Spire's profits plunge after payouts to victims of rogue surgeon Ian Paterson

Surgeon Ian Paterson
Surgeon Ian Paterson

Spire Healthcare's shares tumbled more than 16% in reaction to a 75% plunge in profits after the hospital group shelled out £27.6 million to help compensate victims of disgraced breast surgeon Ian Paterson.

The company said pre-tax profits for the six months to June 30 tumbled to £8.9 million from £35.7 million a year earlier, having set aside millions for a new fund that will provide financial redress for approximately 750 patients that suffered at the hands of Mr Paterson.

The news sent Spire's shares down around 50.2p to 259.7p.

The settlement - reached earlier this week - will see Spire Healthcare put forward most of the cash for the £37 million fund, while the remaining £10 million will be provided by Paterson's insurers and the Heart of England NHS Foundation Trust.

Spire's interim chief executive Simon Gordon said: "Following the completion of criminal proceedings against Ian Paterson earlier this year, we are pleased to announce that we have reached a settlement agreement with all civil claimants in connection with his practice at Spire."

It begins to close the book on a difficult period for Spire, after it emerged that Mr Paterson - who treated thousands of patients during his career - exaggerated or invented cancer risks and claimed payments for more expensive procedures.

He was found guilty of 17 counts of wounding with intent, and three further wounding charges at Nottingham Crown Court in April.

In its half year results, Spire said it also took on additional costs linked to staff restructuring, the setup of new hospitals in Nottingham and Manchester, as well as the decommissioning of its old Manchester site.

Even when discounting the medical malpractice settlement and those exceptional costs, Spire still suffered an 8.5% drop in operating profit from £58.9 million to £53.9 million, despite a 2.4% rise in revenue to £481 million.

"Although it is disappointing to report that growth in our NHS business appears to be slowing to some extent in H2 2017 and to accordingly have to revise our outlook for FY 2017, our correspondingly strong self-pay growth in H1 2017 (14.0% on an underlying basis) demonstrates that our core strategic proposition remains valid," Mr Gordon said.

He said the company is now zeroing in on its self-pay business - which sees patients pay for one-off treatment as needed - after noting "very encouraging growth".

"We are increasingly focusing the business on the self-pay opportunity and on our existing robust healthcare insurer arrangements, while emphasising the need for a strong well-invested independent sector to meet the growing shortfall in elective care provision," the chief executive added.

But Liberum analyst Graham Doyle said the private pay segment will not save Spire on its own, considering declining revenues from both private medical insurance (PMI) and the NHS.

"Making up for the weaker performances at PMI and NHS was Spire's self-pay business which was up 11% in reported terms and was 3% ahead of our forecast.

"While the strong self-pay performance is welcome, it accounts for just 20% of group revenues and so can only do so much to offset weakness across the PMI and NHS businesses."