Since 2020 the number of British citizens opting to use private healthcare, either through insurance or 'pay as you go' has notably increased and as a whole private healthcare is slowly becoming more normalised in the UK. The number of high-street private GP clinics or services run by companies like Bupa is noticeably increasing, indicating growing demand for private healthcare. Even the Cleveland Clinic is expanding in London with three sites. Most notably, it looks like this trend is here to stay; since the private healthcare boom in Britain is actually being driven by the 18-24 year olds, representing a major shift in cultural attitudes towards the provision of healthcare in the UK.
Off the back of unacceptably long waiting lists and poor outcomes, more people are simply giving up on the UK's state provider of healthcare, the NHS, and this is to the benefit of private healthcare providers and insurers.
If one is trying to take heed of this for their portfolio, companies like Spire Healthcare may be an undervalued option. Spire is an eminent provider of private healthcare, operating 38 hospitals and 50 clinics across the UK. While some may hazard around Spire's debt-to-equity ratio of 49%, the company is in fine financial health and can cover its debts. At the same time, in the last decade, Spire has been making smart investments in R&D, dedicating on average at least 7% of its revenue to R&D projects. In this sense, Spire may be taking on debt but using it sensibly which, given the increase in the number of patients spending on private healthcare companies like Spire, is likely to be well covered going into the future.
It's not just an increase in demand from patients that works in Spire's favour, either. The NHS itself is supporting the boom in UK private healthcare through outsourcing. For example, one-third of the work undertaken at just one Spire Hospital (Gatwick Park) is done so on behalf of the NHS. Looking more broadly, in 2023, for the first time, 10% of all elective procedures including hip and knee replacements were outsourced to private healthcare providers. This is a huge injection into private healthcare in the UK, including Spire, and such outsourcing to the private sector is indeed a practice that the current Labour Health Secretary, Wes Streeting MP, looks set to encourage more of.
In this retail investor's view, then, there are several reasons to be bullish on Spire. Another reason is that the market looks to be undervaluing the company, considering its future potential. The stock price as of February 2025 is down 41% from its September 2016 peak of £3.90 per share, currently trading at around £2.28 per share. Following the outbreak of the COVID pandemic in 2020, it is true that the stock is up just over 200%, implying some pricing-in, however, it has hovered around the same price for the past roughly three and a half years despite successive annual reports showcasing revenue increases of close to, if not above, double digits and notable jumps in operating profits. With evolving economics and business performance, a reevaluation of Spire's price is overdue.
If 2024's annual report, scheduled to land on 6 March, continues this theme of growth and profitability, in a market where private healthcare is (one way or another) the future, then the case for Spire becomes only more compelling.
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