Spire Healthcare slumps on Berenberg double downgrade

updated: 8 August 2018 at 10:08am Author: Michele Maatouk

(Sharecast News) - Spire Healthcare was under the cosh on Wednesday as Berenberg cut its stance on the company to 'sell' from 'buy' and slashed the price target to 120p from 290p following the profit warning on Monday.
Berenberg said the warning means it now has even less certainty of a near-term improvement in Spire's fortunes since the visibility of NHS market factors that are affecting the company's growth has declined over the last six months and cost growth has been more rapid than expected.

"Given that guidance was reiterated 10 weeks ago, operations have clearly taken a marked turn for the worse, and the lack of new guidance indicates that management is currently unable to forecast its own business.

"Only when this is possible, and when we regain confidence that the five-year history of earnings downgrades is over, can we look further ahead to its 2022 targets, which themselves imply that Spire will have greater control over the market than we believe is possible."

The bank cut its 2018 EBITDA estimate by 16% and its earnings per share forecast by 37%.

It noted potential for intangible asset write-downs and a dividend cut and said speculation regarding the potential for Mediclinic to acquire the company helps to limit the downside, but Mediclinic's five-year low share price, and the negative reaction to its previous bid for Spire, adds risk to relying on that "get-out-of-jail-free card".

Spire cautioned earlier in the week that it expected to report "materially lower" 2018 profits amid weakness in the NHS business and increased investments.

At 1005 BST, the shares were down 5.5% to 179.40p.