Good morning. I'm Angus Prentice, Director of Investor Relations. Welcome to the presentation of our results for the year-ended 31 December 2023. This is a hybrid event once again, and I'd therefore like to extend a warm welcome to those of you joining on Zoom. We will have a Q&A session at the end, and if you're joining, please submit your name and organisation into the Q&A function on your screen. In the meantime, all attendee lines are muted. If you have any difficulties with your connection, please email Laura Young at the address shown on the screen. Justin.
Good morning.
Hello.
It is a company event. I'd expect more than that. Good morning.
Good morning.
How are we all?
Very good.
Very good. Okay, well, welcome. Welcome to our presentation for the full year results for year-ended December 2023, and thank you for joining us online. I'm delighted to again be presenting a strong set of results this morning. I'm going to give you an overview looking at some of our financial and non-financial highlights of the year. Jitesh will take you through some of the financial detail. I'm going to come back. I'm going to expand on progress towards our medium-term financial objectives, and I'm going to conclude with an outlook. Let's begin. First of all, here is a reminder of our strategy. It sits behind everything we do, and it sits behind the good set of results we're presenting today.
We deliver strong financial performance by helping to meet Britain's healthcare needs, and we do that by running great hospitals, providing high-quality care, supporting our workforce, and developing new services. We also do this at scale. We now provide care for over 1 million patients a year while maintaining that strong focus on quality and patient safety. I'm going to cover our achievements against each of these pillars shortly.
This strong set of results has been achieved despite the challenging economic environment, and they do demonstrate once again that our strategy is working. Our track record of delivery in the past gives us confidence in our ability to grow in the future. So in 2023, revenue was up 13.4% on 2022. This was driven in particular by PMI and NHS growth. We saw strong profit growth year-over-year. Our Adjusted EBITDA was up 15%.
EBIT was up 23.5%, and adjusted profit before tax was up almost 200%. I said 20% in the rehearsal because I missed out a digit. 200%. We were successful again in delivering savings of GBP 15 million over the year. Our ROCE for the last 12 months has also improved significantly from 6.2% in 2022 to 7.5% this year. This is in line with our trajectory towards our medium-term target of over 10%. I'm therefore delighted that the board has recommended a final dividend of 2.1 p per share, which is payable on the 21st of June this year. Having given an overview, I'll now touch on progress on each of the pillars of our strategy. First, our hospital business, which remains at the center of what we do, where we've had another successful year.
Hospital revenue was up 10.8%, roughly double our 5% CAGR target that we set out at our Capital Markets Day two years ago. We aim to be the first choice for private patients with PMI and self-pay business between 70% and 80% of revenue. This year, private revenue was 72.3% in the hospital business.
Overall private revenue grew by 9.5%. In particular, we see a growing trend of employers seeking to support the health of their workforce by providing PMI, and that trend is underpinning the growth here. As I mentioned earlier, we delivered GBP 15 million savings in 2023 on top of the GBP 15 million we delivered in 2022 through initiatives such as the ongoing reorganization of hospitals into hubs and effective cost management through procurement. By managing our mix and pricing, we increased average revenue per case for private patients by 6.8% over the year.
This all enabled us to deliver Adjusted EBITDA margin for our hospitals business of 17.6%, up on 17.17% in 2022. Now, we did this despite the highest level of inflation for many years, with the knock-on pressures on wages and costs. So today's figures, combined with future initiatives which I will cover later, set us up well to achieve our medium-term margin target for the hospital business of over 21%.
Now, we are only able to deliver these results because of our brilliant workforce. And this year, we have again consistently and consciously invested in our colleagues, their well-being, and providing the best possible working environment for them. As I mentioned at the half-year, we undertook the insourcing of our recruitment process in the spring, and this has led to improved filling of vacancies and already generated over GBP 500,000 of savings.
We remain passionate about learning and development, and the roles Spire can play in addressing the shortfall of healthcare professionals. At the end of last year, we welcomed the latest new starters onto our flagship nurse apprenticeship program. We reward competitively, and most of our colleagues received a 5.5% pay rise in September, with a 3% pay rise for those eligible for a bonus, as well as alignment for the lowest-paid colleagues with the real living wage at that time.
I'm really pleased that these factors are helping to generate ever higher levels of employee engagement at Spire. 81% of our colleagues said they're proud to work for Spire in the latest colleague survey, which is an increase, and particularly pleased that participation was 86%. That's 9% up on 2022, and I think really does show that our colleagues are really engaged in the future of Spire.
Our colleague turnover rate is falling. Our 12-month turnover rate was 15%, down from 18.8% in the previous year. And the combination of these factors has meant that as we head into 2024, we are seeing reduced spend on agency, and this is absolutely key for us as our rates of agency colleagues are around double that of permanent colleagues. Quality and patient safety is the bedrock of our business, and our commitment to this is unwavering.
We remain at 90% of our inspected locations being good, outstanding, or the equivalent by health inspectors in England, Scotland, and Wales. Spire Nottingham retained its outstanding rating, which is a significant achievement. The CQC regime is changing this year to a new approach which blends data analysis with inspections, and we look forward to continuing our constructive relationship with the CQC as the program develops.
We've also continued to support our 230 Freedom to Speak Up Guardians and ambassadors. I and my executive colleagues have made clear statements to the whole group that we welcome colleagues raising concerns, and they shall suffer no detriment as a result. Our patient feedback continues to be positive, with 96% saying their experience with us was good or very good, and 93% rating their care as outstanding, which is up 1% on the year before. Our key initiative in 2023 was training for the rollout of the Patient Safety Incident Response Framework, or PSIRF for short, which was carried out across Spire. Now, we are clear that when we do get things wrong, we apologize, learn, and embed our findings. PSIRF will help make our response faster and more inclusive.
Our consultants are an integral part of the care we deliver, and we also carry out an annual survey of their views. This year, we had the highest participation rate for some years, almost 50%, and 83% said that the care Spire gives to patients is excellent or very good, which was a 5 percentage point increase. We also saw a corresponding increase in consultant satisfaction with the service and support we give to them. Now, we aspire to lead the sector on sustainability, and we made good progress during the year. We reduced the intensity of our carbon emissions by 12% over the year, keeping us well on track to be net-zero by 2030. We're also increasing our recycling rates. As you can see, we increased overall recycling from 30%-35%. Diversity is critical to the strength of our business, and we continue to make good progress.
I'm pleased that 47% of our board and executive team combined are women, up from 37% last year. We rank seventh of all FTSE 250 companies in terms of women in leadership positions, and we're top of the FTSE for healthcare and pharma. I was also pleased that Spire was listed again in the FTSE index of the 850 companies considered Europe's diversity leaders, and we aim to rise even higher in the coming year.
We also continue to work ever more closely with the communities that we serve. We raise GBP 40,000 through our annual charity fundraising challenge for a range of good causes, and our hospitals regularly run outreach events in the local community. I'm about to announce this year's challenge, which will be both more inclusive and more exciting, and everyone in the team are waiting to see what it is. Think triathlon.
So during the year, we've also revitalized our patient forums in every hospital, ensuring that patients have a voice in shaping our services. The final pillar of our strategy is to develop new services, selectively investing to meet more of people's healthcare needs. We made a major step forward in October when we acquired Vita Health Group.
Vita provides mental health talking therapies, musculoskeletal, and dermatology services to the NHS, corporate and private customers, tackling some of the main causes of ill health and absence from the workplace. It's an exciting move into the new areas for Spire of community mental health and physiotherapy, allowing us for the first time to address people's physical and mental health conditions together. The space in which Vita is operating is expanding, with a potential market size of GBP 3 billion. Vita has consistently positive customer feedback.
It has a strong record on winning contracts and an excellent management team. I'm very pleased that Derrick Farrell, Vita's CEO, is here this morning. There are numerous opportunities for working together with the hospitals business, and we're already all over exploring those and realizing them. I should also mention our other new and developing services. We recently rebranded the occupational health business that we acquired in 2022 to Spire Occupational Health.
It's performing well with new client wins, including Formula One. Exciting. I was delighted to see the government launch a task force last week to increase the use of occupational health and well-being in the workforce. Our GP services continue to expand, and we've been adjusting the portfolio with five new openings and four closures. This week, the first of our new clinics, Abergele in North Wales, opened to patients.
So in summary, this is a good performance across all areas of our business. We're confident about the future because our strategy is working. We're delivering on our promises, strengthening Britain's healthcare system, and generating good returns. As ever, I'd just like to take a moment to thank my fantastic colleagues and our consultant partners for everything they've done over the year. We could not have achieved these results without you, so thank you. So Jitesh will now go through the financials in more detail. Jitesh.
Thank you, Justin. These are a strong set of results and delivered in a complex economic environment with high inflation. We saw increases in all of our key financial metrics in 2023. With EBITDA of GBP 234 million, we delivered the highest EBITDA since the company listed in 2014. I'm particularly pleased to see that 80% of the year-on-year growth in EBITDA flowed through to the bottom line, with Adjusted EBIT of GBP 130 million, up 23.5%, and the highest profit before tax in five years.
At group level, Adjusted EBITDA margin increased from 17% to 17.2%, while Adjusted EBIT margin rose from 8.8% to 9.6%. Going forward, we will present numbers for our hospitals business and our new services separately. This is because Vita and the other new services have a different financial structure, with lower EBITDA margin but also lower CapEx, so good flow-through. So in our hospitals business, which excludes Vita, Doctors Clinic Group, and the new clinics, Adjusted EBITDA margin was up 0.6 percentage points to 17.6%. Adjusted EBIT margin for the hospitals business was 9.9% for the period, up from 8.8% in 2022. Turning now to cash and the balance sheet.
The group continues to be cash-generative, with cash conversion of 98%. Free cash flow increased by 71.4% to GBP 48 million. We continue to invest in the business. We spent GBP 84 million on CapEx, which represents 6.2% of revenue and within our target range of 67% of revenue. More on CapEx in a little while. We are very pleased that we have acquired Vita. The cash consideration for the acquisition was GBP 73 million, financed through a combination of cash and debt. We borrowed GBP 50 million on our revolving credit facility, and we've already paid down GBP 10 million of that within two months of the completion. The year-on-year increase in net bank debt of GBP 316 million was due to the Vita acquisition.
Net Debt-to-EBITDA covenant ratio was unchanged at 2.2x , and we have exercised an option to extend the group's senior bank facility by one more year to February 2027. We have interest rate hedges in place on our senior bank facility, with 75% hedged to April 2024, then 50% to February 2026. As we've already shown, total revenue growth was excellent, with hospitals revenue growth across all payor groups of 10.8%. Private revenue increased represented 72.3% of hospital revenue, and NHS represented 25.7%. NHS revenue increased by 15.5%, and private revenue increased by 9.5%. I'll now go into the primary drivers of our growth by payor group. Starting with the PMI group. PMI providers are reporting increased demand for cover from both private and corporate customers.
Our partnerships with the PMI providers and the fact that we are continuing to gain market share is resulting in a 10% increase in outpatient procedures and admissions into our hospitals. Good volume and price management increased ARPC by 5.1%. A conscious mix of inflation recovery and partner incentives delivered a revenue increase of 14.3%. Bless you. Self-pay inquiries remain at record levels, and we had high levels of self-pay admissions when compared with pre-pandemic levels.
We have maintained the high levels of revenue from 2022, with ARPC increasing 10.1%. This revenue has been delivered with management of mix and price. We have used our digitized pricing engine to generate increased ARPC and revenue, and we have reduced volumes in cosmetics. PHIN data has shown that the year-on-year market as a whole is down slightly, and we are comfortable with our market positioning and market share.
These charts demonstrate how we make active choices on managing mix and price in self-pay. Our focus is on orthopedics. The left-hand chart shows that orthopedic volumes remain strong and stable, and the right-hand chart shows that revenue from orthopedics has also remained high. However, we manage margins, and to optimize theaters, we have reduced volumes in areas such as cosmetics. We also continue to invest selectively in high-quality ophthalmology.
We have remained disciplined on pricing in a competitive market. Despite managing cosmetic and ophthalmology with lower volumes, the right-hand chart shows that we have maintained revenue. We continue to support the NHS to reduce waiting lists. The increase in NHS work is primarily through ERS referrals, which have generated a rise in orthopedic volumes in particular, which are up 14% year-over-year and now constitute around 58% of all Spire NHS activity.
Through active management of mix and volume, NHS ARPC was up 8.4%, while the tariff increase was only 4.1%, and NHS revenue is up 15.5% to GBP 341 million. This chart shows the NJR data for hip and knee procedures performed by private providers nationally. Our focus on orthopedics has enabled us to sustain our market leadership with nearly a quarter of the market in hips and knees. As part of our focus on orthopedic procedures, we continue to invest in robotic surgery, with over 2,000 procedures carried out last year, a 20% increase year-on-year. Our cash management continues to be disciplined, with cash conversion at 98% and an increase in free cash flow resulting in a bank debt leverage ratio of 2.2x even after the GBP 73 million cash consideration for Vita.
Total debt leverage, which includes IFRS 16 lease liabilities, has reduced steadily since its peak of 6.6x in 2020, closing at 5x at the end of 2023. Based on our latest valuation, the gross value of our own sites is GBP 1.2 billion. These sites are held on our balance sheet at GBP 651 million. We continue to invest in our estate and in new capacity projects. More than 30% of the CapEx was investment CapEx.
This included a new off-site outpatient and diagnostic unit at Yale Chesney Court in Wrexham, a new theatre for minor procedures at Claremont in Sheffield, new cardiac surgery facilities in Nottingham and Manchester, taking to five the number of hospitals where we carry out cardiac surgery, and the construction of the first of our new clinics at Abergele in North Wales. We are focused on being green and on the PNL.
We are managing our carbon footprint by reducing carbon emissions and reducing our costs. As you may recall, our energy hedge comes to an end in October 2024, which will result in an additional cost of GBP 2 million for gas and electricity in Q4 of this year. To reduce our emissions and our costs, we're investing GBP 12 million in installing solar panels and building management systems in each of our 39 hospitals.
This will reduce electricity consumption at those sites by 17%. So in summary, we have delivered a very good financial performance with significant growth in revenue and EBITDA, but especially the flow-through to EBIT and profit before tax. Adjusted earnings per share has increased from 4.2p- 7.9 p per share. And in line with our dividend policy, we have increased our dividends from 0.5 p- 2.1p per share.
And this demonstrates our confidence in the business. We've demonstrated our ability to execute in complex and changing environments. Now, before I hand back to Justin, these are the last set of results that I'll be presenting. So I'm going to say a couple of things. On a personal level, the timing is ideal. I can't tell you how many people have absolutely understood it and laughed at me when I've told them I've been a CFO for 26 years. And 5.5 of those have been here at Spire, and I've absolutely loved my time here, and I really do. The business is in a great place, and the future is really looking positive. We've transformed the balance sheet, the financial position, and the strategic flexibility that we have over the last 5 years.
The business is also going to be in good hands with Harbant succeeding me. Harbant was the first person I recruited into Spire, and we've worked closely together for 5.5 years. It's been great. It's a deserved opportunity for him, and I'm sure he's going to enjoy the role as much as I have. From Spire's perspective, this change should be seamless and smooth. Thank you, Justin.
Can I just build on what Jitesh said? We have worked together for five years. We've not just been partners. We've been friends. We've achieved a lot together. My respect for Jitesh is as high for any executive I've ever worked with. I will miss you. Thank you, and well done. Harbant, it's great to have internal succession. You've earned your stripes. You're going to be an excellent CFO. We're delighted to welcome you.
So I'm going to do that round of applause all over again for both of you. So in this final section, I'm going to lay out our plans for achieving our medium-term financial objectives, including the ambitious strategic initiatives that sit at the heart of these. So if we look at our performance in the context of our medium-term financial targets that we set out at Capital Markets Day in summer of 2022, I'm really pleased to say we are making positive progress towards all of them. Hospital growth was above 5% last year. We're within our financial framework, and we're making progress in hospital margin, ROCE, and new service mix. Looking forward now, I'm going to focus on our plans in three key areas: growing our revenue, improving EBITDA margin, and getting our ROCE above 10%.
In terms of hospital growth, so we are confident in our ability to continue to grow our revenue at least 5% per annum. It's hard to predict trends in this sector, but these are our current assumptions based on our own management of our hospitals and what we observe as pervading trends. Projecting from 2023 and the start of 2024 and reflecting on PMI provider results and insights, we expect to see strong growth in PMI. This is due to the insurers covering more lives as employers seek to have their employees treated faster and more predictably, and the mechanisms in our own partnership contracts. We expect modest growth in the self-pay market. This is driven to a great extent by the continuing waiting lists, offset somewhat by economic pressures for some potential patients.
As we at Spire continue to manage mix and over time stop reducing volumes of treatments such as cosmetics, we should see our own growth driven by core treatments like orthopedics. Our analysis also suggests that reduced pressure on household income should be supportive to self-pay growth. In the NHS on balance, we expect modest growth.
Now, there is cross-party support for the increased use of the independent sector, but there is also, as is well known, a shortage of funds in the NHS. So our current growth is coming from choice through ERS, while trusts on the whole are retaining waiting list work to preserve their finances. So the evolution of the market will depend on how those two factors balance out and the commitment in particular of government to drive through waiting list reduction.
So I'm delighted to announce today that our savings programs that have already delivered GBP 30 million of efficiency savings over the past two years will deliver at least GBP 60 million additional savings by the end of 2026. The projects to deliver these are in flight. They're thoroughly planned and costed with all savings identified. Digitalization and automation of many of our processes and systems will deliver the most significant benefits.
Other benefits will come from greater centralization, from ongoing operational efficiencies, which we call One Best Way, and from standardizing many of our activities through new robotic processes. And we're going to share more detail of this at a Capital Markets event, which we'll be holding on Wednesday, the 17th of April. It's important to stress, I think, that we're not executing digital transformation in a big bang way.
Instead, we continue to take a phased approach to our program, rolling out different initiatives in an incremental way. The deployment of a new integration platform will allow us to mix and match bespoke and off-the-shelf systems without being tied to the costs or restrictions of any single digital healthcare provider. This means that we will invest gradually over the coming years, generating cumulative returns in the way I showed a few minutes ago, though there will be material upfront investment in the first half of this year. And while the headline of these programs is at least GBP 60 million of additional savings, we will, by the end of 2026, have transformed our business performance and developed advanced digital data capabilities.
This will generate a range of benefits for patients who will benefit from a more personalized, tailored experience, for colleagues who will see some of their most frustrating, repetitive tasks eliminated, for consultants and for partners, and it will also enhance patient safety. So thinking about EBITDA margin, clearly a range of factors, both internal and external, will influence our progression towards our hospital margin target. Those factors over which we exert the most influence are our savings programs, our efficiencies, payer acuity and mix, pricing and ARPC, and organic volume growth. The factors over which we have less influence are workforce factors, although we have a reward strategy to manage these, government policy, and general inflation.
Given our current trajectory on these factors, we are confident of hitting our target of Adjusted EBITDA margin for the hospital's business of more than 21% by the end of 2026, Adjusted EBIT margin of greater than 13% by that date, and ROCE of over 10%. Again, we're going to explore some of these factors in more detail at our Capital Markets event on the 17th of April. It is worth noting that our digitalization program, as it takes hold, EBIT will become a more relevant indicator for us because the improvement of our profitability will show there's more investment in IT, and IT investment is increasingly treated as OpEx as opposed to CapEx. So finally, let me turn to our outlook for this year. Thinking about our priorities, the first is clearly digitalization and the generation of at least GBP 15 million of savings and efficiencies.
And that will come through mainly in H2 because the investment phase is in H1. Second will be the rollout of our reward framework. This piece of work is aimed at ensuring we have a competitive pay structure based on a standard job framework, which underpins our strategy to make further progress in recruiting and retaining a great workforce. This work will inevitably require investment, but we have factored this into our remuneration budget for the year. Third, we will continue to work to grow the services provided by VITA, our occupational health business, and explore benefits from opportunities from integration and synergies. And we continue to further develop our new services, growing organically, and where should there be the right fit at the right value through acquisitions.
Turning to guidance, we are forecasting another good year with market dynamics in our favor as growing numbers of both individuals and companies seek out the healthcare services we provide. As you can see here, we're targeting a group EBITDA, including VITA, of between GBP 255 million and GBP 275 million. As highlighted earlier, various factors will determine whereabouts we come within this range, some of which, for clarity, are listed here.
I'm really pleased to say that we have started the year strongly, continuing the momentum of last year. We are therefore confident about our prospects for the year ahead. We anticipate another year of strong revenue growth in our hospital business in excess of 5%. For VITA, we anticipate revenue in excess of GBP 100 million and Adjusted EBITDA of around GBP 10 million for the year, in line with the guidance that we gave at the time of the acquisition.
Our investment in reward will be similar to that in 2023 as part of rolling out our reward strategy. We target margin improvement weighted to the second half as we make the IT investments in H1. We will continue to invest in the estate with priorities including diagnostics, clinics, and capacity enhancements at sites, in particular Edinburgh and Little Aston in Birmingham. We're targeting ROKI of 8%-9% and leverage of less than 2x, dependent on any possible M&A activity.
And we will continue to deliver on all elements of our strategy, remembering our unwavering commitment to quality and patient safety. So the next opportunity for us to come together will be our Capital Markets Day on Wednesday, the 17th of April, which I alluded to earlier. During the session, we will share more detail in our savings programme and initiatives to drive margin.
Derrick Farrell, Vita's CEO, will take you through Vita's plans for the period ahead. We'll also introduce you to Caroline Gardner, who heads up our occupational health business, who will talk about our occupational health strategy. We really look forward to seeing you there. Thank you very much. Thank you for coming this morning and listening so attentively. I'm going to open the floor to Q&A and invite Cathy, Peter, John, and Harbant to join me at the front on the panel. Thank you.