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On Friday, Deutsche Bank (ETR:DBKGn) analyst Kane Slutzkin revised the price target for Spire (NYSE:SR) Healthcare stock, listed on the London Stock Exchange (LON:LSEG) (SPI:LN) and over-the-counter (OTC: SRRHF), to GBP3.00 from the previous GBP3.20. Despite this adjustment, the analyst maintained a Buy rating on the company’s shares.
In his analysis, Slutzkin highlighted Spire Healthcare’s performance for the fiscal year 2024, noting the company achieved mid-single-digit (MSD) growth. The company also reported a modest margin expansion and continued improvement in Return on Capital Employed (ROCE). Additionally, Spire Healthcare made strategic progress in expanding its non-hospital services.
The analyst pointed out changes in market dynamics, particularly a shift in the payor mix. This shift was characterized by robust growth in private medical insurance (PMI), which also saw a notable number of patients switching from self-pay options. Furthermore, volumes from the National Health Service (NHS) were higher than expected.
Slutzkin acknowledged the anticipated increase in wage costs due to National Insurance (NI) and the National Minimum Wage (NMW) as a factor in the company’s 2025 financial outlook. These cost increases have now been quantified. To address this, Spire Healthcare has set targets for accelerated and new cost savings throughout 2024-2026. The goal of these savings is to offset the impact of NI and NMW cost increases by 2027. Additionally, these measures are intended to mitigate the near-term challenges posed by the payor mix and the roll-over of energy cost hedges.
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