.
Until 31 December 2022, the retirement benefits
for incumbent executive directors were 18% of
base salary, consistent with the policy on
appointment. Benefits for incumbent executive
directors were reduced to be consistent with the
policy for new appointments with effect from
1 January 2023.
Director independence
Independence is determined by ensuring that, apart from receiving
their fees for acting as directors or owning shares, non-executive
directors do not have any other material relationship or additional
remuneration from, or transactions with, the group, its promoters, its
management or its subsidiaries, which in the judgement of the board
may affect, or could appear to affect, their independence of judgement.
The company does not consider Dr. Ronnie van der Merwe, who has been
nominated to act as a non-executive director by Mediclinic International
PLC, the company’s principal shareholder, to be independent. Mediclinic
International PLC’s subsidiary, Mediclinic Jersey Limited (formerly Remgro
Jersey Limited), entered into a relationship agreement with the company
in June 2015 (the ‘Relationship Agreement’). Under the terms of the
Relationship Agreement, when Mediclinic International PLC controls
15% or more of the votes, it will be entitled to appoint one non-executive
director to the board. It controls 29.9% of votes as at 1 March 2023.
The directors believe that the terms of the Relationship Agreement will
enable the group to carry on its business independently of Mediclinic
International PLC.
The board considers that, excluding the chairman, over half of the
board is independent of management and free from any business or
other relationship that could affect the exercise of their
independent judgement.
Conflicts of interest
Save as set out below, there are no actual or potential conflicts of interest
between any duties owed by the directors or senior management to the
company and their private interests or other duties. The board will
continue to monitor and review potential conflicts of interest on a
regular basis.
Director
Dr. Ronnie van der Merwe
Conflict
Chief executive officer of Mediclinic International PLC, which controls
29.9% of the voting rights in the company as at 1 March 2023.
Changes to your board during 2022
Individual
Event
Date
Paula Bobbett
Appointed an
independent
non-executive
director
1 November 2022
Workforce engagement
The board has appointed the remuneration committee to monitor
workforce engagement and report to the board on the progress of
Spire Healthcare’s workforce initiatives, together with the challenges,
concerns and priorities of colleagues. This provides directors with an
understanding into how culture is embedded across hospitals and
central functions, and any issues to be addressed.
Principal decisions of the board during 2022
Throughout this annual report, we provide examples of how the
company takes into account the likely consequences of long-term
decisions; builds relationships with stakeholders; understands the
importance of engaging with our colleagues; understands the impact
of our operations on the communities in our region and the environment
we depend upon; and attributes importance to behaving as a responsible
business. The directors recognise the importance of effective stakeholder
engagement and that stakeholders’ views should be considered in its
decision-making.
Decision of
the board
Stakeholders
Link to Spire Healthcare’s
strategy
Further details
can be found
Acquisition of
The Doctors
Clinic Group
– Patients
– GPs
Expand our proposition
Deliver strong financial
performance
See pages
31 to 32
Updated
purpose and
strategy
– Patients
– Community
See pages
18 to 32
Refinancing our
bank debt
– Investors/
lenders
Deliver strong financial
performance
See page
137
The board has a formal schedule of matters reserved to it and delegates
certain matters to committees. Specific matters reserved for the board
considered during the year to 31 December 2022 included reviewing
the group’s performance (monthly and year to date), approving capital
expenditure, setting and approving the group’s strategy and
annual budget.
Key roles and responsibilities
The company has set out in writing a division of responsibilities
between the chairman, senior independent director and the chief
executive officer.
Non-executive chairman
Sir Ian Cheshire
The non-executive chairman leads the board and is responsible for:
–
The leadership and overall effectiveness of the board
–
A clear structure for the operation of the board and its committees
–
Setting the board agenda in conjunction with the chief executive
officer an company secretary
–
Ensuring that the board receives accurate, relevant and timely
information about the group’s affairs
Chief executive officer
Justin Ash
The chief executive officer manages the group and is responsible for:
–
Developing the group’s strategic direction for consideration and
approval by the board
–
Day-to-day management of the group’s operations
–
The application of the group’s policies
–
The implementation of the agreed strategy and purpose
–
Being accountable to, and reporting to, the board on the performance
of the business
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Deputy Chairman and Senior Independent Director
Martin Angle
The board nominates one of the independent non-executive directors
to act as senior independent director and is responsible for:
–
Being an alternative contact for shareholders at board level other
than the chairman;
–
Acting as a sounding board for the chairman
–
Leading the annual performance evaluation process for the board
–
If required, being an intermediary for non-executive directors’
concerns
–
Undertaking the annual chairman’s performance evaluation
Company Secretary
Philip Davies
The company secretary supports the chairman on board corporate
governance matters and is responsible for:
–
Making appropriate information available to the board in a timely
manner
–
Ensuring an appropriate level of communication between the board
and its committees
–
Ensuring an appropriate level of communication between senior
management and the non-executive directors
–
Keeping the board apprised of developments in relevant legislative,
regulatory and governance matters
–
Facilitating a new director’s induction and assisting with professional
development, as required
Board and committee structure
Ultimate responsibility for the management of the group rests with the
board of directors. The board focuses primarily upon strategic and policy
issues and is responsible for:
–
Leadership of the group
–
Implementing and monitoring effective controls to assess and
manage risk
–
Supporting the senior leadership team to formulate and execute
the group’s strategy
–
Monitoring the performance of the group
–
Setting the group’s values and standards
There is a specific schedule of matters reserved for the board.
The non-executive directors
The non-executive directors bring a wide range of skills and experience
to the board. The independent non-executive directors represent a
strong, independent element on the board and are well placed to
constructively challenge and support management. They help to shape
the group’s strategy, scrutinise the performance of management in
meeting the group’s objectives and monitor the reporting of performance.
Their role is also to satisfy themselves with regard to the integrity of
the group’s financial information and to ensure that the group’s internal
controls and risk management systems are robust and defensible.
The independent non-executive directors oversee the adequacy of the
risk management and internal control systems (from their membership
of the audit and risk committee and clinical governance and safety
committee), as well as the remuneration for the executive directors
(from their membership of the remuneration committee).
As members of the nomination committee, the non-executive directors
also play a pivotal role in board succession planning and the
appointment of new executive directors.
Your board in 2022
The principal decisions of the board during the year can be found on
page 85.
Board meetings were held in person during the year and director
attendance at scheduled meetings is shown on page 91.
The agenda at scheduled meetings in 2022 covered standing agenda
items, including: a review of the group’s performance from the chief
executive officer, the current month’s and year to date financial statistics
by the chief financial officer and a review of clinical performance and
medical governance by both the group clinical director and group
medical director. In addition, the board received a verbal report from
committee chairs, where their committee met immediately in advance
of the scheduled board meeting, and the board regularly received
reports on legal and statutory matters.
The board’s plan for 2023
It is currently planned that the board will convene for eight scheduled
meetings in 2023, as well as holding any necessary ad hoc board and
committee meetings to consider non-routine business.
The chairman and the other non-executive directors will meet on their
own without the executive directors present. In addition, the senior
independent director and other non-executive directors will meet
without the chairman present to discuss matters such as the
chairman’s performance.
The board will maintain its focus on the group’s pursuit of its 2023
targets during the year. Its activities will include:
–
Reviewing and approving the 2022 annual report
–
Reviewing the revised five-year strategic plan and approving the 2023
annual operating plan
–
Completing deep dives into key areas of the business
–
Embedding the risk management framework
–
Reviewing the makeup of the board
–
Following a rolling agenda, ensuring proper time for strategic debate
Furthermore, the board will maintain its commitment to continuous
improvement of clinical quality and the implementation of the
company’s Quality Improvement strategy. It will maintain overall
responsibility for the group’s system of internal control and risk
management processes via the relevant board committees.
Board evaluation
2023 action plan
Board evaluation identified two principal areas of focus and associated
actions to address them during 2023.
Area of focus
Actions
Digital and
technology
To receive regular updates on application of new technology,
digitisation and AI in the healthcare sector
Integrating new
directors
Ensure the three new non-executive directors are integrated on
to the board with appropriate handovers from departing board
members and that they have suitable induction programmes
in place
Disclosure committee
The board has established a disclosure committee to ensure, under
delegated authority, that the company complies with its disclosure
obligations, specifically under the Market Abuse Regulation and related
legislation. The disclosure committee also manages the company’s share
dealing code, ensuring colleague compliance and provides training where
required. The members of the disclosure committee are shown on
page 89.
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continued
Share schemes committee
In addition, the board delegates certain responsibilities in relation to the
administration of the company’s share schemes on an ad hoc basis to
the share schemes committee. This committee operates in accordance
with the delegation of authority agreed by the board.
Executive committee
The executive committee meets twice a month, splitting its time
between project work and strategic matters. The executive committee
delegates certain matters to the safety, quality and risk committee
who have specific focus on safety, quality and risk matters respectively
(see the governance framework on page 89).
National medical professional standards committee
The national medical professional standards committee meets monthly
and is chaired by the group medical director, with membership including
the group clinical director, chief operating officer (deputy chair),
associate medical directors, deputy general counsel (regulatory)
and director of integrated quality governance.
The purpose of the national medical professional standards committee
is to:
–
Have oversight of performance and monitoring of safety standards
of consultants and GPs with practising privileges or employed by
Spire Healthcare
–
Have oversight over the investigations relating to the practice of
doctors with practising privileges at Spire Healthcare’s facilities in
order to provide assurance to the executive committee and board in
relation to compliance with medical policies relating to professional
standards
–
Provide oversight of consultant related Patient Notification Exercises
in order to promote and maintain good medical practice, and inform
the continuous quality improvement programme across Spire
Healthcare
–
Ensure that local and organisational learning is determined
and actioned in relation to medical professional standards and
performance
Board meetings
The attendance of the directors who served during the year ended
31 December 2022, at meetings of the board during 2022, is shown on
page 91. To the extent that directors are unable to attend scheduled
meetings, or additional meetings called on short notice, they will receive
the papers in advance and relay their comments to the chairman for
communication at the meeting. The chairman will follow up after the
meeting in relation to both the discussions held and decisions taken.
Effectiveness
Board composition
The board seeks to ensure that both it and its committees have the
appropriate range of skills, experience, independence and knowledge
of the group to enable them to discharge their respective duties and
responsibilities effectively; for example, the 2022 board calendar
included sessions on clinical data analysis and statutory regulations.
The board considers its size and composition to be appropriate for the
current requirements of the business but will continue to keep this
under review.
Committee composition is set out in the relevant committee reports
and listed on page 89. No one other than committee chairs and
members of the committees is entitled to participate in meetings
of the audit and risk, CGSC, disclosure, nomination and remuneration
committees, unless by invitation of the respective committee chair.
Martin Angle is the Deputy Chairman and Senior Independent Director.
Biographical details of the directors are set out on pages 92 to 94.
Appointments to the board
Recommendations for appointments to the board are made by
the nomination committee. As part of the recruitment process the
nomination committee follows a formal, rigorous and transparent
procedure. Further information is set out in the nomination committee
report on page 96.
Time commitment of the non-executive directors
The non-executive directors each have a letter of appointment which
sets out the terms and conditions of their directorship. An indication
of the anticipated time commitment is provided in any recruitment role
specification, and each director’s letter of appointment provides details
of the meetings that they are expected to attend.
Non-executive directors are required to set aside sufficient time to
prepare for meetings, and to regularly refresh and update their skills
and knowledge. In signing their letters of appointment, all directors
have agreed to commit sufficient time for the proper performance of
their responsibilities, acknowledging that this will vary from year to year,
depending on the group’s activities.
Directors are expected to attend all board and committee meetings,
and any additional meetings, as required. Each director’s other
significant commitments were disclosed to the board at the time of their
appointment and they are required to notify the board of any subsequent
changes. The group has reviewed the availability of the non-executive
directors and considers that each of them is able to, and in practice does,
devote the necessary amount of time to the group’s business.
Induction and training
Generally, reference materials are provided, including information about
the board, its committees, directors’ duties, procedures for dealing in the
group’s shares and other regulatory and governance matters, and directors
are advised of their legal and other duties, and obligations as directors of
a listed company.
On joining the board, it is the responsibility of the chairman and company
secretary to ensure that all newly appointed directors receive a full and
formal induction which is tailored to their individual needs. The induction
programme includes a comprehensive overview of the group, dedicated
time with other directors and senior management, as well as guidance
on the duties, responsibilities and liabilities as a director of a listed and
regulated company. These activities formed part of the induction
programmes for Paula Bobbett and Debbie White.
The company secretary ensures that any additional request for
information is promptly supplied. The chairman, through the company
secretary, ensures that there is an ongoing process to review any internal
or external training and development needs.
As already noted, in the event of a general training need, in-house
training will be provided to the entire board. Necessary and relevant
regulatory updates are provided by the company secretary or by external
advisers as required.
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Information and support
The board ensures that it receives, in a timely manner, information of an
appropriate quality to enable it to adequately discharge its responsibilities.
This is aided by the use of an online portal. Papers are provided to the
directors in advance of the relevant board or committee meeting to
enable them to make further enquiries about any matters prior to the
meeting, should they so wish. This also allows directors who are unable
to attend to submit views in advance of the meeting.
Outside the board papers process, the executive directors provide
written updates to the non-executive directors on important business
issues, including financial and commercial information. In addition,
relevant updates on shareholder matters (including analysts’ reports)
are also provided to the board.
All directors have access to the advice and services of the company
secretary. There is also an agreed procedure in place for directors, in the
furtherance of their duties, to take independent legal advice, if necessary,
at the group’s expense.
Election of directors
All the directors appointed at the time offered themselves for election
or re-election at the eighth annual general meeting in May 2022.
Directors are elected or re-elected in accordance with the requirements
of the Code.
All directors, with the exception of Adèle Anderson, Tony Bourne and
Simon Rowlands who have decided to step down from the board, will
stand for election or re-election at the annual general meeting in May
2023. A thorough review was undertaken in February 2023, with regard
to Dame Janet Husband remaining on the board for longer than nine
years, which is a circumstance the Code deems could impair the
independence of a non-executive director. The assessment concluded
that Dame Janet continues to make a valuable contribution to the board,
and leads the clinical governance and safety committee effectively.
There was considered no impairment to her independence resulting
from her tenure. It was further considered to be in the best interests
of the company that Dame Janet Husband continue in her role and the
nomination committee recommended to the board that she remain
on as a director. Dame Janet was appointed Spire Healthcare’s vice chair
on 1 March 2023.
The biographical details of each director standing for re-election is
included in the 2023 notice of annual general meeting. The board
believes that each of the directors standing for re-election is effective
and demonstrates commitment to their respective roles. Accordingly,
the board recommends that shareholders approve the resolutions to be
proposed at the 2023 annual general meeting relating to the re-election
of the directors.
The biographical details of all directors are set out on pages 92 to 94.
Directors’ indemnities
The directors of the company have the benefit of a third-party indemnity
provision, as defined by section 236 of the Companies Act 2006, in the
group’s articles of association. In addition, directors and officers of the
group are covered by directors’ and officers’ liability insurance.
Directors’ conflicts of interest
The Companies Act 2006 provides that directors must avoid a situation
where they have, or can have, a direct or indirect interest that conflicts,
or possibly may conflict, with a company’s interests. Directors of public
companies may authorise conflicts and potential conflicts, where
appropriate, if a company’s articles of association permit.
The board has established formal procedures to authorise situations
where a director has an interest that conflicts, or may possibly conflict,
with the interests of the company – Situational Conflicts. Directors
declare Situational Conflicts, so that they can be considered for
authorisation by the non-conflicted directors.
In considering a Situational Conflict, these directors act in the way
they consider would be most likely to promote the success of the group,
and may impose limits, or conditions, when giving authorisation or,
subsequently, if they think this is appropriate.
The company secretary records the consideration of any conflict and
any authorisations granted. The board believes that the system it has in
place for reporting Situational Conflicts continues to operate effectively.
Non-executive director engagement with hospitals
Non-executive directors, particularly the members of the clinical
governance and safety committee are regular attendees at a wide range
of hospital briefings, meetings and specialist conferences. These events
have included local and national meetings, and the national medical
professional standards committee. Directors have also attended the
national theatre managers conference and the national pharmacy
managers conference, as well as conferences for directors of clinical
services and critical care, and cardiology specialists.
Accountability
The audit and risk committee
The audit and risk committee report is set out on pages 101 to 106
and identifies its members, whose biographies are set out on
pages 92 and 93.
The report describes the audit and risk committee’s work in discharging
its responsibilities during the year ended 31 December 2022, and its
terms of reference can be found on the group’s website at
www.investors.spirehealthcare.com.
Risk management and internal control
The board has overall responsibility for establishing and maintaining a
sound system of risk management and internal control, and for reviewing
its effectiveness. This system is designed to manage, rather than eliminate,
the risks facing the group and safeguard its assets. No system of internal
control can provide absolute assurance against material misstatement
or loss. The group’s system is designed to provide the directors with
reasonable assurance that issues are identified on a timely basis and are
dealt with appropriately.
The audit and risk committee and the clinical governance and safety
committee, whose reports are set out on pages 101 to 106 and pages 98
to 100 respectively, assist the board in reviewing the effectiveness of the
group’s risk management system and internal controls, including
financial, clinical, operational and compliance controls.
Strategic report
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Financial statements
Other information
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Annual Report and Accounts 2022
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Corporate governance report
continued
Audit and risk committee
Adèle Anderson (chair), Martin Angle,
Tony Bourne, Dame Janet Husband
Key objectives:
–
Monitors the integrity of financial
reporting
–
Assists the board in its review of the
effectiveness of the group’s internal
control and risk management systems
Clinical governance and safety
committee
Dame Janet Husband (chair), Adèle
Anderson, Justin Ash, Tony Bourne,
Jenny Kay, Professor Cliff Shearman
Key objectives:
–
Promotes, on behalf of the board,
a culture of high-quality and safe
patient care; and monitors specific
non-financial risks and their associated
processes, policies and controls:
(i)
clinical and regulatory risks
(ii)
health and safety
(iii)
facilities and plant
Disclosure committee
Sir Ian Cheshire (chair),
Martin Angle, Justin Ash, Jitesh Sodha
Key objectives:
–
Ensures that the company complies
with its disclosure obligations,
specifically under the Market Abuse
Regulation and related legislation
–
Oversees the company’s Share Dealing
Code including colleague training
Nomination committee
Sir Ian Cheshire (chair), Adèle Anderson,
Martin Angle, Dame Janet Husband,
Dr. Ronnie van der Merwe
Key objectives:
–
Advises the board on appointments,
retirements and resignations from
the board and its committees
–
Reviews succession planning for
the Board
Remuneration committee
Tony Bourne (chair), Martin Angle, Jenny
Kay, Simon Rowlands
Key objectives:
–
Determines the appropriate
framework and level for remuneration
of the chairman, executive directors,
company secretary and other
members of the executive committee
–
Reviews workforce remuneration and
related policies
Executive committee
The group also operates an executive
committee (convened and chaired by
the chief executive officer). The
executive committee meets fortnightly.
Key objectives:
–
Assists the chief executive officer
in discharging his responsibilities
–
Ensures a direct line of authority from
any member of staff to the chief
executive officer
–
Assists in making executive decisions
affecting the company
Safety, quality and risk committee
A committee of the executive
committee (chaired by the group
medical director) that focuses on safety,
quality and risk matters across the
group’s operations. The safety, quality
and risk committee meets monthly.
Key objectives:
–
Reviews the group’s clinical
performance
–
Reviews evidence of compliance with
statutory notification requirements
–
Scrutinises all unexpected deaths
occurring at hospitals
The board of Spire Healthcare Group plc
The board comprises thirteen directors
– the non-executive chairman, two
executive directors and ten non-
executive directors, nine of whom
are deemed to be independent for the
purposes of the 2018 UK Corporate
Governance Code. Philip Davies serves
the board as company secretary.
Key objectives:
–
Leads the group
–
Oversees the group’s system of risk
management and internal controls
–
Supports the executive committee to
formulate and execute the group’s
strategy
–
Monitors the performance of the
group
–
Sets the group’s values and standards
Non-Executive Chairman
Sir Ian Cheshire
Key objectives:
–
Ensure effectiveness of the board
–
Promote high standards of
corporate governance
–
Ensure clear structure for the
operation of the board and its
committees
–
Encourage open communication
between all directors
Senior Independent Director
Martin Angle
Governance framework in 2022
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Other information
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Annual Report and Accounts 2022
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Corporate governance report
continued
Executive compensation and risk
Only independent non-executive directors are allowed to serve on the
audit and risk committee and remuneration committee. The non-
executive directors are therefore able to bring their experience and
knowledge of the activities of each committee to bear when considering
the critical judgements of the other.
This means that the directors are in a position to consider carefully the
impact of incentive arrangements on the group’s risk profile and to ensure
the group’s remuneration policy and programme are structured, so as to
accord with the long-term objectives and risk appetite of the group.
Financial and non-financial risk
The clinical governance and safety committee, with the audit and risk
committee, collectively ensure that the control and monitoring of both
financial and non-financial risks is satisfactory.
In addition, both committees seek to ensure, as far as practicable, there
are no elements omitted or unnecessarily duplicated, and that all critical
judgements receive the correct level of challenge.
Relations with shareholders
The board is committed to communicating with shareholders and
stakeholders in a clear and open manner, and seeks to ensure effective
engagement through the group’s regular communications, the annual
general meeting and other investor relations activities.
The group undertakes an ongoing programme of meetings with
investors, which during 2022 was led by the chief executive officer,
chief financial officer and the director of investor relations.
The non-executive chairman, senior independent director and
committee chairs remain available for discussion with shareholders on
matters under their areas of responsibility, either through contacting
the company secretary or directly at the annual general meeting.
The company reports its financial results to shareholders twice a year,
with the publication of its annual and half yearly financial reports.
In conjunction with these announcements, presentations or
teleconference calls are held with institutional investors and analysts,
and copies of any presentation materials issued are made available
through the company’s website at www.investors.spirehealthcare.com.
All directors are expected to attend the company’s annual general
meeting, providing shareholders with the opportunity to question
them about issues relating to the group, either during the meeting or
informally afterwards.
Modern slavery
We are committed to act ethically and with integrity in all our
relationships in line with our value of ‘Doing the right thing’. Our
approach to tackling the risk of modern slavery continues to evolve under
the oversight of our multi-department modern slavery working group.
Our two main areas of focus are at front-line level, to safeguard patients
and others who come through our facilities, and in our supply chain. In
our business operations, we believe practitioners and our staff are well
placed to identify and deal with modern slavery through the training and
protections in place to protect patients. The safeguarding system trains
those practitioners and other colleagues (clinical and non-clinical) to
recognise and report signs of abuse. We believe the rigour of this system
mitigates the risk of modern slavery from either going undetected or
being inadequately dealt with at front-line level. This risk is further
controlled by the support, training and infrastructure in place for all
colleagues to be able to raise concerns through our network of local
‘Freedom to Speak Up Guardians’, or other available channels. In 2022,
we maintained our modern slavery due diligence process for all new
suppliers with an annual spend of more than £1m; there were no issues
identified through this process. In addition, we started an assessment
exercise of third-party management systems to provide robust evaluation
of the level of performance and risk of key suppliers across a range of
areas including labour and human rights. We plan to conclude this
assessment exercise during 2023.
A copy of our latest Modern Slavery Act statement can be found on our
website at www.investors.spirehealthcare.com.
Annual general meeting
Shareholders are encouraged to participate at the company’s annual
general meeting, ensuring that there is a high level of accountability
and identification with the group’s strategy and goals. A summary of
the proxy voting at the 2022 annual general meeting was made available
via the London Stock Exchange and on the company’s website as soon
as reasonably practicable on the same day as the meeting and is
shown below:
Summary of resolution
Total votes
for %
Total votes
against %
Number
of votes
withheld
1
2021 Annual report and accounts
100.00
0.00
784,991
2
2021 Directors’ remuneration report
99.32
0.68
8,649
3 to
13
Election or re-election of directors
Between
99.99 and
89.59
Between
0.01 and
10.41
Maximum
605,573
14
Reappointment of auditors
100.00
0.00
6,594
15
Auditors’ remuneration
100.00
0.00
7,461
16
Political expenditure
99.20
0.80
603,976
17
Authority to allot shares
98.91
1.09
5,761
18
Disapplication of statutory
pre-emption rights*
99.52
0.48
5,761
19
Disapplication of statutory
pre-emption rights for an acquisition*
94.87
5.13
5,761
20
Authority to purchase own shares*
99.75
0.25
16,429
21
General meetings to be held on 14
clear days’ notice*
99.32
0.68
5,761
* Special resolution.
The corporate governance report has been approved by the board and
signed on its behalf by:
Philip Davies
Company Secretary
1 March 2023
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Other information
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Annual Report and Accounts 2022
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Board meeting attendance during 2022
Chairman and executive directors
Board meetings
Non-Executive Chairman
Sir Ian Cheshire
8
/8
Deputy Chairman
and Senior Independent Director
Martin Angle
8
/8
Executive directors
Justin Ash
8
/8
Jitesh Sodha
5
/8
Non-executive directors
Board meetings
Adèle Anderson
8
/8
Paula Bobbett
1
1
/1
Tony Bourne
8
/8
Dame Janet Husband
8
/8
Jenny Kay
8
/8
Simon Rowlands
8
/8
Professor Cliff Shearman
7
/8
Dr. Ronnie van der Merwe
7
/8
1.
Appointed an independent non-executive director on 1 November 2022.
Board of directors
Ethnicity
Tenure
Position
Gender balance
1
Board skills, experience and background
Healthcare
Accounting and finance
Sustainability and ESG
UK plc experience
Remuneration
Digital and technology
Multi-site operating
M&A
Key to board and executive committees
A
Audit and risk committee
C
Clinical governance and safety committee
D
Disclosure committee
N
Nomination committee
R
Remuneration committee
E
Executive committee
S
Safety, quality and risk committee
Committee chair
2. Asian Indian 8%
1. White 92%
2
1
2. Female 38%
1. Male 62%
2
1
2. Female 45%
1. Male 55%
2
1
March 2022
May 2023
2. Non-independent NED 8%
1. Independent NED 69%
3. Executive 15%
4. Chairman 8%
3
2
4
1
2. 4-6 years 33%
1. 0-3 years 67%
3. 6-9 years 31%
3
2
1
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Annual Report and Accounts 2022
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Board of directors
continued
Sir Ian Cheshire
Non-Executive Chairman
Justin Ash
Chief Executive Officer
Jitesh Sodha
Chief Financial Officer
Martin Angle
Deputy Chairman and Senior Independent
Director
Professor Dame Janet Husband
Vice Chair
Sir Ian Cheshire joined Spire Healthcare as
chairman-designate in early March 2021 and
become non-executive chairman at the conclusion
of its annual general meeting in May 2021.
Justin Ash was appointed chief executive officer
and an executive director in October 2017.
Jitesh Sodha was appointed chief financial officer
and an executive director in October 2018.
Martin Angle was appointed as deputy chair and
senior independent director in May 2019, having
initially joined the board as an independent
non-executive director in March 2019.*
Dame Janet Husband was appointed an
independent non-executive director in June 2014.
Dame Janet was appointed vice chair on 1 March
2023.
Current external appointments
–
Chairman of Menhaden Resource Efficiency plc
–
Chairman of Channel 4
–
Non-executive director of BT Group plc
–
Trustee of the Institute for Government
–
Chair of We Mean Business Coalition
Current external appointments
–
Member of the strategic council of Independent
Healthcare Providers Network
–
Chair of the trustees of Tropical Health and
Education Trust (THET)
Current external appointments
–
Non-executive director of PZ Cussons Plc
Current external appointments
–
Deputy chairman and senior independent
director of Gulf Keystone Petroleum plc
–
Non-executive director of Ocean Biomedical, Inc.
(listed on the NASDAQ)
–
Honorary professor, College of Social Sciences
and International Studies, University of Exeter
Current external appointments
–
Emeritus Professor of Radiology at the Institute
of Cancer Research
Skills and previous experience
Sir Ian brings to Spire Healthcare considerable
FTSE experience, deep understanding of the
government-business interface and broad ESG
credentials, which are important to the company’s
strategy and long-term sustainable success.
Sir Ian was chairman of Barclays Bank UK PLC
until December 2020 and a non-executive director
of Barclays PLC until May 2021. He was also
previously senior independent director and
remuneration committee chair of Whitbread plc
until September 2017. Sir Ian held a variety of
posts whilst at Kingfisher plc including chief
executive of B&Q from 2005 to 2008 and group
chief executive from 2008 to 2014. He is involved
with many charitable organisations, such as
The Prince of Wales’s Charitable Fund which
he also chairs, and has also worked with various
government departments.
Skills and previous experience
Justin was previously chief executive of Oasis
Dental Care between 2008 and 2017 before
leading its sale to Bupa. Prior to this, he was
managing director of Lloyds Pharmacy and has
held several other senior retail positions including
general manager of KFC in the UK/Ireland, and
commercial director of Allied Domecq Spirits and
Wines (Europe). Justin was previously a senior
consultant with Bain and Company in London and
Paris, and a non-executive board member and
chair of the audit and risk committee of Al Nadhi
Medical Company. He was chair of Independent
Healthcare Providers Network until December
2020 and of The New World Trading Company Co.
until August 2022.
Skills and previous experience
Jitesh is a CIMA qualified accountant. He has worked
in a range of businesses with an international
footprint, most recently as chief financial officer
of De La Rue plc. He was previously chief
financial officer of Greenergy International,
Mobilestreams Plc, where he led the IPO, and
T-Mobile International UK. Jitesh graduated
from New College, Oxford with a degree in
Philosophy, Politics and Economics.
Skills and previous experience
Martin has held a number of non-executive
positions including with Pennon Group plc and
its subsidiary South West Water, Savills Plc (senior
independent director), National Exhibition Group
(chairman), Dubai International Capital, and Shuaa
Capital, then the only listed Gulf investment bank.
In his earlier career, he held a number of senior
positions in investment banking with S.G. Warburg
& Co, Morgan Stanley, where he headed UK M&A,
and Kleinwort Benson, before becoming group
finance director of TI Group, then a FTSE 100
company with worldwide engineering activities.
Martin joined Terra Firma Capital Partners as
an operating managing director where he held a
number of senior roles in its portfolio companies
including Le Meridien Hotel Group (executive
deputy chairman and acting chairman) and the
Waste Recycling Group (executive chairman),
then a leading UK waste management business.
He is a chartered accountant and a graduate in
physics from the University of Warwick.
*Martin has kindly agreed to step aside as senior
independent director from 11 May 2023, when
Debbie White will take over the role. This will allow
the company to meet the Listing Rule’s requirement
that at least one senior board position is held by
a woman. Martin Angle will remain as deputy
chairman following this change and become chair
of the Audit and Risk Committee from 1 May 2023.
He will also become a member of the Clinical
Governance and Safety Committee on this date.
Skills and previous experience
Having trained in medicine at Guy’s Hospital
Medical School, Dame Janet’s extensive career in
healthcare allows her to bring invaluable insight
and knowledge of the industry.
Dame Janet has previously served as a non-
executive director and special adviser to the Royal
Marsden NHS Foundation Trust, as a specially
appointed commissioner to the Royal Hospital
Chelsea and as chair of the National Cancer
Research Institute. She was elected president of
the Royal College of Radiologists in 2004 and also
served as vice chair of the Academy of Medical
Royal Colleges.
These appointments followed a long career as
professor of radiology at the Institute of Cancer
Research and Royal Marsden Hospital during
which Dame Janet gained global recognition for
her pioneering research in cancer imaging. Prior
to retirement from clinical practice she was
appointed medical director of the Royal Marsden
NHS Foundation Trust where she worked closely
with senior management to develop a programme
of robust clinical governance and continuous
improvement in the quality of patient services.
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Board of directors
continued
Adèle Anderson
Independent Non-Executive Director
Paula Bobbett
Independent Non-Executive Director
Tony Bourne
Independent Non-Executive Director
Jenny Kay
Independent Non-Executive Director
Simon Rowlands
Independent Non-Executive Director
Adèle Anderson was appointed an independent
non-executive director in July 2016. After nearly
seven years on the board, Adèle has decided not to
seek re-election by shareholders at the company’s
next annual general meeting and will leave the
board on 11 May 2023. She will step down as chair
of the audit and risk committee on 30 April 2023
but will remain a member of that committee until
she leaves Spire Healthcare.
Paula Bobbett was appointed an independent
non-executive director in November 2022.
Tony Bourne was appointed an independent
non-executive director in June 2014. After nine
years on the board, Tony has decided not to seek
re-election by shareholders at the company’s next
annual general meeting and will step down from
the board on 11 May 2023.
Jenny Kay was appointed an independent
non-executive director in June 2019. She has been
designated Spire Healthcare’s non-executive
director lead for safeguarding and the board’s
Freedom to Speak Up Guardian.
Simon Rowlands was appointed a non-executive
director in June 2014. After nine years on the
board, Simon has decided not to seek re-election
by shareholders at the company’s next annual
general meeting and will step down from the
Board on 11 May 2023.
Current external appointments
Current external appointments
–
Chief digital officer of Boots UK
Current external appointments
–
Non-executive director of Barchester Healthcare
Limited
–
Non-executive director of Totally plc
–
Non-executive chairman of CW+ (the Chelsea
and Westminster Hospital NHS Foundation Trust
charitable trust)
Current external appointments
Current external appointments
–
Non-executive director of Alfa Medical Group
–
Founding partner of Africa Platform Capital
–
Non-executive director of British International
Investment plc
–
Member of University of Cranfield Council and
chairman of the School of Management
Advisory Board
Skills and previous experience
Adèle is a qualified chartered accountant and has
gained extensive financial experience during her
career including significant knowledge of audit
committees. Until July 2011 she was a partner in
KPMG LLP and held a number of senior roles across
their business including chief financial officer of
KPMG UK, chief executive officer of KPMG’s captive
insurer and chief financial officer of KPMG Europe.
Adèle was a non-executive director and chair of
the audit committees of easyJet plc until February
2019, and intu properties plc until October 2019.
She was a member of the audit and risk
committee of the Wellcome Trust until
August 2022.
Skills and previous experience
Paula specialises in business strategy and critical
analysis, particularly in digital. She is highly
experienced in online trading, commercial strategy
and analytics as well as in delivering digital
transformation across commercial operations.
Paula joined Boots in December 2020 and has
driven the end-to-end development of boots.com
leading to growth in online performance and
positioning boots.com as the UK’s number one
health and beauty website.
Prior to joining Boots UK, Paula was head of online
performance at Dixons Carphone. She has held
senior analytics and customer insight roles at a
variety of companies, including strategy and
analytics manager at Avon, commercial insight
manager at Debenhams, as well as roles at British
Airways and Vanguard Strategy.
Skills and previous experience
Tony brings considerable knowledge of the
healthcare industry to his role having been chief
executive of the British Medical Association for
nine years until 2013. Prior to this he was in
investment banking for over 25 years, including as
a partner at Hawkpoint, an independent corporate
finance advisory firm, and as global head of the
equities division and a member of the managing
board of Paribas. Tony also previously served as a
non-executive director of Bioquell Plc, Southern
Housing Group, Sensyne Health plc and the
charity, Scope.
Skills and previous experience
Jenny has extensive experience as a front-line
registered nurse and subsequent experience in
senior management and board roles across the
NHS including as director of nursing at Dartford
and Gravesham NHS Trust in Kent. She was a
senior independent director at East London NHS
Foundation Trust until the end of December 2020.
Jenny also worked at the Department of Health
in the chief nursing officer’s team, leading on
communications. Additionally, Jenny has
experience as director of quality in a clinical
commissioning group.
Jenny’s clinical background is in children’s nursing
– she was a ward sister at King’s College Hospital
for many years, specialising in care for children
with liver disease and children requiring intensive
care. Jenny trained at St Thomas’ (RGN) and Guy’s
Hospitals (RSCN).
Before commencing her nursing career, Jenny
studied languages at Durham University and she
also has an MBA from the Bristol Business School.
Skills and previous experience
Simon’s extensive knowledge of the company and
its markets, combined with his wise counsel over
a number of years, were among the reasons he
was asked to continue to serve as a member of the
board following Cinven’s sale of their shareholding
in 2015.
Simon was a founding partner of the private
equity firm Cinven until 2013, establishing and
leading its healthcare team, and then served as
a senior adviser until 2017. He founded a new
private equity firm in 2016 focused on healthcare
and disruptive technology in Africa. Prior to joining
Cinven, Simon worked with an international
consulting firm on multidisciplinary engineering
projects in the UK and southern Africa.
Simon was a non-executive director of MD
Medical Group Investments plc to March 2022.
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Board of directors
continued
Professor Cliff Shearman
Independent Non-Executive Director
Dr. Ronnie van der Merwe
Non-Executive Director
Debbie White
Independent Non-Executive Director
Professor Cliff Shearman was appointed an
independent non-executive director in
October 2020.
Dr. Ronnie van der Merwe was appointed as a
non-executive director in May 2018. The company
does not consider Ronnie to be independent as he
has been appointed to the board by the company’s
principal shareholder, Mediclinic International PLC,
under the terms of the relationship agreement
with them.
Debbie White was appointed an independent
non-executive director on 1 February 2023.
Debbie will become senior independent director
on 11 May 2023 and a member of the audit and
risk committee and nomination committee on
1 May 2023.
Current external appointments
–
Emeritus professor of vascular surgery,
University of Southampton
–
Non-executive director of University Hospitals
Dorset NHS Foundation Trust
Current external appointments
–
Group chief executive officer of Mediclinic
International PLC
Current external appointments
–
Non-executive director of Howden Joinery
Group plc
–
Director of PAVmed Inc (listed on the NASDAQ)
–
Director of Lucid Diagnostics Inc (listed on the
NASDAQ)
–
Trustee and honorary treasurer for the charity
Wellbeing of Women
Skills and previous experience
Cliff was a consultant vascular surgeon for 26 years,
initially in Birmingham and then in Southampton,
and professor of vascular surgery at the University
of Southampton. His research interests focus on
factors that lead to diabetic vascular disease and
how to improve the clinical outcomes for people
with diabetes.
Cliff was a clinical service director and associate
medical director in the University Hospital
Southampton. At a national level he was president
of the Vascular Society of Great Britain and Ireland
and was one of the team that separated vascular
surgery from general surgery leading to a new
speciality, centralisation of services and a new
training programme for vascular surgeons.
These changes have been associated with
dramatic improvements in outcomes for patients.
Cliff was a member of the council and a trustee
of the Royal College of Surgeons of England,
serving as vice president from 2018 until July 2021.
He was awarded an OBE in 2021 for services to
vascular surgery.
Skills and previous experience
Ronnie has a strong track record of leadership
and management within the healthcare industry,
including strategy, organisational development,
clinical performance, adoption of technology,
and quality and data management.
As a specialist anaesthesiologist in private
practice, Ronnie gained extensive experience in
trauma and elective anaesthesia, intensive care
management, and the management of acute
and chronic pain. He subsequently expanded his
expertise at medical insurance company Sanlam
Health before joining Mediclinic in 1999. As chief
clinical officer, he took responsibility for various
aspects of the business, contributed greatly to
the growth and strategic positioning of the group,
and served as chair of the board of trustees of the
in-house medical aid scheme, Remedi. He also
served on the board of the premier private
emergency medical care provider in South Africa,
ER24, and as executive director of Mediclinic
International Limited from 2010 up to the
combination of the businesses of Mediclinic
(then Al Noor Hospitals Group plc) and Mediclinic
International Limited. He was appointed as group
chief executive officer in 2018.
Skills and previous experience
Debbie is an experienced CEO and independent
director. Her last full time executive role was as
chief executive officer of Interserve Group which
was preceded by a number of senior executive
roles at Sodexo SA including global chief executive
officer of Sodexo Healthcare and Sodexo
Government, chief financial officer of the
North American and UK&I businesses and chief
executive officer of Sodexo UK&I. She was interim
group HR director for BT Group plc during 2022,
supporting the executive on the transformation
of the group.
Debbie started her career with Arthur Andersen
and is a chartered accountant and chartered tax
practitioner. She joined AstraZeneca where she
held a variety of financial roles, before joining
Sodexo. Debbie was a director of PWC consulting
where she advised principally in the
pharmaceutical sector.
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Executive committee
John Forrest
Chief Operating Officer
John Forrest joined Spire Healthcare in
October 2018, after spending most of his
career as a leading operator in the retail
and hospitality industries.
John started his career at Marks &
Spencer, before moving to the Body Shop
and then the Co-operative Group. In
2007, John joined Whitbread as the head
of new openings and led the roll out of
Premier Inn, before being promoted to
chief operating officer at Premier Inn in
2011. In 2015, John moved to Greene
King as chief operating officer for their
retail division to lead the operational
integration of the recently acquired Spirit
Pub Company. Most recently, he was
promoted to managing director for
Greene King Pub Partners Business
before leaving to join Spire Healthcare.
Mantraraj Budhdev
Group General Counsel
Mantraraj Budhdev joined Spire
Healthcare in September 2022 as group
general counsel, with 15 years’ global
experience from a range of industries in
both private practice and in-house roles.
A large proportion of his experience was
gained at two global law firms – Linklaters
and Hogan Lovells – where he worked on
compliance, regulatory and risk matters,
while advising leading blue-chip and
listed corporate clients, and completed
secondments at investment banks
including Goldman Sachs. Most recently,
Mantraraj was responsible for leading a
wide range of transactional, governance
and regulatory matters as the group head
of compliance and head of legal for
Europe and the Americas region with
a global port and logistics provider.
Mantraraj is responsible for leading a
legal team of corporate, commercial,
healthcare and litigation lawyers, Spire
Healthcare’s data protection team and
has also been appointed as the group
corporate concerns director. Mantraraj
is a member of the executive committee
and the safety, quality and risk committee.
Mantraraj was appointed a member of
the executive committee and the safety,
quality and risk committee on
1 January 2023.
Dr Cathy Cale
Group Medical Director
Dr. Cathy Cale joined Spire Healthcare
in October 2020, following a successful
30-year career in the NHS, which spanned
clinical, research and leadership roles.
Cathy trained in paediatric immunology
and immunopathology. She has extensive
experience as a medical director, with
roles at three NHS trusts, including Great
Ormond Street Hospital for Children NHS
Foundation Trust.
In 2017, she became a clinical
ambassador for Getting it Right First
Time (GIRFT), a national programme
designed to improve medical care by
tackling variations in the way services are
delivered across the NHS, and by sharing
best practice between trusts. At this
time, she was also deputy medical
director for NHS Improvement London
region, combining this with ongoing
clinical work. Cathy most recently worked
as medical director at The Hillingdon
Hospitals NHS Foundation Trust.
Peter Corfield
Chief Commercial Officer
Peter Corfield joined Spire Healthcare
in October 2015 as group commercial
Director and has responsibility for
delivering revenue growth through
our payor groups and identifying new
business opportunities. He was
appointed chief commercial officer
in January 2018 with additional
responsibility for business development
across the hospital portfolio.
Prior to joining Spire Healthcare, he held
a number of senior executive and board
roles within the financial services
industry in the UK, most recently as
managing director of Ageas Retail Direct.
Prior to this, Peter worked for both Zurich
Financial Services Group and Royal Bank
of Scotland in various roles that covered
Europe, the Middle East and Japan.
Rachel King
Group People Director
Rachel King joined Spire Healthcare in
January 2023 as group group people
director director, with responsibility
for leading our people strategy across
the group.
Prior to joining Spire Healthcare,
Rachel was the group people director
at Camelot, the regulated operator of
The National Lottery where she sat on
the executive committee, leading the
transformation of the people strategy
and culture. Prior to her six years at
Camelot, she held a number of senior
executive roles in a wide range of
organisations spanning media,
broadcasting, technology and retail
sectors. In addition, Rachel sits on the
board of Network Homes, a London-
based housing association.
Rachel was appointed a member of
the executive committee and the safety,
quality and risk committee on
1 January 2023.
Until 31 December 2022, Shelley Thomas
held the role of group HR director.
Professor Lisa Grant
Group Clinical Director/Chief Nurse
Professor Lisa Grant joined Spire
Healthcare in March 2023, following
a successful 25 year career in the NHS
holding a number of leadership and
management roles. Lisa is an experienced
nurse and has held three executive chief
nurse posts over the last 12 years and
also held the role of chief operating
officer in large acute NHS trusts. Lisa
established the Royal Liverpool Nursing
Programme and developed the Excellence
in Practice Programme at Leeds Teaching
Hospitals NHS Trust that focuses on the
development and recognition of the
workforce teams. Lisa held a variety
of management and leadership roles
in the north of England and was awarded
a visiting chair in health professions
leadership from the University of
Leeds in 2022.
Lisa was appointed a member of the
executive committee and the safety,
quality and risk committee on
1 March 2023.
Until 28 February 2022, Alison Dickinson
held the role of group clinical director.
Justin Ash
and
Jitesh Sodha
also sit on the executive committee.
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Nomination
committee report
“I am pleased with the
progress we have made on
diversity this year, at board
level and across the business.
This not only helps us to
reflect the diverse nature
of the environment in which
the company operates,
it supports optimal decision-
making in the execution
of our strategy.”
Sir Ian Cheshire
Chair, Nominations Committee
At a glance
The majority of nomination committee members were independent
non-executive directors at all times during the year in line with the
provisions of the UK Corporate Governance Code 2018. The board
appoints the chair of the committee, who must be either the chairman
of the board or an independent non-executive director. If members
are unable to attend a meeting they have the opportunity beforehand
to discuss any agenda items with the chair of the committee.
The company secretary, or their appointed nominee, acts as secretary
to the committee.
Committee meetings
3
Committee membership and attendance at meetings
The nomination committee members at the end of 2022 and the
number of meetings they each attended during the year were as
follows (the maximum number of meetings that the member was
eligible to attend is also shown):
Member
Committee
member since
Position in Company
Committee
meetings
attended/
held in 2022
Sir Ian Cheshire
(Committee Chair)
May 2021
Non-executive
chairman
3 (3)
Adèle Anderson
May 2020
Independent
non-executive
director
3 (3)
Martin Angle
March 2019
Deputy chairman
and senior
independent
director
3 (3)
Dame Janet Husband
July 2014
Vice chair
3 (3)
Dr. Ronnie van der
Merwe
May 2020
Non-executive
director
2 (3)
Nomination committee members’ biographies are shown on pages 92 to 94.
Adèle Anderson will step down from the board at the company’s annual general
meeting in May 2023. Debbie White and Natalie Ceeney will be appointed to the
Nomination Committee on 1 May 2023.
The Nomination Committee’s terms of reference can be found at
www.investors.spirehealthcare.com
Role and responsibilities
The nomination committee’s foremost priorities are to ensure that the
group has the best possible leadership and to plan for both executive
and non-executive director succession. Its prime focus is therefore on
the composition of the board, for which appointments will be made
on merit against objective criteria. The nomination committee advises
the board on these appointments, oversees the recruitment processes,
and also considers retirements and resignations from the board and
its other committees. The nomination committee regularly examines
succession planning based on the board’s balance of experience,
overall diversity and the leadership skills required to deliver the
company’s strategy.
Process for board appointments
While making new appointments to the board on merit, the board
will actively seek to secure candidates with a diverse background.
Appointments will take account of the specific skills and experience,
resilience, independence and knowledge needed to ensure a rounded
board and the diverse benefits each candidate can bring to its overall
composition. Care is taken to ensure that proposed appointees have
sufficient time to devote to the role and have no conflicts of interest.
The nomination committee uses the services of an executive search
firm to identify appropriate candidates, ensuring that the search
firm appointed does not have any other conflicts with the group.
In addition, the nomination committee will only use those firms
that have adopted the Voluntary Code of Conduct addressing gender
diversity and best practice in search assignments. A long list of
potential appointees is reviewed, followed by the shortlisting of
candidates for interview based upon the objective criteria identified
in the specification. Committee members interview the shortlisted
candidates together with other directors as appropriate, and identify
a preferred candidate. Following these meetings, and subject to
satisfactory references, the nomination committee makes a formal
recommendation to the board on the appointment.
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Nomination committee report
continued
Dear shareholder,
I am pleased to present the nomination committee’s report for the
year ended 31 December 2022. The committee finally returned to full
face-to-face meetings this year – something that was welcomed by
all committee members in a period when we have made significant
progress on Spire Healthcare’s diversity agenda, with the launch of both
our Board Diversity Policy, and our wider Equity, Diversity and Inclusion
strategy that puts four commitments at the heart of our approach we:
1. recognise the value of diversity
2.
understand how it will help us deliver our purpose
3.
respect and appreciate each other for who we are
4.
include diverse colleagues in our problem solving to make better,
faster decisions
This has been an important part of our thinking as the nomination
committee maintained its focus on the identification and appointment
of the right individuals to the company’s board and senior leadership
team, recognising the requirement of the UK Corporate Governance
Code 2018 (the ‘Code’) in our decision-making. While all appointments
are made on merit and based on objective criteria, we have a clear
strategy to promote diversity across the business.
Succession planning and appointments to the board
During 2022, three of our independent non-executive directors,
Adèle Anderson, Tony Bourne and Simon Rowlands, indicated their
intention to step down from the Board and not seek re-election at the
company’s annual general meeting in May 2023. To ensure an orderly
succession, we set out to appoint two new independent non-executive
directors, one of whom could succeed Tony Bourne as the chair of the
remuneration committee.
In our planning we were mindful of the corporate governance
requirements for the chair of the remuneration committee to have
at least one year’s remuneration committee experience. Sensitive to
the importance of diversity and a culture of inclusion, we were also
keen to balance the composition of the board between the genders,
while acquiring new skill sets that would further strengthen the board.
To assist with this process, the committee engaged and retained Odgers
Berndtson, an executive search firm, to advise on the appointments.
Following extensive, detailed briefing conversations with the chairman
and the board more widely, Odgers Berndtson summarised the skills
and experience required of the two individuals sought as follows:
1.
Broad technology leadership insights from a multisite B2C, commercial
environment, with a deep understanding of how technology has
revolutionised consumer behaviour and how this might be applied
to patients, consultants, and healthcare provision; and
2. Demonstrable experience of successfully scaling businesses alongside
a good understanding of, and connections with, the City; a track record
of engaging effectively with investors; and the ability to balance
clinical quality and patient safety with our value creation strategy.
After a thorough and wide ranging search, Odgers Berndtson secured
the interest of 21 individuals across the two positions we were seeking
to fill. Following the rigorous selection process that followed, and given
the exceptional quality of the shortlist presented, the board took the
decision to bring three of these individuals onto the board – Paula
Bobbett, Natalie Ceeney and Debbie White.
Paula brings extensive digital and ecommerce insights due to her retail
sector credentials and current position as chief digital officer at Boots
UK. Natalie offers broad commercial expertise from a leadership
background in financial services and government agencies. Debbie
is a former chief executive officer of Interserve Group and a proven
non-executive director.
Once the three successful candidates were offered the board roles,
Odgers Berndtson also ensured they each had the appropriate points
of contact to facilitate a successful onboarding process.
Natalie Ceeney will join the remuneration committee on her
appointment to the board on 1 May 2023, and will succeed Tony Bourne
as the chair of that committee when he steps down as a director. Natalie
and Debbie White will become members of the nomination committee
on 1 May 2023. Martin Angle will step down from his role as senior
independent director after the AGM, with Debbie White taking on that
role. The board is grateful to Martin for stepping aside from this role to
allow the company to meet the Listing Rule changes brought about by
the FCA’s policy statement on diversity and inclusion on boards. Martin
will remain as the company’s deputy chairman, and will take over from
Adèle Anderson as chair of the audit and risk committee and become a
member of the clinical governance and safety committee in May 2023.
Diversity and inclusion
As I mentioned above, diversity and inclusion has been a major focus of
activity across Spire Healthcare during 2022, and will continue to be in
the years ahead. The board promotes diversity and inclusivity within the
organisation, including supporting women to become leaders within the
business and improving the diversity of the company’s workforce.
During the year, the board approved a board diversity policy, through
which we aim to ensure optimal decision-making that assists in the
development and execution of a strategy that promotes the success
of the company for the benefit of its shareholders, as well as other
stakeholders. We believe that a diverse board includes and makes
good use of differences in skills, experience, background, ethnicity,
gender and other characteristics.
As part of the policy, our aim is to achieve a minimum 33% female
representation on the board by our annual general meeting in May 2023
and 40% by 2025. The board has also committed to carefully consider
and aim to meet any recommendations set out by the FTSE Women
Leaders review (formerly the Hampton-Alexander Review). I am pleased
to say that, with the new appointments to the board discussed above,
that the gender split on our board will be 55% male, 45% female from
May 2023.
While Spire Healthcare employs a large majority of female colleagues
and the company’s gender pay gap is lower than average, we recognise
that there is further progress to be made towards better gender
representation at senior leadership levels. Details of the company’s staff
diversity and gender pay gap, in line with reporting requirements, can be
found on page 54. The chart on page 53 also illustrates the diversity of
the board in terms of gender. Diversity and inclusion is core to everything
that we do, and you can read more about our new equity, diversity and
inclusion strategy on pages 26 and 52.
Performance evaluation
In early 2023, the committee completed its annual performance
evaluation. In discussing the matters identified in Lintstock’s Report the
committee agreed minor actions to be implemented during the year.
Re-election of directors
The committee met in early 2023 to review our new appointments to
the board, and the continuation in office and potential reappointment of
all other members of the board. Following this review, the committee
recommended to the board that, apart from the three retiring members,
all directors standing be reappointed or have their appointments
confirmed, and hence these directors will seek election or re-election at
the annual general meeting in May.
Sir Ian Cheshire
Chair, Nomination Committee
1 March 2023
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Clinical governance and safety
committee report
“As Spire Healthcare adapts
to meet increasing demand
across a variety of healthcare
sectors, quality and safety
remain paramount. We
continue to improve and
oversee clinical governance
across the business, and the
committee supports our
people to improve services
and patient care.”
Professor Dame Janet Husband
Chair, Clinical Governance and Safety Committee
At a glance
The clinical governance and safety committee (CGSC) must have
at least two members, one of whom must be an independent
non-executive director. The board appoints the chair of the CGSC
who must be an independent non-executive director. If members are
unable to attend a meeting, they have the opportunity beforehand
to discuss any agenda items with the chair of the committee.
The group company secretary, or their appointed nominee,
acts as secretary to the CGSC.
Committee meetings
4
Committee membership and attendance at meetings
The CGSC members at the end of 2022 and the number of meetings
they each attended during the year were as follows (the maximum
number of meetings they could have attended is also shown):
Member
Committee
member since
Position in Company
Committee
meetings
attended/
held in 2022
Dame Janet Husband
(committee chair)
July 2014
Vice Chair
4 (4)
Adèle Anderson
February 2018
Independent
non-executive
director
4 (4)
Justin Ash
October 2017
Chief executive
officer
4 (4)
Tony Bourne
July 2014
Independent
non-executive
director
4 (4)
Jenny Kay
June 2019
Independent
non-executive
director
4 (4)
Professor Cliff Shearman
January 2021
Independent
non-executive
director
3 (4)
CGSC members’ biographies are shown on pages 92 to 94.
Adèle Anderson and Tony Bourne will step down from the board at the company’s
annual general meeting on 11 May 2023. Martin Angle will be appointed to the
CGSC on 1 May 2023.
The CGSC’s terms of reference can be found at www.investors.spirehealthcare.com
Role and responsibilities
The CGSC sits above the group’s clinical governance systems and is
charged by the board with ensuring effective systems and processes
are in place to review clinical performance, including the management
of complaints, safeguarding concerns, whistleblowing and freedom
to speak up issues.
These responsibilities of the CGSC include:
–
Promoting a culture of high-quality and safe patient care
and experience
–
Reviewing the group medical director’s report
–
Reviewing the group clinical director’s clinical governance
and safety reports
–
Monitoring patient health and safety matters
–
Reviewing governance matters that impact patient safety
–
Reviewing the clinical matters on the whistleblowing register
–
Promoting continuous clinical improvements
–
Holding the executive committee accountable for following
up actions
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Clinical governance and safety committee report
continued
Dear shareholder,
Once again this year, effective communication has been my priority and
that of the clinical governance and safety committee (the ‘committee’
or the ‘CGSC’), as we have sought to further strengthen the company’s
ward-to-board approach. Due to COVID-19 restrictions at our hospitals
for much of the year, in person visits have been replaced by Zoom virtual
visits and, while not so inclusive, these have been a great success.
They have allowed us to engage with and support our hospital senior
leadership teams, and to hear first-hand about the issues they are
facing day-to-day.
Our integrated governance reporting has also matured during the year
– the committee now has access to excellent data to help us oversee
our key performance indicators (KPIs), and determine how our hospitals
and services are progressing. Through extensive data correlation, we can
clearly see the themes that are coming through, examine the trends, and
we know right away when issues arise. All this means we can give the
board strong assurance and a high level of confidence.
Committee activities in 2022
In 2021, we found the agenda at our four CGSC meetings was tight –
there was a lot of pressure, and lots to get through. That’s why in 2022,
in addition to our four standard meetings, we introduced informal
seminars, which will be held twice yearly. These will allow us to delve
into particular areas in more detail and also, on occasion, to invite an
expert guest speaker to discuss a particular topic of national interest.
Our programme of standard meetings have enabled the committee
to meet its broad remit again this year, covering the oversight of Spire
Healthcare’s clinical governance, as well as medical professional
standards, clinical risk and the clinical aspects of health and safety.
At our meeting in March, the Spire Healthcare insights team gave a
presentation on their patient experience research, which looks far
deeper than individual hospital performance, taking a holistic approach
to examining the drivers for real satisfaction and dissatisfaction with
our services. The committee was delighted to see such high satisfaction
scores in both the private and NHS patient service areas, reflecting the
great care and dedication of colleagues across the organisation.
We continued our practice of monitoring performance and progress
across the business by undertaking themed reviews of specific areas of
clinical practice or service. The first of these focused on our Children and
Young People (CYP) services, which include tests and treatments from
ear, nose and throat conditions and allergy management to general
surgery and radiology.
The presentation demonstrated the benefits of adopting a ward-to-
board approach, and how this is facilitating a culture of continuous
improvement across all areas of our CYP services. Our focus is to increase
accreditation for our CYP services, maximise CYP opportunities within
the family private healthcare insurance market and ensure Spire
Healthcare continues to be the CYP service provider of choice.
At our June meeting, the committee reviewed the first integrated
learning report which brings together learnings from various aspects
of patient care including incidents, complaints, never events and patient
deaths, as well as stories of excellent patient care at our hospitals.
Where patient care fell below Spire Healthcare’s high standards, it is
clear that poor communication was often an important contributory
factor. However, by reflecting openly on these issues, the committee felt
confident that we can make any changes needed and share best practice
across our hospitals. Mortality is very rare at Spire Healthcare hospitals,
but any patient death, whether this occurs within a hospital or following
discharge within 31 days of surgery, is subject to robust review. Initially
this is undertaken by our Medical Examiner, Dr Suzy Lishman. Spire
Healthcare established this role to ensure that we have external scrutiny
of every patient death, and also to give patients’ families a voice. In
addition to this excellent service our group medical director introduced
a Spire Healthcare group mortality review process to provide additional
assurance and to further support group-wide learning. Regular group
mortality meetings are held during the year when each patient death
is analysed in detail with evidence from the medical examiner review,
the hospital’s review of the care and evidence from the coroner’s
investigations, if these are available. This new approach has now been
developed into a mortality and morbidity framework and implemented
throughout our hospitals. It is now well embedded and I will be
attending one of the mortality review meetings during the coming
year to see for myself the detailed analysis undertaken, and to gain
first-hand assurance that Spire Healthcare’s new approach is effective in
identifying any learnings and that the care of our patients is exemplary.
The committee held its first informal seminar in September, with an
external speaker, Dame Cally Palmer, who is national cancer director,
NHS England and NHS Improvement. Dame Cally is responsible for the
development and implementation of the national strategy to improve
survival and quality of life for all those affected by cancer. She led a
discussion on the UK’s statistics, and the challenges in diagnostics. We
then talked about how at Spire Healthcare we are developing our cancer
services, including launching the Macmillan electronic Holistic Needs
Assessment (eHNA) platform across the group, and expanding our Bupa
bowel cancer centres of excellence.
At the CGSC meeting in November, we received updates on projects
and new developments, all of which supported our drive towards
continuously improving our practices to deliver high-quality patient-
centred care, safely. The committee also reflected on the fact that
Spire Healthcare had recently added the word ‘people’ to our company
purpose; specifically to show that what we do affects not just our
patients’ lives, but those of their families, friends and wider
communities too.
Clinical risk is a standing item on the CGSC’s agenda, and I liaise regularly
with the chair of the audit and risk committee on this. Our clinical risk
profile is active and dynamic, and is constantly under review. We discuss
and assess clinical risks nationally, and this filters back to our hospitals,
as they each operate their own individual hospital risk registers. Several
hospitals undertook internal audits during the year, and this has shown
how the culture we have built at Spire Healthcare enables people to
speak up about issues, and this helps them work together as a team.
At our meetings, the committee reviews issues that have been raised
through our Freedom to Speak Up (FTSU) Guardians. The FTSU initiative
has become an important part of our business-as-usual practices at
Spire Healthcare, enhancing the oversight of concerns raised, and
ensuring that most of them are resolved swiftly and successfully.
A review of the initiative was carried out in 2022 by Erica Bowen, our
FTSU lead who is an active participant in the National Guardian’s Office
forums and activities. The review showed that the majority of colleagues
feel confident to speak up if necessary, and they appreciate the support
of the dedicated FTSU Guardians we have across the organisation.
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High-quality standards
Quality continues to be at the centre of our culture and everything
we do. It is a key pillar of our updated business strategy, and our Quality
Improvement (QI) strategy that was launched last year has gone from
strength to strength in 2022. Each hospital has its own QI programme,
and we now have a standard QI methodology that has reinforced our
quality improvement culture.
Our electronic preoperative assessments solution (ePOA) has also played
an important part in our quality improvement. This was the subject of
one of the committee’s themed reviews during the year, focusing on
how our solution has transformed processes that relied on a manual,
paper based system to triage and assess, to become a fully digitalised
ePOA process. Not only has this standardised patient pathways and
made more efficient use of our clinical resources, but it has also helped
us adhere to national guidance and ensure patients are pre-optimised
ahead of surgery.
Congratulations are due to the in-house team behind ePOA, as the
successes of the rollout – saving colleagues time, reducing cancellations,
and allowing patients to do so much more from home – were recognised
with an award for ‘Nursing Practice’ at the annual LaingBuisson awards.
The CQC, and regulators in Scotland and Wales, continued their
inspections at our hospitals this year, and I am delighted to say we now
have 98% of inspected hospitals and clinics rated ‘Good’ or ‘Outstanding’
by the CQC or equivalent in Scotland and Wales across the group. A huge
thank you is due to so many colleagues for this achievement, and I am
grateful for the hard work they have put in.
In particular, my heartfelt thanks go to Alison Dickinson for her
outstanding contribution to Spire Healthcare over a number of years.
I have witnessed first-hand Alison’s absolute commitment to patient
safety, and dedication to improving the clinical services we provide,
having worked closely with her since 2017 when she was appointed
chief nurse, and later group clinical director. She will be retiring from
the group in 2023 having played such an influential part in getting
us so close to 100% ‘Good’ or ‘Outstanding’, and I know I speak for
all at Spire Healthcare when I wish her well for the future.
Integrated governance
We continue to move towards integrated governance that fully aligns
with the NHS Quality Assurance Framework. Our integrated governance
report is split across the areas of safe care, effective care, positive
experience, well led, and sustainable use of resources, and has been
designed to provide a more strategic oversight of governance data.
Ensuring that we have the right data to oversee KPIs and monitor
trends has been a key priority for our group medical director Cathy Cale,
and the committee has benefited greatly from her progress in this area.
Hospital engagement
Jenny Kay, Cliff Shearman and I have continued our hospital engagement
programme in 2022 – holding Zoom calls with the hospital directors and
directors of clinical services at 36 hospitals.
These Zoom calls continued to be very useful and CGSC members
have been able to see for themselves how our people are adapting,
as everything has gradually returned to more normal ways of working.
Support given by the executive team and local hospital management
teams remains a major factor in maintaining colleagues’ morale and
loyalty. However, the national shortages in healthcare professionals
are still a concern across the group, as it is for all healthcare providers.
International recruitment has helped us fill gaps, while our nursing
apprenticeship scheme, one of the largest in our sector, will give us
access to a strong group of fresh talent in the coming years.
Other activities
Members of the committee are regular attendees at a wide range of
briefings, meetings and specialist conferences – in some cases using
virtual platforms, but increasingly in person. These events have included
local MAC committee meetings and national meetings, such as the
safety, quality and risk committee and the national medical professional
standards committee. Members have also attended the national theatre
managers conference and the national pharmacy managers conference,
as well as conferences for directors of clinical services and critical care
and cardiology specialists. Along with Jenny Kay and Cliff Shearman,
I again attended the national MAC chairs conferences this year.
Clinical governance and safety committee report
continued
Looking ahead
The committee has functioned well during the year, but we are looking
forward to getting out there in the business in 2023, meeting people
face-to-face. There is no substitute for touring our hospital facilities,
meeting junior front-line colleagues and more senior members
of hospital management teams in person, as well as our
consultant colleagues.
This engagement will be especially important as we seek to expand
our proposition beyond our hospitals into our communities, through
smaller outpatient clinics and new GP services. I expect the committee,
working alongside Cathy Cale, to be very busy in the coming year as we
develop new governance and standards around the expanded business,
supporting the integration of new occupational health services,
long-term condition management and other services into the group.
I am also looking forward to working closely with Lisa Grant, who will take
on Alison’s role as group clinical director in March 2023. This will be a big
focus for me, as we work together to achieve 100% of inspected hospitals
and clinics rated ‘Good’ or ‘Outstanding’ by the CQC or equivalent in
Scotland and Wales. We are mindful of the new CQC assessment
framework for 2023 that emphasises safety cultures that can learn
and improve over time, with systems in place that plan and deliver safe,
person-centred care. The existing CQC key lines of enquiry are all being
retired to be replaced by a set of topic areas and ‘quality statements’.
We will work with the CQC to fully understand and comply with these
changes, but our approach will be the same. We need to focus on quality
as much as we have ever done – keeping everyone on high alert, putting
patient safety and experience first, and maintaining our very high clinical
standards to make a positive difference to people’s lives through
outstanding personalised care.
Professor Dame Janet Husband
DBE FMedSci, FRCP, FRCR
Chair, Clinical Governance and Safety Committee
1 March 2023
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Audit and risk
committee report
“In 2022, the committee
focused on the rapidly
changing external risk
environment, and
the resilience of the
organisation and finance
leadership team.”
Adèle Anderson
Chair, Audit and Risk Committee
At a glance
The audit and risk committee must have at least three members, all of
whom must be independent non-executive directors. If members are
unable to attend a meeting, they have the opportunity beforehand to
discuss any agenda items with the chair of the committee.
The audit and risk committee invites the external auditor, the chief
executive officer, chief financial officer and the director of audit, risk
and compliance to attend each meeting, with other members of the
management team attending as and when invited. Representatives
of the group’s external auditors and internal auditors have a private
session with the audit and risk committee twice a year and with the
chair prior to each meeting.
The company secretary, or their appointed nominee, acts as secretary
to the committee
Committee meetings
7
Committee membership and attendance at meetings
The Audit and Risk Committee members at the end of 2022 and the
number of meetings they each attended during the year were as
follows (the maximum number of meetings that the member was
eligible to attend is also shown):
Member
Committee
member since
Position in Company
Committee
meetings
attended/
held in 2022
Adèle Anderson
(Committee chair)
July 2016
Independent
non-executive
director
7 (7)
Martin Angle
September
2019
Senior
independent
director
7 (7)
Tony Bourne
July 2014
Independent
non-executive
director
7 (7)
Dame Janet Husband
July 2014
Vice chair
7 (7)
Audit and risk committee members’ biographies are shown on pages 92 and 94.
The audit and risk committee’s terms of reference can be found at
www.investors.spirehealthcare.com.
Role and responsibilities
The audit and risk committee has responsibility for overseeing the
financial reporting and internal financial controls of the group, for
reviewing the group’s internal control and risk management systems,
and for maintaining an appropriate relationship with the external
auditor of the group, and for reporting its findings and
recommendations to the board.
These include:
–
Receiving and reviewing the annual report and accounts of the
group and half yearly financial statements, and any public financial
announcements as required, and advising the board on whether the
annual report and accounts is fair, balanced and understandable
–
Receiving and reviewing reports from the external auditor,
monitoring its effectiveness and independence, and approving
its appointment and terms of engagement
–
Agreeing the annual internal audit programme, including the use
of external consultants to support the internal resource
–
Monitoring the effectiveness of the risk management system
–
Reviewing the effectiveness of the group’s system of internal
controls and assessing and advising the board on the internal
financial, operational and compliance controls
–
Overseeing the group’s procedures for detecting fraud and
whistleblowing
As we announced on 14 October 2022, Martin Angle will take over from
Adèle Anderson as chair of the company’s audit and risk committee
from 1 May 2023. Adèle will remain a member of the audit and risk
committee until she steps down from the board at the 2023 AGM.
Likewise Tony Bourne is retiring from the board at the next AGM and
will also step down from the audit and risk committee at the same
time. Debbie White and Natalie Ceeney CBE will join the audit and risk
committee from 1 May 2023.
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Audit and risk committee report
continued
Dear shareholder,
As chair of the audit and risk committee (the ‘committee’), I am pleased
to present our report for the year ended 31 December 2022.
Risk management and internal controls
Internal audit and risk management continue to be areas of particular
focus and scrutiny for the committee at each meeting, with papers
presented and discussed in detail to understand key issues raised and
identify emerging and significant risks to the business.
Internal audit function
During 2022, KPMG continued to provide co-sourced internal audit
resource to support the internal audit function. The internal audit
function carried out audits of five of the more material hospitals in the
group. The scopes focused on hospital level financial controls, hospital
governance and soft controls. Internal audit carried out central or
functional audits to support assurance over principal risk mitigation or
areas of high inherent risk eg aspects of information technology, delivery
of transformation programme benefits, and corporate governance.
The committee receives an update report from the director of audit, risk
and compliance on internal audit activity four times a year, with two of the
committee meetings reserved for deep dives into specific internal control
matters. In each update, the committee receives the executive summary
of recently published internal audit reports, and the chair receives the
full internal audit report. The committee also receives a status update
of any remedial actions agreed with management. If there are significant
findings, the committee asks the appropriate senior management to
attend to discuss the findings.
The director of audit, risk and compliance, under International internal
audit standards, has to declare to the committee any potential
compromises on his independence. This may include other ‘control’
functions for which he has line management responsibility. The
committee has to approve any activity that falls outside of internal audit.
In 2022, the director of audit, risk and compliance has the following
control functions reporting into him, all approved by the committee:
risk management; and the corporate guardian (responsible for the
raising concern processes).
The committee also requires KPMG, as the co-source provider of internal
audit services, to maintain independence. In 2022, KPMG provided
additional services to the group, the most material of which was support
with an acquisition financial due diligence. KPMG is required to obtain
pre-approval from the chair of the committee prior to undertaking any
additional work. In all cases, the committee approved the KPMG
engagements and KPMG has reported all additional fees earned to the
committee. As fees for acquisition due diligence can be material
compared to the internal audit fees, and based on contingent fee
arrangements, the committee has required the executive management
team to engage with other financial advisors going forward to provide
due diligence support.
The 2023 internal audit plan was approved at the November 2022
committee meeting subject to one audit confirmation. The plan is
prepared on a risk-focused basis with input from the senior leadership
team and non-executive directors. The plan will focus for 2023 on
corporate reviews at head office, and involve hospitals where corporate
processes interface with hospitals.
Risk management function
The risk management and internal control report details the changes to
the risk environment the group has faced in 2022 (see pages 66 to 76).
The risk management team has continued to provide reports into various
management and board governance committees of the group including
this committee. Clinical governance and safety committee received risk
reports focused on clinical and medical risks. This committee continued
to review the principal risks as they evolved during 2022.
In the group’s 2022 CQC inspections, the CQC reported back positively on
the risk management processes at hospitals. In 2023, the CQC is changing
its inspection regime. Risk management has always been part of its
‘Key Lines of Enquiry’ (KLOEs). Whilst KLOEs will be replaced by a series
of Quality Statements, risk management will still be a fundamental part
of our regulatory regime because one Quality Statement will focus on
how we involve our people to manage risks.
The committee reviews the risk appetite the executive report against
the principal risks providing challenge where appropriate on the level
of risk the executive wish to tolerate.
Emerging risks
Along with the executive management team, the committee has focused
more time on the risks, and potential mitigations, that have emerged
from the rapidly changing geopolitical and economic environment. The
committee agreed with the executive’s recommendation to elevate a
number of emerging risks to the main principal risk register as reported
in summary with the interim financial statements. The new principal
risks and emerging risks are discussed in more detail in the risk
management and internal control report on pages 66 to 76.
New financial and internal control reporting requirements
In 2020, the committee received a briefing from the external auditors on
the broad range of matters the UK government is consulting in relation
to corporate governance following the publication of the independent
review of the Financial Reporting Council in 2018 and the Brydon Report
in 2020. In 2021, management set up a project team to prepare for the
most likely aspects of new legislation from the UK government in this
area. The committee received a report from management on the progress
of this project in May 2022 and is satisfied that the group is on track to
comply with the likely new legislative requirements
The committee reviewed an internal assessment of its 2021 climate
change disclosures as recommended by the Task Force on Climate-
Related Financial Disclosures (TCFD) and that became mandatory for
premium listed companies in 2021 against good practice as highlighted
by the FRC in their July 2022 report. The committee accepted the
recommended improvements be reflected in the 2022 TCFD disclosures
(see pages 60 to 65).
Viability
The committee reviewed the process undertaken by management to
support and allow the directors to make the group’s viability statement.
The committee considered and provided input into the determination of
which of the group’s principal risks and combinations thereof might have
an impact on the group’s liquidity and solvency. The committee reviewed
the results of management’s scenario modelling and the stress testing of
these models. The group’s viability statement can be found on page 77.
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Other activities in 2022
In February 2022, the group’s chief financial officer, Jitesh Sodha,
suffered an injury whilst cycling leaving him in a serious condition.
Harbant Samra, group financial controller (subsequently promoted
to deputy chief financial officer), took on Jitesh’s duties as chief financial
officer. Martin Angle and I provided additional support to Harbant to
ensure he had sufficient opportunity to draw on our expertise as former
chief financial officers. I also worked with the director of audit, risk and
compliance to review emergency changes to delegated authorities.
The committee is pleased to note that the emergency transition of
roles was conducted smoothly.
Prior to the release of the company’s 2022 interim results, the committee
completed a thorough review of:
–
Viability and going concern
–
Assessment of goodwill for impairment
–
Assessment of property carrying values for impairment
–
Assessment of provisions for future liabilities
The committee also reviewed the company’s banking covenant
compliance.
In addition to providing oversight of the group’s financial reporting,
internal controls and risk framework, the committee has had reports
on information governance, preparations for external reporting on the
Internal control framework over financial reporting (known as UK SOX)
and counter fraud initiatives. In October 2022, in addition to the six
planned meetings, a further exceptional meeting was held in order to
allow the committee to consider certain specific risk mitigation steps
relating to areas of software development.
External audit
Annual auditor appointment
The committee has primary responsibility for the relationship with,
and performance of, our external auditor. This includes making the
recommendation on the appointment, reappointment and removal
of the external auditor, assessing their independence on an ongoing
basis and for negotiating the audit fee in conjunction with the chief
financial officer.
The shareholders re-appointed Ernst & Young LLP as the company’s
external auditor during 2022. Ernst & Young LLP has served the business
since 2008. Whilst recognising that the 10-year period of its appointment
technically began with the company’s admission in 2014, the committee
agreed that a full audit tender should be linked to the end of the previous
lead audit partner’s term of office and took place in 2020. Our current
audit partner from Ernst & Young LLP is Stephney Dallmann who took
on the role in 2020.
The committee ensures that the external auditor adheres to The Auditing
Practices Board’s Ethical Standard 3, which requires the rotation of the
audit partner for listed companies every five years. As a result, this is the
third fiscal year for Stephney Dallmann to serve as the audit partner.
External auditor independence
The committee reviewed the independence and effectiveness of the
external auditor. We did this by:
–
Reviewing its proposed plan for the 2022 audit
–
Discussing the results of its audit, including its views about material
accounting issues and key judgements and estimates, and its audit
report
–
Reviewing the quality of the people and service provided by Ernst &
Young LLP
–
Evaluating all of the relationships between the external auditor and
the group, to determine whether these impair, or appear to impair,
the auditor’s independence
Significant issues and material judgements
The audit and risk committee assesses whether suitable accounting
policies have been adopted and whether management has made
appropriate estimates and judgements.
The committee reviewed the nature of all items classified as ‘adjusting
items’ in the year and management’s justification thereof against
relevant accounting guidance. Where costs spanned a reporting period,
the committee considered the significance of the total expected costs to
be incurred across reporting periods (based on management’s estimates),
when determining the appropriateness of the accounting treatment.
Audit and risk committee report
continued
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The table below summarises the matters where the most material judgements have been made in relation to reporting in 2022:
Matters
Judgement and estimation required
How the committee gained comfort on the matter
Improper revenue
Pressure to achieve results could lead management to manipulate the
financial reporting of revenue. This could include the:
–
Manipulation of prices charged, in particular in relation to PMI
–
Miscoding of procedures by hospitals impacting revenue recorded
–
Misreporting of other income in the year
–
Overstatement of accrued revenue at the year end
Central management carry out a detailed review of monthly hospital performance compared
to forecast, in particular focusing on the cut-off of revenue reported at the balance sheet date.
The group maintains effective segregation of duties to safeguard the integrity of pricing
masterfile data on which billing is dependent. Management routinely reconciles revenues and
cash collections as part of monthly cash flow management procedures. This includes accrued
revenue, which is substantiated with reference to subsequent billings and cash collection.
Goodwill carrying value
Goodwill is tested for impairment semi-annually. This is achieved by
comparing the value-in-use of the goodwill with its carrying value in
the accounts. The value-in-use calculations require the group to estimate
future cash flows expected to arise in the future, taking into account
market conditions. The current value of goodwill is underpinned by these
forecasts. The present value of these cash flows is determined using an
appropriate discount rate.
The committee has reviewed in detail the analysis produced by management to assess the
carrying value of goodwill. Its review included assessing for reasonableness the key underlying
assumptions used by management in their analysis. These included the discount factor rate,
future anticipated growth rates and forecasted levels of capital maintenance investment
(excluding expenditure on new or enhancement of assets). The committee noted that the
discount factor was within EY’s comparative range.
The committee has reviewed management’s latest assessments in August and November
2022, and again in February 2023. This regular recurring review process has allowed for earlier
visibility of the key assumptions and any potential issues.
Property carrying values
Freehold and leasehold property is held at depreciated cost and its
carrying value is required to be assessed for indicators of impairment
by management on an annual basis.
For those properties with an indicator, an impairment test is performed
by calculating a value-in-use, by means of a discounted cash flow model.
As this process involves some degree of estimation there is a risk that
properties are held in the financial statements at inappropriate
carrying values.
The committee reviewed the analysis prepared by management to assess the carrying value of
those properties with an indicator of potential impairment, including the appropriateness of
the key underlying assumptions. These included future anticipated growth rates, the discount
factor rate and levels of ongoing capital maintenance investment (excluding expenditure on
new or enhancement of assets).
This work was conducted in two phases. An initial review was performed in November 2022.
This initial review was performed to provide early visibility of any potential issues and to allow
for a preliminary assessment of the reasonableness of the key judgements applied by
management. These judgements included:
–
The terminal growth rate
–
The discount factor rate
–
Appropriateness of the determination of a Cash Generating Unit
–
Forecasts in ongoing capital maintenance
–
Growth rates applied at an individual hospital level over the next five years
Management’s review was updated at the year end using the latest available forecasts.
A shortlist of hospitals was identified from this activity and reviewed in detail by the
committee to ensure that management’s conclusions were appropriate. This included, where
appropriate, establishing the level of confidence management has in its ability to deliver the
plan underlying the forecast. The committee noted that the work carried out by the external
auditors, Ernst & Young LLP, supported its own findings in this area.
Audit and risk committee report
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Matters
Judgement and estimation required
How the committee gained comfort on the matter
Provision for Paterson Public Inquiry costs
Following the publication of the Public Inquiry report on Ian Paterson on
4 February 2020, the group continues to assess the potential impact of
the remedial actions recommended in the report. Since 2020, the group
recognised a charge of £21.6 million to ensure the recommended actions
are fully adhered to. It is possible that, as further information becomes
available, an adjustment to this provision may be required.
The committee has reviewed the information prepared by management, including the key
assumptions and judgements underpinning their assessment. The committee also notes that,
whilst it is possible that new information may necessitate a revision to this charge in the
future, the position taken by management at 2022 year end is appropriate at this time.
Adjustments to EBITDA (‘adjusting items’)
It is the group’s policy to disclose EBITDA after adjusting for certain items,
due to their nature, amount or incidence, in order to provide a meaningful
comparison of the group’s underlying performance. Group underlying
performance is considered the comparable year-on-year business, and
therefore excludes items of a one-off or irregular nature. Pressure to
achieve targets could lead management to manipulate the outcome
by overstating the level of adjusting Items.
The committee:
–
Reviewed in detail each item which was proposed by management to be classified as
an adjusting Item
–
Assessed whether the proposed approach was consistent with prior periods
Audit and risk committee report
continued
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UK Competition and Markets Authority (CMA) Order
During the year, the company has complied with the CMA Order
in relation to Statutory Audit Services for Large Companies.
Audit risk
The committee received from Ernst & Young LLP a detailed plan
identifying the scope of their audit for the year, planning materiality
and their assessment of key risks. The audit risk identification process is
considered a key factor in the overall effectiveness of the external audit
process. Ahead of the full-year audit, the committee reviewed the key
risks that Ernst & Young LLP identified to ensure their areas of audit
focus remain appropriate.
Working relationship with the external auditor
During the year, the committee met with the external auditor
without management present to provide additional opportunity for
open dialogue and feedback between both parties. Matters typically
discussed include the external auditor’s assessment of business risks,
the transparency and openness of interactions with management,
confirmation that there has been no restriction in scope placed on
them by management, the independence of their audit and how they
have exercised professional scepticism. I also meet with the external
lead audit partner ahead of each committee meeting. Additionally,
the director of audit, risk and compliance liaises with, and meets,
the external auditors on a regular basis, and the external auditors
receive a copy of each internal audit report.
External financial reporting
On 5 September 2022, the Financial Reporting Council’s (FRC) corporate
reporting review team wrote to the company’s non-executive
chairman following their review of our annual report and accounts to 31
December 2021. They raised queries over our disclosures on impairment
testing and taxation as well as making some observations on other areas
of the annual report and accounts for us to take into consideration in
preparing this annual report and accounts to 31 December 2022. We
engaged positively with the FRC on the queries they raised and on 23
November 2022, the FRC confirmed in writing that they had closed their
enquiries.
1
As a result of the FRC engagement we have agreed to clarify some
disclosures related to impairment of goodwill and property values
namely:
–
Whether a reasonably possible change in the key assumptions
would result in the recoverable amount of goodwill being less than
the balance sheet carrying amount
–
To distinguish those disclosures relating to estimation uncertainty
required under IAS 1, where there is a significant risk of a material
adjustment in the next financial year, from additional disclosures
provided voluntarily
–
Where the basis on which a significant improvement in hospital
performance was assumed in the value-in-use calculations
The FRC requested further information in respect of our disclosure of a
tax adjustment resulting from a sale and leaseback transaction in late
2021. The tax adjustment related to a release of a deferred tax liability.
We agreed in future to disclose the fact that the majority of our freehold
properties had been acquired by way of business combinations which
would explain why they had attracted deferred tax.
We have adopted other points that the FRC raised in their observations.
The committee found the review helpful and welcomed the questions
and observations made by the FRC.
The committee is responsible for monitoring, reviewing and challenging
the integrity of the financial statements, and ensuring compliance with
legal, regulatory and statutory requirements, giving due consideration
to the provisions of the UK Corporate Governance Code.
The external auditor provided reports for the half-year and year-end
reporting, including all significant issues, with an assessment of their
view of the appropriateness of management’s judgements.
At the request of the board, the committee considered whether the
annual report and accounts for the year ended 31 December 2022
was fair, balanced and understandable, and whether it provided the
necessary information for the shareholders to assess the group’s
performance, business model and strategy. The committee took into
account its own knowledge of the group, its strategy and performance
in the year, internal verification of the factual content, comprehensive
review undertaken at different levels in the Group to ensure consistency
and overall balance, and detailed review by senior management and the
external auditor. The committee was satisfied that, taken as a whole, the
annual report and accounts for the year ended 31 December 2022 is fair,
balanced and understandable, and has affirmed that view to the board.
Our priorities for 2023
The committee’s focus in 2023 will be:
–
Cyber security and general IT controls
–
Monitoring the organisation’s preparations for expected new
corporate reporting requirements (including certification of internal
controls related to financial reporting and the development of an
audit and assurance policy over non-financial information)
–
Adequacy of mitigations to areas of evolving and other principal risks
–
Assessing risk (i) on the transformation programme and (ii) from
macroeconomic factors including in particular work force risk
Non-audit services and independence
Ernst & Young LLP provided non-audit services to the group during the
year ended 31 December 2022. These services related only to the interim
review. Total non-audit service fees amounted to £0.1 million (2021:
£0.1 million). All non-audit fees are approved by the committee.
Clinical governance and safety committee (CGSC)
To ensure that the committee and the CGSC complement each other’s
work, Dame Janet Husband and I have developed the follow protocols:
–
We both sit on each other’s committees
–
At each meeting this committee receives a report from Dame Janet
Husband on the main activities of the CGSC
–
We split the focus of risk management with the CGSC focusing on
the clinical risk management at corporate and hospital level and this
committee on the Principal Risks, and non-clinical operational risks,
of the group
Annual evaluation of the committee’s performance
The latest evaluation of the committee’s performance was carried out
in early 2023 and confirmed that it continued to perform effectively.
As I step down from the board at the next annual general meeting, and
as chair of this committee on 1 May 2023, I wish to express my gratitude
to my fellow committee members, the wider board and the executive
team for their support and engagement over the last seven years.
Adèle Anderson
Chair, Audit and Risk Committee
1 March 2023
Audit and risk committee report
continued
1.
The FRC’s review does not benefit from detailed knowledge of our business
or an understanding of underlying transactions entered into.
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Remuneration
committee report
“In spite of the
continued challenges,
Spire Healthcare has
delivered positive
performance and has
continued to recognise
the contribution of
all colleagues.”
Tony Bourne
Chair, Remuneration Committee
At a glance
The remuneration committee must have at least three members,
all of whom must be independent non-executive directors, and the
board appoints the remuneration committee’s chair. If a member is
unable to attend a meeting, they have the opportunity beforehand
to discuss any agenda items with the chair of the committee.
The company secretary, or their appointed nominee, acts as secretary
to the Remuneration Committee.
Committee meetings
4
Committee membership and attendance at meetings
The remuneration committee members at the end of 2022 and the
number of meetings they each attended during the year were as
follows (the maximum number of meetings that the member was
eligible to attend is also shown):
Member
Committee
member since
Position in Company
Committee
meetings
attended/
held in 2022
Tony Bourne
(Committee chair)
July 2014
Independent
non-executive
director
4 (4)
Martin Angle
March 2019
Deputy chairman
and senior
independent
director
4 (4)
Jenny Kay
June 2020
Independent
non-executive
director
4 (4)
Simon Rowlands
October 2020
Independent
non-executive
director
4 (4)
Remuneration committee members’ biographies are shown on pages 92 and 94.
Tony Bourne and Simon Rowlands will step down from the board at the company’s
annual general meeting in May 2023.
Natalie Ceeney will become a member of the remuneration committee on her
appointment as an independent non-executive director on 1 May 2023 and will chair
the committee from 12 May 2023.
The remuneration committee’s terms of reference can be found at
www.investors.spirehealthcare.com
Role and responsibilities
The remuneration committee has authority from the board to
determine the framework and total remuneration arrangements of
the executive directors and, in consultation with the chief executive
officer, senior management. It also oversees the group’s share-based
incentive arrangements. In practice, the committee agrees the:
–
Policy for cash remuneration, executive share plans, service
contracts and termination arrangements
–
Reward packages of the chairman, executive directors and the
executive committee, including arrangements on appointment
–
Termination arrangements for executive directors and the
executive committee members
–
Recommendations to the board concerning any new executive
share plans or changes to existing schemes which require
shareholders’ approval
–
Basis on which awards are granted and their amount to executive
directors and senior management under the LTIP
–
Ensures a consistency of remuneration arrangements across all
levels within Spire Healthcare
The remuneration committee also has responsibility for matters
identified by the UK Corporate Governance Code relating to
workforce engagement.
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Dear shareholder,
This remuneration report includes details of decisions taken by the
remuneration committee in respect of 2022, as well as a summary of
how we intend to operate the remuneration policy for the coming year.
The remuneration structure has been in place since 2014 and remains
aligned with mainstream FTSE market and best practice. We are not
proposing any major changes to our approach in the coming year.
Performance in 2022
The uncertain macroeconomic environment has meant that 2022 has
been another challenging year but one in which the company delivered
positive performance. There has been continued growth in revenue as a
result of the management’s investment in marketing and sales system
for self-funded treatment at a time of sustained rise in levels of demand,
and their negotiating attractive new contracts with PMI providers. PMI
volume has also returned to pre-pandemic levels.
Revenue growth combined with exceeding the targets of the first
phase of the savings and efficiency programme are the key drivers
of the strong financial results delivered for the year. This meant that
our revenues increased from £1,106.2 million to £1,198.5 million, and
our adjusted EBITDA grew 14.2% from £178.2 million to £203.5 million,
despite the challenging trading environment.
We are also broadening our own approach to seeing more private
patients in the community. We are opening new, smaller clinics, and
offering a range of new services that can be delivered remotely or
in person within or outside a hospital setting. Our acquisition of
The Doctors Clinic Group in late 2022 supports this element of our
new strategy, bolstering our GP services, and adding new clinics and
corporate clients to our portfolio. This is an exciting development for
the group, and one that has scope to broaden our reach to patients.
Maintaining strong quality and safety credentials remain core to our
activities and our focus on continuous improvement has resulted in
an increase to 98% of our inspected hospitals and clinics rated ‘Good’
or ‘Outstanding’ by the CQC (or equivalent in Scotland and Wales).
In addition the board has approved a capital investment programme
focusing on upgrading imaging, MRI and anaesthetics and we have the
long term capability to capitalise on demand and deliver outstanding
service to the highest standards.
In recognition of our positive business performance in 2022, the board
is proposing to reintroduce dividends for the first time since the start
of the pandemic.
Wider workforce pay
The committee has closely monitored the impact of current economic
pressures on our colleagues and regularly seeks input from a wide range
of sources including reviewing the annual colleague engagement survey.
The committee fully supported management proposals to undertake a
series of salary interventions during 2022 to align with the 2021/22 real
living wage and to award an exceptional annual salary rise of 5% to the
majority of our permanent colleagues. Through these interventions,
those colleagues who were on the national minimum wage before April,
will have received an increase of up to 16.6% during 2022. The committee
determined a 3% salary increase for the executive directors.
There are a number of additional benefits and initiatives available
to support colleagues in these challenging times including a pilot of
affordable meals for staff to take home for their families, swap shop
ideas and forming a ‘Helping Hand’ community. Our colleagues
(including our bank colleagues) also have access to a range of retail
discounts through our Spire for You platform.
We have also been working on a new job framework as part of our
reward framework project, to give us a simple, consistent and
transparent structure with roles categorised into job families by
discipline, job and role levels.
2022 incentive outcomes
The positive financial and operating performance in the year resulted in
bonuses being earned in respect of 2022. The bonus was primarily linked
to adjusted EBITDA, free cash flow and individual strategic measures.
In 2022, 30% of the maximum bonus for Jitesh Sodha and two members
of the executive committee were linked to delivery of critically important
savings and efficiency goals. The business outperformed the stretch cost
savings target in 2022. While Justin Ash has led the important savings
and efficiency plan, his bonus targets for 2022 remained aligned to our
traditional bonus plan of adjusted EBITDA (60%), free cash flow (20%)
and individual strategic objectives (20%).
The committee evaluated the performance of the chief executive officer
and chief financial officer against a number of individual strategic
objectives. Following this assessment, the committee was mindful of the
agility and exceptional performance demonstrated by the chief executive
officer in executing a number of complex strategic initiatives during the
year, including the delivery of our strategy in relation to primary care
services. These factors were not fully captured in the original objectives
set at the start of the year but have scope to create significant value for
our shareholders over the longer term. The committee was mindful that
the chief executive officer led the achievement of the savings and
efficiency goals and had the metrics been aligned to the structure
applied to the chief financial officer, his bonus outcome would have been
66%. The committee therefore determined that it would be appropriate
to make a modest adjustment to the overall bonus outcome for the chief
executive officer from 46.6% to 53.0%
The overall bonus outcomes for the chief executive officer is 53.0%
and chief financial officer is 52.3%. The committee concluded that these
outcomes are fully warranted and proportionate relative to the scale of
performance delivered.
A portion of the bonuses earned by the executive directors will be
deferred into shares for three years to ensure continued alignment with
our shareholders (50% for chief executive officer and one-third for chief
financial officer). Further detail on the performance criteria for this
award are set out on page 111.
The 2020 LTIP awards were based on TSR, financial and operating
excellence performance measured to 31 December 2022. During the
performance period, the company delivered growth in shareholder value
of more than 80% compared to the negative returns delivered by the
broader FTSE 250 index over the equivalent period. The company
considerably outperformed the upper-quartile of the comparator group
and therefore the relative TSR element for the 2020 award will vest in
full. The targets for the EPS element were set before the full impact of
the pandemic was understood. Like many companies, the financial
targets set at this time proved to be unrealistic and therefore this
element lapsed. For the operational excellence measures we were
delighted to see the regulatory rating objective being met in full with
currently 98% of our inspected hospitals rated as ‘Good’ or ‘Outstanding’
by the CQC (or the equivalent in Scotland and Wales), and a strong
colleague engagement score of 80% despite the business undergoing
substantial change. The overall vesting outcome for this award is 73.33%
of maximum. Vested awards will be subject to a further two-year
holding period.
Remuneration committee report
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Remuneration committee report
continued
The 2020 awards were granted at a time when there was considerable
volatility in the market place. The committee responded to this volatility
by granting awards below the policy maximum and using a higher grant
price to determine the number of shares under award. Under this
alternative approach, the awards granted were equivalent to a grant
of c.130% of salary rather than the 200% of salary limit under the policy.
In light of this proactive adjustment, and Spire’s considerable
outperformance of the market over the last three years, no further
adjustment has been made to the vesting level. Overall the committee
is satisfied that the strong outcomes from this award are supported by
both underlying performance and the experience of our shareholders.
Further details are set out in the main body of the report.
Remuneration for 2023
For the coming year, remuneration arrangements will continue to be
operated in line with the policy approved by shareholders at the annual
general meeting held in May 2021. Salary increases normally take effect
from September. Any increase to salaries for executive directors will
not exceed the average increase awarded to the wider workforce.
As previously announced, retirement benefits for executive directors
have reduced from the start of 2023 to 8% from 18% of salary to align
with the contribution rate available to the majority of the workforce.
For 2023, the maximum bonus opportunity for executive directors
remains unchanged at 150% of salary. For both the executive directors,
the performance measures will remain heavily weighted towards the
achievement of adjusted EBITDA targets (60%) and the remainder
assessed based on free cash flow (20%) and individual strategic
objectives (20%).
Given the long-term nature of ESG metrics, these have not been included
as individual objectives for the executive directors bonus in 2023 but the
committee will continue to track performance against our strategic
priorities as part of its normal review of overall performance before
determining outcomes following the year end. The LTIP will continue
to have measures linked to operational excellence. Ahead of the
renewal of the remuneration policy at the annual general meeting
in 2024 the committee will review how ESG targets can be included
in incentive arrangements.
For LTIP grants to executive directors, it is expected that awards
equivalent to 200% of salary will be granted, consistent with the limits
in the remuneration policy. The LTIP performance measures and their
respective weightings remain unchanged from 2022. The ROCE targets
have been increased to reflect our strategic ambition. The committee
has reviewed the operational excellence targets and amended the target
employee engagement achievement from 79% to 80% to align with the
2022 engagement score. The committee remains comfortable that the
objectives are challenging, taking into account wider industry norms
and the continued enhancements in the expectations of our regulators.
Having served three terms of three years, I will be stepping down from
the board at the AGM. During my tenure, the remuneration committee
has sought to take a responsible and measured approach to pay. We
have regularly communicated with our major shareholders regarding
key decisions, and we have valued this dialogue. I would like to take
this opportunity to thank our shareholders for their support of our
remuneration arrangements since the IPO in 2014. We look forward
to your continued support at our annual general meeting in May.
If you have any questions about this year’s directors’ remuneration
report, please contact me via [email protected].
Tony Bourne
Chair, Remuneration Committee
1 March 2023
Remuneration principles – how our approach to pay reflect the
principles of the UK Corporate Governance Code
Clarity
Incentive arrangements are intended to be
closely aligned to our strategy to effectively
engage with participants. The remuneration
committee regularly engages with wider
stakeholders including shareholders and seeks
to provide clear disclosure and explanation of
our pay arrangements.
Simplicity
Our remuneration policies are straightforward
and easy to understand.
Risk
Our variable incentive schemes contain an
appropriate balance of financial and non-financial
measures so that risk is effectively managed and
mitigated. Discretion, malus and clawback help
to prevent payments for failure.
Predictability
Potential values from remuneration arrangements
are clearly communicated.
Proportionality
Incentives incorporate performance measures that
are linked to the strategic goals of the business.
Variable pay is intended to reward for successful
execution of the strategy over the short and longer
term. The remuneration committee is also mindful
of the outcomes of variable incentives for the
wider workforce.
Alignment to
culture
Targets for variable incentives are intended to
be based on a balance of measures to provide
a rounded assessment of performance. We are
conscious of our impact on wider stakeholders
and how that ultimately impacts the value we
create for shareholders.
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Remuneration policy report
Summary of remuneration policy and approach for 2023
The directors’ remuneration policy was approved by shareholders at the annual general meeting on 13 May
2021. This remuneration policy will continue to apply for 2023.
The table below summarises the key terms within the policy together with the detail on how remuneration
arrangements will be operated in the coming year. The full remuneration policy can be found in the 2021
annual report and accounts.
Remuneration
element
Summary of policy
Implementation for 2023
Fixed remuneration
Salary
Fixed remuneration set at levels appropriate
to the role to secure and retain required
talent. When setting the salary level, the
remuneration committee takes into account
factors including: scope and responsibility
of the role, skills and experience of the
individual, salary levels for similar roles
within comparators, overall structure
of the remuneration package and wider
workforce remuneration.
Any increases in the executive directors’
salaries will not exceed the average increase
awarded to the wider workforce.
Benefits
A range of role-appropriate benefits may
be provided to executive directors. These
include: private medical cover, income
protection, life assurance, an annual
health assessment and car allowance.
Executive directors are also eligible to
participate in any all-employee share
plans operated by the company.
No changes to approach.
Both executive directors will continue to
be eligible for private medical cover, life
assurance, health assessment, income
protection cover and a car allowance
from January 2023.
Retirement
benefits
Retirement benefits assist with retirement
planning and are provided to support
retention.
For new executive directors, retirement
benefits will be aligned to the rate received
by the majority of employees, currently 8%
of salary.
From 1 January 2023, retirement benefits for
incumbent executive directors reduced to
8% to align with the wider workforce level.
Remuneration
element
Summary of policy
Implementation for 2023
Performance-related pay
Annual bonus
The annual bonus incentivises and rewards
the achievement of annual financial,
operational and individual strategic
objectives:
–
At least 50% assessed against financial
metrics, the remainder will be linked to
performance against strategic and/or
individual objectives
–
Portion of the bonus will be deferred
into shares for three years.− Awards
are subject to malus and clawback
–
Policy maximum: 150% of salar2y
–
2023 maximum: 150% of salary
–
2023 bonus: adjusted EBITDA (60%),
free cash flow (20%) and individual
strategic measures (20%)
Our practice has been to defer a portion of
bonus for three years and for 2023 this will
continue to be 50% of bonus for Justin Ash
and one-third of bonus for Jitesh Sodha.
The details of targets for the coming year
are commercially sensitive; however, the
remuneration committee expects to
provide full disclosure of targets and
bonus outcomes in the 2023 directors’
remuneration report.
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Remuneration
element
Summary of policy
Implementation for 2023
Performance-related pay
LTIP
The LTIP incentivises and rewards the
achievement of long-term strategic
objectives, alongside aligning the interests
of executive directors and shareholders:
–
At least 30% based on measures linked
to the share price; remainder based on
financial and/or operational measures
–
Targets are set by the remuneration
committee for a three-year performance
period. Awards are subject to a two-year
holding period
–
Awards are subject to malus and
clawback
–
Policy maximum: 200% of salary
–
The remuneration committee may
adjust targets in certain circumstances
(eg major acquisition or disposal;
change to accounting standards)
2023 LTIP grants: 200% of salary
Performance will be measured from
1 January 2023 to 31 December 2025.
Measures and targets will be as follows:
25% vests
50% vests
100%
vests
Relative TSR
(35%)
Median
–
Upper
quartile
ROCE (35%)
7.3%
8.6%
10.0%
Regulatory
ratings (15%)
84%
Achieve
‘Good’ or
above
88%
Achieve
‘Good’ or
above
94%
Achieve
‘Good’ or
above
Employee
engagement
(15%)
76%
80%
82%
1.
Straight-line vesting between points shown.
2.
Return on Capital Employed is calculated as
‘Adjusted EBIT/Capital Employed’. Capital
Employed is calculated as ‘Total Assets less Cash
less Current Liabilities less Capital expenditure
in the previous 12 months’. Capital expenditure
in the last 12 months reflects additions of fixed
assets (excluding leased assets). Return on
Capital Employed will be measured as at
31 December 2025.
3.
Vesting for the regulatory rating element can be
scaled back (including to nil) if any site is rated
‘inadequate’. The remuneration committee is
satisfied that outcomes at the upper-end of the
scale would represent exceptional and market-
leading results for the portfolio.
Remuneration
element
Summary of policy
Implementation for 2023
Further details
Shareholding
guidelines
Executive directors are expected to build
up and maintain a shareholding equivalent
to twice their respective base salary.
In addition, following departure, executive
directors will be expected to hold 200% of
base salary (or actual relevant holding on
departure, if lower) on departure, for two
years following cessation of employment.
–
No change to approach for 2023.
Non-executive
directors
Fees are appropriate to ensure that
non-executive directors are paid to reflect
the individual responsibility taken as well
as skills and experience.
Benefits may be provided to non-executive
directors including travel and other
reasonable expenses incurred in the course
of performing their duties.
Fees for 2023 as follows:
–
Non-executive chairman: £230,000
–
Deputy chairman: £150,000
–
Senior independent director: £75,000
–
Vice chair: £100,000
–
Basic fee for independent non-executive
directors: £56,650
–
Basic fee for non-independent non-
executive directors: £50,000
–
Chairs of audit and risk committee and
remuneration committee: £10,000
Martin Angle, Deputy Chairman, will not
receive a fee to chair the audit and risk
committee when he takes over the role
from Adèle Anderson on 1 May 2023.
Remuneration policy report
continued
Summary of remuneration policy and approach for 2023
continued
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Annual report on remuneration
Single total figure of remuneration – executive directors (audited)
The following table sets out the total remuneration for the executive directors for the year ended 31 December
2022. This comprises the total remuneration in respect of the full year from 1 January 2022 to 31 December
2022.
Justin Ash
Jitesh Sodha
(£000)
2022
2021
2022
2021
Salary
630.5
624.2
424.2
420.0
Benefits
10.3
7.1
20.3
16.9
Retirement benefits
113.5
112.4
76.4
75.6
Total fixed pay
754.3
743.7
520.9
512.5
Annual bonus
2
496.2
453.2
329.5
342.7
Long-term incentives
3,4
1,658.5
932.4
1,065.2
598.9
Total variable pay
2,154.7
1,385.6
1,394.7
941.6
Total
2,909.0
2,129.3
1,915.6
1,454.1
1.
Both Justin Ash and Jitesh Sodha received a 3% increase in their salaries from 1 September 2022.
2.
Half of the annual bonus paid to Justin Ash and one-third of the annual bonus paid to Jitesh Sodha will be deferred into shares for
three years.
3.
Both executive directors were participants of the 2020 LTIP awards. These awards are due to vest during 2023. For the purposes
of this table, the value of awards is based on the average share price during the final quarter of 2022 (220p). The 2020 LTIP awards
were made based on a grant price at share price of £0.897 on 6 April 2020. Based on the average share price of last quarter of 2022
of £2.20, there has been a 145% share price growth during the three year performance period. Therefore, 59% of the value shown
is attributable to share price appreciation.
4.
The 2019 LTIP awards have been restated to reflect the actual share price on vesting, which was 246p.
Additional notes to the table
Salary
Taking into account the impact of the wider macroeconomic trends on colleagues, salary increases of 5% were
awarded to the majority of permanent colleagues. The salary increase for the senior leadership team was set
at a lower rate than for the wider workforce. Both Justin Ash and Jitesh Sodha received a 3% increase in their
salaries from 1 September 2022.
The salaries for the executive directors following 1 September 2022 increase were:
–
Justin Ash’s salary is £642,952
–
Jitesh Sodha’s salary is £432,600
Benefits
The benefits consist of private medical cover (for the executive directors and their families), life assurance,
health assessment and income protection cover. Jitesh Sodha also received a car allowance.
Retirement benefits
The amount set out in the table represents the group contribution to the executive directors’ retirement
planning at a rate of 18% of base salary. From the 1 January 2023 this has reduced to 8% of base salary to align
with the wider workforce.
The previous retirement benefit of 18% was consistent with benefit levels offered to other senior executives
in the business.
Annual bonus
For the 2022 financial year, the maximum bonus opportunity for Justin Ash and Jitesh Sodha was 150% of base
salary. Justin’s bonus award was based 60% on EBITDA, 20% on Free Cash Flow and 20% assessed against
individual strategic objectives. Taking into account the importance of the transformation objectives in 2022,
Jitesh’s bonus award was based 30% on transformation objectives, 40% on EBITDA, 10% on Free Cash Flow
and 20% on individual strategic objectives.
All bonuses in the group, including those payable to executive directors, were subject to a minimum EBITDA
trigger of £165m and a minimum quality trigger. Both of these hurdles were achieved for 2022, and therefore
executive directors were considered for bonuses. A portion of bonuses for executive directors are deferred into
shares for three years.
Financial measure targets and outcomes for 2022 were as follows:
0% of
element
50% of
element
100% of
element
Outcome
Outcome
(% of element)
EBITDA
(CEO – 60%; CFO – 40%)
£178.2m
£214.2m
£220.8m
£203.5m
35.1%
Free Cash Flow
(CEO – 20%; CFO – 10%)
£15m
£35m
£55m
£28m
32.5%
Transformation – cost savings
(CFO only – 30%)
£10m
£12.75m
£15.5m
>£15.5m
83.33%*
*
Although, actual cost savings for 2022 exceeded the maximum, the outcome for this element was adjusted to 83.3% of
maximum for the chief financial officer.
The assessment of the financial measures therefore resulted in an outcome of 27.6% for the chief executive
officer and 42.3% for the chief financial officer of the overall bonus.
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For 2022, the strategic element comprised 20% of the overall bonus and was centred around the achievement
of the areas of focus noted in the table below. The outcome for the chief executive officer fairly reflects
the outstanding contribution made during the year, including progress towards a number of key
strategic initiatives.
Area of focus
Progress and achievements during the year
Outcome
Chief executive officer
1. Deliver year one Transformation
Programme savings.
Spire Healthcare’s efficiency programmes have delivered
savings in excess of £15.5m in 2022 in spite of inflationary
pressures.
5/5
2. Develop a five-year strategy to
be presented at the Capital
Markets Day, and delivery of year
one strategy.
The five-year strategy was well received at the Capital
Markets Day with positive feedback from investors. The
Doctors Clinic Group acquisition was completed in 2022.
5/5
3. Progress quality improvement
strategy delivering against key
in-year priorities.
Fully implemented improved integrated quality governance
reporting and learning from Ward to Board Level.
5/5
4. Implement 2022 digitalisation
programme
Strong progress delivered in year with rollout across Spire
Healthcare of the electronic pre-operative assessment tool,
Order Communications, and Spire Diabetes Care.
4/5
Total bonus achieved against individual strategic targets
19%
Chief financial officer
1. Execute on divestment of Spire
Sussex Hospital, and integrate
and deliver the year one plan for
The Claremont Hospital
acquisition
Successful completion of Spire Sussex Hospital divestment
and delivery of year one Claremont acquisition on plan.
4/4
2. Develop and agree ESG strategy
including vision, targets and
deliver 2022 initiatives
Spire Healthcare developed and delivered an ESG strategy at
Capital Markets Day. The outcome recognises that during the
year this initiative was primarily led by other members of the
senior leadership team.
0/5
3. Deliver 2022 digitalisation
programme
Strong progress delivered in year with rollout across Spire
Healthcare of the electronic pre-operative assessment tool,
Order Communications, and Spire Diabetes Care.
4/6
4. Develop and pilot a share
ownership model for consultants
The initiative was diligently explored and researched however,
due to regulatory constraints, could not be implemented.
2/5
Total bonus achieved against individual strategic targets
10%
Based on the assessment above, the outcome is 46.6% of the maximum bonus for the chief executive officer
and 52.3% of maximum for the chief financial officer.
As noted in the remuneration committee chair’s statement, the committee was mindful that the chief
executive officer led the achievement of the savings and efficiency goals, and had his bonus been more
strongly aligned to the delivery of these crucial objectives, his bonus outcome would have been 66%.
In light of this and the chief executive officer’s delivery of key new strategy on primary care, the committee
determined that it would be appropriate to make a modest adjustment to the overall bonus outcome for
the chief executive officer from 46.6% to 53.0%.
Taking into account overall performance during the year and recognition of the efforts, the remuneration
committee is satisfied that the outcomes are appropriate.
For Justin Ash, 50% of the bonus will be deferred into shares for three years, with deferral of one-third of the
award for Jitesh Sodha.
Long Term Incentive Plan (LTIP)
The performance period for awards granted in 2020 ended on 31 December 2022. This award was based on
targets linked to EPS, relative TSR performance and operational excellence measures. Justin Ash and Jitesh
Sodha both participated in this award.
The performance targets for this award were disclosed on a retrospective basis in the 2020 directors’
remuneration report and the result at the conclusion of the three-year performance period was as follows:
0% vest
25% vests
50% vests
100% vests
Outcome
Percentage
outcome
TSR v FTSE 250 (excluding
investment trusts) (40%)
n/a
Median
1
Upper
quartile
Above Upper
quartile
40.0%
Adjusted EPS – outcome
for 2022 (20%)
5.0p
1
6.25p
7.5p
11.0p
Below
threshold
0%
Regulatory rating (20%)
n/a
80% achieve
‘Good’ or
above
1
85% achieve
‘Good’ or
above
90% achieve
‘Good’ or
above
98% achieve
‘Good’ or
above
20.0%
Employee engagement (20%)
n/a
76%
1
79%
82%
80%
13.33%
73.33%
1.
There is no vesting for performance below these levels.
2.
There is straight-line vesting between the points shown.
The targets for 2020 awards were set at the outset of the pandemic when the impact on the business was not
fully understood and there was limited visibility on financial performance over the three years. While the EPS
threshold was not achieved, in practice the business has performed strongly over the period, as reflected in the
strong relative TSR performance and the achievement against the operational excellence measures.
The 2020 awards were granted at a time when there was considerable volatility in the market, with the share
price dropping as low as 52.55p in mid-March 2020. In response to this volatility, the remuneration committee
firstly maintained grant levels at 150% of salary for a second consecutive year (below the 200% of salary limit
under the Remuneration Policy), and secondly granted awards based on a higher 30-day average share price
of 89.7p. When valued at the normal five-day average price prior to grant (77.6p), the face value of the award
was equivalent to c.130% of salary.
Annual report on remuneration
continued
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Over the performance period, the company delivered total shareholder return of 82%, compared to a
performance of -12% for the median for the comparator group. The average share price during the final quarter
of the performance period was 220p. This share price is also considerably higher than the average share price of
121p during 2019, before the onset of the pandemic. The committee was therefore satisfied that the business
had delivered very significant value for our shareholders over the period.
In light of the proactive adjustment to award levels at grant, and the fact that Spire Healthcare has
considerably outperformed the market over the performance period, no further adjustment has been made to
the vesting level. Overall the committee is satisfied that the strong outcomes from this award are supported by
both underlying performance and the experience of our shareholders.
Therefore, the committee is satisfied that the vesting outcomes are fully warranted. Vested shares are subject
to a two-year holding period.
Awards under the LTIP were granted to Justin Ash and Jitesh Sodha on 14 March 2022. These awards were
granted in the form of nil-cost options over Spire Healthcare Group plc shares, with the number of shares that
may vest conditional on performance over the three-year period to 31 December 2024. The maximum award
granted to executive directors was equivalent to 200% of base salary. As noted last year, ROCE was introduced
to ensure focus on profitability and capital discipline, replacing the EPS measure.
The full details of the performance conditions applying to the 2022 awards are set out below.
25% vests
50% vests
100% vests
Relative TSR (35%)
Median
1
–
Upper
quartile
Return on Capital Employed (35%)
2
6.0%
1
7.3%
9.6%
Regulatory Ratings (15%)
4
84% achieve
‘Good’ or
above
1
88% achieve
‘Good’ or
above
94% achieve
‘Good’ or
above
Employee engagement (15%)
76%
1
79%
82%
1.
There is no vesting for performance below this level.
2.
Return on Capital Employed is calculated as ‘Adjusted EBIT/ Capital Employed’. Capital Employed is calculated as ‘Total Assets
less Cash less Current Liabilities less Capital expenditure in the previous 12 months’. Capital expenditure in the last 12 months
reflects additions of fixed assets (excluding leased assets). Return on Capital Employed will be measured at a point in time on
31 December 2024.
3.
The remuneration committee may adjust targets in certain circumstances (eg major acquisition or disposal; change to
accounting standards).
4.
Vesting for the regulatory rating element can be scaled back (including to nil) if any site is rated as ‘inadequate’.
5.
Straight-line vesting between points shown.
Outstanding share awards
The following table provides details of all outstanding awards, as at 31 December 2022, made to executive
directors under the LTIP that remain within their three-year performance period:
Type of award
Date of grant
Number of shares
Share price
Face value at
grant
1
End of performance period
Justin
Ash
Conditional Share
Award (in the form of
nil-cost options)
6 April 2020
1,028,046
£0.897
£922,500
31 December 2022
18 March
2021
665,606
£1.641
£1,092,394
31 December 2023
14 March
2022
543,750
£2.296
£1,248,450
31 December 2024
Jitesh
Sodha
Conditional Share
Award (in the form of
nil-cost options)
6 April 2020
660,289
£0.897
£592,500
31 December 2022
18 April
2021
447,843
£1.641
£735,000
31 December 2023
14 March
2022
365,853
£2.296
£840,000
31 December 2024
1.
The face value of awards made in 2022 was equivalent to 200% of base salary. The share price used to determine the number
of shares under the 2022 award was based on the average of the mid-market quotation at close of business over the five trading
days ending on 12 March 2022 (229.6p). The face value of awards made in 2020 and 2021 were equivalent to 150% and 175% of
base salary respectively.
2.
The 2022 awards are subject to relative TSR, ROCE performance and Operational Excellence conditions. The 2020 and 2021
awards are also subject to TSR, EPS and Operational Excellence conditions. Further detail on specific targets is set out in the 2020
and 2021 Directors’ Remuneration Reports.
The following table provides details of all outstanding awards, as at 31 December 2022, that have completed
their three-year performance period and have vested to executive directors under the LTIP but remain within
the two-year holding period:
Type of award
Date of grant
Number
of shares
originally
awarded
Number of
shares lapsed
Number
of shares in
two-year
holding period
End of two-year
holding period
Justin Ash
Conditional Share
Award (in the form of
nil-cost options)
28 March
2018
576,058
467,184
108,874
28 March
2023
25 March
2019
694,444
321,181
373,263
25 March
2024
Jitesh Sodha
Conditional Share
Award (in the form of
nil-cost options)
28 March
2018
414,219
335,932
78,287
28 March
2023
25 March
2019
446,025
206,287
239,738
25 March
2024
Annual report on remuneration
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Financial statements
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114
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The following table provides details of awards granted to the executive directors during 2022 under the
Deferred Share Bonus Plan, which relate to bonuses payable in respect of 2021 and disclosed in last year’s
remuneration report. Awards will normally vest three years after the grant date.
Type of award
Date of grant
Number
of shares
Share price
Face value at
grant
Justin Ash
Conditional Share Award
(in the form of nil-cost options)
14 March
2022
95,007
£2.385
£226,592
Jitesh Sodha
Conditional Share Award
(in the form of nil-cost options)
14 March
2022
47,420
£2.385
£113,571
These awards will be released in 2025, and remain subject to malus terms during this period.
Sharesave
The company encourages share ownership and operates an HMRC-approved Savings-Related Share Option
Plan (Sharesave). Participation in Sharesave is conditional on three months’ service and executive directors may
participate in the same way as all other colleagues. Sharesave is an all-employee share plan and there are no
performance conditions.
Date of grant
Number
of shares
Option price
Awards are
exercisable
between
Justin Ash
26 April 2022
1,818
£1.98
1 June 2025
and
30 November
2025
Jitesh Sodha
26 April 2022
1,818
£1.98
1 June 2025
and
30 November
2025
Single total figure of remuneration – non-executive directors (audited)
The following table sets out the total remuneration for the non-executive directors for the year ended
31 December 2022.
(£000)
2022
Fees
2022
Benefits
1
2022
Total
2021
Fees
2021
Benefits
1
2021
Totals
Sir Ian Cheshire
2
230.0
0.9
230.9
155.9
–
155.9
Adèle Anderson
65.6
4.5
70.1
65.0
–
65.0
Martin Angle
150.0
10.5
160.5
150.0
2.1
152.1
Paula Bobbett
3
9.4
–
9.4
–
–
–
Tony Bourne
65.6
–
65.6
65.0
–
65.0
Professor Dame Janet Husband
71.2
6.9
78.1
70.0
2.9
72.9
Jenny Kay
55.6
–
55.6
55.0
–
55.0
Simon Rowlands
54.7
–
54.7
50.0
–
50.0
Professor Cliff Shearman
55.6
1.3
56.9
55.0
–
55.0
Dr. Ronnie van der Merwe
4
50.0
–
50.0
50.0
–
50.0
Garry Watts (former Director)
5
–
–
–
133.6
0.8
134.4
Total
807.7
24.1
831.8
849.5
5.8
855.3
1.
Reasonable expenses incurred by any non-executive director will be reimbursed by the company but they have no other
contractual entitlement to benefits. For non-executive directors certain expenses relating to the performance of a non-executive
director’s duties in carrying out activities, such as travel to and from company meetings, are classified as taxable benefits by
HMRC. In line with current regulations these taxable benefits have been disclosed and are shown in the taxable benefits column
in the directors’ remuneration table above. The figures shown include the cost of the expenses grossed up for tax and national
insurance.
2.
Sir Ian Cheshire was appointed chairman-designate on 4 March 2021. Between 4 March 2021 and 13 May 2021 he was paid the
standard fee for an independent non-executive director of £55,000 per annum. From 14 May 2021 he received a fee of £230,000
per annum as non-executive chairman.
3.
Paula Bobbett was appointed an independent non-executive director on 1 November 2022.
4.
Pursuant to the relationship agreement dated 22 June 2015 between the company and Mediclinic Jersey Limited, under which
Mediclinic Jersey Limited is entitled to nominate for appointment to the board one non-executive director and Dr. Ronnie van der
Merwe was appointed to the Board on 24 May 2018. As a non-executive director nominated by the principal shareholder, the fees
for Dr. Ronnie van der Merwe are paid to a subsidiary company within the Mediclinic International PLC group.
5.
Garry Watts stepped down from the board on 13 May 2021.
Annual report on remuneration
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Non-executive directors
There was a 3% increase to the independent non-executive directors’ basic fees from 1 September 2022.
This was the first increase since 2017. The current fees payable to the non-executive directors are shown above.
Statement of directors’ shareholding and share interests (audited)
The table below sets out the directors’ shareholdings in the company. As noted above, executive directors
are expected to build up and maintain a holding equivalent to twice their base salary. In addition, executive
directors are required to retain this level of shareholding (or actual relevant holding on departure, if lower),
for two years after stepping down from the board. There is no requirement for non-executive directors to
hold shares in the company.
Shareholding
Guidelines
As at
31 December 2022
As at
31 December 2021
Proportion of
shareholding
guideline achieved
1
Non-executive chairman
Sir Ian Cheshire
8,846
–
Executive directors
Justin Ash
418,962
394,654
153.7%
Jitesh Sodha
53,802
50,500
80.5%
Non-executive directors
Adèle Anderson
9,582
9,582
Martin Angle
–
–
Paula Bobbett
2
–
Tony Bourne
11,904
11,904
Professor Dame Janet Husband
10,231
10,231
Jenny Kay
4,911
–
Simon Rowlands
786,516
786,516
Professor Cliff Shearman
–
–
Dr. Ronnie van der Merwe
–
–
1.
Calculated based upon the closing share price on 31 December 2022 of 228.0 pence. Unvested DSBP shares and vested LTIP
awards subject to a holding period only are taken into account on a net of tax basis for the purpose of the guidelines. As noted
above during 2022, shares relating to the 2019 LTIP will vest for both executive directors.
2.
Paula Bobbett was appointed an independent non-executive director on 1 November 2022. She did not hold any shares in the
company on appointment.
There have been no changes to directors’ shareholdings between 31 December 2022 and the date of this report.
The table below sets out the directors’ interests in shares of the company which remain unvested or have
vested but are unexercised as at 31 December 2022. Unvested awards are structured as nil-cost options.
Options
Shares
Unvested and
not subject to
performance
conditions
1
Unvested and
subject to
performance
conditions
2
Unvested and
not subject to
performance
conditions
3
Vested and not
subject to
performance
conditions
4
Non-executive chairman
Sir Ian Cheshire
–
–
–
–
Executive directors
Justin Ash
1,818
2,237,402
363,091
482,137
Jitesh Sodha
1,818
1,473,985
162,197
318,025
Non-executive directors
Adèle Anderson
–
–
–
–
Martin Angle
–
–
–
–
Paula Bobbett
5
Tony Bourne
–
–
–
–
Dame Janet Husband
–
–
–
–
Jenny Kay
–
–
–
–
Simon Rowlands
–
–
–
–
Professor Cliff Shearman
–
–
–
–
Dr. Ronnie van der Merwe
–
–
–
–
1.
Consists of awards granted under Sharesave.
2.
Consists of grants under the LTIP that have been awarded but remain subject to performance conditions.
3.
Consists of grants under the DSBP that have been awarded but remain unvested.
4.
Consists of grants under the LTIP that have vested and currently subject to a two-year holding period.
5.
Paula Bobbett was appointed an independent non-executive director on 1 November 2022.
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Letters of appointment
Non-executive director
Date of appointment
Notice period
Date of expiry
Adèle Anderson
1
28 July 2016
2 months
No later than 30 June 2025
Martin Angle
14 March 2019
3 months
No later than 30 June 2024
Paula Bobbett
2
1 November 2022
2 months
No later than 30 June 2025
Tony Bourne
1
24 June 2014
2 months
No later than 30 June 2023
Sir Ian Cheshire
4 March 2021
12 months
No later than 30 June 2023
Dame Janet Husband
24 June 2014
2 months
No later than 30 June 2023
Jenny Kay
1 June 2019
2 months
No later than 30 June 2025
Simon Rowlands
1,3
24 June 2014
2 months
No later than 30 June 2023
Professor Cliff Shearman
1 October 2020
2 months
No later than 30 June 2023
Dr. Ronnie van der Merwe
4
24 May 2018
n/a
No later than 30 June 2024
Debbie White
5
1 February 2023
2 months
No later than 30 June 2025
1.
Adèle Anderson, Tony Bourne and Simon Rowlands will not seek re-election by shareholders at the company’s annual general
meeting on 11 May 2023 and will step down from the board on that date.
2.
Paula Bobbett was appointed an independent non-executive director on 1 November 2022.
3.
Simon Rowlands appointment was renewed for a further one-year period during 2022.
4.
Pursuant to the relationship agreement dated 22 June 2015 between the company and Mediclinic Jersey Limited, under which
Mediclinic Jersey Limited is entitled to nominate for appointment to the board one non-executive director, Dr. Ronnie van der
Merwe was appointed to the board on 24 May 2018. Dr. Ronnie van der Merwe is considered to be a non-independent non-
executive director.
5.
Debbie White was appointed an independent non-executive director on 1 February 2023. She will become the company’s
senior independent director from 12 May 2023.
Service contracts
Justin Ash and Jitesh Sodha will put themselves up for re-election at the annual general meeting to be
held on 11 May 2023. Executive directors are employed under ongoing service contracts with the group.
These contracts do not have a fixed term of appointment. Copies of their service contracts are available
to shareholders for inspection at the company’s registered office.
Performance graph
The graph below illustrates Spire Healthcare Group plc’s TSR performance against the FTSE 250 (excluding
investment trusts) since Admission on 23 July 2014. Given that the company is a constituent of the FTSE 250
index, the remuneration committee considers this an appropriate peer group.
Spire Healthcare Group plc
FTSE 250 (excluding investment trusts)
Source: ThomsonReuters Datastream
180
160
140
120
100
80
40
60
TSR (rebased to 100 on Admission)
31/12
2014
23/07
2014
31/12
2015
31/12
2016
31/12
2017
31/12
2019
31/12
2020
31/12
2022
31/12
2021
31/12
2018
The table below shows the total remuneration paid in respect of the chief executive officer role.
2014
2015
2016
2017
2018
2019
2020
2021
2022
Chief executive’s
single figure
remuneration
(£000s)
1,2
6,223.1
1,095.8
320.5
128.2
732.4
1,010.1
1,251.7
2,129.3
2,909.0
Annual bonus
payout (% of
maximum)
34%
0%
0%
0%
0%
30%
35%
48.4%
53.0%
LTIP vesting (%
of maximum)
3
n/a
n/a
n/a
n/a
n/a
n/a
18.9%
53.75%
73.33%
1.
2017: Justin Ash was appointed chief executive officer on 30 October 2017. The value shown for 2017 therefore represents a
part-year figure for his time in role. During 2017: (i) Garry Watts fulfilled the role of chief executive officer from 14 March 2016
to 12 June 2017 for which he was paid £714,600; and (ii) Simon Gordon undertook the role of Interim chief executive officer
between 13 June 2017 and 29 October 2017 for which he was paid c.£243,000.
2.
2016: Rob Roger stepped down from the board on 30 June 2016. The value shown for 2016 therefore represents a part-year
figure for his time in the role. Garry Watts fulfilled the role of chief executive officer from 14 March 2016 to 12 June 2017.
3.
Rob Roger and Garry Watts did not have any LTIP awards vesting in respect of 2016; for other participants the LTIP based on
performance to 31 December 2016 vested at 50% of maximum. Similarly, Justin Ash and Garry Watts did not have any LTIP
awards vesting in respect of 2017, 2018 or 2019; for other participants (including Simon Gordon) the LTIP based on performance
to 31 December 2017 and 31 December 2018 lapsed in full while the LTIP based on performance to 31 December 2019 vested at
3.75% of maximum.
Annual report on remuneration
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Annual change in remuneration
In line with the requirements in The Companies (Directors’ Remuneration Policy and Directors’ Remuneration
Report) Regulations 2019, the table below shows the annual percentage change in remuneration (based on
salary or fees, benefits and annual bonus). Given the small number of people employed by the Spire Healthcare
Group plc entity, data for all employees of the group has been included.
2022
2021
2020
Salary/fee
FY22 vs
FY21
Benefits
FY22 vs
FY21
Annual
Bonus
FY22 vs
FY21
Salary/fee
FY21 vs
FY20
Benefits
FY21 vs
FY20
Annual
Bonus
FY21 vs
FY20
Salary/fee
FY20 vs
FY19
Benefits
FY20 vs
FY19
Annual
Bonus
FY20 vs
FY19
Chairman
Sir Ian
Cheshire
1
0%
100%
–
–
–
–
–
–
–
Garry Watts
2
–
–
–
–
–
–
(4.5)%
(61.7)%
–
Executive
directors
Justin Ash
1.0%
45.1%
9.5%
1.0%
2.9%
40.4%
(4.5)%
(0.1)%
16.7%
Jitesh Sodha
1.0%
20.1%
(3.6)%
5.8%
0%
65.2%
(4.5)%
0%
16.7%
Non-
executive
directors
Adèle
Anderson
0.9%
–
–
0%
–%
–
0%
(100.0)%
–
Martin Angle
0%
400.0%
–
0%
(64.4)%
–
0%
(59.0)%
–
Paula
Bobbett
3
0%
–
–
–
–
–
–
–
–
Tony Bourne
0.9%
–
–
0%
–%
–
0%
(86.5)%
–
Dame Janet
Husband
1.7%
137.9%
–
0%
(60.3)%
–
0%
(67.6)%
–
Jenny Kay
1.1%
–
–
0%
–%
–
0%
(100)%
–
Simon
Rowlands
9.4%
–
–
0%
–
–
0%
–
–
Professor
Cliff
Shearman
1.1%
100.0%
–
–
–
–
–
–
–
Dr. Ronnie
van der
Merwe
0%
–
–
0%
–
–
0%
–
–
Average
employee
4.4%
11.8%
(1.4)%
2.3%
11.2%
4.4%
5.3%
2.7%
75.7%
1.
Sir Ian Cheshire was appointed chairman-designate on 4 March 2021. To provide a meaningful comparison of percentage increase
his fee received as chairman for 2022 has been considered on a full-time equivalent basis..
2.
Garry Watts stepped down from the board on 13 May 2021.
3.
Paula Bobbett was appointed an independent non-executive director on 1 November 2022. To provide a meaningful comparison
of percentage increase her fee for 2022 has been considered on a full-time equivalent basis.
Relative importance of spend on pay
The table below shows the ratio of the total remuneration of the chief executive officer to that of the lower
quartile, median and upper quartile employees and bank workers in 2021, consistent with the Regulations.
£(m)
2022
2021
% change
Total remuneration
418.4m
397.6
5.2
Distributions to shareholders
0
0
–
CEO pay ratio for 2022
Year
Method
CEO
P25 (LQ)
P50 (Median)
P75 (UQ)
2019
A
Base salary
£615,000
£18,085
£25,573
£36,055
Total remuneration
£1,010,112
£20,065
£28,487
£40,461
Pay Ratio
n/a
50:1
35:1
25:1
2020
A
Base salary
£587,325*
£18,013
£24,256
£33,165
Total remuneration
£1,251,684
£20,519
£27,893
£39,978
Pay Ratio
n/a
61:1
45:1
31:1
2021
A
Base salary
£624,225
£19,285
£23,529
£44,503
Total remuneration
£2,096,781
£22,712
£31,798
£49,524
Pay Ratio
n/a
92:1
66:1
42:1
2022
A
Base salary
£630,467
£21,198
£29,488
£40,498
Total remuneration
£2,908,962
£23,800
£32,810
£47,281
Pay Ratio
n/a
122:1
89:1
62:1
*
Decrease in salary rate year-on-year due to chief executive officer’s voluntary waiver of three months of salary from May to
July 2020.
Spire Healthcare has compared the total remuneration of the chief executive officer to UK employees for the
12 months ending 31 December 2022 on a full-time equivalent basis. The Company has determined the P25,
P50 and P75 individuals with reference to a ranking of total remuneration as at 31 December 2022.
The Company’s principles for pay setting and progression in our wider workforce are the same as for our
executives which form a total reward proposition which is competitive to attract and retain the highest quality
of talent in a difficult market, whilst providing opportunities for development and career progression.
The median pay ratio reported is consistent with the wider policies in place at Spire Healthcare. All employees
are eligible for pay increases, recognition awards, participation in Sharesave, and career and development
opportunities.
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The pay for the chief executive officer is by design intended to have a larger proportion linked to performance-
based variable pay, and therefore the pay ratio would be expected to vary year-on-year and be higher in years
when the business performs well. The primary driver for the increase in the pay ratio for 2022 is the 2020 LTIP
vesting for the chief executive officer. For 2022, 59% of the value reported for the chief executive officer’s LTIP
is directly attributable to share price growth. Removing the impact of the share price growth on the 2020 LTIP
would reduce the median CEO to employee ratio to 59:1. In contrast excluding the impact of share price on the
2021 figure would reduce the median pay ratio from 66 to c 53.
For colleagues, year-on-year changes in remuneration are principally driven by the exceptional annual salary
review of 5% (vs 3% for executive directors) and the additional interventions taken throughout the year to align
colleagues to the 2021/2022 voluntary Real Living Wage.
Notes to the calculation
–
Under option A, the ratios are based on the full-time equivalent total remuneration which includes base
salary, incentive payments, taxable benefits and pension benefits for the financial year 1 January to
31 December 2022.
–
Options A is selected as it is considered to provide the most transparent approach to calculation
–
The Doctors Clinic Group is excluded from the 2022 calculation as they were not part of Spire for all of the
year
–
The reference colleagues at the 25th, 50th and 75th percentile have been determined by reference to the last
day of the financial year, 31 December 2022
–
In accordance with the Regulations, employees and bank workers have been included, whilst Non-Executive
directors, contractors and medical consultants we contract with in our hospitals and clinics have not been
included
–
A total of 12,974 employees and bank workers were included in the calculation of the CEO Pay ratio.
Colleagues on reduced pay due to long term sickness absence, maternity leave or with zero pay in 2022 were
excluded from the calculation
–
Pay for each colleague is calculated in accordance with the single figure of remuneration. All components of
remuneration are presented on a full-time equivalent basis by dividing sums by the number of hours for the
portion of the year worked and subsequently multiplying by the relevant annual full-time hours.
–
Bank workers do not participate in the annual bonus plan, long term incentive plan and do not have any
taxable benefits
–
A significant portion of the chief executive officer’s pay is variable. The pay ratio is, therefore, significantly
impacted by the outcomes of variable pay plans
–
The full amount of the annual bonus for the chief executive officer for 2022 is included in the total
remuneration figure including the portion deferred into share
Advice provided to the remuneration committee
During the course of the year, Deloitte LLP provided external advice to the remuneration committee and its
total fees were £65,750 (2021: £45,250). During 2022, Deloitte LLP also provided other consulting services to
the group. Deloitte LLP has voluntarily signed up to the Remuneration Consultants’ Code of Conduct in relation
to executive remuneration consulting during the year. The remuneration committee is comfortable that the
Deloitte LLP engagement partner and team that provides remuneration advice to the remuneration
committee do not have connections with the company or any of its directors that may impair their
independence.
The non-executive chairman, chief executive officer, chief financial officer, group human resources director and
company secretary attended committee meetings by invitation in order to provide the remuneration
committee with additional context. No individual participates in decisions regarding their own remuneration.
Statement of voting at 2022 annual general meeting
The following table sets out the voting in respect of the resolutions to approve the company’s directors’
remuneration policy and 2021 directors’ remuneration report put to shareholders at the company’s annual
general meeting held on 11 May 2022:
Resolution at 2022 AGM
Votes for
% of vote
Votes against
% of vote
Votes withheld
Approve the 2021 Directors’
Remuneration Report
345,732,512
99.32%
2,369,832
0.68
8,649
Resolution at 2021 AGM
Votes for
% of vote
Votes against
% of vote
Votes withheld
Approve the Directors’
Remuneration Policy
334,256,201
99.68%
1,076,261
0.32
4,562
This report on directors’ remuneration will be put to an advisory vote at the annual general meeting on 11 May
2023. The directors confirm that this report has been prepared in accordance with the Companies Act 2006
and reflects the provisions of the Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013. It also includes updates to legislation from The Companies (Miscellaneous
Reporting) Regulations 2018 (SI 2018/860) and The Companies (Directors’ Remuneration Policy and Directors’
Remuneration Report) Regulations 2019. The report was approved at a meeting of the directors held on
1 March 2023.
Details of all resolutions passed at the annual general meeting held on 11 May 2022 can be found on page 90.
Tony Bourne
Chair, Remuneration Committee
1 March 2023
Annual report on remuneration
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Directors’ report
The directors submit their annual report together with the audited
financial statements of Spire Healthcare Group plc (the ‘company’)
together with its subsidiaries (the ‘group’) for the year ended
31 December 2022.
Certain disclosure requirements for inclusion in this directors’ report
have been incorporated by way of cross reference to the strategic report
on pages 1 to 83 and the directors’ remuneration report on pages 112 to
119, and should be read in conjunction with this report. The following,
included in the strategic report, also form part of this report:
–
Greenhouse gas emissions, which can be found under engagement
with stakeholders on page 40 and sustainability on page 46
–
Employees, which can be found in our strategy on page 25 and
engaging with stakeholders on page 37
–
The corporate governance report on pages 85 to 90
–
Our strategy on pages 18 to 32
A description of the group’s exposure and management of risks is
provided in the strategic report on pages 66 to 76.
Information regarding the company’s gender pay gap reporting and
charitable donations can be found in sustainability on pages 54 to 55.
Registered office
The company’s registered office and principal place of business is
3 Dorset Rise, London EC4Y 8EN.
Annual general meeting
The annual general meeting of Spire Healthcare Group plc will be held
at 11.00am on 11 May 2023. Full details of shareholder attendance at
the meeting will be provided in the 2023 notice of annual general
meeting and at www.spirehealthcare.com/AGM.
At the meeting, resolutions will be proposed to receive the 2022 annual
report and financial statements, approve a final dividend, approve the
directors’ remuneration report, elect or re-elect directors and to
reappoint Ernst & Young LLP as auditor. Shareholders will also be asked
to authorise the directors to hold general meetings at 14 clear days’
notice (where this flexibility is merited by the business of the meeting
and is thought to be in the interests of shareholders as a whole). Further
items of business to be proposed at the annual general meeting are
described throughout this directors’ report.
Dividends
The directors recommend the payment of a final dividend in respect
of the year ended 31 December 2022 of 0.5 pence per ordinary share.
Subject to shareholders approving the recommendation at the annual
general meeting, the final dividend will be paid on 23 June 2023 to
shareholders on the register as at 26 May 2023.
Board of directors
The following changes were made to the board of directors between
1 January 2022 and signing of this report:
–
Paula Bobbett was appointed an independent non-executive director
on 1 November 2022
–
Debbie White was appointed an independent non-executive director
on 1 February 2023
The UK Corporate Governance Code provides for all directors of FTSE
companies to stand for election or re-election by shareholders every year.
Accordingly, all members of the board will retire and seek election or
re-election at this year’s annual general meeting. Full biographical details
of all of the directors can be found on pages 92 and 94.
Further information on the contractual arrangements of the executive
directors is given on pages 110 and 111. The non-executive directors do
not have service agreements.
Powers of the directors
The business of the company is managed by the directors who may
exercise all the powers of the company, subject to any relevant
legislation, any directions given by the company by passing a special
resolution and to the company’s articles of association. The articles,
for example, contain specific provisions concerning the company’s
power to borrow money and issue shares.
Appointment and removal of directors
Rules relating to the appointment and removal of the directors are
contained within the company’s articles of association.
Director’s indemnities
See page 88 in the corporate governance section.
Amendment of articles of association
The company may only make amendments to the articles of association
of the company by way of special resolution of the shareholders, in
accordance with the Companies Act 2006.
Employees
The group is an equal opportunities employer and is committed to
creating an environment which will attract, retain and motivate its
people, by creating a working environment in which individuals are able
to make best use of their skills, free from discrimination or harassment,
and in which all decisions are based on merit. Spire Healthcare employs
people who consider themselves to have a disability (a physical or mental
impairment which has a substantial and long-term adverse effect on
their ability to carry out normal day-to-day activities).
Employees who consider themselves to have a disability are under no
obligation to inform their employer of this, however, we are fully aware
of, and comply with, our obligations in accordance with the relevant
provisions of the Equality Act 2010.
We remain committed to colleague involvement throughout the
business. Colleagues are kept well informed of the clinical and financial
performance of the hospital that they work in as well as the group more
widely. Examples of colleague involvement and engagement are
highlighted throughout this annual report. When appropriate,
consultations with employee and union representatives take place.
The group gives full and fair consideration to applications for
employment from disabled persons. Should an employee become
disabled during their employment with Spire Healthcare, every effort
is made to enable them to continue their service with the group.
Further information on our colleagues can be found under our strategy
on pages 25 to 27 and engagement with stakeholders on page 37.
Statement regarding fostering relationships with suppliers, customers
and others
Explanation of how the directors have fostered the company’s business
relationships with suppliers, customers, employees and others, and
taken each group into account when making principal decisions can
be found under engagement with stakeholders on pages 36 to 41.
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Political donations and expenditure
The group made no political donations during the year. Although the
company does not make, and does not intend to make, donations to
political parties, within the normal meaning of that expression, the
definition of political donations under the Companies Act 2006 is very
broad and includes expenses legitimately incurred as part of the process
of talking to members of parliament and opinion formers to ensure that
the issues and concerns of the group are considered and addressed.
These activities are not intended to support any political party and the
group’s policy is not to make any donations for political purposes in the
normally accepted sense.
A resolution will therefore be proposed at the annual general meeting
seeking shareholder approval for the directors to be given authority to
make donations and incur expenditure which might otherwise be
caught by the terms of the Companies Act 2006. The authority sought
will be limited to a maximum amount of £100,000.
Share capital
As at the date of this report, Spire Healthcare Group plc had an issued
share capital of 404,109,295 ordinary shares of 1 pence each, being the
total number of shares with voting rights.
Equiniti Trust (Jersey) Limited, as trustee of the company’s Employee
Benefit Trust, holds 26,704 ordinary shares of 1 pence each (2021:
239,283). Further details can be found in note 21 on page 153.
The rights attaching to the shares are set out in the articles of
association. There are no restrictions on the transfer of ordinary shares in
the capital of the company other than those which may be imposed by
law from time-to-time. There are no special control rights in relation to
the company’s shares and the company is not aware of any agreements
between holders of securities that may result in restrictions on the
transfer of securities or on voting rights. In accordance with the
Disclosure Guidance and Transparency Rules, certain employees are
required to seek approval prior to dealing in the company’s shares. The
company’s entire issued ordinary share capital is listed on the premium
segment of the Official List of the Financial Conduct Authority and to
unconditional trading on the London Stock Exchange plc’s main market
for listed securities.
Further information relating to the company’s issued share capital can
be found in note 21 to the company’s financial statements on page 153.
The company has made no purchases of its own shares during the year
and no shares were acquired by forfeiture or surrender or made subject
to a lien or charge. Details of the shares purchased by the company’s
Employee Benefit Trust are shown in note 21 on page 153.
Allot shares and pre-emption rights
Shareholders will be asked to renew both the general authority of the
directors to issue shares and to authorise the directors to issue shares
without applying the statutory pre-emption rights. In this regard, the
company will continue to adhere to the provisions in the pre-emption
group’s Statement of Principles.
Further details on these matters can be found in the 2023 notice of
annual general meeting.
Voting rights
In a general meeting of the company, on a show of hands, every member
who is present in person or by proxy and entitled to vote shall have one
vote. On a poll, every member who is present in person or by proxy shall
have one vote for every share of which they are the holder.
Restrictions on voting
Unless the directors otherwise determine, a shareholder shall not be
entitled to vote either personally or by proxy:
–
If any call or other sum presently payable to the company in respect
of that share remains unpaid or
–
Having been duly served with a notice to provide the company with
information under Section 793 of the Companies Act 2006, and has
failed to do so within 14 days, for so long as the default continues
Directors’ interests in shares
The beneficial interests of the directors’ and their families in the shares
of the company are detailed on page 116.
During the year, no director had any material interest in any contract of
significance to the group’s business.
Employee share scheme participation
The company’s operates an all-employee Sharesave scheme which has
been well received by colleagues. This is an important part of our total
reward package and encourages and supports employee share
ownership.
Material interests in shares
As of 1 March 2023, the company has been notified by the following
investors of their interests in 3% or more of the company’s issued share
capital. These interests were notified to the company pursuant to
Disclosure and Transparency Rule 5:
Shareholder
% disclosed
Mediclinic International PLC
29.90
Toscafund Asset Management
18.1
FIL Limited
5.49
Melquart Opportunities Master Fund Limited
3.82
Significant agreements
The following agreements are considered to be significant in terms of
their potential impact on the business of the group as a whole and could
alter or terminate on a change of control of the group:
–
The group’s bank facility agreement contains provisions entitling the
counterparties to exercise termination or other rights in the event of
a change of control
–
There are a number of contracts which allow the counterparties to
alter or terminate those arrangements in the event of a change of
control of the company. These arrangements are commercially
sensitive and confidential and their disclosure could be seriously
prejudicial to the group
–
The company’s share incentive plans contain provisions relating to
a change of control and full details of these plans are provided in the
directors’ remuneration report on pages 112 to 119. Outstanding
options and awards would normally vest and become exercisable
on a change of control, subject to the satisfaction of performance
conditions, if applicable, at that time
The relationship agreement entered into with Mediclinic Jersey Limited
(formerly called Remgro Jersey Limited), a subsidiary of Mediclinic
International PLC, in June 2015 is deemed a material agreement
between the company and its principal shareholder. The agreement
does not include a change of control provision but does terminate upon
the earlier of the company’s ordinary shares ceasing to be listed and
traded on the London Stock Exchange’s main market for listed securities
and the principal shareholder ceasing to be entitled, in aggregate, to
exercise or to control the exercise of 15% or more of the votes to be cast
on all or substantially all matters of a general meeting of the company.
Directors’ report
continued
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Compensation for loss of office
There are no agreements between the group and its directors or
employees providing for compensation for loss of office or employment
that occurs as a result of a change of control.
Disclosures required under listing rule 9.8.4R
The table below is included to meet the requirements of Listing Rule
section 9.8.4R. The information required to be disclosed by that section,
where applicable to the company, can be located in the annual report
2022 at the references set out above.
Information required
Location in annual report 2022
Long-term incentive schemes
Directors’ Remuneration
Report pages 112 to 119
Equity securities allotted for cash
Note 21 on page 153
Parent and subsidiary undertakings
Note 16 on page 150
Subsisting significant agreements
Page 121
Controlling shareholder relationships
Page 121
Financial risk
The group’s disclosure regarding financial risk is disclosed in note 30 of
the financial statements.
Events after the reporting period
There have been no events to disclose after the reporting date.
Going concern
The group has undertaken extensive activity to identify plausible risks
which may arise and mitigating actions. Further information on these
is provided in the section on viability above. Based on the current
assessment of the likelihood of these risks arising by 31 March 2024
together with their assessment of the planned mitigating actions being
successful, the directors have concluded that it is appropriate to prepare
the accounts on a going concern basis. See note 2 – Basis of Preparation
in the financial statements for more detail.
Disclosure of information to auditor
Having made enquiries of fellow directors and of the company’s auditor,
each of the directors confirms that:
–
To the best of their knowledge and belief, there is no relevant audit
information of which the company’s auditor is unaware
–
They have taken all the steps a director might reasonably be expected
to have taken to be aware of relevant audit information and to
establish that the company’s auditor is aware of that information
Reappointment of auditor
Resolutions for the reappointment of Ernst & Young LLP as the auditor
of the company and to authorise the directors to determine its
remuneration will be proposed at the annual general meeting. Ernst &
Young LLP has expressed its willingness to be reappointed.
The directors’ report has been approved by the board and is signed on
its behalf by:
Philip Davies
Company Secretary
1 March 2023
Directors’ report
continued
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Statement of directors’ responsibilities
The directors are responsible for preparing the annual report and the
group’s financial statements in accordance with applicable United
Kingdom law and regulations.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have elected to prepare
the group and parent company financial statements in accordance with
UK-adopted International Accounting Standards (‘UK-adopted IFRS’) as
issued by the International Accounting Standards Board (‘IASB’) and in
accordance with the Companies Act 2006. Under company law the
directors must not approve the group’s financial statements unless they
are satisfied that they give a true and fair view of the state of affairs of
the group and the company and of the profit or loss of the group and
the company for that period.
In preparing these financial statements the directors are required to:
–
Select suitable accounting policies in accordance with IAS 8
accounting policies, changes in accounting estimates and errors
and then apply them consistently
–
Make judgements and accounting estimates that are reasonable
and prudent
–
Present information in a manner that provides relevant, reliable,
comparable and understandable information
–
Provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand
the impact of particular transactions, other events and conditions on
the group and company financial position and financial performance
–
In respect of the group financial statements, state whether UK-
adopted International Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
financial statements
–
In respect of the parent company financial statements, state whether
UK-adopted International Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
financial statements
–
Prepare the financial statements on the going concern basis unless
it is appropriate to presume that the company and/or the group will
not continue in business
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the company’s and group’s
transactions and disclose with reasonable accuracy at any time the
financial position of the company and the group and enable them to
ensure that the company and the group financial statements comply with
the Companies Act 2006. They are also responsible for safeguarding the
assets of the group and parent company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible
for preparing a strategic report, directors’ report, directors’ remuneration
report and corporate governance statement that comply with that law
and those regulations. The directors are responsible for the maintenance
and integrity of the corporate and financial information included on the
company’s website.
Each of the directors confirms that, to the best of their knowledge:
–
That the consolidated financial statements, prepared in accordance
with UK-adopted International Accounting Standards give a true and
fair view of the assets, liabilities, financial position and profit of the
parent company and undertakings included in the consolidation taken
as a whole
–
That the annual report, including the strategic report, includes a fair
review of the development and performance of the business and the
position of the company and undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face
–
That they consider the annual report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the company’s position, performance, business
model and strategy
By order of the board.
Justin Ash
Chief Executive Officer
1 March 2023
Jitesh Sodha
Chief Financial Officer
1 March 2023
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Independent auditor’s report
Opinion
In our opinion:
–
Spire Healthcare Group plc’s group financial statements and parent company financial statements (the
‘financial statements’) give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 31 December 2022 and of the group’s profit for the year then ended
–
The group financial statements have been properly prepared in accordance with UK adopted international
accounting standards
–
The parent company financial statements have been properly prepared in accordance with UK adopted
international accounting standards as applied in accordance with section 408 of the Companies Act 2006
–
The financial statements have been prepared in accordance with the requirements of the Companies Act
2006
We have audited the financial statements of Spire Healthcare Group plc (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 31 December 2022 which comprise:
Group
Parent company
Consolidated balance sheet as at 31 December 2022
Balance sheet as at 31 December 2022
Consolidated income statement for the year then
ended
Statement of changes in equity for the year then ended
Consolidated statement of comprehensive income for
the year then ended
Statement of cash flows for the year then ended
Consolidated statement of changes in equity for the
year then ended
Related notes C1 to C13 to the financial statements
including a summary of significant accounting policies
Consolidated statement of cash flows for the year then
ended
Related notes 1 to 33 to the financial statements,
including a summary of significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted
international accounting standards and as regards the parent company financial statements, as applied in
accordance with section 408 of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the group and parent in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent
company and we remain independent of the group and the parent company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’
assessment of the group and parent company’s ability to continue to adopt the going concern basis of
accounting included:
–
The audit engagement partner and senior team members directed and supervised the audit procedures on
going concern, in particular assessing the going concern models, assumptions therein and the result of stress
testing scenarios
–
In conjunction with our walkthrough of the group’s financial close process, we confirmed our understanding
of management’s going concern assessment process and also engaged with management early to ensure all
key factors were considered in its assessment
–
In obtaining an understanding of management’s rationale for the use of the going concern basis of
accounting we have challenged the completeness of the assessment by ensuring that management had
considered all principal risks as well as emerging issues within the assessments
Managements’ assessment and assumptions
–
We obtained management’s board approved forecast cash flows and covenant calculations covering the
period of assessment from the financial statement approval date to 31 March 2024. We checked the
models for arithmetical accuracy, whether they were approved by the board and considered the group’s
historical forecasting accuracy
–
We considered the appropriateness of the going concern assessment period
–
We evaluated the relevance and reliability of the underlying data used to make the assessment through
considering corroborating evidence from external sources. We read analyst reports to identify potentially
contradictory evidence on future profitability to challenge the going concern assessment. We ensured
that climate change considerations were factored into future cash flows
Debt covenants
–
We obtained all the group’s borrowing facility agreements and performed a detailed examination of these
agreements with the assistance of EY debt advisory specialists. We assessed their continued availability to
the group throughout the going concern period and ensured the completeness of covenants identified by
management
–
We checked the accuracy of management’s covenant forecast model, verifying inputs to the board
approved forecasts and facility agreement terms
–
We evaluated the compliance of the group with debt covenants in the forecast period by reperforming
calculations of the covenant tests. We further assessed the impact of the downside risk scenarios on
covenant compliance and applied sensitivity analysis
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Independent auditor’s report
continued
Stress testing and evaluation of management’s plans for future actions
–
We performed a reverse stress test to understand what it would take to breach available liquidity and
exhaust covenant headroom
–
We considered management’s plausible downside risk scenarios of the group’s cash flow forecast models
and their impact on forecast liquidity and banking covenants, specifically whether the downside risks
were reasonably possible. We considered the adverse effects that could arise from these risks individually
and also selected risks in combination
–
We considered the likelihood of management’s ability to execute feasible mitigating actions available to
respond to the downside risk scenarios based on our understanding of the group and the sector, including
considering whether those mitigating actions were controllable by management
Disclosures
–
We considered whether management’s disclosures within the annual report and accounts, sufficiently
and appropriately capture the impacts of the group’s principal risks on the going concern assessment and
through consideration of relevant disclosure standards
Our key observations were:
–
The directors’ assessment forecasts that the group will remain compliant with its debt covenants and
maintain sufficient liquidity throughout the Going Concern assessment period
–
Stress testing performed indicated a 17% downturn in revenue is required for the group to breach its debt
covenants. Management considers such a scenario is not plausible, however, in such an event management
considers that the impact could be mitigated by measures within their control, which in the first instance
would include management of working capital and constrained levels of capital investment. The group’s
principal source of funding extends beyond the going concern period to 2026
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the group and parent company’s
ability to continue as a going concern for a period up to 31 March 2024.
In relation to the group and parent company’s reporting on how they have applied the UK Corporate
Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement
in the financial statements about whether the directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report. However, because not all future events or conditions can be predicted, this
statement is not a guarantee as to the group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
We performed an audit of the complete financial information of 2 components and
audit procedures on specific balances for a further 27 components.
The components where we performed full or specific audit procedures accounted
for 95% of Revenue and 99% of Total assets.
Key audit matters
Risk of impairment of the carrying value of intangible and tangible assets
Revenue recognition: Manipulation of NHS revenue by changes to the pricing
master file
Materiality
Overall group materiality of £2.5m which represents 2.5% of Adjusted Earnings
Before Interest, Tax, Depreciation and Amortisation (‘EBITDA’).
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each company within the group. Taken together, this enables us to form an
opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the
group and effectiveness of group-wide controls, changes in the business environment and other factors such
as recent Internal audit results when assessing the level of work to be performed at each entity.
In assessing the risk of material misstatement to the group financial statements, and to ensure we had
adequate quantitative coverage of significant accounts in the financial statements, of the 44 (2021: 42)
reporting components of the group, we selected 27 (2021: 23) components, which represent the principal
business units within the group. The group continues to operate solely within the UK.
Of the 27 (2021: 23) components selected, we performed an audit of the complete financial information of 2
(2021: 2) components (‘full scope components’) which were selected based on their size or risk characteristics.
For the remaining 25 (2021: 21) components (‘specific scope components’), we performed audit procedures on
specific accounts within that component that we considered had the potential for the greatest impact on the
significant accounts in the financial statements either because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted of the group’s revenue and 99%
(2021: 99%) of the group’s total assets. For the current year, the full scope components contributed 95% (2021:
97%) of the group’s revenue and 75% (2021: 78%) of the group’s total assets. The specific scope components
contributed 0% (2021: 0%) of the group’s revenue and 24% (2021: 21%) of the group’s total assets. The audit
scope of these components may not have included testing of all significant accounts of the component but will
have contributed to the coverage of significant accounts tested for the group. It is not possible to present the
split between full and specific scope components on an adjusted EBITDA basis in a meaningful way. This is due
to intra-group profits earned in certain specific scope components which result in the aggregate adjusted
EBITDA amounting to more than 100%.
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Independent auditor’s report
continued
Of the remaining 17 components none are individually greater than 1% of the group’s adjusted EBITDA. For
these components, we performed other procedures, including, analytical review, testing of consolidation
journals and testing of intercompany eliminations to respond to any potential risks of material misstatement
to the group financial statements.
The charts below illustrate the coverage obtained from the work performed by our audit teams.
As explained in the group’s accounting policies and basis of preparation notes that the board has not identified
any climate related risks or opportunities that would have a material impact on the assets or liabilities of the
group. In notes 2, 13 and 14 to the financial statements, significant judgements and estimates relating to
climate change have been described on the impairment assessment of tangible and intangible assets in
addition to financial assets and liabilities.
Our audit effort in considering climate change was focused on ensuring that the effects of material climate
risks disclosed have been appropriately reflected in asset values and associated disclosures where values are
determined through modelling future cash flows, being tangible and intangible assets, and in the timing and
nature of liabilities recognised.
We also challenged the directors’ considerations of climate change risks in their assessment of going concern
and viability and associated disclosures.
Based on our work we have not identified the impact of climate change on the financial statements to be a key
audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters included those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements
as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Total assets
2. Specific scope
components 24%
1. Full scope
components 75%
3. Other
procedures 1%
3
2
1
Revenue
2. Specific scope
components 0%
1. Full scope
components 95%
3. Other
procedures 5%
3
1
Changes from the prior year
Spire Healthcare Group plc acquired two new components in the current financial year which have been
assigned as specific scope, being, The Doctors Clinic Group Limited. These components have been assigned as
specific scope for cash and property, plant, and equipment balances.
Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the group audit team.
Climate change
Stakeholders are increasingly interested in how climate change will impact Spire Healthcare Group plc. The
group has determined that the most significant future impacts from climate change on its operations will be
from severe and extreme weather patterns, potential changes to laws and regulations, fluctuation in energy
prices, and increased costs as a result of measures to reduce carbon emissions. These are explained on pages
60-65 in the Task Force on Climate-Related Financial Disclosures and on pages 66-76 in the principal risks and
uncertainties. All of these disclosures form part of the ‘Other information’, rather than the audited financial
statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether
they are materially inconsistent with the financial statements or our knowledge obtained in the course of the
audit or otherwise appear to be materially misstated, in line with our responsibilities on ‘Other information’.
In planning and performing our audit we assessed the potential impacts of climate change on the group’s
business and any consequential material impact on its financial statements.
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Independent auditor’s report
continued
Risk
Our response to the risk
Key observations communicated to the audit and risk committee
Risk of impairment to intangible and tangible assets
Refer to the audit and risk committee report (page 102);
accounting policies (pages 138-142); and notes 13 and 14 of the
Consolidated Financial Statements (pages 148 and 149)
At 31 December 2022 the carrying value of tangible and
intangible assets was £1,932.7 million (2021: £1,888.3 million)
of which £346.3 million (2021: £334.8 million) relates to
goodwill and £1,586.3 million (2021: £1,552.5 million) relates to
property, plant and equipment of which £618.3 million (2021:
£603.2 million) relates to the right of use assets.
The changing business and economic environment presents
various challenges in forecasting future group and hospital
performance. This results in a high degree of estimation
uncertainty which leads us to conclude there to be a higher
likelihood of material misstatement within the forecasts used in
management’s impairment assessments.
COVID-19 has continued to impact performance and
forecasting accuracy throughout the financial year with
margins impacted by increased costs of staff absence and
cancellations. The UK economic environment also continues to
be challenged by factors including high inflation levels, an
increased cost of living and supply chain disruptions.
No impairment has been recognised in relation to tangible
(2021: £0 million) or intangible assets (2021: £0 million) in the
current year.
We performed the following procedures:
–
We gained an understanding of the process management has in place over the impairment process through a walkthrough
–
We validated that the methodology of the impairment exercise is consistent with the requirements of IAS 36 Impairment of assets,
including appropriate identification of cash generating units for value in use calculations, by assessing the methodology against
the requirements of IAS 36
–
We also confirmed the mathematical accuracy of the models
–
We obtained management’s forecasts underlying the impairment review incorporating the continued impact from COVID-19, the
Ukraine/Russia conflict, the macro-economic environment, and climate related matters. We agreed them to forecasts approved by
the board
–
We compared the forecast to other external sources such as industry analyst reports to assess the reasonableness of the
assumptions applied as well to identify any contrary evidence to assist the audit team in determining the impact of this contrary
evidence
–
We challenged management’s historical accuracy of forecasting through comparing the budgets to actual results from 2019 to
2022 to determine whether forecast cash flows were reliable based on past experiences
–
We performed sensitivity analysis by testing key assumptions in the model to recalculate a range of potential outcomes in relation
to the size of the headroom between the carrying value and the net present value. The sensitivities performed were based on the
key assumptions underpinning managements’ assessment
–
We have checked that the reasonable possible change assumptions applied by management are reasonable, complete and have
been correctly calculated and disclosed
In addition, we worked with our EY internal valuation specialists to:
–
Assess the discount rate, benchmarking to external evidence and against industry averages and trends
–
Independently calculated the discount rate and compared this to the discount rates applied in the models by management. We
sensitised management’s calculation to use the discount rate independently calculated
–
We assessed the inputs applied by management for reasonableness by benchmarking them against peer companies and recent
transactions
Disclosures
We evaluated the disclosures in the financial statements against the requirements of IAS 36 Impairment of Assets, in particular
respect of the requirement to disclose sensitivities where a reasonably possible change in key assumptions could cause an
impairment.
We performed full and specific scope audit procedures over this risk area in 18 components, which covered 95% of the tangible and
intangible assets balance.
We concluded that the discount rate used by management was
at the lower end of the appropriate range determined by EY
internal valuation specialists. In addition, we concluded that key
assumptions in relation to EBITDA growth for property, EBITDA
margin growth for goodwill, capital maintenance expenditure,
discount rates and long-term growth rates applied to the
terminal values were reasonable.
We highlighted that a reasonably possible change in key
assumptions including a change in EBITDA growth and the
discount rate could lead to impairment charges to tangible
assets. We also highlighted that a reasonably possible change in
key assumptions including a change in EBITDA margin growth
and the discount rate could lead to impairment charges to
intangible assets. We concluded that appropriate disclosures
have been made in the financial statements as required.
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continued
Risk
Our response to the risk
Key observations communicated to the audit and risk committee
Revenue recognition: Manipulation of NHS revenue through
changes to the pricing master file
Refer to the audit and risk committee report (page 102);
accounting policies (pages 138-143); and note 5 of the
consolidated financial statements (page 144)
NHS revenue 2022: £295.4 million (2021: £314.5 million)
The high volume of patient transactions, for which pricing is
derived from the NHS national tariff, leads to a higher likelihood
of material misstatement through intentional changes to
individual procedural pricing on the pricing master file.
We consider the pressure to achieve forecast results or targets
increases the risk of financial reporting manipulation by
management.
We have performed the following procedures to gain assurance over NHS pricing:
–
We used data analytics to assess the accuracy of all the FY22 NHS billing data to publicly available NHS national tariff base prices,
adjusted by Market Force factors
–
For any material portion of the revenue population for which we were unable to agree the price billed to NHS national tariff base
prices, eg where the price was agreed locally for a specific procedure, we have agreed a sample of this billing data to appropriate
audit support. Specifically, we have agreed a sample of this billing data to the underlying signed agreement or, in instances where
no current contract or correspondence was available, we traced the settlement of the invoice directly to cash
–
We used data analytics, covering all NHS revenue transactions in the year, to test the correlation between revenue, accrued
revenue, accounts receivable and cash
–
We investigated whether there were any pricing disputes with the NHS during the year through discussions with legal counsel,
review of minutes and verifying any matters noted to correspondence, where available
–
We obtained a summary of aged NHS receivables and verified that the ageing is appropriate by testing a sample across the
different ageing categories. We have performed a search for any large or unusually long outstanding receivables that are outside
expected credit terms that may indicate that pricing disagreements exist
While we have not relied on any of the work performed by internal audit, we reviewed the results from their individual site audits
completed during FY22, to understand if there were any revenue findings specific to NHS pricing which require further enquiry and/
or corroboration.
We performed full scope audit procedures over this risk area in 1 component, which covered 95% of NHS revenue.
We did not identify any material errors in the pricing master file,
nor evidence of management manipulation of revenue through
changes to the pricing master file.
We did not identify any indicators of pricing disputes with the
NHS.
Based on our audit procedures performed, we concluded that
revenue for the year is appropriately recognised and free from
material misstatement.
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Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users of the financial statements. Materiality provides a
basis for determining the nature and extent of our audit procedures.
We determined materiality for the group to be £5.1 million (2021: £4.5 million), which is 2.5% (2021: 2.5%) of
adjusted EBITDA. We believe that adjusted EBITDA provides us with the most important metric for the users of
the financial statements, being the most important KPI for internal metrics and external analyst expectations.
We determined materiality for the parent company to be £11.6 million (2021: £11.1 million), which is 1% (2021:
1%) of equity.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial
statement accounts is undertaken based on a percentage of total performance materiality. The performance
materiality set for each component is based on the relative scale and risk of the component to the group as a
whole and our assessment of the risk of misstatement at that component. In the current year, the range of
performance materiality allocated to components was £0.5 million to £2.5 million (2021: £0.4 million to £2.2
million).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the audit and risk committee that we would report to them all uncorrected audit differences
in excess of £0.3 million (2021: £0.2 million), which is set at 5% of planning materiality, as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed
above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1-123 and
pages 168-172 other than the financial statements and our auditor’s report thereon. The directors are
responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work we have performed, we conclude that there is a
material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
–
The information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements
–
The strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements
During the course of our audit, we reassessed initial materiality and reduced this in line with actual adjusted
EBITDA to reflect the actual reported performance of the group for the year.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an
appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality.
On the basis of our risk assessments, together with our assessment of the group’s overall control environment,
our judgement was that performance materiality was 50% (2021: 50%) of our planning materiality, namely
£2.5 million (2021: 2.2 million). We have set performance materiality at this percentage due to our assessment
of the overall control environment and the history of audit adjustments identified.
Materiality
–
Total adjusted EBITDA: £203.5 million
–
Materiality of £5.1 million (2.5% adjusted EBITDA)
Adjustments
–
Adjusting Items:
–
Business reorganisation and corporate restructuring costs – £4.5 million
–
Costs related to/(income from) asset disposals and aborted projects – £4.3 million
–
Remediation of regulatory compliance or malpractice costs – £1.1 million
–
Hospitals set up and closure costs – £0.3 million
Starting basis
–
EBITDA: £193.3 million
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Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or
the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
–
Adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us
–
The parent company financial statements and the part of the directors’ remuneration report to be audited
are not in agreement with the accounting records and returns
–
Certain disclosures of directors’ remuneration specified by law are not made
–
We have not received all the information and explanations we require for our audit
Corporate governance statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the group and company’s compliance with the provisions of
the UK Corporate Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of
the corporate governance statement is materially consistent with the financial statements or our knowledge
obtained during the audit:
–
Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting
and any material uncertainties identified set out on page 77
–
Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers
and why the period is appropriate set out on page 77
–
Director’s statement on whether it has a reasonable expectation that the group will be able to continue in
operation and meets its liabilities set out on page 77
–
Directors’ statement on fair, balanced and understandable set out on page 123
–
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out
on page 66
–
The section of the annual report that describes the review of effectiveness of risk management and internal
control systems set out on pages 66-68
–
The section describing the work of the audit and risk committee set out on pages 101-106
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 123, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the group or the
parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud
is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged
with governance of the company and management.
–
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and
determined that the most significant are the Companies Act 2006, 2018 UK Corporate Governance Code,
the relevant tax compliance regulations in the UK and those administered by the Care Quality Commission
in England and the equivalent organisations in Scotland and Wales. In addition, we concluded that there are
certain significant laws and regulations which may have an effect on the determination of the amounts and
disclosures in the financial statements being the Listing Rules of the London Stock Exchange, the UK Bribery
Act 2010 and regulation relating to employment law and data protection
–
We understood how Spire Healthcare Group plc is complying with those frameworks by making enquiries of
management, internal audit, those responsible for legal and compliance procedures and the company
secretary. We corroborated our enquiries through our review of board minutes, papers provided to the audit
and risk committees and correspondence received from regulatory bodies
–
We assessed the susceptibility of the group’s financial statements to material misstatement, including how
fraud might occur by meeting with management within various parts of the business to understand where
they considered there was susceptibility to fraud. We also considered performance targets and their
influence on efforts made by management to manage earnings or influence the perceptions of analysts. We
considered the programmes and controls that the group has established to address the risk identified, or
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continued
that otherwise prevent, deter and detect fraud; and how senior management monitors those programmes
and controls. Where this risk was considered to be higher, we performed audit procedures to address each
identified fraud risk. We have involved internal specialists as required in designing procedures and assessing
compliance with relevant laws and regulations
–
Based on this understanding we designed our audit procedures to identify non-compliance with such laws
and regulations. Our procedures involved; review of board minutes to identify non-compliance with such
laws and regulations; reviewing external specialist reports, review of reporting to the audit and risk
committee on compliance with regulations, enquiries with legal counsel, group management and internal
audit, testing of manual journals
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
Other matters we are required to address
–
Following a competitive tender process, we were reappointed by the company at its annual general meeting
on 14 May 2020 to audit the financial statements for the year ending 31 December 2020 and subsequent
financial periods
–
The period of total uninterrupted engagement including the period prior to the company’s admission to the
London Stock Exchange in 2014 is 15 years, covering the years ending 31 December 2008 to 31 December
2022
–
The audit opinion is consistent with the additional report to the audit and risk committee
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Stephney Dallmann
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
2 March 2023
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Consolidated income statement
For the year ended 31 December 2022
2022
2021
(£m)
Note
Total before
Adjusting
items
Adjusting
items
(note 10)
Total
Total before
Adjusting
items
Adjusting
items
(note 10)
Total
Revenue
5
Cost of sales
(660.1 )
(660.1 )
(615.0 )
(615.0 )
Gross profit
Other operating costs
(435.8 )
(10.2 )
(446.0 )
(411.2 )
(17.4 )
(428.6 )
Other income
6
Operating profit/(loss) (EBIT)
7
(10.2 )
Finance income
8
Finance cost
8
(91.5 )
(91.5 )
(88.1 )
(0.8 )
(88.9 )
Profit/(loss) before taxation
(10.2 )
(7.0 )
(1.9 )
Taxation
11
(20.8 )
(7.0 )
Profit/(loss) for the year
(8.4 )
(27.8 )
(8.9 )
Profit/(loss) for the year attributable to owners of the parent
(8.4 )
(28.6 )
(9.7 )
(Loss)/profit for the year attributable to
non-controlling interests
(0.4 )
(0.4 )
Earnings/(loss) per share
(in pence per share)
– basic
12
(2.1 )
(7.1 )
(2.4 )
– diluted
12
(2.0 )
(7.1 )
(2.4 )
The notes on pages 137-162 form an integral part of these financial statements.
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Consolidated statement of comprehensive income
For the year ended 31 December 2022
(£m)
Note
2022
2021
Profit/(loss) for the year
(8.9 )
Items that may be reclassified to profit or loss in subsequent periods
Net gain on cash flow hedges (net of taxation)
21
Other comprehensive profit for the year
Total comprehensive profit/(loss) for the year, net of tax
(6.2 )
Attributable to:
Equity holders of the parent
(7.0 )
Non-controlling interests
(0.4 )
(6.2 )
The notes on pages 137-162 form an integral part of these financial statements.
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Consolidated statement of changes in equity
For the year ended 31 December 2022
(£m)
Note
Share
capital
(note 21)
Share
premium
(note 21)
Capital
reserves
(note 21)
EBT share
reserves
(note 21)
Hedging
reserve
(note 21)
Retained
earnings
Total
Non-
controlling
interests
(note 16)
Total
Equity
As at 1 January 2021
(0.8 )
(3.2 )
(496.4 )
(Loss)/profit for the year
(9.7 )
(9.7 )
(8.9 )
Other comprehensive profit for the year
Total comprehensive profit/(loss)
(9.7 )
(7.0 )
(6.2 )
Non-controlling interests adjustment
(6.1 )
Share-based payments
27
Deferred tax adjustment on share-based payments reserve
Acquisition of a subsidiary
(1.9 )
(1.9 )
(1.4 )
As at 1 January 2022
(0.8 )
(0.5 )
(496.1 )
(4.8 )
Profit/(loss) for the year
(0.4 )
Other comprehensive profit for the year
Total comprehensive profit/(loss)
(0.4 )
Dividends to non-controlling interests
(0.2 )
(0.2 )
Dividends paid in respect of vested share awards
(0.1 )
(0.1 )
(0.1 )
Share-based payments
27
Deferred tax adjustment on share-based payments reserve
(0.1 )
(0.1 )
(0.1 )
Issue of new shares
Utilisation of EBT shares for share awards
(0.8 )
Purchase of non-controlling interest
(0.5 )
As at 31 December 2022
(485.7 )
(5.9 )
The notes on pages 137-162 form an integral part of these financial statements.
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(£m)
Note
2022
2021
ASSETS
Non-current assets
Property, plant and equipment
13
Intangible assets
14
Derivatives
22
Financial assets
15
Current assets
Inventories
17
Trade and other receivables
18
Derivatives
22
Cash and cash equivalents
19
Non-current assets held for sale
20
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
21
Share premium
Capital reserves
21
EBT share reserves
(0.8 )
Hedging reserve
21
(0.5 )
Retained loss
(485.7 )
(496.1 )
Equity attributable to owners of the parent
Non-controlling interests
(5.9 )
(4.8 )
Total equity
Non-current liabilities
Bank borrowings
22
Lease liabilities
22
Deferred tax liabilities
23
Current liabilities
Bank borrowings
22
Lease liabilities
22
Derivatives
22
Financial liabilities
Provisions
24
Trade and other payables
25
Income tax payable
Total liabilities
Total equity and liabilities
Justin Ash
Jitesh Sodha
Chief Executive Officer
The notes on pages 137-162 form an integral part of these financial statements.
Consolidated balance sheet
As at 31 December 2022
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Consolidated statement of cash flows
For the year ended 31 December 2022
(£m)
Note
2022
2021
Cash flows from operating activities
Profit/(loss) before taxation
(1.9 )
Adjustments to reconcile profit before tax to net cash flows:
Impairment of assets held for sale (adjusting items) (see note 10)
20
Fair value adjustment on financial liability (adjusting items) (see note 10)
Loss on disposal of property, plant and equipment
Adjusting items – other
Depreciation of property, plant and equipment and right of use assets
13
Profit on disposal under sale and leaseback (adjusting items) (see note 10)
(23.5 )
Profit on early termination of a lease (adjusting items) (see note 10)
7
(0.2 )
Finance costs
8
Other income
6
(3.0 )
(1.1 )
Share-based payments expense
27
Movements in working capital:
(Increase) /Decrease in trade receivables and prepayments
(6.9 )
Decrease/(Increase) in inventories
(0.4 )
(1.9 )
Increase in trade and other payables
Decrease in provisions
(15.9 )
(2.7 )
Cash generated from operations
Tax paid
(0.1 )
Net cash flows from operating activities
Cash flows from investing activities
Receipt from financial asset
Acquisition of a subsidiary, net of cash acquired
(11.3 )
(14.7 )
Purchase of property, plant and equipment
(87.7 )
(69.3 )
Proceeds of disposal of property, plant and equipment
Proceeds of disposal of assets held for sale (adjusting items)
1
Proceeds from sale and leaseback, net of costs (adjusting items)
1
Proceeds of asset under sale of operating unit, net of costs (adjusting items)
1
Net cash used in investing activities
(95.3 )
(48.3 )
Cash flows from financing activities
Interest paid and other financing costs
(21.1 )
(13.2 )
Interest on lease liabilities
(73.5 )
(66.8 )
Payment of lease liabilities
(20.2 )
(14.7 )
Proceeds from asset sold under sale and leaseback (retained value) (adjusting items)
1
Proceeds from senior loan facility
Repayment of senior loan facility
(425.0 )
Proceeds from the issue of new shares
Purchase of non-controlling interests (adjusting item)
1
(2.7 )
Dividend paid to non-controlling interests
(0.3 )
Net cash used in financing activities
(214.7 )
(39.2 )
Net increase in cash and cash equivalents
(128.4 )
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
19
Adjusting Items (note 10)
Adjusting items paid included in the cash flow
(6.4 )
Total pre-tax adjusting items
10
(10.2 )
1. Adjusting item was not charged to profit and loss in the current financial year and is therefore not included in the adjusting items paid included in the cash flow.
The notes on pages 137-162 form an integral part of these financial statements.
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The financial statements for the year ended 31 December 2022 were authorised for issue by the board of
directors of the company on 1 March 2023.
The company is a public limited company , which is listed on the London Stock Exchange, incorporated,
registered and domiciled in England and Wales
office is 3 Dorset Rise, London, EC4Y 8EN.
The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
The consolidated financial statements of the group have been prepared in accordance with UK-adopted
International Accounting Standards (‘UK-adopted IFRS’) as issued by the International Accounting Standards
Board (‘IASB’) and in accordance with the Companies Act 2006.
The consolidated financial statements have been prepared on a historical cost basis except for derivative
financial instruments and financial assets measured at fair value. The group financial statements are presented
in UK sterling and all values are rounded to the nearest million pounds (£m), except when otherwise indicated.
The preparation of financial statements in accordance with UK-adopted IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the
group’s accounting policies. Further details on the group’s critical judgements and estimates are included in
note 3.
The group has considered the future potential environmental impact on its current and future financial
The group assessed going concern risk for the period through to 31 March 2024. As at 31 December 2022 the
group had cash of £74.2 million, a Senior Loan Facility of £325 million and an undrawn Revolving Credit Facility
of £100 million. On 24 February 2022, the group successfully refinanced its debt facilities with a syndicate of
existing and new Lenders. As part of the refinancing exercise and in recognition of the fact that the group had
substantial cash reserves at 31 December 2021, the group repaid £100 million of the Senior Loan Facility. The
new arrangement has a maturity of four years. The financial covenants relating to this new agreement are
materially unchanged.
The group has undertaken extensive activity to identify plausible risks which may arise and mitigating actions,
which in the first instance would include management of working capital and constrained levels of capital
investment. Based on the current assessment of the likelihood of these risks arising by 31 March 2024, together
with their assessment of the planned mitigating actions being successful, the directors have concluded it is
appropriate to prepare the accounts on a going concern basis. In arriving at their conclusion, the directors have
also noted that, were three of the most likely specific risks to arise in combination, it could result in a liquidity
constraint or breach of covenant, however, the risk of this is considered remote.
The group has also assessed, as part of its reverse stress testing, what degree of downturn in trading it could
sustain before it no longer forecasts a positive cash balance. This stress testing was based on flexing revenue
downwards with a consistent percentage decline in variable costs, whilst maintaining the forecast of fixed
costs. The testing did not allow for the benefit of any action that could be taken by management to preserve
cash. This testing suggested that there would have to be at least a 35% fall in annual revenue before the group
no longer forecast a positive cash balance. We do not believe that such a reduction of income revenue is a
plausible consequence of the group’s identified principal risks.
It should be noted that we are in a period of unprecedented geo-political and macro-economic uncertainty.
Whilst the directors continue to closely monitor these risks and their plausible impact, their severity is hard
to predict and is dependent upon many external factors. Accordingly the actual financial impact of these risks
may materially vary against the current view of their plausible impact.
Further detail on both aacroeconomic related risk and COVID-19 is provided in the risk management and
internal control section on pages 66 to 76.
Other specific scenarios covered by our testing were as follows:
–
The group is subject to temporary suspension of trade, with a temporary adverse impact on revenue,
for example, as a result of a successful cyber-attack on key business systems
–
The downside modelling of a number of risks which result in a decline in earnings, including the loss of
a contractual relationship with a key insurer
–
Significant change in government policy resulting in consultants going on payroll
–
Short term disruption to trade at a sub-set of hospitals owing to an extreme weather event
This review included the following key assumptions:
–
No change in capital structure given the group has refinanced its existing senior finance facility and
revolving credit facility since the 2022 year end
–
The government will not make significant change to its existing policy towards utilising private provision
The group derives its revenue primarily from providing private healthcare services to both the public sector
and private patients in the UK. Revenue from charges to patients is recognised when the treatment is provided.
The criteria for revenue recognition are as follows; identify the contract with the customer, identify the
performance obligation, determine the transaction price, allocate the transaction price to the performance
obligations, and satisfying the performance obligation. It applies to all contracts with customers, except those
in the scope of other standards.
Revenue is recorded as services are transferred to the patient, with the consideration based on the total
amount the group expects to receive, taking account of discounts where they are quantifiable and probable.
Approximately 70% of the group’s revenue is derived from inpatient and daycase admissions. Revenue is
recognised day by day, as services are provided to patients. These services are typically provided over a short
time frame, that is, one to three days. Outpatient cases and other revenue represent approximately 30% of the
group’s revenue. Outpatient cases generally do not involve surgical procedures and revenue is recognised on
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.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
2. Accounting policies
continued
Revenue from contracts with customers
continued
The group reports disaggregated revenue by material revenue stream (ie type of payor: PMI, NHS and self-pay)
and other revenue which includes consultant revenue, third party revenue streams (eg pathology services)
and ‘commissioning for quality and innovation payments’ (CQUIN). Material revenue streams are consistent
in nature, being the consideration received in return for the provision of healthcare services to patients. The
timing and uncertainty of cash flows is similar for PMI and NHS business while self-pay revenue is received in
advance or collected by credit card shortly after treatment. In addition, where possible and meaningful, Spire
Healthcare reports revenue split between inpatient/daycase, outpatient and other. As noted above, in all cases,
revenue is recognised as performance obligations are completed in the form of services being provided to
patients. Unbilled revenue is accrued at period ends. Invoices for the combination of services provided to
Revenue recognition – the NHS contracts
Approximately 0.3% of the group’s revenue is derived from the NHS COVID-19 contracts (2021: 5%). Revenue
from the NHS COVID-19 contracts is recognised as the services are transferred to the customer over the life
of the contract. In the prior year the contracts’ transaction price is based on variable consideration, recognition
of revenue is constrained to the extent that it is probable that a significant reversal will not occur when the
Cost of sales principally comprises salaries of clinical staff, consultant and clinical fees, medical services and
Other operating costs mainly comprise non-clinical staff costs, rent associated with short or low value leases,
the depreciation of property, plant and equipment and right of use assets and the maintenance and running
costs of properties and equipment. It also includes administrative expenses, including the provision of central
Other income
Other income comprises fair value movements on the financial asset, a profit share arrangement with Genesis
Care.
Operating profit
Operating profit is the profit arising from the normal, recurring operations of the business and after charging
adjusting items, as defined below. Operating profit is adjusted to exclude adjusting items to calculate the Key
Performance Indicator (KPI) ‘Operating profit before adjusting items (adjusted EBIT)’.
Adjusting items
Adjusting items are those items which the directors believe, by virtue of their nature, size or incidence, either
individually or in aggregate, should be disclosed separately to allow a full understanding and comparison of the
underlying performance of the group. Examples of items which may be considered this way in nature include
significant write-downs of goodwill and other assets, restructuring costs relating to strategic review,
impairments, hospital closures and set-up costs, business acquisition costs, medical malpractice provisions,
aborted project costs and compliance set-up costs.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on
demand and form an integral part of the group’s cash management are included as a component of cash and
cash equivalents for the purpose only of the statement of cash flows. There are no bank overdrafts in either
Total income tax on the result for the year comprises current and deferred tax. Income tax is recognised in
the income statement except to the extent that it relates to items recognised directly in equity and other
comprehensive income.
Current tax is the expected tax payable on the taxable result for the year, using tax rates enacted, or
substantively enacted, at the balance sheet date, and any adjustments to tax payable in respect of previous
years.
Where there is an uncertain tax position, a provision is recognised when it is not probable that the tax
authority will accept the uncertain tax position, based on either the most likely amount where the range
of results is binary, or as a weighted average of possible outcomes where a range of outcomes is possible.
Deferred tax is provided on all temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes, except for:
Deferred tax is provided on all temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes, except for:
–
Goodwill not deductible for tax purposes
–
The initial recognition of an asset or liability in a transaction that is not a business combination and which,
at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss
–
Investments in subsidiary companies where the timing of the reversal of the temporary difference is
controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable
future
It should be noted that the initial recognition exception does not apply to the majority of the group’s freehold
property portfolio as these were acquired through the Bupa and Classics acquisitions in 2007 and 2008, which
were accounted for as a business combination.
The amount of deferred tax recognised is based on the expected manner of realisation or settlement of the
carrying amounts of assets and liabilities, using tax rates enacted, or substantively enacted, at the balance
sheet date. The group offsets deferred tax assets and deferred tax liabilities if, and only if, it has a legally
enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and
deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable
entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis,
or to realise the assets and settle the liabilities simultaneously, in each future period in which significant
amounts of deferred tax liabilities or assets are expected to be settled or recovered.
In assessing the recoverability of deferred tax assets, the group relies on the same forecast assumptions used
elsewhere in the financial statements and in other management reports, which, among other things, reflect
the potential impact of climate-related development on the business, such as increased costs as a result of
measures to reduce carbon emission.
A deferred tax asset, subject to the offsetting above, is only recognised to the extent that it is probable that
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
2. Accounting policies
continued
Property, plant and equipment is stated at cost less accumulated depreciation. Major projects are treated as
assets in the course of construction until completed when they are transferred to the appropriate asset class.
so as to write off the carrying amounts of the assets, less their estimated residual values, over their expected
useful lives, as follows:
Freehold property and improvements
–
5 to 60 years
Leasehold improvements
–
lower of unexpired lease term or expected life, with a maximum
of 35 years
Equipment
–
The expected useful lives and residual values of property, plant and equipment are reviewed semi-annually and
revised as appropriate. The review of the asset lives and residual values of properties takes into consideration
the plans of the business and levels of expenditure incurred on an ongoing basis to maintain the properties
in a fit and proper state for their ongoing use as hospitals. In addition, the potential impact of future climate
change is considered. In the case of major facilities opening in new locations, depreciation may be applied
to only those assets available for use at the official opening date to reflect that the site is not always fully
operational at this opening date. During the year management revised the useful life and residual value
The results of all subsidiary undertakings are included in the consolidated financial statements. Assets,
liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the
consolidated financial statements from the date the group gains control until the date the group ceases
to control the subsidiary.
Control is achieved when the group is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee. Specifically, the group
controls an investee if, and only if, the group has:
–
Power over the investee (ie existing rights that give it the current ability to direct the relevant activities
of the investee)
–
Exposure, or rights, to variable returns from its involvement with the investee
–
The ability to use its power over the investee to affect its returns
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of
any non-controlling interests in the acquiree. For each business combination, the group elects whether to
measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the
acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in other
operating costs.
The group determines that it has acquired a business when the acquired set of activities and assets include
an input and a substantive process that together significantly contribute to the ability to create outputs.
The acquired process is considered substantive if it is critical to the ability to continue producing outputs,
and the inputs acquired include an organised workforce with the necessary skills, knowledge, or experience
to perform that process or it significantly contributes to the ability to continue producing outputs and is
considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability
to continue producing outputs.
When the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and
Goodwill represents the excess of the cost of acquisition (being the fair value of consideration transferred) over
the fair value of the assets, liabilities and contingent liabilities of acquired businesses at the date of acquisition.
Goodwill is stated at cost less accumulated impairment losses.
Goodwill is allocated to one cash-generating unit and is not amortised but is tested annually for impairment,
or more frequently if there is an indication that the value of the goodwill may be impaired (see impairment
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability
or equity instrument of another entity.
Initial recognition and measurement
Financial assets are classified as financial assets at fair value through profit or loss, amortised cost or fair value
through other comprehensive income (‘OCI’).
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the group’s business model for managing them. With the exception of trade receivables
that do not contain a significant financing component or for which the group has applied the practical expedient,
the group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component
or for which the group has applied the practical expedient are measured at the transaction price determined
under IFRS 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs
to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount
outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
2. Accounting policies
continued
Financial Instrument
continued
The group’s business model for managing financial assets refers to how it manages its financial assets in order
to generate cash flows. The business model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both.
The company’s financial assets include cash and short-term deposits, trade and other receivables, unbilled
receivables and receivables from profit share arrangements. Unbilled receivables may include contract assets
where the performance obligation has been met, but the invoice not raised due to agreement with the
customer being required in respect of the variable consideration. Unbilled receivables can also include
amounts where the performance obligation has been met, but the invoice not yet raised due to the timing
of the reporting period.
Subsequent measurement
Trade receivables and unbilled receivables are accounted for at amortised cost. The group applies the IFRS 9
simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all
trade receivables. At each reporting period, the group makes an assessment of the asset’s recoverable amount
based on forward looking information. Losses arising from impairment are recognised in the consolidated
income statement in other operating costs.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. On initial recognition, loans and receivables are measured at fair value plus directly
attributable transaction costs. Subsequently, such assets are measured at amortised cost, using the effective
interest rate (‘EIR’) method, less any allowance for impairment.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is included in interest receivable in the consolidated
income statement.
Receivables relating to profit share arrangements are recognised as fair value through profit and loss. At each
reporting period, the assets are revalued, with any movement in fair value being recognised in the consolidated
income statement. Any cash received from profit share arrangements is presented within cash flows from
investing activities within the Cash Flow statement.
Derecognition
A financial asset is derecognised when the rights to receive cash flows from the asset have expired, or the
group has transferred its rights to receive cash flows from the asset including transferring substantially all
the risks and rewards of the asset.
The group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair
value through profit or loss. ECLs are based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the group expects to receive, discounted at an
approximation of the original effective interest rate. The expected cash flows will include cash flows from
the sale of collateral held or other credit enhancements that are integral to the contractual terms.
For trade receivables and contract assets (including unbilled receivables), the group applies a simplified
approach in calculating ECLs. Therefore, the group does not track changes in credit risk, but instead recognises a
loss allowance based on lifetime ECLs at each reporting date. The group has established a provision matrix that
is based on its historical credit loss experience, adjusted for forward-looking factors specific to the receivables
and the economic environment. To measure the expected credit losses, trade receivables have been grouped
based on shared characteristics and the days past due. The group has concluded that the expected loss rates
for trade receivables, are a reasonable approximation of the loss rates for each ageing bucket based on
historical debt trends of our portfolio of customers for the last two reporting periods, with the exception
of patient debt. Patient debt is more susceptible to the economic environment. As a result, the group have
reviewed the expected loss rates for this payor group, as well as considering forward looking information
Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit or
loss, or at amortised cost. The group determines the classification of financial liabilities at initial recognition.
Initial recognition and measurement
All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, net of directly
attributable transaction costs.
The group’s financial liabilities include trade and other payables, loans and borrowings, and derivative financial
instruments.
Subsequent measurement
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost
using the effective interest rate (EIR) method. Gains and losses arising on the repurchase, settlement or
otherwise cancellation of liabilities are recognised respectively in interest receivable and interest payable in the
consolidated income statement. Amortised cost is calculated by taking in to account any discount or premium
on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance
costs in the consolidated income statement.
Financial liabilities on business combination
On acquisition of a business combination, a financial liability may be recognised at fair value through profit and
loss where there is an obligation on the group to settle a liability. In subsequent periods, the liability will be
remeasured based on its fair value, with movements being recognised in the income statement. Cash flows
will be discounts as appropriate.
To determine the obligation, the group will review whether the liability arises as a result of an action or decision
of the group, or if an action by a third party would result in the obligation crystallising.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is
treated as the derecognition of the original liability and the recognition of a new liability. The difference in the
The group may enter into derivative financial instrument arrangements to manage its exposure to interest
rate risk. Derivatives are initially recognised at fair value on the date on which a derivative contract is entered
in to and subsequently remeasured at fair value at each balance sheet date. Derivatives are carried as financial
assets when the fair value is positive and as financial liabilities when the fair value is negative.
The group applies cash flow hedge accounting to such derivatives if the criteria for doing so are met. At the
inception of a hedge relationship, the group formally designates and documents the hedge relationship to
which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking
the hedge.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
2. Accounting policies
continued
Financial Instrument
continued
The effective portion of the changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is
recognised immediately in the income statement. The cash flow hedge reserve is adjusted to the lower of the
cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item.
Amounts deferred in equity are recycled in the income statement in the periods when the hedged item is
recognised, in the same line of the income statement as the recognised hedged item. If cash flow hedge
accounting is discontinued, the amount that has been accumulated in the consolidated statement of other
comprehensive income is maintained if the hedged future cash flows are still expected to occur. Otherwise,
Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance
sheet if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is
Inventories are stated at the lower of cost and net realisable value. Cost means purchase price, less trade
discounts, calculated on an average basis. Net realisable value means estimated selling price less incremental
costs including trade discounts and all costs to be incurred in marketing, selling and distribution.
The group holds consignment stock on sale or return. The group is only required to pay for the equipment
2. Accounting policies
continued
Borrowing costs that are directly attributable to the acquisition and construction of qualifying assets, which
are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are substantially ready for their intended
use or sale.
A provision is recognised in the consolidated balance sheet when the group has a present legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required
to settle the obligation. If the effect is material, provisions are determined by discounting the expected,
risk-adjusted, future cash flows at a pre-tax risk-free rate. Management consider their best estimate of the likely
outcomes of the obligation when determining the recognition. Where a material range of outcomes could arise,
details are disclosed accordingly. Provisions are measured gross of any expected insurance recovery. Any such
At inception, the group assesses whether a contract is or contains a lease. This assessment involves the exercise
of judgement about whether the group obtains substantially all the economic benefits from the use of that
asset, and whether the group has the right to direct the use of the asset when considering whether the
contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. After initial recognition, the lease liability is measured at amortised cost using the effective
interest method. A reassessment of the lease liability occurs when there is a change in lease payments. The
incremental borrowing rate is only revised where the change in payments is a result of a change in floating
interest rates, lease term change or a change in assessment relating to the exercise of purchase option charges.
The group has elected not to separate lease and non-lease components for leases of vehicles or buildings.
The group recognises a Right Of Use (ROU) asset and a lease liability at the commencement of the lease. The
ROU is initially measured based on the present value of lease payments, less any incentives received. Initial
direct costs and costs to dismantle or restore an asset are included. The ROU is depreciated over the shorter
of the lease term or the useful life of the underlying asset. The incremental borrowing rate is used to discount
the assets over the relevant term. The ROU is subject to testing for impairment if there is an indicator for
impairment.
Lease payments generally include fixed payments and variable payments that depend on an index (such as
inflation index) or rate. When the lease contains an extension or purchase option that the group considered
reasonably certain to be exercised, the cost of the option is included in the lease payments. The incremental
borrowing rate is used to discount the lease payments over the term of the lease.
ROU assets are categorised to reflect the nature of the underlying asset and to be consistent with the plant,
property and equipment (PPE) note. The assets are depreciated over the term of the lease, accounting for break
clauses or options to extend in line with the lease liability decision.
ROU assets are disclosed as PPE on the balance sheet (non-current) with a separate disclosure within the
associated note, and the lease liability is included in the headings lease liability (current and non-current)
on the Consolidated balance sheet.
The group has elected not to recognise ROU assets and liabilities for leases where the total lease term is less
than 12 months, or for leases of low value equipment. The payments for such leases are recognised in the
Sale and leaseback of properties
In circumstances where the group sells a property to a third party and then enters into an agreement with the
buyer to lease the asset back under a lease arrangement (a ‘sale and leaseback transaction’) which meets the
criteria of a sale under IFRS 15, the group derecognises the underlying asset from PPE, and instead recognises a
ROU asset measured at the retained portion of the previous carrying amount, recognising a gain or loss on the
rights transferred to the lessor. Values recognised will be adjusted where the sale is not completed at fair value,
or where lease payments do not reflect market value.
Where the sale of a property is not deemed a sale under IFRS 15, the group will continue to recognise the
underlying asset within PPE, and will also recognise a financial liability for any amount received from the
buyer/lessor.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
2. Accounting policies
continued
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
are deducted from share premium. Where the employee benefit trust 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 in both the company and the consolidated balance sheet until
Dividend distribution to the company’s shareholders is recognised as a liability in the group’s financial
statements in the period in which the dividend is approved by the company’s shareholders. Interim dividends
The group operates the Spire Healthcare Pension Plan, a defined contribution scheme. The assets of the
scheme are held separately from those of the group in independently administered funds.
Obligations for contributions to defined contribution pension schemes are recognised as an expense in the
income statement as incurred.
Other employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A provision is recognised for the amount expected to be paid under short-term cash
bonuses if the group has a present legal or constructive obligation to pay this amount as a result of past service
The group operates a number of equity-settled share-based payment schemes under which the group receives
services from employees as consideration for equity instruments of the group. The fair value of the employee
services received in exchange for the grant of the options is recognised as an expense. The group has estimated
the relevant fair value of the share options and awards, which are subject to total shareholder return (‘TSR’)
market-related performance criteria, using a Monte Carlo simulation model (see note 27). This applies to LTIP
Awards and Deferred Share Bonus Schemes.
The group also operates a Save-As-You-Earn (‘SAYE’) scheme, which is open to all employees. Employees are
required to save a fixed amount, up to a cap, every month for three years. At the end of the three year period
employees are entitled to use their savings to purchase shares in the company at a stated exercise price.
Employees are free to stop contributing to the scheme and obtain a refund of contributions at any time, but
forfeit their entitlement to exercise the options if they do so. Payment of contributions into a SAYE scheme is
not a vesting condition; it does not meet the definition of a performance condition because it has no link to
service. Failure to meet a non-vesting condition (eg by ceasing to contribute to an SAYE scheme) is accounted
for as a cancellation of the options so that the expense is accelerated and recognised in the income statement,
with a corresponding adjustment to equity as required. The IFRS 2 charge has been calculated using an
adjusted Black Scholes model with judgements including leavers of the scheme (employees who may cease
to save) and dividend yields.
At the end of each year, the group revises its estimates of the number of options that are expected to vest
based on the non-market conditions and recognises the impact of the revision to original estimates, if any,
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use. This condition is regarded as met
only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its
present condition. Management must be committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying
The group applies its impairment policy to non-financial assets, being intangible assets (goodwill), plant,
property and equipment and right of use assets. The group assesses, at each reporting date, whether there
is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing
for an asset is required, the group estimates the asset’s recoverable amount. An asset’s recoverable amount
is the higher of an asset’s or CGU’s fair value less costs of disposal or its value in use. The recoverable amounts
is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired, and is written down to its recoverable
amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a discount
rate that reflects current market assessments of the time value of money and risks specific to the asset. As part
of this, the group assesses where climate risks could have a significant impact, such as the introduction of
emission-reduction legislation that may increase costs. These risks in relation to climate-related matters are
included as key assumptions where they materially impact the measure of recoverable amount. The group
bases its impairment calculation on most recent budgets and forecast calculations, which are prepared for
each CGU. The forecasts generally cover a five year period. A long term growth rate is calculated and applies
to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised in the consolidated income statement in other
operating costs. Impairment is likely to be considered an Adjusting item.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an
indication that previously recognised impairment losses no longer exist or have decreased. If such indication
exists, the group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment
loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable
amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount
of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such
reversal is recognised in the statement of profit or loss.
Goodwill is tested for impairment annually as at 31 December and when circumstances indicate that the
carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs)
to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an
impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.
Intangible assets with indefinite useful lives are tested for impairment annually as at 31 December at the
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
2. Accounting policies
continued
The following amendments to existing standards were effective for the group from 1 January 2022. Other than
some additional disclosures, these amendments have not had a material impact.
Effective date*
Amendments to IFRS 3 Business Combinations – reference to the conceptual framework
1 January 2022
Amendments to IAS 16 – Property, Plant and Equipment: proceeds before intended use
1 January 2022
Amendments to IAS 37 – Onerous Contracts – costs of fulfilling a contract
1 January 2022
IFRS 9 Financial Instruments – Fees in the ‘10 per cent’ test for derecognition of financial liabilities
1 January 2022
*
The effective dates stated above are those given in the original IASB/IFRIC standards and interpretations that are consistent with
As at date of approval of the group financial statements, the following new and amended standards,
interpretations and amendments in issue are applicable to the group but not yet effective and thus, have not
been applied by the group:
Effective date*
Amendments to IAS 1 – Classification of liabilities as current or non-current
1 January 2023
Amendments to IAS 8 – Definition of accounting estimates
1 January 2023
Amendments to IAS 12 – Deferred tax related to assets and liabilities arising from a single
transaction
1 January 2023
IFRS 17 – Insurance contracts
1 January 2023
Amendments to IFRS 16 – Lease Liability in a sale and leaseback
1 January 2024
*
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 issued by the IASB as endorsed by the UK, the application of new standards
and interpretations will result in an effective date subject to that agreed by the UK Endorsement process.
IFRS 17 is under review by management and the impact if any is still to be quantified. All other amendments
Changes in accounting estimates
In line with our accounting policy, management has reviewed the expected useful lives and residual values of
property, plant and equipment. This exercise included a detailed benchmarking exercise. As a result, the useful
life and residual value for freehold land and buildings has been revised, and with effect from 1 July 2022 the
group changed its estimate for freehold buildings from 5-50 years to 5-60 years.
The benchmarking exercise confirmed that it would be appropriate to also revise the residual value on freehold
hospital buildings to 20% from a nil residual value and this change took place with effect from 1 July 2022.
Management has therefore concluded that it would be appropriate to apply a 20% residual value to the original
cost of the freehold properties, and this change took effect on 1 July 2022.
Management has concluded that the impact of climate-related risks would not have a material impact on the
extended useful life and residual value of its freehold land and buildings, as these risks have been mitigated.
The depreciation charged to the profit and loss in the current year was £97.9 million (2021:£97.1 million).
The change in accounting estimate has resulted in a reduction in depreciation of £2.9 million in the current
year. In addition this has given rise to a one-off deferred tax credit of £9.0 million. The effect of the change
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.
Judgements
Adjusting items
Judgements are required as to whether items that are material in size, unusual or infrequent in nature should
be disclosed as adjusting items. Deciding which items meet the respective definitions requires the group to
exercise its judgement. Details of these items categorised as adjusting items are outlined in note 10.
Leases
The application of IFRS 16 requires the group to make certain judgements which affect the value of the ROU
asset and lease liability, and these include: determining contracts in the scope of IFRS 16 and the contract term.
The lease term is determined by the group and includes the non-cancellable period of lease contracts, periods
covered by an option to extend the lease if the group is reasonably certain to exercise that option and period
covered by an option to terminate the lease if the group is reasonably certain not to exercise that option. The
group reviews the business plan, investment in leasehold improvements and market conditions when
considering the certainty of options to extend or terminate. For lease contracts with an indefinite term, the
group determines the length of the contract to be equal to the average or typical market contract term of the
particular type of lease. The same life is then applied to determine the depreciation rate of ROU assets.
In the prior period, the group undertook a sale and leaseback. The group determined that the sale criteria had
been met. There was no option to purchase, and any option to extend would be completed at fair value at the
point of exercise of such option.
Significant accounting estimates
The preparation of the group’s consolidated financial statements includes the use of estimates and
assumptions. The significant accounting estimates with a significant risk of a material change to the carrying
value of assets and liabilities within the next year in terms of IAS 1, ‘Presentation of Financial Statements’, are:
Goodwill is tested for impairment at least annually or more frequently if there is an indication that goodwill
may be impaired. This is achieved by comparing the carrying value in the accounts with the recoverable
amount (being the value-in-use), as set out in the impairment policy. The value-in-use calculations require
the group to estimate future cash flows expected to arise in the future, taking into account market conditions.
The current value of goodwill is underpinned by these forecasts. The present value of these cash flows is
determined using an appropriate discount rate.
The assumptions are considered to be most critical in reviewing goodwill for impairment are contained in
Spire Healthcare Group plc
Annual Report and Accounts 2022
3. Critical accounting judgements and estimates
continued
Significant accounting estimates
continued
Property impairment
Property, including property ROU assets, is considered for indicators of impairment at each reporting date, or
earlier if a trigger indicates, as set out in the impairment policy. The recoverable amount, being the value-in-use,
require the group to estimate cash flows expected to arise in the future, taking into account market conditions.
The variables in the cash flows are interdependent and reflect management’s expectations based on past
experience and current market trends, it takes into account both current business and committed initiatives.
The present value of these cash flows is determined using an appropriate discount rate.
The assumptions are considered to be most critical in reviewing properties for impairment are contained
in note 13.
Other areas of accounting estimates
The consolidated financial statements include other areas of judgement and accounting estimates. While
these areas do not meet the definition under IAS 1 of significant accounting estimates and critical accounting
judgements, the recognition and measurement of certain material assets and liabilities are based on
assumptions and/or are subject to longer term uncertainties. The other areas of accounting estimates
and judgement are:
Leases
The present value of the lease payment is determined using the discount factor (incremental borrowing rate)
which is based on a risk free UK gilt rate plus an applicable credit spread or margin to reflect the credit standing
of the group observed in the period when the lease contract commences or is modified. The incremental
borrowing rate applied reflects a rate for a similar term and security to that of the lease and is determined
at inception.
Details of incremental borrowing rates can be found in note 22.
The group has not changed the methodology in respect of the expected credit loss (ECL) calculations. The
group’s customer profile includes large organisations that have stable credit ratings, and the payment profiles
have remained stable for historical debts. The exception to this is patient debt where economic circumstances
can have a significant impact and, given the current economic uncertainty, remains the highest risk for the
Climate-related risk and opportunities on the financial statements
To date, the board has not identified any climate-related risks or opportunities that would have a material
impact on the assets or liabilities of the group, and therefore has not adjusted financial balances for climate-
During the year, the group (including its subsidiary undertakings) obtained the following services from the
group’s external auditor as detailed below:
(£m)
2022
2021
Audit of these financial statements
1.0
0.6
Audit of the financial statements of subsidiaries of the company pursuant to
legislation
0.3
0.2
Audit-related assurance services
0.1
0.1
Total
1.4
In determining the group’s operating segment, management has primarily considered the financial information
in internal reports that are reviewed and used by the executive management team and board of directors
(who together are the chief operating decision maker of Spire Healthcare) 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.
The nature of the NHS COVID-19 specific contracts in Q1 2021, and specific agreement with one hospital in
FY22, means that not all of the detail of revenue by location (inpatient, daycase or outpatient) is available. In Q1
2021, where a patient was admitted, this revenue has been recorded within the revenue by location. Amounts
relating to the minimum income guarantee over and above admitted patients, or any other elements are
reflected in the NHS COVID-19 line.
Revenue by location (inpatient, daycase or outpatient) and wider customer (payor) group is shown below:
(£m)
2022
2021
Inpatient
487.5
414.2
Daycase
348.0
307.0
Outpatient
333.1
300.9
Other
1
26.4
26.0
NHS – COVID-19
3.5
58.1
Total revenue
1,198.5
1,106.2
Insured
538.7
473.7
Self-pay
338.0
292.0
NHS
295.4
314.5
Other
1
26.4
26.0
Total revenue
1,198.5
1,106.2
1.
Other revenue includes fees paid to the group by consultants (eg for the use of group facilities and services) and third-party
revenue (eg pathology services to third-parties).
Group revenues increased 8.3% to £1,198.5 million (2021: £1,106.2 million). The increase in revenue driven
by the ongoing strong demand for private treatment with the continued growth in self-pay seen during the
prior period, but also the recovery by Insured patients. NHS revenue of £295.4 million includes £3.5 million
(2021: £314.5 million and £58.1 million respectively) revenue from specific COVID-19 contracts. In the prior
year (Q1 2021) the group operated under an NHS volume based contract with a minimum income guarantee,
included in the £58.1 million was £47.4 million reflecting the ‘top up’ to minimum income guaranteed under
Notes to financial statements
continued
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
(£m)
2022
2021
Fair value movement on financial asset
2.3
0.7
Realised profit in respect of financial asset
0.7
0.4
Profit on disposal relating to sale and leaseback, net of costs (adjusting item)
(see note 10)
–
23.3
Total other income
3.0
24.4
The fair value movement and realised profit in respect of the financial asset reflect the on-going profit share
Arrived at after charging/(crediting):
(£m)
2022
2021
Depreciation of property, plant and equipment (see note 13)
64.2
67.4
Depreciation of right of use assets (see note 13)
33.7
29.7
Acquisition-related transaction costs (adjusting Item) (see note 10)
1.8
1.5
Lease payments made in respect of low value and short leases
13.6
12.3
Provision following a court judgment related to Ian Paterson (adjusting Item)
(see note 10)
0.3
12.2
Impairment on assets held for sale (see note 20)
0.5
–
Movement on the provision for expected credit losses of trade receivables
(see note 18)
0.9
(1.2)
Loss on disposal of property, plant and equipment
0.3
–
Fair value adjustment on financial liability
0.8
–
Staff restructuring costs (see notes 9)
4.5
1.2
Staff costs (net of staff restructuring costs and including share based payment
charge) (see note 9 and 27)
413.9
396.4
Profit on disposal relating to sale and leaseback (adjusting Item) (see note 10)
–
(23.5)
Profit on disposal relating to a lease modification at Spire Sussex (adjusting Item)
(see note 10)
–
(0.4)
Profit on the early termination of a lease (adjusting Item) (see note 10)
–
(0.2)
Impairment losses and reversals of impairment are included in other operating costs.
(£m)
2022
2021
Finance cost
Interest on bank facilities
12.4
18.8
Interest on the RSA judgement repayable (included in adjusting items)
–
0.8
Refinancing fees
1.0
–
Amortisation of fee arising on facilities extensions/borrowing costs
1
1.5
1.0
Accelerated amortisation and loss on extinguishment of loan
1
3.1
–
IFRS 9 release arising on facilities extension
1
–
0.1
Interest on obligations under leases
73.5
68.2
Total finance costs
91.5
88.9
Total net finance costs
91.5
88.9
1.
£5.0 million of borrowing costs were capitalised on the refinancing of the senior facility, these are being amortised. In the prior
year £3.3 million that was recorded at the date of the 2018 extension and £0.3 million recorded at the date of the 2020 extension.
(No.)
2022
Restated
1
2021
The average number of persons employed by the group (including directors) during
the year:
Clinical
7,388
7,280
Non-clinical
5,227
5,426
Central
614
596
Total
13,229
13,302
(No.)
2022
2021
The average number of full-time equivalent persons employed by the group during
the year:
Clinical
5,539
5,476
Non-clinical
4,017
4,134
Central
538
521
Total
10,094
10,131
1.
The prior year average number of persons employed by the group was restated to include bank staff. The average number of
The aggregate payroll costs of these persons were as follows:
(£m)
2022
2021
Wages and salaries
350.3
336.8
Social security costs
34.7
31.1
Pension costs, defined contribution scheme
33.4
29.7
418.4
397.6
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
9. Staff costs
continued
There were £4.7 million wages and salaries and social security costs for year ended 31 December 2022 in
Adjusting items (2021: £1.3 million) of which £4.5 million relate to business restructuring costs and which
are included in staff costs (2021: £1.2 million), and are set out in note 7.
Pension costs are in respect of the defined contribution scheme; unpaid contributions at 31 December 2022
10. Adjusting items
(£m)
2022
2021
Business reorganisation and corporate restructuring costs
4.5
1.2
Asset acquisitions, disposals, impairment and aborted project costs
4.3
4.5
Remediation of regulatory compliance or malpractice costs
1.1
11.4
Hospital set up and closure costs
0.3
0.3
Income from asset disposals
–
(23.3)
Total adjusting items in operating costs
10.2
(5.9)
Interest payable on adjusting items
–
0.8
Total pre-tax adjusting items
10.2
(5.1)
Income tax (credit)/charge on adjusting items
(1.8)
(13.8)
Total post-tax adjusting items
8.4
(18.9)
Adjusting items comprise those matters where the directors believe the financial effect should be adjusted
for, due to their nature, size or incidence, in order to provide a more accurate comparison of the group’s
underlying performance.
During H2 21, the group announced a strategic, group wide initiative that impacts the operating model of the
group to allow a more efficient governance and reporting structure, as well as a drive on digital functionality.
This initiative will be implemented over several phases. In the period, £4.5 million (2021: £1.2 million) has been
incurred. The initial phase of the initiative was completed in 2022, the estimated time frame to overall
completion being the end of 2024.
Asset acquisitions, disposals, impairment and aborted project costs of £4.3 million mainly comprise costs in
respect of the acquisition of The Doctors Clinic Group, and the acquisition of the minority interest in Claremont,
as well as its integration with the group. In the prior year costs incurred by the group relating to Merger and
Acquisition (M&A) costs, related to the attempted takeover bid by Ramsay Health Care, and the acquisition
and integration of Claremont.
In December 2022, the group acquired 100% of the share capital in The Doctors Clinic Group Limited for
£12 million as part of its strategic investment in its broader healthcare offering. The costs of acquisition
of £1.8 million have been incurred in the period. Costs for integration are expected to continue into FY23.
Following the acquisition of Claremont Hospital in November 2021, the group has incurred costs of £0.5 million
for integration alongside some transitional services in the period. In addition, on 31 March 2022, the group
acquired the remaining minority interest for £2.7 million, of which £1.9 million had been provided for in FY21.
Therefore, £0.8 million is included in adjusting items. Other costs incurred mainly relate to the final business
transfer of the Sussex Hospital to the NHS Trust which completed on 31 March 2022, as announced during
FY21. In addition, integration costs of £0.5 million were incurred in the period.
In December 2022, the group completed on the sale of St Saviours, an asset held for sale, for £3.2 million,
following a write down in value reported at H1 2022 of £0.5 million recognised in other operating costs.
In the prior period, the group agreed the sale and leaseback of its Cheshire Hospital for consideration of
£89 million. A gain on disposal of £23.5 million has been recognised, offset by £0.2 million of costs to sell.
Remediation of regulatory compliance or malpractice costs includes amounts paid to the insurer following
the Court of Appeal hearing. £13.0 million was provided in FY21, with £13.3 million being settled in FY22.
The £0.3 million recognised in the period reflects this additional amount. In the prior year, and in response
to the Public Inquiry the group commenced a detailed patient review initiative, during the year the group has
re-evaluated the expected cost of completing this complex project, and its associated settlement of claims.
As a result, the group has increased its overall provision in respect of Paterson by £0.9 million. In the prior year,
a credit of £0.4 million was recognised following the settlement of costs to Spire Healthcare from its insurer
following the original judgment finding in favour of the group in FY20.
Hospital set-up and closure costs mainly relate to the maintenance costs of non-operational sites.
(£m)
2022
2021
Current tax
UK corporation tax expense
0.1
0.8
Adjustments in respect of prior years
(0.7)
–
Total current tax (credit)/charge
(0.6)
0.8
Deferred tax
Origination and reversal of temporary differences
(2.6)
(15.0)
Effect of change in tax rate
–
17.7
Adjustments in respect of prior years
(1.1)
3.5
Total deferred tax (credit)/charge
(3.7)
6.2
Total tax (credit)/charge
(4.3)
7.0
In addition to the above, a charge of £2.1 million has been recognised in Other Comprehensive income
(2021: £0.6 million charge) and £0.1 million charge (2021: £3.0 million credit) through equity.
Corporation tax is calculated at 19.0% (2021: 19.0%) of the estimated taxable profit or loss for the year. The
effective tax rate on profit before taxation for the year was not meaningful (2021: not meaningful) as a result
of adjustments in respect of prior years and movements on deferred tax which are not directly linked to profit.
During the period, the group has reassessed the useful life and residual value of its freehold property portfolio.
This has results in a one-off deferred tax credit of £9.0 million. The prior year deferred tax charge was largely
driven by the effects of revaluing deferred tax assets and liabilities from 19% to 25% due in April 2023, and
the deferred tax movement as a result of the sale and leaseback of Spire Cheshire. Deferred tax is detailed
in note 23.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
11. Taxation
continued
The effective tax assessed for the year, all of which arises in the UK, differs from the standard weighted rate
of corporation tax in the UK. The reconciliation of the actual tax charge to that at the domestic corporation tax
rate is as follows:
(£m)
2022
2021
Profit/(loss) before taxation
3.9
(1.9)
Tax at the standard rate
0.7
(0.4)
Effects of:
Expenses and income not deductible or taxable
8.2
4.5
Tax adjustment for the super-deduction allowance
(2.6)
(2.2)
Tax adjustment in respect of sale and leaseback
–
(16.0)
Impairment charge in respect of held for sale assets (not tax deductible)
0.1
–
One-off impact of revision to useful economic life and residual value of freehold
property portfolio
(9.0)
–
Adjustments to prior year
(1.8)
3.5
Difference in tax rates
0.1
17.7
Deferred tax not previously recognised
–
(0.1)
Total tax (credit)/charge
(4.3)
7.0
Expenses and income not deductible or taxable relate mostly to depreciation on non-qualifying fixed assets,
disallowable entertaining and legal and professional fees. The one-off impact of revision to useful life and
residual value of the freehold property portfolio is described in note 23.
The charge above in the prior year was driven mainly by the revaluation of deferred tax assets and liabilities
to 25% from 19% as a result of the substantive enactment of the government’s decision to increase the
corporation tax rate from 1 April 2023, as well as the deferred tax movement as a result of the sale and
leaseback of Spire Cheshire. The current year charge driven by expenses not deductible for tax purposes, offset
by the one-off deferred tax credit of £9.0 million as a result in the revision to the useful life and residual value
of the freehold property portfolio, an adjustment in respect of prior year and the claim of the super deduction
for capital allowance purposes.
Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent
by the weighted average number of ordinary shares outstanding during the year.
2022
2021
Profit/(loss) for the year attributable to ordinary equity holders of the parent (£m)
8.6
(9.7)
Weighted average number of ordinary shares for basic EPS (No.)
402,756,797
401,087,547
Adjustment for weighted average number of shares held in EBT
(77,501)
(239,283)
Weighted average number of ordinary shares in issue (No.)
402,679,296
400,848,264
Basic earnings per share (in pence per share)
2.1
(2.4)
12. Earnings per share (EPS)
continued
For dilutive EPS, the weighted average number of ordinary shares in issue is adjusted to include all dilutive
potential ordinary shares arising from share options. Refer to the remuneration committee report for the terms
and conditions of instruments generating potential ordinary shares that affect the measurement of diluted
EPS.
2022
2021
Profit/(loss) for the year attributable to ordinary equity holders of the parent (£m)
8.6
(9.7)
Weighted average number of ordinary shares in issue (No.)
402,679,296
400,848,264
Adjustment for weighted average number of contingently issuable shares
9,363,470
–
Diluted weighted average number of ordinary shares in issue (No.)
412,042,766
400,848,264
Diluted earnings per share (in pence per share)
2.1
(2.4)
In the prior year the weighted average number for contingently issuable shares would be anti-dilutive, they are
excluded from the above. However 8,891,739 shares are potentially dilutive.
The directors believe that EPS excluding adjusting items (‘adjusted EPS’) better reflects the underlying
performance of the business and assists in providing a clearer view of the performance of the group.
Reconciliation of profit after taxation to profit after taxation excluding adjusting items (‘adjusted profit’):
2022
2021
Profit/(loss) for the year attributable to owners of the parent (£m)
8.6
(9.7)
Adjusting items (see note 10)
8.4
(18.9)
Adjusted profit/(loss) (£m)
17.0
(28.6)
Weighted average number of Ordinary Shares in issue
402,679,296
400,848,264
Weighted average number of dilutive Ordinary Shares
412,042,766
400,848,264
Adjusted basic earnings per share (in pence per share)
4.2
(7.1)
Adjusted diluted earnings per share (in pence per share)
4.1
(7.1)
In the prior year the weighted average number for contingently issuable shares would be anti-dilutive, they are
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
(£m)
Freehold
property
Leasehold
improvements
Equipment
Assets in the
course of
construction
Right of use
(ROU)
Total
Cost:
At 1 January 2021
870.5
164.0
447.4
9.2
763.9
2,255.0
Additions
11.4
11.9
47.6
6.2
–
77.1
Acquisition of a subsidiary (Note 32)
–
0.1
4.7
25.5
30.3
Additions to ROU assets
–
–
–
–
32.6
32.6
Adjustments to existing assets (eg
indexation)
–
–
–
–
9.7
9.7
Disposals
(35.9)
(1.7)
(20.9)
–
(5.8)
(64.3)
Transfers
1
(0.7)
3.4
1.8
(4.5)
–
–
At 1 January 2022
845.3
177.7
480.6
10.9
825.9
2,340.4
Additions
8.5
6.4
55.9
19.3
–
90.1
Acquisition of a subsidiary (Note 32)
–
–
0.6
–
–
0.6
Additions to ROU assets
–
–
–
–
4.9
4.9
Adjustments to existing assets (eg
indexation)
–
–
–
–
34.0
34.0
Disposals
(3.6)
(3.7)
(71.8)
–
(0.9)
(80.0)
Transfer
–
–
(10.0)
–
10.0
–
At 31 December 2022
850.2
180.4
455.3
30.2
873.9
2,390.0
Accumulated depreciation and
impairment:
At 1 January 2021
180.3
46.9
295.3
–
197.2
719.7
Charge for the year
17.9
8.4
41.1
–
29.7
97.1
Acquisition of a subsidiary (Note 32)
–
–
4.1
–
–
4.1
Disposals
(9.2)
(0.9)
(19.7)
–
(4.2)
(34.0)
At 1 January 2022
189.0
54.4
320.8
–
222.7
786.9
Charge for the year
12.3
9.3
42.6
–
33.7
97.9
Disposals
(3.1)
(3.6)
(71.6)
–
(0.9)
(79.2)
At 31 December 2022
198.2
60.1
291.8
–
255.5
805.6
Net book value:
At 31 December 2022
652.0
120.3
163.5
30.2
618.4
1,584.4
At 31 December 2021
656.3
123.3
159.8
10.9
603.2
1,553.5
The net book value of land is £156.3 million (2021: £156.3 million). During the year the group refinanced
its senior finance facility and pledged nine of its freehold properties as security, the net book value of these
properties are £157.6 million as at 31 December 2022. No assets in the prior year were subject to restriction
on title or pledged as security for liabilities. There were no borrowing costs capitalised during the year ended
31 December 2022 (2021: Nil).
The directors consider property and property right-of-use assets for indicators of impairment semi-annually.
As equipment and leasehold improvements do not generate independent cash flows, they are considered
alongside the property as a single cash-generating unit (‘CGU’). When making the assessment, the value-in-use
of the property is compared with its carrying value in the accounts. Where headroom is significant, no further
work is undertaken. Where headroom is minimal, a detailed assessment is performed for the property, which
includes identifying the factors resulting in limited headroom and undertaking financial forecasts to assess the
level of sensitivity this has to key assumptions.
In order to estimate the value-in-use, management has used trading projections covering the period to
December 2027 from the most recent board approved strategic plan. The variables in the cash flows are
interdependent and reflect management’s expectations based on past experience and current market trends,
it takes into account both current business and committed initiatives. To the extent that there was a shortfall
between the recent actual cash flows and forecast, the future cash flows have been adjusted to reflect any
initiatives implemented by management to address the underlying cause. In addition, management consider
the potential financial impact from short term climate change scenarios, and the cost of initiatives by the
group to manage the longer term climate impacts.
Key assumptions
Management identified a number of key assumptions relevant to the value-in-use calculations, being EBITDA
growth over the five year period, capital maintenance spend, discount rates and long term growth rates. The
assumptions are based on past experience and external sources of information.
There were three properties triggered for detailed review in the period owing to the relatively lower level of
headroom. Management has performed a sensitivity analysis on these properties using reasonably possible
changes for each key assumption, keeping all other assumptions constant. The sensitivity analysis included
an assessment of the break-even point for each of the key assumptions.
The trading projections for the five-year period underlying the value in use reflect a growth in EBITDA. EBITDA
is based on a number of elements of the operating model over the longer-term, including pricing trends,
volume growth and the mix and complexity of procedures and assumptions regarding cost inflation. The
sensitivity analysis identified that a reasonably possible change that would result the elimination of headroom
for each property as shown in the table below.
The group has used a pre-tax discount rate of 10.6% (2021: 8.5%), adjusted for the effect of IFRS 16. The
sensitivity analysis identified that a reasonably possible change in the pre-tax discount rate, would result in the
elimination of headroom as shown in the table below.
For the properties triggered for review the table below provides the headroom and the reasonably possible
change identified in the sensitivity analysis mentioned above which would result in the elimination of headroom.
Headroom (the amount
that recoverable amount
exceeded the carrying
amount)
EBITDA growth over
the five year period
Sensitivity for
decrease of EBITDA
growth per annum
Sensitivity for increase
of the pre-tax discount
rate sensitivity
Property CGU 1
£5.7m
2%–62%
8.6%
270 bps
Property CGU 2
£5.0m
2%–70%
4.5%
299 bps
Property CGU 3
£7.4m
0%–79%
2.6%
135 bps
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
13. Property, plant and equipment
continued
Impairment
A long-term growth rate of 2.0% has been applied to cash flows beyond 2027 based on long term view of
inflation, revenue growth and market conditions. Capital maintenance spend is based on historic run rates and
our expectations of the group’s requirements. The sensitivity testing identified no reasonably possible changes
in the capital maintenance and long term growth rates that would cause the carrying amount of any CGU to
exceed its recoverable amount.
As a result, management believe that some of the key impairment review assumptions constitute a major
source of estimation uncertainty as they consider that there is a significant risk of a material change to its
(£m)
Leasehold
property
Equipment and
motor vehicles
Total
Cost:
At 1 January 2021
760.4
3.5
763.9
New leases entered
25.5
7.1
32.6
Acquisition of a subsidiary (Note 32)
25.5
–
25.5
Adjustments to existing assets (eg indexation)
9.7
–
9.7
Disposals
(5.6)
(0.2)
(5.8)
Transfers
–
–
–
At 1 January 2022
815.5
10.4
825.9
New leases entered
0.4
4.5
4.9
Adjustments to existing assets (eg indexation)
34.0
–
34.0
Disposals
(0.1)
(0.8)
(0.9)
Transfers
–
10.0
10.0
At 31 December 2022
849.8
24.1
873.9
Accumulated depreciation and impairment:
At 1 January 2021
194.8
2.4
197.2
Charge for year
27.4
2.3
29.7
Disposals
(4.0)
(0.2)
(4.2)
At 1 January 2022
218.2
4.5
222.7
Charge for the year
29.9
3.8
33.7
Disposals
(0.1)
(0.8)
(0.9)
At 31 December 2022
248.0
7.5
255.5
Net book value:
At 31 December 2022
601.8
16.6
618.4
At 31 December 2021
597.3
5.9
(£m)
Goodwill
Cost or valuation:
At 1 January 2021
518.8
Acquisition of a subsidiary
17.0
At 31 December 2021
535.8
Acquisition of a subsidiary
11.1
Adjustment to prior year goodwill acquired
(0.1)
At 31 December 2022
546.8
Impairment:
At 31 December 2021 and 31 December 2022
201.0
Carrying amount:
At 31 December 2022
345.8
At 31 December 2021
334.8
Acquisition during the year
On 16 December 2022, the group acquired 100% of the voting shares of The Doctors Clinic Group, a non-listed
company based in England who are an integrated provider of occupational health services and private GP
services, for £12 million generating goodwill of £11.1 million.
Impairment testing
The directors treat the business as a single cash-generating unit for the purposes of testing goodwill for
impairment prior to the acquisition of The Doctors Clinic Group. The recoverable amount of goodwill is
calculated by reference to its estimated value-in-use. In order to estimate the value-in-use, management has
used trading projections covering the period to December 2027 from the most recent board approved strategic
plan. The variables in the cash flows are interdependent and reflect management’s expectations based on past
experience and current market trends, it takes into account both current business and committed initiatives. In
addition, management consider the potential financial impact from short term climate change scenarios, and
the cost of initiatives by the group to manage the longer term climate impacts. The recoverable amount
exceeded the carrying amount by c£400 million.
Key assumptions
Management identified a number of key assumptions relevant to the value-in-use calculations, being EBITDA
margin growth over the five year period, capital maintenance spend, discount rates and long term growth
rates. The assumptions are based on past experience and external sources of information.
Management has performed a sensitivity analysis using reasonably possible changes for each key assumption,
keeping all other assumptions constant. The sensitivity analysis included an assessment of the break-even
point for each of the key assumptions.
The trading projections for the five year period underlying the value in use reflect a growth in EBITDA margin.
EBITDA Margin is dependent on a number of elements of the operating model over the longer-term, including
pricing trends, volume growth and the mix and complexity of procedures and assumptions regarding cost
inflation. The growth in EBITDA margin over the next 5 years ranges between 0.5% and 1.8% per annum. The
sensitivity analysis identified that a reasonably possible decrease of 12% in the annual EBITDA forecast within
the trading projection (2023-2027) would result in the elimination of headroom.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
14. Intangible assets
continued
Impairment testing
continued
The group has used a pre-tax discount of 10.6% (2021: 8.5%), adjusted for the effect of IFRS 16. The sensitivity
analysis identified that a reasonably possible increase of 250 bps in the pre-tax discount rate, would result in
the elimination of headroom.
A long-term growth rate of 2.0% has been applied to cash flows beyond 2027 based on long term view of
inflation and market conditions. Capital maintenance spend is based on historic run rates and our expectation
of the group’s requirements. The sensitivity testing identified no reasonably possible changes in the capital
maintenance and long term growth rates that would cause the carrying amount of any CGU to exceed its
recoverable amount.
As a result, management believe that some of the key impairment review assumptions constitute a major
source of estimation uncertainty as they consider that there is a significant risk of a material change to its
On 31 October 2019, the group entered into a profit share arrangement with Genesis Care. The agreement
provides the group with an entitlement to a gross profit share relating to the chemotherapy business
transferred to Genesis Care as part of the sale of the Bristol Cancer Centre in perpetuity.
The group has recognised a financial asset in respect of this gross profit share and the asset is classed as a fair
value through profit and loss asset. The financial asset is valued using forward looking information to establish
cash flows and is discounted back to net present value. This valuation is reviewed at each reporting date,
with movements in fair value being recognised through the consolidated income statement. Cash received
is adjusted against the financial asset, and is included within cash flows from investing activities on the
consolidated statement of cash flows.
(£m)
2022
2021
Valuation at 1 January
2.3
1.6
Realised
(0.7)
(0.4)
Unrealised fair value adjustments
3.0
1.1
Carrying amount at 31 December (Note 30)
4.6
2.3
Management completes relevant sensitivities on the inputs when assessing the fair value.
With all other inputs remaining constant:
–
A 1.2% increase (decrease) in the discount rate used, would see a decrease (increase) in fair value of £0.6
million (£0.3 million) (2021: 1.3% increase (decrease) £0.3 million (£0.4 million))
–
A 20% increase (decrease) in the forecast annual cash flow of £0.14 million (2021: £0.36 million), would see
As at 31 December 2022, these consolidated financial statements of the group comprise the company and the
following companies, most of which are incorporated in, and whose operations are conducted in, the United
Kingdom. All subsidiaries are 100% owned unless otherwise indicated.
Incorporated in England and Wales and registered at 3 Dorset Rise, London, EC4Y 8EN,
unless otherwise stated
Principal activity
Class of share
Claremont Hospital Holdings Limited
Holding company
Ordinary
Claremont Hospital LLP
!^
Health provision
N/A
Classic Hospitals Group Limited
#
Holding company
Ordinary
Classic Hospitals Limited
#
Non-trading company
Ordinary
Classic Hospitals Property Limited
Property company
Ordinary
Didsbury MSK Limited°
Health provision
Ordinary
Fox Healthcare Acquisitions Limited
Leasing company
Ordinary
Fox Healthcare Holdco 2 Limited
#
Holding company
Ordinary
Lifescan Limited
#
Non-trading company
Ordinary
Maitland Medical Service Limited
Health provision
Ordinary
Medicainsure Limited
Non-trading company
Ordinary
Montefiore House Limited
+
Health provision
Ordinary
SHC Holdings Limited
#
Holding company
Ordinary
Soma Health Limited
Health provision
Ordinary
Spire Cambridge (Disposal) Limited
#
Non-trading company
Ordinary
Spire Fertility (Disposal) Limited
#
Non-trading company
Ordinary
Spire Healthcare (Holdings) Limited
Holding company
Ordinary
Spire Healthcare Finance Limited*
Holding company
Ordinary
Spire Healthcare Group UK Limited
#
Holding company
Ordinary
Spire Healthcare Holdings 1
&#
Holding company
Ordinary
Spire Healthcare Holdings 2 Limited
#
Holding company
Ordinary
Spire Healthcare Holdings 3 Limited
#
Holding company
Ordinary
Spire Healthcare Limited
Health provision
Ordinary
Spire Healthcare Properties Limited
Property company
Ordinary
Spire Healthcare Property Developments Limited
Development company
Ordinary
Spire Property 1 Limited
Property company
Ordinary
Spire Property 4 Limited
Property company
Ordinary
Spire Property 5 Limited
Property company
Ordinary
Spire Property 6 Limited
Property company
Ordinary
Spire Property 13 Limited
Property company
Ordinary
Spire Property 16 Limited
Property company
Ordinary
Spire Property 18 Limited
Property company
Ordinary
Spire Property 19 Limited
Property company
Ordinary
Spire Property 23 Limited
Property company
Ordinary
Spire Thames Valley Hospital Limited
#
Non-trading company
Ordinary
Spire Thames Valley Hospital Propco Limited
Property company
Ordinary
Spire UK Holdco 2A Limited
#
Holding company
Ordinary
Spire UK Holdco 4 Limited
Holding company
Ordinary
The Doctors Clinic Group Ltd
Holding company and
health provision
Ordinary
The London Doctors Clinic Ltd
Non-trading company
Ordinary
°
Ownership interest is 51.0%.
+
Ownership interest is 50.1%.
*
Direct shareholding of the company.
&
Spire Healthcare Holdings 1 is an undertaking with unlimited liability.
!
The LLP has ‘Members’ capital classified as equity’ in lieu of ‘Class of shares’.
#
In liquidation and expected to be dissolved during 2023.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
16. Subsidiary undertakings and non-controlling interest
continued
In the prior year, in order to simplify the structure of the group and reduce costs, the group undertook a
process in which a number of companies within the group were identified for members’ voluntary liquidation.
The entities in members’ voluntary liquidation at year end are shown above and they are expected to be
formally dissolved at Companies House during 2023.
Non-controlling interest
Financial information of subsidiaries that have a material non-controlling interest is provided below. The
entities, as set out above, are Montefiore House Limited, Didsbury MSK Limited and Claremont Hospital LLP.
On the initial acquisition of Claremont Hospital LLP on 30 November 2021, the group owned c 88%. Following
the exercise of a put option during the period, Spire Healthcare acquired the remaining interest in the LLP on
31 March 2022, and now owns 100% of this entity. The accumulated interest relating to Claremont has
therefore been reclassified to retained earnings.
Accumulated balances of material non-controlling interest:
(£m)
2022
2021
Profit/(loss) allocated to material non-controlling interests:
Montefiore House Limited
(0.8)
0.3
Didsbury MSK Limited
0.4
0.5
Claremont Hospital LLP
–
–
Accumulated balances of material non-controlling interest:
Montefiore House Limited
(6.4)
(5.6)
Didsbury MSK Limited
0.5
0.3
Claremont Hospital LLP
–
0.5
Within the entities, the most material assets and liabilities relate to right of use assets and lease liabilities in
respect of property. Except for the lease rental payments, the majority of cash flows are generated through
(£m)
2022
2021
Prostheses, drugs, medical and other consumables
40.6
40.2
Cost of sales for the year ended 31 December 2022 includes inventories recognised as an expense amounting
(£m)
2022
2021
Amounts falling due within one year:
Trade receivables
59.8
54.7
Unbilled receivables
18.2
12.3
Prepayments
15.7
18.4
Other receivables
11.8
17.9
105.5
103.3
Allowance for expected credit losses
(5.0)
(4.1)
Total current trade and other receivables
100.5
99.2
Unbilled receivables reflects work in progress where a patient had treatment, or was receiving treatment, at
the end of the period and the invoice had not yet been raised.
Other receivables includes the £5.4 million insurance reimbursement right (2021: £7.4 million); as well as
£2.6 million (2021: £7.9 million) reimbursement right related to the new Paterson fund, which is being held
by solicitors on account until payments are made, with any amount not paid out being returned to Spire
Healthcare. During the year, £5.3 million was paid out of this fund. The amounts paid to the new Paterson
fund do not reflect an investment in a financial asset, but merely a right to reimbursement should the fund
not be utilised in full.
In the prior year, as well as the £7.4 million insurance reimbursement right, other receivables includes a
£2.2 million receivable from the vendor of Claremont Hospital, which was acquired by the group during the
year, and is the difference between the original estimated purchase price of £19.1 million and the final agreed
purchase price of £16.9 million.
Trade and other receivables of £1.5 million have been recognised on the acquisition of The Doctors Clinic Group
during the year (Note 32).
Trade receivables comprise amounts due from private medical insurers, the NHS, self-pay patients, consultants
and other third parties who use the group’s facilities. Invoices to customers fall due within 60 days of the date
of issue.
The group was successful in its bid to be included on the NHSE Framework for purchasing additional activity
from the independent sector, which commenced in April 2021. Inclusion on the Framework is at an agreed
price for activity, based on the NHS tariff, but carries no guaranteed volumes. For contracts under the
framework that include an estimated contract value, billing is in advance for the expected volume, with a
quarterly true-up for actual volumes undertaken. For contracts under the framework without an estimated
contract value (which can include local agreements), billing is in arrears based on actual volumes only.
The ageing of trade receivables is shown below and shows amounts that are past due at the reporting date
(excluding payments on account where there is no right to offset these at the reporting date). A provision for
expected credit losses has been recognised at the reporting date through consideration of the ageing profile
of the group’s trade receivables and the perceived credit quality of its customers reflecting net debt due. The
carrying amount of trade receivables, net of expected credit losses, is considered to be an approximation to
its fair value.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
18. Trade and other receivables
continued
The loss allowance as at 31 December 2022 for trade receivables was determined as follows:
Current
0-30 days
31-90 days
91-364 days
1-2 years
Total
Expected loss rate
0.0%
1.8%
8.3%
29.2%
17.5%
7.2%
Gross debt (£m)
27.8
16.8
8.4
8.9
8.0
69.9
Less payments on account (£m)
(10.1)
Carrying amount of trade receivables (£m)
59.8
Loss allowance (£m)
–
0.3
0.7
2.6
1.4
5.0
The loss allowance as at 31 December 2021 for trade receivables was determined as follows:
Current
0-30 days
31-90 days
91-364 days
1-2 years
Total
Expected loss rate
0.7%
2.2%
5.1%
19.5%
23.6%
5.5%
Gross debt (£m)
27.1
22.9
13.7
7.7
5.5
76.9
Less payments on account (£m)
(22.2)
Carrying amount of trade receivables (£m)
54.7
Loss allowance (£m)
0.2
0.5
0.7
1.5
1.2
4.1
Trade receivables are written off when there is no longer a reasonable expectation of recovery. Indicators that
there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a
repayment plan with the group, and failure to make contractual payments for a period of greater than two
years past due.
The group assesses on a forward looking basis expected credit losses associated with its debt instruments
carried at amortised cost. The impairment methodology applied for trade receivables is the simplified
approach, which requires expected lifetime losses to be recognised from initial recognition of the trade
receivables.
Trade receivables after expected credit losses comprise the following wider customer/payor groups:
(£m)
2022
2021
Private medical insurers
30.4
27.4
NHS
8.2
9.2
Patient debt
7.2
8.9
Other
9.0
5.1
54.8
50.6
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
(£m)
2022
2021
At 1 January
4.1
5.3
Provided in the year
1.1
–
Utilised during the year
(0.2)
(0.2)
Released during the year
–
(1.0)
At 31 December
5.0
4.1
The group applies the IFRS 9 simplified approach to measuring Expected Credit Losses (ECLs) for trade
receivables. Under this standard, lifetime ECL provisions are recognised for trade receivables using a matrix
of rates dependant on age thresholds and customer types. The ECL rates are determined with reference to
historical performance of each payor age group during the last two years.
To develop the ECL matrix, trade receivables were grouped according to shared characteristics (payor/payor
type) and the days past due. As the majority of the group’s debt is receivable from large, well-funded insurance
companies, the National Health Service or from a large number of individuals, the group has concluded that
historical debt performance of the portfolio during the last two reporting periods provides a reasonable
(£m)
2022
2021
Cash at bank
67.1
165.5
Short-term deposits
7.1
37.1
74.2
202.6
Cash and cash equivalents comprise cash balances, short-term deposits and other short-term highly liquid
investments (including money market funds) with maturities not exceeding three months placed with
investment grade counterparties which are subject to an insignificant risk of change in value.
Cash and cash equivalents of £0.3 million has been added on the acquisition of The Doctors Clinic Group during
During the year the group completed the sale of its Spire St Saviours property and received proceeds of
£3.2 million. In June 2022 an impairment of £0.5 million was recognised on the property, as the sales price less
costs to sell on the property was lower than the carrying value. No impairment was recognised in the prior year
(see Note 10).
As at 31 December 2022 the group’s management have committed to sell a parcel of land at Bostocks Lane as
the group has accepted an offer on the property. The sale is considered highly probable and the assessment
has not changed. It therefore remains as classified as held for sale.
(£m)
2022
2021
Spire St Saviours Hospital property
–
3.7
Bostocks Lane (East Midlands Cancer Centre)
1.1
1.1
1.1
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
2022
2021
Authorised shares
Ordinary share of £0.01 each
404,108,470
401,104,036
404,108,470
401,104,036
£0.01 ordinary shares
Shares
£’000
Issued and fully paid
At 31 December 2022
404,108,470
4,041
At 31 December 2021
401,104,036
4,010
During the year, the authorised share capital was increased by £31,000 by the issue of 3,004,434 ordinary
shares of £0.01 each.
Share premium
Share premium
2022
2021
At 1 January
826.9
826.9
Issue of new shares
3.1
–
At 31 December
830.0
826.9
During the year the group issued 3,004,434 shares to settle share awards of which 2,916,000 shares were
exercised under the save as you earn 2019 scheme at an exercise price of £1.09 per share. The proceeds from
the issue of shares were £3.1 million.
Capital reserves
This reserve represents the loans of £376.1 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 the year, the EBT purchased 88,354 shares and exercised 300,491 (2021: nil shares acquired and nil
exercised) in order to settle share awards in relation to the directors’ share bonus award and Long-Term
Incentive Plan.
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 2022, 27,146 shares (2021: 239,283) were held by the EBT in
relation to the directors’ share bonus award and Long-Term Incentive Plan. The EBT share reserve represents the
consideration paid when the EBT purchases the company’s equity share capital, until the shares are reissued.
(Number of shares)
2022
2021
(£m)
(Number of shares)
(£m)
(Number of shares)
At 1 January
0.8
239,283
0.8
239,283
Purchased
–
88,354
–
–
Exercised
(0.8)
(300,491)
–
–
At 31 December
–
27,146
0.8
239,283
Hedging reserve
The balance of £6.6 million at 31 December 2022 (2021: (£0.5 million)) reflects the £1.2 million (2021: £2.5 million)
recycled in the period, the fair value credit of £8.1 million (2021: £0.8 million credit) and the £2.2 million tax charge
on the profit (2021: £0.6 million tax charge on the profit) to give a net movement of an increase of £7.1 million
The group has borrowings in two forms, bank borrowings and lease liabilities as disclosed on the consolidated
balance sheet. Total borrowings at 31 December 2022 were £1,190.8 million (2021: £1,265.3 million). More
detail in respect of these two forms of borrowings are set out below.
The bank loans are secured on fixed and floating charges over both the present and future assets of material
subsidiaries of the group. On 24 February 2022, the group successfully refinanced its debt facilities with a
syndicate of existing and new lenders. As part of the exercise and in recognition of the fact that the group
had substantial cash reserves at 31 December 2021, the group repaid £100.0 million of the Senior Loan Facility.
The new arrangement has a maturity of four years. The financial covenants relating to this new agreement
are materially unchanged. The loan is non-amortising and carries interest at a margin of 2.05% over SONIA
(2021: 2.25% over LIBOR).
For accounting purposes the loan and associated deferred and amortised fees have been treated as an
extinguishment under IFRS 9, as a result £3.1 million has been recognised within finance costs in the
income statement.
(£m)
2022
2021
Amount due for settlement within 12 months
2.9
5.7
Amount due for settlement after 12 months
321.4
421.8
Total bank borrowings
324.3
427.5
Terms and debt repayment schedule
The maturity date is the date on which the relevant bank loans are due to be fully repaid.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
22. Borrowings
continued
Bank borrowings
continued
The carrying amounts drawn (after issue costs and including interest accrued) under facilities in place at the
balance sheet date were as follows:
(£m)
Maturity
Margin over SONIA
2022
2021
Senior finance facility
(1)
February 2026
2.05%
324.3
–
Senior finance facility
(1)
July 2023
2.25%
(2)
–
428.2
1.
In the prior period the difference between the carrying amount of the facility and the value of the debt repayment schedule is
a modification fee on the loan extension and is deferred and amortised in accordance with IFRS 9 loan modification accounting.
On refinancing in the current period, these amounts have been accelerated and recognised in the Income Statement as a result
of the refinancing being treated as an extinguishment for accounting purposes.
2.
Margin over LIBOR.
Net debt for the purposes of the covenant test in respect of the Senior Loan Facility was £250.8 million
(December 2021: £222.4 million) and the net debt to EBITDA ratio was 2.2x (December 2021: 2.3x). The net
debt for covenant purposes comprises the senior facility of £325.0 million less cash and cash equivalents of
£74.2 million. EBITDA for covenant purposes comprises Adjusted EBITDA for Last Twelve Months (LTM) of
pre-IFRS 16 Adjusted EBITDA of £123.9 million (December 2021: 106.0 million) less the rental of a finance lease
pre-IFRS 16 of £9.5 million (2021: £9.1 million).
The interest cover for covenant purposes was 8.5x (2021: 4.5x 2020: 4.0x, 2019 4.8x) and is calculated as the
pre-IFRS 16 EBITDA described above over pre-IFRS 16 finance costs paid.
The new facilities include a sustainability-linked element connected to environmental and quality factors.
The group also has access to a further £100.0 million through a committed and undrawn revolving credit
Obligations under finance leases
The group has finance in respect of hospital properties, vehicles, office and medical equipment. The leases
are secured on fixed and floating charges over both the present and future assets of material subsidiaries in
the group. Leases, with a present value liability of £866.5 million (2021: £837.8 million), expire in various years
to 2046 and carry incremental borrowing rates in the range 3.1–14.6% (2021: 3.1–14.6%). Rent in respect of
hospital property leases are reviewed annually with reference to RPI or CPI, subject to assorted floors and caps.
The discount rates used are calculated on a lease by lease basis, and are based on estimates of incremental
borrowing rates. A movement in the incremental borrowing rate of 1% would result is an 8% movement in
lease liability.
In the year, the group recognised charges of £13.6 million (2021: £12.3 million) of lease expenses relating to
short term and low value leases for which the exemption under IFRS 16 has been taken. Cash outflows in
respect of these are materially in line with the expense recognised, resulting in a total cash outflow of £105.6
million (2021: £38.3 million). The group has not made any variable lease payments in the year. The group is not
a lessor for any leases to external parties. There has been no (2021: one) sale and leaseback transaction in this
period. Where new leases have the right to extend and management is not reasonably certain to exercise the
extension option, those future cash flows are not reflected in the above. The new leases do not include any
restrictions or covenants.
Some leases receive RPI increases on an annual basis which affects both the cash flow and interest charged on
those leases. Except for this increase, cash flows and charges are expected to remain in line with current year.
The cash flows above do not reflect any termination or extension options as management is reasonably certain
that the options will not be exercised. There are no significant restrictions or covenants which impact the cash
flows in respect of these leases.
See note 13 for more detail on the depreciation of the Right of Use (ROU) assets and note 8 for more detail on
the interest expense relating to leases.
Changes in bank borrowings and lease liabilities arising from financing activities
(£m)
1 January
Cash flows
Non cash
changes
1
Additions
3
31 December
2022
Bank loans
427.5
(121.1)
17.9
–
324.3
Lease liabilities
837.8
(93.7)
73.5
48.9
866.5
Total
1,265.3
(214.8)
91.4
48.9
1,190.8
(£m)
1 January
Cash flows
Non cash
changes
1
Loan
modification
2
Additions
3
Disposals
31 December
2021
Bank loans
420.8
(13.2)
18.8
1.1
–
–
427.5
Lease liabilities
749.5
(26.0)
67.7
–
48.4
(1.8)
837.8
Total
1,170.3
(39.2)
86.5
1.1
48.4
(1.8)
1,265.3
1.
Non-cash changes reflect interest charged on the loan.
2.
The loan modification relates to the fees incurred on the loan extensions, which are amortised in accordance with IFRS 9.
3.
Additions include both new leases entered into, indexation of existing leases, sale and leaseback transactions and acquisitions
The following derivatives were in place at 31 December:
Interest rate
Maturity date
Notional amount
Carrying value
liability/(Asset)
31 December 2022 (£m)
Interest rate swaps
2.7780%
Feb 2026
243.8
(8.6)
31 December 2021 (£m)
Interest rate swaps
1.2168%
July 2022
213.0
0.7
(£m)
2022
2021
Amount due for settlement within 12 months
(3.6)
0.7
Amount due for settlement after 12 months
(5.0)
–
Total derivatives (asset)/liability
(8.6)
0.7
The interest rate swap from the prior year matured on 22 July 2022. The group entered into new interest
rate swaps on the 25 July 2022. The movement in respect of derivatives reflects £1.2 million (December 2021:
£1.2 million) recycled in the period and a £8.1 million credit (December 2021: £0.4 million credit) in fair value.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
(£m)
Property,
plant and
equipment
IFRS 16
leases –
spreading
IFRS 16
Share-
based
payments
Losses
Provisions
and other
temporary
differences
Total
At 1 January 2021
73.3
(38.3)
25.0
(1.1)
(2.2)
(2.8)
53.9
(Credit)/charge to the profit or loss
(12.7)
1.9
(2.6)
–
(1.9)
0.3
(15.0)
(Credit)/charge to other
comprehensive income and equity
–
–
–
(3.0)
–
0.6
(2.4)
Prior year adjustment
4.1
0.2
(0.8)
–
–
–
3.5
Change in tax rates
22.6
(10.8)
7.1
(0.1)
(0.7)
(0.4)
17.7
At 1 January 2022
87.3
(47.0)
28.7
(4.2)
(4.8)
(2.3)
57.7
(Credit)/charge to the profit or loss
(7.1)
1.8
2.8
0.1
(0.8)
0.6
(2.6)
(Credit)/charge to other
comprehensive income and equity
–
–
–
0.1
–
2.1
2.2
Adjustment in respect of prior year
(2.2)
–
1.5
–
(0.6)
0.2
(1.1)
At 31 December 2022
78.0
(45.2)
33.0
(4.0)
(6.2)
0.6
56.2
Disclosed within liabilities
78.0
(45.2)
33.0
(4.0)
(6.2)
0.6
56.2
Deferred tax on property, plant and equipment has arisen on differences between the carrying value of the
relevant assets and the tax base. Included in this amount is a one off credit to the profit and loss of £9.0 million
in respect of the change in useful life and residual value of the freehold properties. The credit arises as a result
of the ability to take into account additional tax basis and indexation for future capital disposals when
calculating the deferred tax liability on property.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when
the asset is realised or the liability settled, based on tax rates that have been enacted, or substantively enacted,
at the balance sheet date. The group has separately calculated the tax rates applicable in respect of adjusting
items for the period. The prior year change in tax rates reflects the reassessment of deferred tax assets and
liabilities to 25% from 19%. Deferred tax in the current period continues to be measured at 25%.
Deferred tax assets are recognised on the basis that the deferred tax liabilities represent forecast profits of the
appropriate type (either capital or trading) and therefore represent a suitable taxable profit against which the
reversal of the deferred tax assets can be offset. Deferred tax assets and liabilities in relation to property are
only offset to the extent that they relate to the same site.
The group has unrecognised deferred tax assets (which do not expire) as follows:
2022
2021
(£m)
Gross
Tax effected
Gross
Tax effected
Trading losses
8.0
2.0
9.9
2.5
Capital losses
–
–
1.2
0.3
Tax basis for future capital disposals
11.6
2.9
34.4
8.6
Total
19.6
4.9
45.5
11.4
These amounts are the expected tax value of the gross temporary difference at the enacted long-term tax rate
of 25% (2021: 25%) following the substantive enactment of the increased corporation tax rate of 25% effective
from 1 April 2023. A deferred tax asset has not been recognised in respect of these amounts due to
uncertainties as to the timing of future profits that the trading losses could be offset against and whether
(£m)
Medical
malpractice
Business
restructuring
and other
Total
At 1 January 2022
42.0
2.8
44.8
Increase in existing provisions
7.9
0.5
8.4
Provisions utilised
(30.1)
(1.0)
(31.1)
Provisions released
(0.4)
–
(0.4)
At 31 December 2022
19.4
2.3
21.7
Medical malpractice relates to estimated liabilities arising from claims for damages in respect of services
previously supplied to patients. During the period £6.4 million was added due to additional claims received,
and £9.1 million utilised. Amounts are shown gross of insured liabilities. Any such insurance recoveries of
£5.4 million (December 2021: £7.4 million) are recognised in other receivables. This drives the majority of the
movement in the medical malpractice provision with the exception of the insurer settlement and the Paterson
actions following the Public Inquiry. Following the Court of Appeal judgment in H2 2021, relating to the
ongoing legal action between the group and its insurer, finding in favour of the insurer, Spire Healthcare
provided for £13.0 million in the prior period, and settled £13.0 million in the current period which is reflecting
as utilised during the period.
Following the completion of the criminal proceedings against Ian Paterson, a consultant who previously had
practicing privileges at Spire Healthcare, management agreed settlement with all current and known civil
claimants (and the other co-defendants) and made a provision for the expected remaining costs in FY20. The
provision is being utilised, including £5.3 million in patient claim settlements. The provision to complete the
reviews, settle any claims and costs in respect of other Paterson items has been increased by £0.9 million. This
provision remains subject to ongoing review following the publication of the Public Inquiry report on Paterson
issued on 4 February 2020, as the group continues to assess the potential impact of the recommendations. The
project is complex and the process for review and settlement takes some time. It is possible that, as further
information becomes available, an adjustment to this provision will be required, but at this time, it reflects
management’s best estimate of the costs and settlement of claims at this point. The variables include the
number of patients which are found to have been harmed following review, the level of harm, and the
associated compensation claim, as well as the time to review each case can vary significantly.
The provision in relation to the Ian Paterson costs has been determined before taking account of any potential
further recoveries from insurers.
As at 31 December 2022, the remaining business restructuring and other provisions primarily includes
non-patient claims made against the group. The group is in the process of settling or defending such claims
as appropriate. Management have sought external counsel, where appropriate, to determine the appropriate
provision levels.
Provisions as at 31 December 2022 are materially considered to be current and expected to be utilised at any
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
(£m)
2022
2021
Trade payables
67.2
51.7
Accrued expenses
58.4
52.6
Social security and other taxes
9.7
8.3
Other payables
29.2
46.5
Trade and other payables
164.5
159.1
Trade and other payables of £1.9 million have been added on the acquisition of The Doctors Clinic Group during
the year (see Note 32)
Accrued expenses includes general operating expenses incurred but not invoiced as at the year end, as well
as holiday pay accrued of £5.2 million (2021: £9.1 million) due to staff deferring leave to maintain operations
throughout the COVID-19 pandemic, and bonuses accrued during the year and paid during the following year
of £7.0 million (FY21: £6.4 million).
Other payables include an accrual for pensions and payments on account. Revenue is not recognised in respect
of payments on account until the performance obligation has been met. At year end the balance of payments
on account was £11.9 million (2021: £9.9 million) partly, and other credit balances reclassed from trade debtors
were £28.2 million (2021: £25.8 million), which largely relate to NHS credits. Payments on account are expected
to be utilised against patient procedures within the following 12 months. The balance of payments on account
as at 31 December 2021 have been fully utilised in the current year. However, this is subject to the patient
attending for the procedure, and not cancelling or deferring treatment, which could result in repayment to
During the year Didsbury MSK Limited declared and paid an interim dividend of £0.4 million to its shareholders
of which £0.2 million was paid to the non-controlling interests. In addition £0.1 million of dividends were paid
to the executive directors in respect of grants under the LTIP share scheme that have vested and are currently
subject to a two-year holding period.
Since the end of the financial year, the directors have proposed a final dividend of approximately 0.5 pence per
share. The dividend is subject to approval by shareholders at the Annual General Meeting and is therefore not
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 in respect of LTIPs and SAYE recognised in the income statement was £2.3 million in the year ended
31 December 2022 (2021: £2.8 million). Employer’s National Insurance is being accrued, where applicable, at
the rate of 14.3%, 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 £0.3 million
(2021: £0.4 million).
The following table analyses the total cost between each of the relevant schemes, together with the number
of options outstanding:
2022
2021
Charge
£m
Number of
options
(thousands)
Charge
£m
Number of
options
(thousands)
Long Term Incentive Plan
1.8
12,787
2.5
11,449
Deferred Share Bonus Plan
–
525
–
383
Save As You Earn (SAYE)
0.5
3,652
0.3
3,114
2.3
16,964
2.8
14,946
A summary of the main features of the scheme is shown below:
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.
Awards granted under the LTIP vest subject to achievement of performance conditions measured over a period
of at least three years, unless the committee determines otherwise. Awards may be in the form of conditional
share awards or nil-cost options or any other form allowed by the plan rules.
Vesting of awards will be dependent on a range of financial, operational or share price measures, as set by
the committee, which are aligned with the long-term strategic objectives of the group and shareholder value
creation. No less than 30% of an award will be based on share price measures. The remainder will be based on
either financial and/or operational measures. At the threshold performance, no more than 25% of the award
will vest, rising to 100% for maximum performance.
On 6 April 2020, the company granted a total of 5,638,223 options to the executive directors and other senior
management. The options will vest based on earnings per share (‘EPS’) (20%) targets for the financial year
ending 31 December 2022, relative total shareholder return (‘TSR’) (40%) targets on performance over the
three year period to 31 December 2022 and operational excellence (‘OE’) (40%) targets based on employee
engagement targets and regulatory ratings for the current portfolio of hospitals, subject to continued
employment. Upon vesting, the options will remain exercisable until 1 April 2030.
On 18 March 2021, the company granted a total of 3,595,102 options to the executive directors and other
senior management. The options will vest based on return on capital employed (‘ROCE’) (35%) targets for the
financial year ending 31 December 2023, relative total shareholder return (‘TSR’) (35%) targets on performance
over the three year period to 31 December 2023 and operational excellence (‘OE’) (30%) targets based on
employee engagement targets and regulatory ratings for the current portfolio of hospitals, subject to
continued employment. Upon vesting, the options will remain exercisable until March 2031. The executive
directors are subject to a 2 year holding period, whilst other senior management are not.
On 14 March 2022, the company granted a total of 3,097,060 options to the executive directors and other
senior management. The options will vest based on return on capital employed (‘ROCE’) (35%) targets for the
financial year ending 31 December 2024, relative total shareholder return (‘TSR’) (35%) targets on performance
over the three year period to 31 December 2024 and operational excellence (‘OE’) (30%) targets based on
employee engagement targets and regulatory ratings for the current portfolio of hospitals, subject to continued
employment. Upon vesting, the options will remain exercisable until March 2032. The executive directors are
subject to a two year holding period, whilst other senior management are not.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
27. Share-based payments
continued
Deferred Share Bonus Plan
The Deferred Share 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.
On 6 April 2020, the company granted a total of 243,973 options to executive directors, with a vesting date
of 6 April 2023. The options will vest based on a target EBITDA net debt leverage ratio for the year ending
31 December 2021, and subject to continued employment.
On 18 March 2021, the company granted a total of 138,888 options to executive directors, with a vesting date
of 18 March 2024. The options will vest based on a target EBITDA net debt leverage ratio for the year ending
31 December 2022, and subject to continued employment.
On 14 March 2022, the company granted a total of 142,427 options to executive directors, with a vesting
date of 14 March 2025. There are no performance conditions in respect of the scheme and is subject to
continued employment.
Save As You Earn
The Save As You Earn (‘SAYE’) is open to all Spire Healthcare employees. Vesting will be dependent on continued
employment for a period of 3 years from grant. The requirement to save is a non-vesting condition. On 3 May
2019, the company launched the SAYE scheme. There are no performance conditions in respect of the scheme
and the scheme vested on 1 June 2022. The options remained exercisable for 6 months to 31 December 2022.
On the 24 April 2022, the company granted 3,800,557 options to employees with a vesting date of 1 June 2025.
There are no performance conditions in respect of the scheme. Upon vesting, the options will remain
exercisable for six months. The IFRS 2 charge has been calculated using an adjusted Black Scholes model
with judgements including leavers of the scheme (employees who may cease to save) and dividend yields.
The aggregate number of share awards outstanding for the group and their weighted average contractual life
is shown below:
2022
LTIP (ROCE
condition)
(thousands)
LTIP (TSR
condition)
(thousands)
LTIP (EPS
condition)
(thousands)
LTIP (OE
condition)
(thousands)
Deferred Share
Bonus Plan
(thousands)
SAYE
(thousands)
At 1 January
1,133
4.175
1,975
4,166
383
3,114
Granted
1,084
1,079
–
925
142
3,811
Exercised
–
(208)
–
(93)
–
(2,916)
Surrendered
1
(48)
(205)
(77)
(198)
–
–
Cancelled
2
–
(115)
(358)
(457)
–
(357)
At 31 December
2,169
4,731
1,540
4,347
525
3,652
Exercisable at 31 December
–
–
–
–
–
37
Weighted average contractual life
2.4 years
3.2 years
0.4 years
2.8 years
1.1 years
2.5 years
2021
LTIP (ROCE
condition)
(thousands)
LTIP (TSR
condition)
(thousands)
LTIP (EPS
condition)
(thousands)
LTIP (OE
condition)
(thousands)
Deferred Share
Bonus Plan
(thousands)
SAYE
(thousands)
At 1 January
–
3,854
2,727
3,612
244
3,222
Granted
1,258
1,258
–
1,079
139
–
Exercised
–
–
–
–
–
(23)
Surrendered
1
(106)
(217)
(55)
(201)
–
–
Cancelled
2
(19)
(720)
(697)
(324)
–
(85)
At 31 December
1,133
4,175
1,975
4,166
383
3,114
Exercisable at 31 December
–
39
–
326
–
37
Weighted average contractual life
2.2 years
2.2 years
1.2 years
2.2 years
3.0 years
0.9 years
1.
These are shares where the participants are considered to be good leavers and forfeit a proportion of their shares on pro-rata basis.
2.
These are shares where the participants forfeit all share options.
The weighted average remaining contractual life for the share options outstanding as at 31 December 2022
was 2.2 years (2021: 2.2 years) in respect of LTIPs, and 2.5 years for SAYE (2021: 0.9 years).
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
27. Share-based payments
continued
Save As You Earn
continued
Share options outstanding at the end of the year have the following expiry date:
Grant – vest
Expiry date
Exercise price
(£)
Share options
thousands
2022
2021
LTIP grants
30/09/2014 – December 2016
30/09/2024
–
32
32
30/03/2018 – March 2021
30/03/2028
–
2
7
30/03/2018 – March 2021
30/03/2028
–
326
326
30/03/2019 – March 2022
30/03/2029
–
1,118
2,702
30/03/2020 – March 2023
30/03/2030
–
5,112
5,145
30/03/2021 – March 2024
30/03/2031
–
3,199
3,237
01/04/2022 – March 2025
01/01/2032
–
2,997
–
Deferred Share Bonus Plan
06/04/2020 – April 2023
05/04/2030
–
244
244
18/03/2021 – March 2024
17/03/2031
–
139
139
01/04/2022 – April 2025
01/04/2032
142
–
Save As You Earn
03/05/2019 – June 2022
01/12/2022
1.09
18
3,114
26/04/2022 – May 2025
01/11/2025
1.98
3,634
–
During the year, 300,491 shares, relating to LTIPs, were exercised from the company’s Employee Benefit Trust
(‘EBT’), during the year (see note 21 for more information). Where considered the most appropriate use of
surplus cash, the company will continue to fund the Spire Healthcare Employee Benefit Trust (‘EBT’), a
discretionary trust held for the benefit of the group’s employees, for the ongoing acquisition of shares to
satisfy the exercise of share plan awards by employees.
The following information is relevant to the determination of the fair value of the awards granted for the years
ended 31 December 2022 and 2021, respectively, under the schemes:
2022
LTIP
(TSR condition)
LTIP
(ROCE condition)
LTIP
(OE condition)
Deferred Share
Bonus Plan
Save as you Earn
Option pricing model
Monte Carlo
Fair value
at grant date
Fair value
at grant date
n/a
Black-Schöles
model
Fair value at grant date (£)
1.75
2.44
2.44
n/a
0.71
Fair value at grant date for
shares subject to holding
period(£)
1.48
2.06
2.06
n/a
n/a
Weighted average share price
at grant date (£)
2.44
2.44
2.44
n/a
2.21
Exercise price (£)
Nil
Nil
Nil
Nil
1.98
Weighted average contractual
life
2.2 years
2.2 years
0.2 years
3.0 years
2.5 years
Expected dividend yield
n/a
n/a
n/a
n/a
n/a
Risk-free interest rate
1.4%
n/a
n/a
n/a
n/a
Volatility
(1)
53%
53%
53%
n/a
n/a
2021
LTIP
(TSR condition)
LTIP
(EPS condition)
LTIP
(OE condition)
Deferred Share
Bonus Plan
Option pricing model
Monte Carlo
Fair value
at grant date
Fair value
at grant date
n/a
Fair value at grant date (£)
1.17
1.65
1.65
n/a
Fair value at grant date for shares subject to
holding period(£)
1.00
1.41
1.41
n/a
Weighted average share price at grant date (£)
1.65
1.65
1.65
n/a
Exercise price (£)
Nil
Nil
Nil
Nil
Weighted average contractual life
2.2 years
2.2 years
2.2 years
3.0 years
Expected dividend yield
n/a
n/a
n/a
n/a
Risk-free interest rate
0.2%
n/a
n/a
n/a
Volatility
(1)
49%
49%
49%
n/a
1.
The expected volatility is based on the historical volatility of the company and a comparator group of other international
Consignment stock
At 31 December 2022, the group held consignment stock on sale or return of £24.3 million (2021: £23.5 million).
The group is only required to pay for the equipment it chooses to use and therefore this stock is not recognised
as an asset.
Capital commitments
Capital commitments comprise amounts payable under capital contracts which are duly authorised and in
progress at the consolidated 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:
(£m)
2022
2021
Contracted but not provided for
27.0
The group had the following guarantees at 31 December 2022:
–
The bankers to Spire Healthcare Limited have issued a letter of credit in the maximum amount of £1.5 million
(2021: £1.5 million) in relation to contractual pension obligations
–
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
–
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
The group has exposure to the following risks from its use of financial instruments:
–
Credit risk
–
Liquidity risk
–
Market risk
This note presents information about the group’s exposure to each of the above risks, the group’s objectives,
policies and processes for measuring and managing risk. Further quantitative disclosures are included
throughout these financial statements.
The directors have overall responsibility for the establishment and oversight of the group’s risk management
framework.
The group’s risk management policies are established to identify and analyse the risks faced by the group,
to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails
to meet its contractual obligations, and arises principally from the group’s receivables from customers and
investment securities.
Trade and other receivables
The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
The group’s exposure to credit risk from trade receivables is considered to be low because of the nature of
its customers and policies in place to prevent credit risk occurring in normal circumstances.
Most revenues arise from insured patients’ business and the NHS. Insured revenues give rise to trade
receivables which are mainly due from large insurance institutions, which have high credit worthiness.
The remainder of revenues arise from individual self-pay patients and consultants.
During the period, trade receivables have increased as private work has increased as a result of COVID-19
restrictions being removed, but aged debt has reduced. Individual self-pay patients continues to be the largest
risk for the group given the current economic uncertainty. Given the COVID-19 induced economic uncertainty,
the group has considered the provision required, specifically for self-pay patients, and maintained a provision
accordingly through the expected loss rate percentages. The Expected Credit Loss (ECL) as at year end is
£5.0 million (December 2021: £4.1 million).
The group establishes an allowance for impairment that represents its ECL in respect of trade and other
receivables.
This allowance is composed of specific losses that relate to individual exposures and also an ECL component
established using rates reflecting historical information for payor groups, and forward looking information.
Given the continued economic uncertainty, the group has considered the provision required, specifically for
self-pay patients and maintained an adjustment to the provision accordingly, which is in line with the position
at December 2021.
Note 18 shows the ageing and customer profiles of trade receivables outstanding at the year end.
Unbilled receivables are considered for expected credit losses, but these are not considered material and
therefore not recognised.
Investments
The group limits its exposure to credit risk by only investing in short-term money market deposits with large
Market risk is the risk that changes in market prices, such as interest rates, will affect the group’s income or
the value of its holdings of financial instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters, while optimising the return on risk.
Interest rate risk
The group is exposed to interest rate risk arising from fluctuations in market rates. This affects future cash
flows from money market investments and the cost of floating rate borrowings.
From time-to-time, the group considers the cost benefit of entering into derivative financial instruments to
hedge its exposure to interest rate volatility based on existing variable rates, current and predicted interest
yield curves and the cost of associated medium-term derivative financial instruments.
Interest rates on variable rate loans are determined by SONIA (2021: LIBOR) fixings on a quarterly basis.
Interest is settled on all loans in line with agreements and is settled at least annually.
Variable
Total
Undrawn facility
1
31 December 2022 (£m)
325.0
325.0
100.0
Effective interest rate (%)
4.85%
4.85%
31 December 2021 (£m)
425.0
425.0
100.0
Effective interest rate (%)
2.96%
2.96%
1.
If this facility was drawn the interest rate would be in line with the variable rate loans.
The group has an interest rate swap derivative asset of £8.6 million (2021: £0.7 million liability) in place (refer
to note 22).
The fair value of this instrument is considered the same as its carrying value and level 2 of the fair value
hierarchy is used to measure the fair value of the instrument. The variable rate consideration received by the
group is Sterling three month SONIA, being lower than the hedged rate, resulting in some exposure on the
A change of 25 basis points (‘bp’) in interest rates at the reporting date would have increased/(decreased)
equity and reported results by the amounts shown below. This analysis assumes that all other variables
remain constant.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
30. Financial risk management and impairment of financial assets
continued
Sensitivity analysis
continued
(£m)
Profit or loss
Equity
25bp increase
25bp decrease
25bp increase
25bp decrease
At 31 December 2022
Variable rate instruments
(0.2)
0.2
(0.2)
0.2
At 31 December 2021
Variable rate instruments
(0.5)
0.5
(0.5)
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due.
The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the group’s reputation.
Liquidity is managed across the group and consideration is taken of the segregation of accounts for regulatory
purposes. Short-term operational working capital requirements are met by cash in hand and overdraft facilities.
Typically the group ensures that it has sufficient cash on demand to meet expected operational expenses for
a period of at least 90 days, including the servicing of financial obligations. In addition to cash on demand,
the group has available the following line of credit:
–
£100.0 million of revolving credit facility, which was undrawn as at 31 December 2022 (2021: £100.0 million
undrawn)
The following are contractual maturities, at as the balance sheet date, of financial liabilities, including interest
payments and excluding the impact of netting agreements:
At 31 December 2022
(£m)
Maturity analysis
Carrying
amount
Contractual
cash flows
Within
1 year
Between 1
and 2 years
Between 2
and 3 years
Between 3
and 4 years
Between 4
and 5 years
More than 5
years
Trade and other payables
154.8
154.8
154.8
–
–
–
–
–
Bank borrowings
324.3
394.4
20.2
22.1
20.5
331.6
–
–
Lease liabilities
866.5
1,819.1
92.8
93.2
93.6
92.2
92.2
1,355.1
1,345.6
2,368.3
267.8
115.3
114.1
423.8
92.2
1,355.1
Derivative financial assets
Interest rate swaps
(8.6)
(9.2)
(2.9)
(3.6)
(2.1)
(0.6)
–
–
(8.6)
(9.2)
(2.9)
(3.6)
(2.1)
(0.6)
–
–
At 31 December 2021
(£m)
Maturity analysis
Carrying
amount
Contractual
cash flows
Within 1
year
Between 1
and 2 years
Between 2
and 3 years
Between 3
and 4 years
Between 4
and 5 years
More than 5
years
Trade and other payables
150.8
150.8
150.8
–
–
–
–
–
Bank borrowings
427.5
449.6
12.8
436.8
–
–
–
–
Lease liabilities
837.8
1,819.3
86.8
87.0
87.7
87.9
86.5
1,383.4
Financial liability
1.9
1.9
1.9
–
–
–
–
–
1,418.0
2,421.6
252.3
523.8
87.7
87.9
86.5
1,383.4
Derivative financial
liabilities
Iinterest rate swap
0.7
1.2
1.2
–
–
–
–
–
0.7
1.2
1.2
–
–
–
–
The group’s objective is to maintain an appropriate balance of debt and equity financing to enable the group
to continue as a going concern, to continue the future development of the business and to optimise returns
to shareholders and benefits to other stakeholders.
The board closely manages trading capital, defined as net assets plus net debt. The group’s net assets at
31 December 2022 were £725.1 million (2021: £704.8 million) and net debt, calculated as borrowings, less cash
and cash equivalents and the amortised fees of £3.6 million (2021: £0.7 million) that was recorded at the date
of the loan extensions, amounted to £253.7 million (2021: £225.6 million).
The principal focus of capital management revolves around working capital management and compliance
with externally imposed financial covenants see note 22 for more detail.
Major investment decisions are based on reviewing the expected future cash flows and all major capital
expenditure requires approval by the board.
At the balance sheet date, the group’s committed undrawn facilities, and cash and cash equivalents were
as follows:
(£m)
2022
2021
Committed undrawn revolving credit facility
100.0
100.0
Cash and cash equivalents
74.2
As of 31 December 2022, except for an interest rate swap and financial asset relating to a gross profit share,
the group did not hold financial instruments that are included in level 1, 2 or 3 of the hierarchy.
Management assessed that cash and short-term deposits, trade and other receivables, unbilled receivables,
trade payables and other current liabilities approximate their carrying amounts largely due to the short-term
maturities of these instruments. The carrying value of debt is approximately equal to its fair value. During the
year ended 31 December 2022, there were no transfers between the levels in the fair value hierarchy.
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
30. Financial risk management and impairment of financial assets
continued
Fair value measurement
continued
In determining fair value measurement, the impact of potential climate-related matters, including legislation,
which may affect the fair value measurement of assets and liabilities in the financial statements has been
considered.
A derivative is a financial instrument whose value is based on one or more underlying variables. The group
uses derivative financial instruments to hedge its exposure to interest rate risk. Derivatives are not held for
speculative reasons. Fair values are obtained from market observable pricing information including interest
rate yield curves and have been calculated as follows; fair value of interest rate swaps is determined as the
present value of the estimated future cash flows based on observable yield curves.
The financial asset reflects a profit share arrangement with a partner. There are no market observable prices
for the valuation. Management therefore assesses forward looking information and appropriate discount rates
and risk factors to determine the fair value. Sensitivities are also taken into account when reviewing the fair
value (note 15).
As at 31 December 2022, the group held the following financial instruments measured at fair value:
Financial instruments measured at fair value
(£m)
Maturity analysis
Value as at
31 December
2022
Level 1
Level 2
Level 3
Financial assets at fair value through profit and loss
Profit share arrangement (Note 15)
4.6
–
–
4.6
Interest rate swaps
8.6
–
8.6
–
Financial assets measured at fair value
13.2
–
8.6
4.6
During the year, Spire Healthcare received a profit share in respect of the financial asset of £0.7 million (2021:
£0.4 million). In addition an unrealised fair value movement of £3.0 million (2021: £1.1 million) was recognised
in income upon review of the financial asset to increase the value of the financial asset on the balance sheet.
As at 31 December 2021, the group held the following financial instruments measured at fair value:
Financial instruments measured at fair value
(£m)
Maturity analysis
Value as at
31 December
2022
Level 1
Level 2
Level 3
Financial assets at fair value through profit and loss
Profit share arrangement (Note 15)
2.3
–
–
2.3
Financial assets measured at fair value
2.3
–
–
2.3
Financial liabilities at fair value through profit and
loss and using hedge accounting
Interest rate swaps
0.7
–
0.7
–
Financial liabilities at fair value on acquisition of a
subsidiary
Share put options
1.9
–
–
1.9
Financial liabilities measured at fair value
2.6
–
0.7
Cash flow hedge
The group designate, as cash flow hedges, interest rate swaps entered into with three counterparties maturing
in February 2026. These interest rate swaps convert floating interest rate liabilities into fixed interest rate
liabilities. The swaps run concurrently with the hedged item, being the group’s floating rate liabilities under
the senior finance facility.
For the years ended December 2022 and 2021, there were no significant amounts recognised in the profit
or loss relating to the ineffective portion of hedges or portions excluded from the assessment of hedge
effectiveness. The movement in the interest rate swap relates to fair value movement and is recognised
through other comprehensive income.
Fair value hierarchy
The group uses the following hierarchy for determining and disclosing the fair value of financial instruments
by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly; and
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not
based on observable market data.
As at 31 December 2022, the group held financial instruments measured at fair value, being an asset of
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the group, directly or indirectly. They include the board and executive committee,
as identified on pages 91 to 95.
Compensation for key management personnel is set out in the table below:
Key management compensation
(£m)
2022
2021
Salaries and other short term employee benefits
5.0
4.5
Post-employment benefits
0.5
0.5
Termination benefits
–
–
Share-based payments
1.1
1.0
6.6
6.0
Further information about the remuneration of individual directors is provided in the audited part of the
directors’ remuneration report on pages 112 to 119.
There were no transactions with related parties external to the group in the year to 31 December 2022
Spire Healthcare Group plc
Annual Report and Accounts 2022
Notes to financial statements
continued
Acquisitions in 2022
Acquisition of The Doctors Clinic Group Limited (together ‘Doctors Clinic Group’)
On 16 December 2022, the group acquired 100% of the voting shares of The Doctors Clinic Group Limited
(which in turn owns 100% of the shares of The London Doctors Clinic Limited, Maitland Medical Service Limited
and Soma Health Limited), a non-listed company based in England which operates GP and occupational health
services in the UK, for £11.6 million. The group acquired the companies to expand its offering for GP and
occupational health services in line with its strategic plan.
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of The Doctors Clinic Group Limited as at the date of
acquisition were:
(£m)
Fair value
recognised on
acquisition
Assets
Plant, property and equipment (Note 13)
0.6
Trade and other receivables (Note 18)
1.5
Cash (Note 19)
0.3
2.4
Liabilities
Payables (Note 25)
(1.9)
Total identifiable net assets at fair value
0.5
Goodwill arising on acquisition (Note 14)
11.1
Purchase consideration transferred
11.6
The amounts recognised, are subject to adjustment in line with IFRS 3 for up to a 12 months from acquisition,
with goodwill being adjusted accordingly.
The fair value of the trade receivables amounts to £1.5 million. The gross amount of trade receivables is
£1.5 million and it is expected that the full contractual amounts can be collected.
From the date of acquisition, The Doctors Clinic Group contributed £0.4 million of revenue and loss of £0.1 to
profit before tax from continuing operations of the group. If the combination had taken place at the beginning
of the year, revenue from continuing operations would have been £10.0 million and loss before tax from
continuing operations for the group would have been £2.5 million.
Goodwill has been recognised to reflect the synergies which the group believes are available to expand its
offering for GP and occupational health services in line with its strategic plan which reflect intangibles that
cannot be separately quantified. This goodwill is not deductible for tax purposes.
Purchase consideration transferred
(£m)
Cash flow on
acquisition
Net cash acquired with the subsidiary
0.3
Cash paid
11.6
Net cash flow on acquisition
11.3
Transaction costs of £1.7 million were expensed and are included within adjusting Items. The acquisition is
subject to a completion accounts process which is due to take place during H1 2023. Following this, the final
purchase price adjustments will be agreed, and goodwill updated accordingly in line with IFRS 3, which allows
12 months from the acquisition date to finalise the goodwill position.
Prior year Acquisition of Claremont Hospital Holdings Limited and Claremont Hospital LLP (together
‘Claremont Hospital’)
During the year the group reviewed its goodwill position in respect of Claremont Hospital in line with IFRS 3
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
162
Overview
Contents
Back / Forward
restated
(£m)
Note
2022
2021
ASSETS
Non-current assets
Investments
C9
840.5
838.2
Other receivables
C7
168.3
162.6
1,008.8
1,000.8
Current assets
Other receivables
C7
170.2
117.0
Cash and cash equivalents
C6
0.2
0.2
170.4
117.2
Total assets
1,179.2
1,118.0
EQUITY AND LIABILITIES
Equity
Share capital
21
4.0
4.0
Share premium
830.0
826.9
EBT share reserves
21
–
(0.8)
Retained earnings
337.8
285.0
Total equity
1,171.8
1,115.1
Current liabilities
Income tax payable
1.8
1.1
Trade and other payables
C8
5.6
1.8
Total liabilities
7.4
2.9
Total equity and liabilities
1,179.2
1,118.0
The profit attributable to the owners of the company for the year ended 31 December 2022 was £51.4million
(2021: £43.5million).
The financial statements on pages 164 to 167 were approved by the board of directors on 1 March 2023 and
signed on its behalf by:
Justin Ash
Chief Executive Officer
Jitesh Sohda
Chief Financial Officer
Company balance sheet
As at 31 December 2022
(Registered number 09084066)
(£m)
Share
capital
Share
premium
EBT
share
reserves
Retained
earnings
Total
equity
At 1 January 2021
4.0
826.9
(0.8)
238.7
1,068.8
Profit for the year
–
–
–
43.5
43.5
Other comprehensive income for the year
–
–
–
–
–
Share-based payment
–
–
–
2.8
2.8
Dividend paid
–
–
–
–
–
As at 1 January 2022
4.0
826.9
(0.8)
285.0
1,115.1
Profit for the year
–
–
–
51.4
51.4
Other comprehensive income for the year
–
–
–
–
–
Issue of new shares
–
3.1
–
–
3.1
Share-based payment
–
–
–
2.3
2.3
Utilisation of EBT shares
–
–
0.8
(0.8)
–
Dividend paid
–
–
–
(0.1)
(0.1)
As at 31 December 2022
4.0
830.0
–
337.8
1,171.8
Company statements of changes in equity
For the year ended 31 December 2022
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
163
Overview
Contents
Back / Forward
(£m)
2022
2021
Cash flows from operating activities
Profit before taxation
52.1
43.6
Dividend received
(46.9)
(43.4)
Profit before taxation (excluding dividend received)
5.2
0.2
Adjustments for:
Interest income
(9.8)
(6.8)
Finance costs
3.4
2.4
(1.2)
(4.2)
Movements in working capital:
Increase in trade and other receivables
(45.9)
(41.7)
Increase in trade and other payables
0.3
2.1
Net cash used in operating activities
(46.8)
(43.8)
Cash flows from investing activities
Dividend received
46.9
43.4
Net cash generated from investing activities
46.9
43.4
Cash flows from financing activities
Dividend paid to equity holders of the Parent
(0.1)
–
Net cash used in financing activities
(0.1)
–
Net decrease in cash and cash equivalents
–
(0.4)
Cash and cash equivalents at beginning of year
0.2
0.6
Cash and cash equivalents at end of year
0.2
0.2
Company statement of cash flows
For the year ended 31 December 2022
C1. Basis of preparation
The financial statements have been prepared in accordance with UK-adopted International Accounting Standards
(‘IAS’) in accordance with the Companies Act 2006 and on an historical cost basis. The financial statements are
presented in UK sterling and all values are rounded to the nearest million pounds (£m), except when otherwise
indicated.
See note 1 for general information about the company.
The financial statements have been prepared on a going concern basis as the directors believe there are no
material uncertainties that lead to significant doubt that the company can continue as a going concern until
March 2023 (see the going concern section in note 2 for more detail).
The company applies consistent accounting policies, as applied by the group. To the extent that an accounting
policy is relevant to both group and company financial statements, refer to the group financial statements for
disclosure of the accounting policy. Material policies that apply to the company only are included as appropriate.
The company has used the exemption granted under s408 of the Companies Act 2006 that allows for the
non-disclosure of the income statement of the parent company.
The financial statements contain a prior period restatement in relation to the classification of intercompany
receivables. The receivable was classified as a current asset as the company does not expect to realise these assets
within the next 12 months after the reporting period, these have been reclassified as non-current. In accordance
with the accounting standards a third balance sheet has not been provided as this adjustment does not affect the
profit for the year, cash flow statement or statement of changes in equity. The effect of the change is shown in the
table below.
Balance sheet line item
As previously
reported at 1
January 2021
As restated at 1
January 2021
As previously
reported at 31
December 2021
As restated at 31
December 2021
Non-current other receivables
£0m
£158.9m
£0m
£162.6m
Current other receivables
£323.6m
£164.7m
£279.6
£117.0m
The company did not have items to be reported as other comprehensive income; therefore, no statement of
comprehensive income was prepared.
C2. Significant accounting policies in this section
Investment in subsidiaries
The company’s investments in subsidiaries are carried at cost less provisions resulting from impairment. In testing
for impairment, the carrying value of the investment is compared to its recoverable amount, being its value-in-use.
In addition, market capitalisation is compared to the investments of the company when assessing impairment
requirements.
Share-based payments
The financial effect of awards by the company of options over its equity shares to employees of subsidiary
undertakings is recognised by the company in its individual financial statements as an increase in its investment in
subsidiaries with a credit to equity equivalent to the IFRS 2 cost in subsidiary undertakings. The subsidiary, in turn,
will recognise the IFRS 2 cost in its income statement with a credit to equity to reflect the deemed capital
contribution from the company.
Notes to the parent company financial statements
For the year ended 31 December 2022
This section contains the notes to the company financial statements. The issued share capital and EBT share
reserves are consistent with the Spire Healthcare Group plc group financial statements. Refer to note 21 of
the group financial statements.
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
164
Overview
Contents
Back / Forward
Notes to the Parent Company financial statements
continued
C3. Key estimates and assumptions in this section
Impairment testing of investments in subsidiaries
The company’s investments in subsidiaries have been tested for impairment by comparison against the underlying
value of the subsidiaries’ assets based on value-in-use calculated using the same assumptions as noted for the
testing of goodwill impairment in note 14 of the group financial statements. In addition, the market capitalisation
is also compared to the investments of the company to determine if there is a trigger for impairment review. See
note C9 for more detail.
C4. Staff costs and directors’ remuneration
The company had no employees during the year, except for the directors. The information on compensation for the
directors, being considered as the key management personnel of the company, is disclosed in note C12.
C5. Auditor’s remuneration
During the year, the company obtained the following services from the company’s external auditor, as detailed
below:
(£’000)
2022
2021
Amounts payable to auditor in respect of:
Audit of the company’s annual financial statements
15.0
15.0
15.0
15.0
C6. Cash and cash equivalents
(£m)
2022
2021
Cash at bank
0.2
0.2
0.2
0.2
C7. Other receivables
(£m)
2022
Restated
2021
Amounts owed by subsidiary undertakings – current
170.2
117.0
170.2
117.0
The amounts owed by subsidiary undertakings bear interest at SONIA plus 2.05% (2021: LIBOR plus 2.25%). No
allowance for expected credit losses has been included for amounts receivable from subsidiary undertakings
as the provision rates calculated based on two years are immaterial. As described in the directors’ report, the
group has sufficient resources to satisfy going concern and viability considerations. All subsidiaries are under
common control and resources could be made available for settlement of debts as and when required.
(£m)
2022
Restated
2021
Amounts owed by subsidiary undertakings – non-current
168.3
162.6
168.3
162.6
The amounts owed by subsidiary undertakings bear interest at SONIA plus 2.05% (2021: LIBOR plus 2.25%).
The amounts are unsecured and repayable on demand. The prior year restatement in relation to the
classification of intercompany receivables. The receivable was classified as a current asset as the company
does not expect to realise these assets within the next 12 months after the reporting period, these have
been reclassified as non-current.
C8. Trade and other payables
(£m)
2022
2021
Amounts owed to subsidiary undertakings
5.1
1.7
Accruals
0.5
0.1
5.6
1.8
The amounts owed to subsidiary undertakings bear interest at SONIA plus 2.05% (2021: LIBOR plus 2.25%). The
amounts are unsecured and repayable on demand.
C9. Investment in subsidiaries
(£m)
Subsidiary
undertakings
Total
Net book value
At 1 January 2021
835.4
835.4
Additions – IFRS 2 costs
2.8
2.8
At 1 January 2022
838.2
838.2
Additions – IFRS 2 costs
2.3
2.3
At 31 December 2022
840.5
840.5
Details of the company’s subsidiaries at the balance sheet date are in note 16 to the group financial
statements.
At the year end, investments in subsidiaries were reviewed for indicators of impairment.
Management acknowledged one indicator of impairment at the year end, being, the net assets of the company
are higher than that of the group’s consolidated net assets. In the current period, market capitalisation exceeds
the investment value.
The company undertakes a five year forecast when assessing the recoverable amount of the investment
consistent with the forecast in note 14 to the group financial statements. Management determined that
no impairment was required.
C10. Capital management and financial instruments
The capital structure of the company comprises issued capital, reserves and retained earnings as disclosed
in the company statement of changes in equity totalling £1,171.8 million (2021: £1,115.1 million) as at
31 December 2022, and cash amounted to £0.2 million (2021: £0.2 million).
Credit risk
As at 31 December 2022, the company had amounts owed by subsidiary undertakings of £338.5 million
(2021: £279.6 million). The company’s maximum exposure to credit risk from these amounts is £338.5 million
(2021: £279.6 million).
Liquidity risk
The company finances its activities through its investments in subsidiary undertakings.
The company anticipates that its funding sources will be sufficient to meet its anticipated future
administrative expenses and dividend obligations as they become due over the next 12 months.
Strategic report
Governance report
Financial statements
Other information
Spire Healthcare Group plc
Annual Report and Accounts 2022
165
Overview
Contents
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C10. Capital management and financial instruments
continued
Liquidity risk
continued
£0.1 million of dividends were paid to the executive directors in respect of grants under the LTIP share scheme
that have vested and are currently subject to a two-year holding period.
Since the end of the financial year, the directors have proposed a final dividend of approximately 0.5 pence per
share. The dividend is subject to approval by shareholders at the Annual General Meeting and is therefore not
included in the balance sheet as a liability at 31 December 2022.
(£m)
2022
2021
Financial assets: carrying amount and fair value:
Loans and receivables
Cash and cash equivalents
0.2
0.2
Amounts owed by subsidiary undertakings
338.5
279.6
338.7
279.8
All of the above financial assets are current and not impaired.
(£m)
2022
2021
Financial liabilities: carrying amount and fair value:
Amortised cost
Amounts owed to subsidiary undertakings
5.1
1.7
5.1
1.7
All of the above financial liabilities have a maturity of less than one year.
The fair value of financial assets and liabilities approximates their carrying value.
Market risk
Interest rate risk and sensitivity analysis
As at 31 December 2022 the company had short-term borrowings of £5.1 million (2021: £1.7 million) owed to
subsidiary undertakings, which are repayable on demand and bear interest at LIBOR plus 2.25% (2021: LIBOR
plus 2.25%). Interest on these borrowings in the year amounted to £3.4 million (2021: £2.4 million) and the
directors do not perceive that servicing this debt poses any significant risk to the company given its size in
relation to the company’s net assets.
IFRS 7 Financial Instruments: Disclosures required a market risk sensitivity analysis illustrating the fair values
of the company’s financial instruments and the impact on the company’s income statement and shareholders’
equity of reasonably possible changes in selected market risks. Excluding cash and cash equivalents, the
company has no financial assets or liabilities that expose it to market risk, other than the amounts owed by/to
subsidiary undertakings of £338.5 million (2021 £279.6 million) and £5.1 million (2021: £1.7 million)
respectively. The directors do not believe that a change of 25 basis points in the LIBOR interest rates
will have a material impact on the company’s income statement or shareholders’ equity.
C11. Contingent liabilities
Lease arrangements with a consortium of investors
The company has given a guarantee to a consortium of investors, comprising Malaysia’s Employees Provident
Fund (EPF), affiliated funds of Och-Ziff Capital Management group and Moor Park Capital, in relation to the
sale of 12 of the Spire Healthcare group’s property-owning companies on 17 January 2013. With effect from
Notes to the Parent Company financial statements
continued
17 January 2013, the total third party annual commitments of the group under these leases increased by
£51.3 million per annum.
As a result of the sale, the group has long-term institutional lease arrangements (up to December 2042, subject to
renewal or extension), with the landlord for 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. 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, £5.0 million of maintenance capital expenditure and £3.0 million of additional capital
expenditure on the portfolio of 12 hospitals each year, such being subject to indexation in line with RPI. If the
minimum rent cover ratio is not met, the group is required to enter into an asset performance recovery plan in
order to comply with the covenants, but no default would be deemed to have occurred. The company is a party
to this guarantee. As at 31 December 2022, the group complied with the required covenants and the lease
liability held on the consolidated balance sheet is £611.4 million (2021: £593.4 million).
Lease agreements entered into by Classic Hospitals Limited (novated to Spire Healthcare Limited during
the year)
Under lease agreements entered into on 26 January 2010 by Classic Hospitals Limited, a subsidiary undertaking
of the company, the company has undertaken to guarantee the payment of rentals over the lease term to
August 2040, and to ensure that the other covenants in the lease are observed. The lease has been moved to
Spire Healthcare Limited, another subsidiary undertaking of the company, to allow Classic Hospitals Limited to
enter Members’ Voluntary Liquidation as part of the entity rationalisation carried out during the year. The initial
rentals payable under the leases in 2010 were £6.3 million per annum, which will be subject to an increase
in future years. As part of these arrangements, the assets of the company are subject to a fixed and floating
charge in the event of a default. As at 31 December 2022, there was no breach in the required covenants
and the lease liability held on the Consolidated balance sheet is £80.8 million (2021: £79.9 million).
C12. Related party transactions
The company’s subsidiaries are listed in note 16 to the group financial statements. The following table provides
the company’s balances that are outstanding with subsidiary companies at the balance sheet date:
(£m)
2022
2021
Amounts owed from subsidiary undertakings – Spire Healthcare Finance Limited,
Spire Healthcare Limited and Spire Healthcare (Holdings) Limited
338.5
279.6
Amounts owed to subsidiary undertakings – Spire Healthcare Limited
(5.1)
(1.7)
333.4
277.9
The amounts outstanding are unsecured and repayable on demand.
The following table provides the company’s transactions with subsidiary companies recorded in the profit for
the year:
(£m)
2022
2021
Amounts invoiced to subsidiaries
57.8
46.5
Amounts invoiced by subsidiaries
–
–
Dividend received from subsidiaries
46.9
43.4
Amounts invoiced to/by subsidiaries relate to general corporate purposes.
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C12. Related party transactions
continued
Directors’ remuneration
The remuneration of the non-executive directors of the company is set out below. Further information about
the remuneration of individual directors is provided in the audited part of the directors’ remuneration report
on pages 146 to 155.
(£m)
2022
2021
Short term employee benefits*
1.0
3.9
Pension contributions
–
–
Share-based payments*
–
–
Total
1.0
3.9
*
Emoluments and share-based payment charges for the executive directors are borne by a subsidiary company, Spire Healthcare
Limited. Share-based payment related charges for the Executive Chairman prior to Admission (ie directors’ Share Bonus Plan) are
also borne by a subsidiary company, Spire Healthcare Limited. Please refer to note 27 of the group consolidation statements.
Directors’ interests in share-based payment schemes
Refer to note 27 to the group financial statements for further details of the main features of the schemes
relating to share options held by the chairman, executive directors and senior management team.
Other transactions
In order to simplify the structure of the group and reduce costs, the company undertook a process in the prior
year in which a number of companies within the group were identified for members’ voluntary liquidation,
as follows:
Classic Hospitals Group Limited
–
Fox Healthcare Holdco 2 Limited
–
Spire UK Holdco 2A Limited
–
Spire Healthcare Holdings 1
–
Spire Cambridge (Disposal) Limited
–
Spire Fertility (Disposal) Limited
–
Spire Healthcare Group UK Limited
–
SHC Holdings Limited
–
Spire Healthcare Holdings 3 Limited
–
Spire Healthcare Holdings 2 Limited
–
Classic Hospitals Limited
–
Lifescan Limited
–
Spire Thames Valley Hospital Limited
These entities were all in members’ voluntary liquidation at year end and are expected to be formally dissolved
at Companies House during 2023.
C13. Events after the reporting period
There have been no events to disclose after the reporting date.
Notes to the Parent Company financial statements
continued
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Spire Healthcare website
Shareholders are encouraged to visit our website at www.spirehealthcare.com which has a wealth of
information about the company and the services it offers. There is a section designed specifically for investors
at www.investors.spirehealthcare.com where shareholder and media information can be accessed. This year’s
annual report and notice of annual general meeting can also be viewed there.
Registered office and group 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 and Wales No. 09084066
Shareholder enquiries
All shareholder enquiries regarding your shares should be addressed to the company’s share registrar at the
address on page 215, or as follows:
Equiniti Limited
Tel (UK only) 0371 384 2030*
Tel (non-UK) +44 (0)121 415 7047
For the hard of hearing, Equiniti Limited offers a special Textel service that can be accessed by
dialling 0371 384 2255*
(or +44 (0)121 415 7028 from outside the UK).
*
Lines are open from 8.30am to 5.30pm, Monday to Friday, UK time.
Managing your shares
Please contact our registrar, Equiniti Limited, to manage your shareholding if you wish to:
–
Register for electronic communications
–
Transfer your shares
–
Change your registered name or address
–
Register a lost share certificate and obtain a replacement
–
Consolidate your shareholdings
–
Manage your dividend payments
–
Notify the death of a shareholder
When contacting Equiniti Limited or registering online, you should have your shareholder reference number
at hand. This can be found on your share certificate or latest dividend confirmation. You can manage your
shareholding online by registering for Shareview at www.shareview.co.uk. This website has a ‘frequently
asked questions’ section which addresses the most common shareholder problems.
All other shareholder enquiries not related to the share register should be addressed to the company secretary
at the registered office or emailed to [email protected].
Electronic shareholder communications
Registering for online communications gives shareholders more control of their shareholding. The registration
process is via our registrar’s secure website at www.shareview.co.uk. Once registered you will be able to:
–
Elect how we communicate with you
–
Amend your details
–
Amend the way you receive dividends
–
Buy or sell shares online
This does not mean shareholders can no longer receive paper copies of documents if they so wish. We are able
to offer a range of services and tailor communication to meet your needs.
Share dealing services
UK resident shareholders can sell shares on the internet or by phone using Equiniti Limited’s Shareview Dealing
facility by either logging onto www.shareview.co.uk/dealing or by calling 0345 603 7037 between 8.00am and
4.30pm on any business day (excluding bank holidays).
In order to gain access to this service, the shareholder reference number is required, which can be found at the
top of the Company’s share certificates.
ShareGift
It may be that you have a small number of shares which would cost you more to sell than they are worth. It is
possible to donate these to ShareGift, a registered charity, who provide a free service to enable you to dispose
charitably of such shares. There are no implications for Capital Gains Tax purposes (no gain or loss) on gifts of
shares to charity and it is also possible to obtain income tax relief. More information on this service can be
obtained from www.sharegift.org or by calling +44 (0)207 930 3737.
Dividend mandate
If you are a shareholder who has a UK bank or building society account, you are recommended to arrange
payment electronically through a bank or building society mandate. There is no fee for this service and
notification confirming details of any dividend payment will be sent to your registered address. Please contact
Equiniti on 0371 384 2030 or download an application form from www.shareview.co.uk.
Overseas dividend payment service
Equiniti Limited provides a dividend payment service to over 30 countries that automatically converts
payments into the local currency by an arrangement with Citibank Europe PLC. Further details, including
an application form and terms and conditions of the service, are available on www.shareview.co.uk or from
Equiniti Limited by calling +44 (0)121 415 7047 or writing to them at Aspect House, Spencer Road, Lancing,
West Sussex BN99 6DA (please quote Overseas Payment Service with the Company name and your
shareholder reference number).
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Shareholder information
continued
Shareholder security
From time-to-time, in common with other listed companies, shareholders may receive unsolicited phone calls
or correspondence concerning investment matters. These are typically from overseas-based ‘brokers’ who
target UK shareholders, using persuasive and high-pressure tactics to lure investors into scams in what often
turn out to be worthless, non-existent or high-risk shares in US or UK investments. These operations are
commonly known as ‘boiler rooms’.
Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers
of free company reports. Further information on how to avoid share fraud or to report a scam can be found on
our website at www.spirehealthcare.com.
2022 Financial calendar
2023 annual general meeting
11 May 2023
Final dividend record date
26 May 2023
Final dividend payment date
23 June 2023
Announcement of 2023 half year results
September 2023
Analysis of ordinary shareholders
Holding of ordinary shares as at 31 December 2022
Private
Institutional and other
Total
Investor type
2022
2021
2022
2021
2022
2021
Number of holders
147
119
355
385
502
504
Percentage of holders
29.28%
23.61%
70.72%
76.92%
100%
100%
Percentage of shares held
0.17%
0.16%
99.83%
99.70%
100%
100%
1–1,000
1,001–50,000
50,001–500,000
500,001+
Investor type
2022
2021
2022
2021
2022
2021
2022
2021
Number of holders
74
91
250
243
106
104
72
66
Percentage of holders
14.74%
18.06%
49.80%
48.21%
21.12%
20.63%
14.34%
13.10%
Percentage of shares held
0.01%
0.01%
0.76%
0.69%
4.67%
4.51%
94.56%
94.79%
Shareholders percentage by shareholding
Shareholders percentage by shareholder
Corporate advisers
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
Brokers
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Numis Securities Limited
45 Gresham Street
London EC2V 7BF
Legal advisers
Freshfields Bruckhaus
Deringer LLP
100 Bishopsgate
London EC2P 2SR
Remuneration consultants
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
1. Private 147
2. Insit 355
2
1
2. 1,001-50,000 – 250
1. 1-1,000 – 74
3. 50,001-500,000 – 106
4. 500,000+ – 72
3
2
1
4
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Performance measure
Definition
Purpose
Adjusted operating profit;
or, adjusted EBIT
Operating profit, less adjusting items
before interest and tax.
Provides a comparable measure of
operating profit performance over time.
Conversion of adjusted
EBITDA to cash
Adjusted EBITDA divided by
operating cash flows before
adjusting items and taxation.
Intends to show the group’s efficiency
at converting adjusted EBITDA into
cash.
Adjusted EBITDA
Adjusted EBITDA is calculated as
operating profit, adjusted to add
back depreciation, and adjusting
items.
Adjusted EBITDA shows the group’s
earning power independent of capital
structure and tax situation with the
purpose of simplifying comparisons
with other companies in the same
industry as it excludes non-cash
accounting entries, such as
depreciation.
Adjusted EBITDA margin
Adjusted EBITDA as a percentage of
revenue.
Provides a comparable performance
metric, expressed as a percentage of
revenues.
Net debt
Interest-bearing liabilities, less cash
and cash equivalents.
Measurement of net group
indebtedness for covenant purposes.
Net bank debt
Interest-bearing liabilities, excluding
borrowing costs, less cash and cash
equivalents.
Measurement of net group
indebtedness.
Pre IFRS 16
Reported numbers before applying
the effects of IFRS 16 Leases.
To provide an understanding of the
impact of IFRS 16 to the reported
numbers and allow comparison to
previously reported numbers.
Net debt/EBITDA
Net debt at the end of the period
divided by EBITDA.
Indicates the group’s ability to service
its debt from cash earnings.
Clinical staff costs as a
percentage of revenue
Clinical staff costs and medical fees
as a percentage of revenue.
Provides a comparable measure of cost
performance over time in relation to
revenue activity.
Other direct costs as a
percentage of revenue
Other direct costs include, direct
costs and medical fees as a
percentage of revenue.
Provides a comparable measure of cost
performance over time in relation to
revenue activity.
Alternative performance measures definitions
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Executive
directors
the executive directors of the
company
FCA
the Financial Conduct Authority
FRC
the Financial Reporting Council
GDP
gross domestic product
GDPR
General Data Protection
Regulation
GHG
greenhouse gas
GMC
General Medical Council
GP
General practitioner
Group
Spire Healthcare Group plc and its
subsidiaries
HCA
Holdings, Inc.
Hospital Corporation of America
HD
Hospital director
Health &
Safety Act
The Health & Safety at Work etc
Act 1974
HIS
Health Improvement Scotland
HIW
Health Inspectorate Wales
HMRC
HM Revenue & Customs
HSE
Health and Safety Executive
IFRS
International Financial Reporting
Standards, as adopted by the EU
IPO
initial public offering of shares
to certain institutional and other
investors
ISO 14001
environmental management
system
ISO 18001
health and safety management
system
ITU
Intensive Therapy Unit
JAG
accreditation
The Joint Advisory Group on
Gastrointestinal Endoscopy (JAG)
accreditation is the formal
recognition that an endoscopy
service has demonstrated that
it has the competence to deliver
against the measures in the
Endoscopy Global Rating Scale
standards
KPI
key performance indicator
Listing Rules
the listing rules of the FCA made
under section 74(4) of the
Financial Services and Markets
Act 2000
LTIP
Long Term Incentive Plan
MAC
Medical advisory committee
MRI
magnetic resonance imaging
NDC
Spire Healthcare’s national
distribution centre in Droitwich
NHS
the National Health Services in
England, Scotland, Wales and
Northern Ireland, collectively
NI
National Insurance
NIC
National Insurance Contributions
Non-
executive
directors
the non-executive directors of
the company
The following definitions apply throughout the
Annual Report 2022, unless the context requires
otherwise:
Act
The Companies Act 2006, as
amended
Acute care
active but short-term treatment
for a severe injury or episode of
illness
Adjusted
EBITDA
Adjusted EBITDA is calculated as
operating profit, adjusted to add
back depreciation, and adjusting
items
Admission
the admission of the shares to the
premium listing segment of the
Official List and to trading on the
London Stock Exchange’s main
market for listed securities
Articles
the articles of association of the
company
Board
the board of directors of the
company
CAGR
compound annual growth rate
Cardiology
specialty which encompasses the
treatment of patients with
cardiovascular disease
CCG
Clinical commissioning group
CGSC
Clinical governance and safety
committee
Cinven
Cinven Partners LLP
CMA
the UK Competition and Markets
Authority
Company
Spire Healthcare Group plc
Glossary
CQC
Care Quality Commission
CO
2
e
carbon dioxide equivalent
CQUIN
commissioning for quality and
innovation payment which is
earned for meeting quality targets
on NHS work
CRC Energy
Efficiency
Scheme
the CRC (Carbon Reduction
Commitment) scheme aims to
incentivise energy efficiency and
cut emissions in large energy
users in the UK’s public and
private sectors
CREST
the UK-based system for the
paperless settlement of trades
in listed securities, of which
Euroclear UK and Ireland Limited
is the operator
CRM
customer relationship
management system/software
CT
computerised tomography
DSBP
Deferred Share Bonus Plan
Directors
the executive directors and
non-executive directors
DPA
Data Protection Act
EBITDA
Earnings before interest, tax,
depreciation and amortisation
EfW
Energy from waste
EPS
earnings per share
ESOS
Energy saving opportunity
scheme
EU
the European Union
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Important information: forward-looking statements
These materials contain 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 presentation, 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
presentation 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 during this presentation 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 these materials.
The group is providing the information in these materials 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.
Forward-looking statements
Official List
the record of whether a
company’s shares are officially
listed, maintained by the FCA
(the UKLA Official List)
Oncology
specialty which encompasses the
treatment of people with cancer
PHIN
Private Healthcare Information
Network
PILON
payment in lieu of notice
PIP Claims
the claims relating to the supply
of alleged faulty PIP breast
implants
PMI
private medical insurance/insurer
PPE
property, plant and equipment
PPU
Private Patient Unit
PROMs
Patient Reported Outcome
Measures
Registrar
Equiniti Limited
Registration
regulations
the Care Quality Commission
(Registration) Regulations 2009
Regulated
activities
regulations
the Health and Social Care Act
2008 (Regulated Activities)
Regulations 2010
RIDDOR
Reporting of Injuries, Diseases and
Dangerous Occurrences
Regulations
ROCE
return on capital employed
SAP
global software developer/
software
Self-pay
when a procedure or treatment
provided is funded by the patient
directly
Shareholders
the holders of shares in the capital
of the company
Shares
the ordinary shares of 1 pence
each in the company, having the
rights set out in the articles
tCO
2
e
tonnes of carbon dioxide
equivalent
TSR
total shareholder return
UK
the United Kingdom of Great
Britain and Northern Ireland
UKAS
UK Accounting Standards
UK Code
the UK Corporate Governance
Code issued by the Financial
Reporting Council, as amended
from time-to-time
Glossary
continued
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