Spire Healthcare Group plc (SPI) Earnings Call Transcript & Summary

Good morning, and welcome to our presentation of the full year results for the year ending 31st December, 2024. I'm Justin Ash. I'm Chief Executive of Spire Healthcare. Thank you for joining us. So you've just heard from Sam. Sam and our other patients are at the heart of why we are here to make a positive difference to people's lives. And her story touches many areas which are so important to us, quality, personalized care, speed of treatment and being there for our patients in the months and years that follow. And I hope this gives you a strong sense of our purpose and our drive. And with that said, let's now move to our presentation. So to start with, I will give an overview of the year and our outlook. So I'm pleased to be presenting a good set of results this morning with strong strategic delivery and all core metrics in line with guidance. And we did this against a backdrop where the market and economic environment is changing, an environment where we have to be more agile and responsive than ever. So pulling out some of the key points, we saw strong growth. Group revenues were up over 6% on a comparable basis in which hospital revenues increased by 5.5%. Margins expanded in both hospital and primary care, delivering adjusted EBITDA of GBP 260 million, up 9%. And we saw strong flow through to the bottom line with adjusted PBT of GBP 50 million growing at over 29%. We're pleased that NHS referrals accelerated to 8.8% growth. We responded to that demand and ensure that our focus was on high acuity procedures. Whilst this did lead to a margin impact from higher NHS mix in the second half, driving our capacity utilization was the right thing to do. As we're all aware, the government also announced plans to increase national insurance and the national minimum wage in H2, which we will talk about shortly. I'm pleased that in H2, we were able to accelerate our efficiency program, delivering over GBP 20 million in savings compared with our guidance of GBP 15 million. Staff turnover and agency use reduced to an all-time low in our hospitals, which brings important workforce stability. We grew our primary care business over 15%, thanks to the outperformance of Vita. And finally, I'm delighted that we now care for over 1.3 million people, demonstrating our scale. Looking forward, like all businesses and employers, we are faced with sizable cost increases in the coming year, GBP 30 million in 2025 as a result of national insurance and minimum wage, rising energy costs, plus the changing payor mix I just referred to. We have already started pivoting the business to adapt to this. We will continue to accelerate our efficiencies program, delivering over GBP 30 million in 2025, which is GBP 10 million ahead of our original plan. And this will continue into the following year, delivering GBP 80 million in cumulative savings benefit by the end of '26, which is now GBP 20 million above our original guidance. And we are confident we have a strategy that will deliver long and midterm growth. We continue to expect above 5% growth in our hospitals, maximizing private mix and price, high acuity work with the NHS and expanding other high growth services. Primary care will be at least a GBP 40 million EBITDA business in the medium term, supported by more contract wins, of which we've already secured GBP 90 million in long term contracts, some small M&A and new clinic openings. And we will also neutralize the cost and margin challenges by 2027. In 2025, we will deliver profitable growth with mid-single digit revenue growth and margin expansion leading to an adjusted EBITDA range of GBP 270 million to GBP 285 million. As ever, the only reason we are able to achieve these results is because of our people. I'd like to place on record my thanks as ever, to all of my colleagues and consultant partners for everything they do for Spire and its patients, and we have many colleague highlights in 2024. We launched the DAISY and IRIS awards for excellence for our nonclinical and nursing colleagues, and these were presented to winners across the country. We hosted over 100 colleagues at our annual long service awards, and we celebrated the opening of our new Spire clinics in Harrogate, Abergele and Norwich. Well done to all those receiving awards and all those involved in these achievements. It's also nice to be recognized externally, having won or received top commendations across several independently benchmarked awards. They recognize our commitment to good employment practices and encouraging diversity. Thank you very much. I'll now hand over to Harbant to go through the financials in more detail.

Good morning, everybody, and thank you, Justin. So it's my pleasure to present our 2024 annual results. I am pleased to report that the group has met guidance on all core measures. Hospital revenue grew by over 5% year-on-year. And as you just heard from Justin, we accelerated our cost savings program, and we grew margins. It is great to share that Vita in its first year as part of our group has outperformed against plan with full year revenue of GBP 107.4 million and an adjusted EBITDA of GBP 11 million. Bringing this together, we have delivered an EBITDA of GBP 260 million for the group, which is an increase of 9% and has resulted in strong expansion in ROCE rising from 7.5% to 8.2%. Before I continue, a quick note, I'll present growth on a comparable basis throughout this presentation by assuming Vita was part of the group for the whole of 2023 and by adjusting hospital performance for the sale of Tunbridge Wells, which took place in March 2024. Turning to our Hospital business. Total revenue grew by 5.5% to GBP 1.4 billion, underpinned by both higher volumes and average revenue per case. We saw good growth in adjusted EBITDA to GBP 249.7 million and an improvement of 30 basis points in margin to 18%. This was achieved during a period where we saw a more dynamic external environment, including a change in payor mix and the end of our energy hedge in October 2024. This was partially mitigated through pricing action and targeting higher acuity work as well as our accelerating cost savings program. Adjusted EBIT rose to GBP 143.3 million with margin expansion of 40 basis points, demonstrating our ongoing discipline towards capital investment. In terms of performance by payor, I will start with our private business, which includes PMI and self-pay. We saw a 1% increase in admissions and outpatient procedures with strong growth in PMI driven by greater coverage of employer policies and in turn, more working age patients switching from self-pay. While demand for self-pay has moderated, we continue to see strong demand in high acuity areas like hip and knee surgery, which along with pricing management, resulted in ARPC growth of 3.9%. Overall, we delivered private revenue growth of 4.3%. Looking ahead to 2025, we expect similar growth trends where PMI will continue to benefit from more policies being written, self-pay switching and new network contracts. Our strategy for self-pay will continue to focus on price and mix management. I'll now move on to NHS activity, which is an important part of our business. Admissions and outpatient procedures grew by 4.4%, reflecting our strategy to increase e-referral conversion and support NHS Trusts, particularly in the area of orthopedics. By focusing on the right acuity, we achieved a 5% uplift in ARPC, which compares favorably against the NHS tariff uplift of 3.9% last year. Taken with the growth in volume, this resulted in total NHS revenue growing by 8.8%, which is ahead of expectation. Looking ahead, our strategic partnership will continue. Expanding our primary care services business is a key part of our strategy, and Justin will provide more details later. The acquisition of Vita in October 2023 was central to our initial rollout, and it is great that it has performed ahead of plan. Our primary care services business as a whole experienced significant growth in 2024 with revenue reaching GBP 121 million, a 15% increase on a pro forma basis. In 2024, EBITDA margin expanded by 340 basis points, driven by Vita's strong growth. The level of EBITDA converting into EBIT is good at 70% and drove an expansion in EBIT margin of 330 basis points. We expect more margin expansion as our young businesses grow and integrate, though margins may be impacted in the short term as we continue to open new clinics. In summary, primary care is on an exciting growth path. Our efficiency program is ahead of plan with more than GBP 20 million saved in 2024 versus a target of at least GBP 15 million. Given our progress, we are now targeting over GBP 80 million in cumulative savings by 2026, up from the GBP 60 million mentioned at our Capital Markets event. We have made significant strides in automation and digitalization. For example, we've successfully implemented hospital tablet registration across all sites, making check-in faster. Over 1 million patients have now used the system already. We have also opened patient support centers in 3 locations, centralizing admin functions for a number of our hospitals as well as driving efficiency. This gives patients improved customer service and also frees up more space for clinical use. Let me now highlight how we are focused on improving the flow from EBITDA to profit before tax to enhance shareholder returns. Adjusted profit before tax has risen by 29.4% with the conversion rate rising to 19.3%, reflecting our effective management of capital investment and finance costs. This allows us to recommend another increase in dividend this year to 2.3p per share. Turning to our CapEx program. In 2024, we deployed a greater proportion of our budget towards driving growth and efficiency. In total, we invested GBP 99 million in hospitals, GBP 40 million of that was deployed towards growth, including the addition of a minor operations unit at Spire Claremont Hospital, 5 new MRIs as well as digitalization such as hospital check-in tablets. We have also made good progress on rolling out solar panels across our estate, which will help offset some of the cost pressure following the maturity of our energy hedge last year. The rest of our CapEx investment in our hospital business around GBP 59 million was dedicated to the maintenance of our estate, including major refurbishments such as that at Spire Washington and on IT equipment and infrastructure. In addition, we have also invested GBP 13 million in our primary care business with the opening of clinics in Abergele, Harrogate and Norwich. Our balance sheet is in excellent shape, having consistently deleveraged over the years. We expect to maintain bank leverage at around 2 in the normal course of business with the flexibility to extend in the short term for small M&A. Additionally, our freehold portfolio has just been independently valued at GBP 1.4 billion, which compares with a valuation of GBP 1.2 billion 2 years ago. Looking ahead to 2025, we are confident in delivering mid-single-digit revenue growth, driven by both our hospitals and increasing demand in primary care. We expect adjusted EBITDA to be in the range of GBP 270 million to GBP 285 million and ROCE to be ahead of last year despite the impact of national insurance, national minimum wage and energy costs. I share Justin's confidence and excitement for the year ahead. Acceleration will be the consistent theme across new services, new clinics and more efficiencies. I'll now hand back to Justin. Thank you.

Thank you, Harbant. So I'm now going to touch on the pillars of our business model, enabling us to deliver great outcomes for patients alongside strong financial returns. So we have and will continue to build scale and access, both geographically across the U.K. and by meeting more needs for our patients with services that we can also scale effectively. We're investing in our core hospital business, as you've just heard, and expanding primary care services to provide integrated care and drive referrals. This will go hand-in-hand with our efficiency drive, which will remove cost from the business without compromising on our leading patient experience and quality. And our ability to do this is underpinned by prudent financial management and a strong balance sheet, supported by the value of our property estate. This is the right strategy, and it will continue to deliver returns to shareholders. So we're building a successful integrated healthcare business. The private market -- the hospital private market, which is our core business, which you can see on the right hand of this slide, is worth around GBP 6 billion, and it's growing at about 5% annually. It includes consultations, in-hospital diagnostics, imaging, elective procedures, which is the bulk of it, and chemotherapy. The primary care market is also around GBP 6 billion, and it is growing at about 6% per annum combined. So Spire is building a fully integrated health care journey. We've grown businesses in private GPs and occupational health, addressing the entry point for consumers and employers. Our clinics program combines access to community diagnostics, outpatient treatments and physiotherapy. As the leading independent sector provider of mental health talking therapies, we are really well placed to win in that GBP 1 billion market, which is a market growing at 10%. And we are already seeing the benefit of cross referrals from primary care to our hospitals, for instance, from our Abergele clinic and Vita Physio sites. So combined, Spire's integrated offering is operating in a fast-growing GBP 12 billion market, underpinning the huge opportunity there is for our business. If we look at our hospitals, we already have a strong nationwide network of 38 sites. But we may look at infill hospital locations should they become available and where it makes sense. We're one of the leading providers of orthopedic services in the private sector, which will continue to be the core of our business. But we're already expanding into areas where there is opportunity, such as oncology, cardiac services, women's health, robotics and diagnostics. Within primary care services, we have strengthened significantly through both acquisition and organic build. Vita, as I said, is the largest outsourced provider of NHS talking therapies in England and has won significant long-term contracts with multiple commissioning boards and also recent wins. We opened 3 new Spire clinics in 2024 with plans to develop more than 5 this year. We're expanding our community physio network, and we will grow our occupational health services through more contract wins, potentially supported with some small local M&A to build a regional network. We will also integrate services across the London Doctors Clinic and Spire GP businesses to meet growing demand for services like health assessments. So by providing a diverse range of integrated services, we can scale more effectively. As I mentioned earlier, we are faced with new and sizable cost increases, but we are already responding. The main program to offset these cost rises are accelerated efficiencies, and we've already outlined the scale of those. As the hospital and primary care businesses expand, we will also optimize capacity utilization further to meet the changing payor mix and primary care referrals are and will support our private growth in particular. We're on a path to fully neutralize currently visible cost pressures by 2027 and deliver hospital EBITDA margins of more than 21% and EBIT margins of more than 13% targets we have previously outlined. And we will neutralize those cost pressures without compromising on quality. Clinical excellence and high-quality patient care is at the heart of what we do. We've implemented the patient incident response framework across all hospitals and support colleagues, and it allows our already broad speak-up arrangements to be enhanced when standards aren't being met or more often where colleagues see something they think can be improved. We are constantly innovating to improve the patient experience. For example, offering 23-hour hip and knee pathways and growing our cardiology and cardiac provision across more of our network. And this is feeding into continued high patient satisfaction. So last year, 97% of our patients rated their experience as good or very good, which was up again 1% on the year before. And increasingly, the business is improving outcomes for patients through technology, moving to digital histopathology using AI to improve MRI scan times and to improve image quality in diagnostics. And we continue our digitization program, which makes our patient pathways secure and safer. So in summary, 2024 was a year of good performance by the business in a dynamic environment. Fundamentals remain strong. We're operating in a market with growing private demand and a continued strategic partnership with the NHS. We're well positioned for growth, leveraging our hospital scale and continuing to expand in the large and fast-growing primary care market. Our accelerated efficiencies program will deliver more cost savings. In short, our strategy is delivering. And although exceptional cost pressures have moved our margin targets out by 1 year, we have a clear plan to deliver them and positive strategic and financial momentum will be maintained in 2025. Thank you very much for listening. You can later on look at the recorded version again should you be so minded as we enter the tech age. I'm now going to invite some colleagues up, and we will take some Q&A, which I'll direct the questions, and we'll see how we go. Thank you.

Okay. And you've got the names of our colleagues on the screen for those of you who are online. So starting here.

Seb Jantet from Panmure Liberum. Three questions, if I may. I'll just ask the first one and then go from there. So just on self-pay, it sounds -- so from the read -- the statement, it looks like that the decline in self-pay accelerated in the second half. And you're guiding to the impact for the full for 2025 being similar. Does that mean you've seen a slight bounce back in the first kind of quarter in terms of self-pay? Because if it accelerated in the last quarter, we'd expect it to actually end up being worse this year.

Do you want to ask all 3 questions, and then I'll see if I can slice them cleverly together?

Second one is around the NHS and just understanding kind of you obviously put a lot of e-referral kind of slots out there in the last quarter. I'm wondering what you saw in terms of fill rate for those slots? And how does that make your business in some way less predictable having to kind of put slots out there and wait to be filled in the short term? And similarly, within that, also, you're pretty much at the bottom of the range of where you said your NHS would get to. Are you changing that kind of range? Are you expecting that to grow? And then the last one was more specifically on NHS then. And looking at the latest guidance for the tariffs, there's a strange piece in there about commissioners having to agree limits with private providers in advance. And I'm wondering how you're planning to navigate that and whether you think that actually will be enacted.

I think you've asked everyone's questions for the most. Right. So I'm going to put PMI in there as well, and then we'll cover the whole. So I'll cover the big picture. I'll hand over to Peter. I think probably what I'll do is cover the whole market together. So top line. We've laid out clear guidance over the years that we will grow hospitals more than 5%. We grew at 5.5% in the first half, and we grew at 5.5% in the second half. And our guidance is we'll continue to do so. And that is the nature of our model, which we have a mixed model, and we can respond to when demand changes. Now it is quite clear that the market has changed a bit. And Peter can talk about the switch from self-pay to PMI and a bit about where the NHS is heading. But I think a key point is we keep demonstrating that our business model is robust. We are hugely responsive. So as the market changes, we can tilt. So that's the first point. And I'll let Peter talk about what's happening in each of those payors. Now within that, if you look at NHS guidance, first of all, don't believe everything you read in the press. There is a consultation. Of course, we participate. We know Jim very well. He's a very sensible guy. And we know Penny very well. So they will be focused on patients, and they will be listening to consultation. There's a consultation every year. I suspect this has had more press coverage because it's a year of change of personnel, et cetera. So I would really just wait to see where that goes. Very constructive engagement with NHS England on various other points. The tariff, others have called out. It is clearly important that as we become more of a strategic partner, we at least get inflationary recovery. So we've made that point very clear. It's a consultation. These things evolve. Our position couldn't be clearer, but I would avoid running the speculation on these things. They're much better played out behind closed doors, okay? And I feel that the strategic partnership with the NHS and with government, in particular, is stronger now than it has been for a very long period of time. So if we look at 5.5% of what we're going to achieve and what we've always been able to achieve, can you just talk about what's happening within the payor groups?

Let me just start first of all with the latest Spindata that came out yesterday, which look to quarter 3. So if you exclude Central London, which we don't operate in Northern Ireland, we outperformed the performance in quarter 3 at a private level. That was driven by PMI. Self-pay was actually in line with the market, okay? So that's the latest position in terms of market share. If we then look at the 3 payors, PMI, obviously, still remains our strongest payor. We saw good growth. We saw good recovery in terms of offset against inflation. All the insurers continue to talk about an increase in number of lives, okay? And we are well placed with our relationships in order to capitalize on that as we look forward. And I'm confident with our contracts, we'll continue to make sure we recover on our inflation as well. Turning to self-pay. Yes, there was a downturn. But that, as I said, in quarter 3 was in line with the market. I'll guide you towards where we're looking in terms of our recovery on price. We still continue to have a very good strong recovery on price. There's definitely this move from self-pay patients of old who've now moved into PMI. We can look at the specialty and the age, and you can see that move. So we're capturing those same patients, but in the PMI space now. And I'm expecting us to continue to see good recovery in costs as we look forward on self-pay, okay? So we've got good pricing control in that space, and we've got good mix. And then finally, NHS, I'm confident that we'll continue to remain disciplined. There's good opportunity of growth. You saw that in the numbers for the NHS, but also guide you again to the average revenue per case, which I've talked at length before about this discipline we have about what work we do, what slots we make available and make -- and that gives us not only the opportunity to deliver good revenue growth, but also gives us the ability to be disciplined about the work we do and efficiency within the operation.

Great. And just add a couple of points. NHS, its role actually is to be more predictable. Self-pay patients can turn up at quite short notice. When the flow is working, NHS is quite predictable. When it goes up quickly, there's a lag effect to adjusting to it in the P&L. When it's predictable, then what it does essentially is gives you guaranteed fill rates. So imagine a day which is all NHS, you had it through ERS, it's very predictable. You can be 2 or 3 weeks out and self-pay is much less predictable. So there's a quid pro quo, which is self-pay is higher margin. It's less predictable. NHS is lower margin, it's more predictable. It's worth pointing out that discipline means already, there are specialties we don't do for the NHS, where there are waiting list. We are a business. So the discussion about tariff isn't just about the numbers. We're actively saying we could do more, we can't do work, which either would lose us money or doesn't basically cover all our fixed and variable costs. So I suspect there are opportunities there. So that's broadly how it works overall. So we will see some efficiency gain. And by the way, to answer your trend question, our trends, we've given you a range. So we obviously think we've got a pretty good visibility of the trends now. The unexpected can happen, but that's broadly how we see it. Does that answer your questions?

Mostly, but I'll ask them again tomorrow.

We're having a second go with the analyst tomorrow because it's so much fun.

Charles Weston from RBC. Also 3 questions, please. First of all, you talked about leverage at the end of this year being around about 2x, but it was about 2x at the end of '24. So can you talk about perhaps how you're going to be spending the money and maintaining that sort of leverage and perhaps give some guidance on CapEx. Secondly, just going back to Seb's point. So if you think about -- you talked about the 5%, 5.5% in the first half and the second half, opening more slots NHS as you saw a downturn in PMI. Should we be thinking about the NHS slots being made available to help to deliver that over 5% depending on what you're seeing in PMI and self-pay, i.e., if you see more demand in self-pay and PMI, you'll offer fewer NHS slots? And then lastly, on primary care, you've seen that improvement in margin. You talked a little bit about near-term headwinds from opening new clinics, but what could a mature margin in that business look like?

Okay. Brilliant. So why don't you take the leverage and CapEx points? And then maybe I'll have Derrick do just a bit of a recap of the whole services strategy and include the margin point.

Yes, fine. So we're very comfortable in terms of where we are from a leverage perspective. So we're at 2 overall at the moment, and we're also trending down from a total leverage point of view as well. From our perspective, that's a good place to be. If we get significantly below 2, then the comment I've had back in the past is that we're possibly underleveraged, which is a nice problem to have as well, right? So I suspect we'll be in the region of 2. The drivers in terms of -- I mean, how we're thinking about capital surplus this year in cash is pretty much how we were thinking about in '24, which is a significant chunk of the 6% to 7% that we use towards -- which is directed towards hospitals. So the 6% to 7% of our revenue is direct towards hospitals. The proportion that will go towards growth and efficiency will be pretty similar. I've said before that the money we're spending on transformation and digitalization is part of that pot. We will not go outside of that because I'm very conscious about flow-through down the P&L. If I then think about the wider business, there's the primary care piece as well. Justin talked earlier about the GBP 40 million medium-term EBITDA forecast. That part of our business is a low CapEx business. So therefore, I mean, I'll let Derrick talk about margins in a minute, which is important, but the key thing there is return. So it outstrips or outperforms the wider group on return, and it will continue to be that way. In terms of the CapEx outlay for that part, it's probably going to be about GBP 50 million to GBP 60 million over a medium-term business, so relatively modest.

Yes. So just to, I suppose, reacquaint people with the business. It's a smaller part of the business, kind of, as Harbant said, came in to the group in October '23. So we're talking about the first year of trading. We are a business that centers ourselves around 2 service lines at the moment, talking therapies business and an MSK business. In the talking therapy service, we are a highly successful business. We've won 85% of the tenders that we've gone for over the last kind of 4 or 5 years. It's kind of the backbone of our growth. We think that's going to continue, and we're planning for that to continue into the future. And we have an MSK business that services the NHS. And as Justin says, we're starting to get some flows and add some value kind of around that proposition. We offer services to the 3 markets, NHS, corporate and private pay. Private pay is quite small at this point. About 75% of our business is NHS, about 25% of it is corporate, tiny bit private pay. And about 75% of our business is mental health and about 25% of it is MSK. So I think we've had a good year -- sorry, we've had a very good year, right? Because we've integrated into a larger organization, and that's sometimes quite difficult as a smaller kind of player. And the integration has gone really, really well. I think it's gone really well at ExCo level. But I think from my own perspective, it's gone well with the team. We've had to reorganize the team a bit. We've had to repurpose some of the team. And we've now got a team that's focused on primary care services as a whole rather than the Vita services elsewhere. I think we've got clear priorities. We've got clear accountabilities. And as you know, that's always a super important part of kind of starting a journey. So as we start into that journey and as we look at the growth and the GBP 40 million that Harbant has been talking about, I look at it in kind of 3 ways. NHS and the sort of Vita business in the context of the core. And as I said already, that's about continuing the growth that we've seen to this point and hopefully accelerating it a little bit. Corporate is going to become a bigger part of what we do. The lens that corporate generally looks through is occupational health. We have a small occupational health business at the moment. We have just won a large national retailer, which will add a bit of size to the business, and we're looking to add some small tactical acquisitions that we can kind of get national coverage where we can start kind of bidding for those larger and more profitable contracts as we go through '25 and into '26. And then there's the clinics business. So how we'll be rolling that out is we'll be focusing on MSK to begin with because I think that's the most sensible place to start because you can get feeds from and to the hospitals in that space. We will expand the services in the clinics to include kind of more GP services, women's service, women's health, et cetera, et cetera, as we kind of go through the year. But initially, it will be focused on MSK. We think all of our markets have significant growth year-on-year, but there's also significant growth in the context of there's not huge players out there, right? It's a very -- I suppose it goes somewhere from quite fragmented to very fragmented depending upon kind of which market you're talking about. So I think there's a lot of room to go, a lot of headroom to kind of aim for. To come back to Harbant's point and the question, the core of the question, which was margins, I want to concentrate in PBT, all right? We can concentrate on EBITDA if we want. And if you compare it to the hospitals, we will be lower, but we're a far lower capital base, right? The capital base that you need to run our business is way lower. The talking therapy services as, for instance, is largely remote, right? Very, very few premises, very few kind of fixed cost kind of inside of that business. So I'm going to try and get the group to concentrate more on the flow to PBT rather than have a fixation on EBITDA. But clearly, that's going to be a focus as well.

Thank you, Derrick. More questions?

Miles Dixon from Peel Hunt. Two, if I can. Firstly, my usual question on CapEx and the split of it, if I can. So thank you for the guidance this morning on the 60-40. How do you see that moving forward, particularly with reference to the -- Justin, you mentioned the acuity of care becoming increasingly important. Where are you on that journey? And secondly, you talked about the increasing outreach and the benefit to the group from primary care. How is that making you think about your estate portfolio? Is it highlighting pockets that you need to access further and deeper with diagnostics or clinics? Is it making you rethink that?

Brilliant. I'll take the second. Do you want to talk about CapEx first?

Yes. I think the answer to that, Miles, is relatively straightforward. I don't see there being much change between the 40-60 that we've moved towards. I mean don't forget a couple of years ago, we were close to 20. So I think that's a good ratio, and that's where we'll be seeing for the foreseeable future.

So in terms of geographic spread, hospitals, primary care. Hospitals, we're obviously not in London. That's a great market. We've got the London Doctor Clinic there, which is doing very well. That's currently a white spot for us. Put that to one side, we've got good geographic coverage, but there are still places where we're not and there is potential to grow. So we keep an eye open for what we could do there, right? There's not a large number, but they would just add to the power of our network. If you think about the percentage of people who can access Spire, it's very good, but we could just get a bit better. So we keep an eye on that, okay?

Would it change your offering in the primary care space, whether it be commercial if you did have...

So as regard to primary care, if you take -- break businesses down, the clinics which we're building, which are sort of hospital focus in clinics like the one we have in Harrogate is absolutely complementing that network. So you wouldn't build a hospital in Harrogate. You would absolutely build a clinic with an MRI. A lot of the patient base for the Yorkshire area is there. We can't access them until we open Harrogate. But now they can be seen, they can have minor treatment, they can have diagnosis and they can be referred to lose, just like Abergele. You wouldn't build a hospital in Abergele. So Abergele is already delivering 2x its income in referrals to the local hospitals. So the role of those clinics is essentially to be a pipeline into the hospitals. Separately, physio in particular, we've got good national coverage, but we can open more clinics. They're also referral. They're really low CapEx. They are rooms essentially. And in occupational health, so first of all, we have won some major contracts with quite a small business. So we've got a really nice business. Derrick has done a good job of leading it, but it does help to have some regional coverage. So small, and I emphasize small M&A at the right price in the right place with the right quality would just help us build a platform on which we can go for organic growth. So essentially, we're building an organic growth platform with the potential for some infill in all businesses just to give us more scale.

And if I can just ask one more to go back to Seb's point from the talk around the potential cap from NHSE. It felt very much that the partnership with the independent sector came from the government and the NHSE put the cap on or the potential of it. How much of that was what they're usually doing, which is putting forward a number of ideas that might cut savings and actually is not something which is central to the government's plans?

Who knows? Who knows? What I do know is Jim, Penny, we have a good relationship with. Penny has given here to talk to us about our quality program. Jim, we talk to as a sector and independently. They are very focused on patients. They are very sensible, and we'll wait to see what happens. But I would worry less about the toing and froing and just wait to see what comes out of them.

And presumably, Jim was nowhere near those plans.

You'd have to ask Jim if he wants to take the call. I don't know where he spends his time.

Kane Slutzkin, Deutsche Numis. Just on the savings, maybe Harbant, this is for you. Just the additional GBP 20 million, sort of -- is it just much of the same you're doing? Where have you found that? And how stretched is that GBP 20 million, I guess, with -- in context of your aim to sort of neutralize the NI impact by '27? Is there any phasing -- sort of separately, any phasing in H1 versus H2? If you can just remind us of the shape? And then just on capital allocation, I'm just wondering, you guys had the pretty small buyback last year. I think was it last year? It was quite small, [ 5 months ]. Just wondering what your thoughts are on that given where maybe the share price is sitting at currently, if there's any sort of thoughts of...

We'll come to that second. So Cathy is leading our transformation program, which, by the way, just emphasizes the way that we link quality and savings by having Cathy lead it. Just to be really clear, how we combine the 2 to deliver substantial savings whilst delivering improvements in quality. Cathy, do you want to talk about where the GBP 80 million is coming from and anything about the phasing?

Yes. So I think we've shown last year, we've got a really good track record of delivery. And actually, delivering extra is a recognition that the quantum that we can deliver whilst maintaining the business and keeping our top line growing is larger than we initially thought. So we have a whole spread of programs, which Harbant and Justin alluded to. So it ranges from improving our procurement, not only the prices that we pay for things, but also how we do it, so electronic procurement, so P2P, making sure that we have the right people in the right places doing the right tasks. So improving our effectiveness of delivery with our people, patient support centers, which we talked about. So moving lots of our customer support functions into fewer places. That has the benefit of improving efficiency, but also releases space in our hospitals. So some of that program is about repurposing that space. So it's a whole range of things. We have a carefully phased program, which the delivery varies over the year. More is phased towards H2, as you would expect, but actually a lot of our program is also thinking about what we deliver into 2026 as well. And so we do have it phased, but it's also about not just this year but also in the future.

Thank you. Harbant?

Yes. So Kane, last year, we said we'd do up to 5. We actually ended up doing 3 because we stopped before the year-end. Look, we remain alive to the opportunity to do more. But at this point in time, that's not our prime, I guess, focus when it comes to the use of any capital surplus that we might have.

Other questions, please?

David Adlington from JPMorgan. Just one left really, which is just given the pressures the sector is seeing and you mentioned sort of infill acquisition opportunities. Do you expect more acquisition opportunities? And are you seeing price expectations coming down at all?

So first of all, in the primary care business, the sort of multiples we look at are low to mid-single-digit multiples. That's one of the attractive features of it, and we're very disciplined about it. In the rest of the sector, I don't know whether we'll see opportunities come up. And if I knew off one already, I'll tell you about it. So we don't know what the multiples are. But I think it's worth looking at the sort of multiples that we have paid in the past. So Vita, okay, not hospitals, 7.5x. If you look at our hospital in Sheffield, I think it was 7.5 or 8x. So we have demonstrated that whatever people's price expectations, we are really disciplined about right site, right quality, right price. This is not bulking up. This is looking for specific opportunities, and we do so in a way which is return accretive. And it's worth pointing out that the CapEx level, did you mention the CapEx level associated with primary care? You get a pretty good return to get to GBP 40 million. So we're really focused on if we deploy capital, it's to generate a return, no getting carried away. Any other questions? Great. Any questions online?

We have no more questions online. So please go ahead with closing remarks.

Okay. Thank you. Look, thank you for your questions, and thank you for joining us. You can join us again online, and then the analysts are joining us again tomorrow morning. So it will be great, friends. So what is the bottom line of what we're seeing here? So what you're seeing is a business which demonstrates again and again that we think forward, okay? So during the course of the last year, we have a change of government. We've had a change of attitude to energize commissioning. We've had a budget, which has affected the economy, which has announced National Minimum Wage, National Insurance, mix shift. So how have we been thinking about the business? So the first thing is we put a self-help program in place 3 years ago. We've been disciplined in delivering it. And we're able, as a consequence of having been working on it, both this year and in future years to accelerate the savings. So the first thing is we've got a track record now of responding. And the truth of the matter is if we hadn't seen National Insurance and National Minimum Wage, then even in '25, we'd be able to absorb the changes in the marketplace. That just gives us a year shift. But we're still confident we'll be able to absorb that into 2027, point number one. Point number two, we've always been really disciplined in thinking about pricing in a market in which is obvious that there's inflation. So you can see in our ARPCs that without losing market share, we're very disciplined on pricing. You will see the benefit of a new insurance contract that we talked about last year, but we're very careful about how we deploy resources with insurers and we're very careful with how we price in self-pay. And I've made it clear that we are focused in our discussions with government on price, and we're also focused on our mix with the NHS. Thirdly, the health care market is changing. If you look at all the insurers, they're all beginning to integrate their health care businesses, they're all beginning to offer GP businesses. Some of the offering physio businesses. Mental care is fundamentally the fastest-growing market. And we've built a business which can respond to it, which critically interfaces with the hospital business. And by the way, we did an acquisition last year, which has outperformed. And I think that demonstrates that we're disciplined in what we're doing strategically as well as disciplined about execution. We respond quickly. We've seen ahead. We've got all sorts of things going on in the world. But what we've proven is we can keep adapting every year profit growth, every year margin growth, every year PBT growth, every year ROCE improvement, and we're predicting the same for this year. So firstly, we're excited about the future because it's a changing world of health care, and we are all over it and ahead on it. And secondly, we just know we're going to deliver continued momentum. So thank you very much. Thank you for listening, and some of you I'll see you again tomorrow.