Berenberg lowers target price on Spire Healthcare following FY24 results
Analysts at Berenberg lowered their target price on from 300.0p to 255.0p on Friday after the firm reported weaker-than-expected, missing consensus expectations across revenues, as well as adjusted underlying earnings and adjusted EPS.
Berenberg noted that Spire's shares were "meaningfully down" on the day as its FY25 guidance implied material cuts to consensus EBITDA and earnings estimates due to the unfavourable impact from higher National Insurance costs, the increase in the UK National Minimum Wage, an unfavourable payor mix and higher energy costs.
In response to these headwinds, Spire stated that it was focused on ramping up its cost-saving initiatives, with new targets of £30.0m in FY25 and £80.0m of cumulative cost savings over FY24-FY26. It plans to achieve this by using electronic procurement, better staff management and by centralising patient support centres.
"We make 1-2% cuts to our revenue forecasts and 8-12% cuts to our EBIT estimates as we factor in the unfavourable impact from cost headwinds (partially offset by internal efficiency measures). We make material cuts to our earnings estimates as we factor in higher finance costs (£103.0m) and taxes (above 30% tax rate) from FY25," said the German bank, which noted that execution would be key to Spire's shares rerating.
In FY25, Berenberg expects bank leverage to be maintained at roughly 2x and free cash flow to remain positive.
Reporting by Iain Gilbert at Sharecast.com
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