By Justin George Varghese
(Reuters) - Spire Healthcare (SPI.L) shares hit a record low on Monday after it warned of sharply lower full-year core earnings on fewer referrals from Britain's publicly funded National Health Service (NHS).
Spire generates a third of its revenue from work carried out on behalf of the NHS, which has been operating with an about 1 billion pound ($1.3 billion) deficit and a shortage of beds and staff.
Companies such as Spire, BMI Healthcare and Nuffield Health have helped the NHS cope with the shortage, but their earnings and revenue have taken a hit as the NHS prioritises emergency cases and makes cuts elsewhere, focusing on essential health services.
Spire shares were down 22 percent at 193 pence at 1040 GMT on London's FTSE 250 (.FTSE) index.
"The current difficult market conditions - also seen by other operators - had a greater impact on our business in the seven months to July 31, 2018 than we had expected," Chief Executive Officer Justin Ash said in a statement on Monday.
Revenue linked to the NHS fell 9.5 percent in the first-half.
Shares of the company have mostly underperformed the UK mid-cap index (.FTMC) since the company warned on revenue and core earnings margins last year.
(Graphic: Spire stock has mostly underperformed the UK mid cap index - https://tmsnrt.rs/2vmfa9d)
Spire rival Ramsay Health Care (RHC.AX), Australia's biggest private hospital operator also took a charge and cut its outlook for profit growth in June on a slump in business from the NHS.
Difficult trading conditions and belt-tightening by the NHS has also forced Netcare (NTCJ.J), which has been in Britain for a decade through a controlling stake in BMI Healthcare, to exit operations in the country.
Spire last year rejected a takeover offer from South African private hospitals operator Mediclinic International (MDCM.L) which has a stake of almost 30 percent. The cash and paper bid valued Spire shares at around 298 pence.
Spire said it expects revenue growth in the second half of the year, and sees benefits from its investments in telephony and central marketing paying off.
The company started cost saving plans in other areas of its business and now expects capital expenditure for 2018 at 90 million pounds, 10 million pounds lower than a previous forecast. Capital expenditure was 118 million pounds in 2017.
"With our renewed focus on the private market, we are seeing encouraging momentum and expect our top line to recover through the second half of 2018 and increasingly in 2019 and beyond, while the benefit of our major cost savings initiatives will accelerate through next year," Ash added.
Ash took over at the end of last October. Jitesh Sodha was named chief financial officer last month.
"While the announcement of a cost savings plan is helpful, it is difficult to reconcile this with the overspend in H1 2018," Liberum analysts said in a note.
Spire Healthcare said on Monday its revenue fell 1.1 percent to about 475 million pounds ($616.7 million) in the first half of the year.
(Reporting by Justin George Varghese and Arathy S Nair in Bengaluru; Editing by Amrutha Gayathri, Bernard Orr and Emelia Sithole-Matarise)