FTSE 250 firm Spire Healthcare Group PLC (LON:SPI) shares weren’t looking healthy in lunchtime trading Thursday after Jefferies downgraded the group to ‘underperform’ on its “increasingly ambitious” growth targets for 2022.
The broker said that after targeting £200mln+ in underlying earnings (EBITDA) by 2022, as well as 80% of sales from private patients and 100% of its hospitals rated good/outstanding by CQC, at a capital markets day in April, it was becoming “increasingly clear” six months later that the targets were “challenging and timelines are likely to slip”.
READ: Spire blames NHS for “disappointing” first-half profits slump and weak outlook
Jefferies added that despite high single-digit growth in Spire’s key self-pay division, this was still “well below” its stated target of a 14% compound annual growth rate (CAGR) and had little sign of change given the group’s “lack of presence in Central London” and around 40% of the UK private market.
Analysts also commented that Spire’s private medical insurance (PMI) and NHS segments were “lagging”, with the NHS business seeing “substantial declines” in local contract work and e-referrals amid forecasts of flat budget spending over the coming years.
For PMI, the broker cited a high concentration of insurers as well as the “looming” threat of Brexit as “unhelpful”.
In addition to the downgrade, Jefferies also slashed its target price for the firm to 115p from 160p, with its internal revenue and EBITDA forecasts being 10% and 22% below Spire’s own guidance respectively.
Analysts added that they also saw “a risk of near term downgrades, given the ongoing challenging environment at the NHS” as well as targeted cost savings being unable to compensate for rising wage costs, shortages of skilled staff and escalating rents.
Spire shares were down 6% at 138p.