Super. Okay, we'll make a start. Thanks, everyone who's joining us in the room. Thank you to people online. Welcome to our Primary Care Roundtable at Spire. I'm Amy. I'm the IR and Commercial Finance Director, and I am joined by Peter Corfield, my colleague here, who's our Chief Commercial Officer, and Derrick Farrell, who is our CEO of Vita Health Group.
Morning.
Morning.
For anyone who doesn't know, but I think we all know in the room, Vita was the business that we acquired back at the end of 2023. Let me just take you through the agenda for the morning. We're going to take about 20 minutes or so just to run through some slides and a bit of a presentation on the business. We'll cover really the market opportunity, which is large and equal in size to hospitals, quite fast growing, and it's still a really fragmented market, actually, with no kind of big corporate presence. We will touch on, so where does Spire fit into that market? Where do we think the opportunity is? What's the strategic rationale? How does it also complement the hospitals business? We will finish with a bit on the financials.
As you know, we've got about a GBP 10 million sized EBITDA business today. That's within a broader business of about GBP 260 million. The ambition is to take that to GBP 40 million of EBITDA in the medium term. We will talk about how that growth is underpinned. We will use the remaining time for Q&A, the bulk of the time. For people in the room with us, we will take all those questions first. For anyone who is online, please type them in. If they have not been covered in the room, we will get to them at the end. Peter, over to you.
Morning all. Most of you I know, some of you I do not. Chief Commercial Officer, I have been here around nine years. Most of you have heard me talk for far too long. I am going to do a little bit of an intro for you. Derrick will cover off the detail of where we have got to and our ambition. Obviously, we will do the Q&A. Let me just remind you of the background of this. We have talked at length over the years around the hospital business. We then started to talk about actually expanding that into an integrated healthcare proposition. I just go back to the original point here that when we, the first setup of the business was all about transactional relationships with patients.
We were brilliant at doing hospital business, brilliant at identifying what was wrong with you and then making sure we were fixed. This is about creating a much longer-term relationship with our patients. In order to do that, we wanted to push and make sure we develop more of the front end. Looking at how we start to develop a primary healthcare strategy. The macro trends are very familiar to you, so I'm not going to go through them at length, but you know about the long-term sickness position that the U.K. is currently facing. Just as a reminder, the two biggest causes of that are mental health and physiotherapy, MSK. Hence why Vita is a strong part of our portfolio. We are now the largest talking therapies business in the U.K.
Also, with the addition of the physio services that we had in the hospital, combined with what we've now acquired with Vita, we've now got a reasonably scaled business that has the opportunity for further growth. There are two areas of getting people back to work we have strong propositions in. Plus, there are other elements of the service that we can add in. Obviously, there is the occupational health story, which we've talked about at length as well. How do we make sure we attract, retain, and manage workforce and support corporate employers? Finally, the waiting lists, which I know went up slightly. If you look at the overall trend, the underlying trend of long waiters is actually still continuing to go down. However, the number of people on the waiting list is still material.
A number of you will have struggled to try it and even get into CHGP. Okay, there is still opportunity. We think there is a place for Spire to operate at the top end of this funnel. If you then throw that through into what we have therefore developed, we have got a talking therapy business, occupational health business, a strong GP and health assessment business, and then, as I said, the emergence of physio clinics. That is a standalone business. Okay, and Derrick is going to talk at length at the opportunity that business has to generate bottom line profit into the business. It also has a role to play in terms of creating long-term relationships, obviously, and then feeding into the business. Look at it as both rather than just thinking about it as just feeding hospitals. It is a standalone business, and it is profitable.
We see this huge opportunity to grow. If we move to the next slide, you will be familiar with this one, which is the numbers. Okay, so I'm not going to go through this detail by detail, but we think that if you look at the evaluation of the primary care market and the hospital care market, they're actually similar in size, worth about GBP 6 billion each. We can see the growth rates that are coming through in the various segments I've talked about. Occupational health at 6%, GP services running at 10%, diagnostics at 2%, outpatient treatments at 10%, physiotherapy at 4%, and talking therapies at 10%. They're all in growth at this moment in time, and we've got an opportunity to grow into them. Obviously, that doesn't mean we're going to distract from our core business.
Clearly, we'll continue to focus on that core business, but this in itself represents an opportunity. If we then just go to the next slide before I hand over to Derrick. Apparently today, hospitals, 1 million patients, which you're all very familiar with, with our 38 hospitals. On the right-hand side, you've got our current position with primary care with 300,000 patients running through the areas that you can see outlined there. Where are we going? That's when I hand over to Derrick. Derrick, if you want to just kind of walk through where you've got to and where we're going with the strategy, I think we can then move on from there.
I did. Before we do, introduce Bex, Rebecca Harper, who's also in the room, who's our Corporate Affairs Director.
Yeah, Corporate Affairs Director. Just joined about six weeks ago. So good to meet you all.
Nice to meet you.
Cool. If you take it in the console, I'm going to take it back to 2023 in the context of the acquisition by Vita. What happened since then. I'm going to talk a little bit about what we do, because I think you're all very au fait with what a hospital does, because who hasn't been in a hospital? When you start talking about talking therapies and physio and stuff like that, physio is a bit more obvious, but I'll take you through kind of what we do. Acquired in October 2023, I think Justin took a few months to make sure he hadn't bought a bottle of confetti that was just going to blow away in the wind. In January, when we hadn't blown away in the wind, it'd be a big wind that would blow me away, let's be honest.
Anyway, we hadn't blown away in the wind. Justin said, right, okay, we've got this vision around primary care. We spoke about it before you were acquired. It's probably time to start gearing ourselves towards what it is we can do in that market. Effectively, he brought together the DCG acquisition, so Doctors Clinic Group, which was the previous year to us and Vita, and said, look, have a look at it, structure yourself in the context of how you think you need to for the success and the growth that we both want to get for the business. Then have a think about how we're going to interact with hospitals and which bits are going to happen and stuff like that.
Effectively, what you've got here in front of you is a slide which talks a little bit about what we do and a little bit about how we're structured. I'm going to try and cover both of those elements off, okay? Before we do, what is talking therapies? We talk a lot about talking therapies because it was 75% of the Vita business when it was acquired, and part of that is corporate, and part of that was NHS. It remains a very strong part of our growth as we move forward. We won a contract, which is now public knowledge in Derby, which will add about GBP 10 million of revenue. We're continuing to be in the fight for that NHS growth going forward. That remains a key part of our growth story, a key part of what we do.
Talking therapies is about taking people who have a common mental health problem, okay? Not complex and enduring mental health problems, but people who suffer from depression and anxiety. They're people who we can get better and keep better. That's kind of a good way of thinking about it, right? If you've got a longer, more enduring mental health issue, then our service will not be for you. They can help, but they won't get you better in the context of that, okay? Physio is a similar sort of thing in the context of we take people who have an acute physio need and we get them better, okay? Effectively, we case manage them from the point of assessment right through to being better. Now, being better in the different markets means different things, okay?
In the NHS, it can mean having some basic functionality just to live your life. In the corporate, it means being able to do your job right, work hardening so that you can actually physically go back and do your job. I'll talk a little bit about that in a second. Of course, in a private setting, it can mean getting better to the extent that you can run a half marathon or marathon or whatever, you know, so you're pushing yourself kind of into a different space. It is about getting people to that point that the commercial proposition allows them to get better to that extent. You're going to have less interventions in the NHS space and a lot more in the private space where people are paying for it themselves. We have a GP service.
I'm not going to explain what a GP service is, but effectively, that was in. I've got there are two bits to this at the moment which we're joining up. One is the London Doctors Clinic, which we know we've talked about in the markets before. The second is Spire GPs, which is what sits inside of the hospitals. The key tenet of our growth and of our story is joining up what we can do inside of the hospitals or what we're doing outside of the hospitals, okay? If you look at GPs, as for instance, having GP coverage in London is great because it's a big market, etc., etc.
When you join that up with what we're doing in the 38 hospitals, and that means system changes and management changes and stuff like that, which we're gearing towards at the moment, you then have a national GP network, okay? If you've got a national GP network, you can then start thinking about doing national health assessments and trying to bat people on that. Both from a B2C and a corporate perspective, okay? If you think about the network that we're setting up, we're starting to cross-pollinate GP services and physio services so that they're becoming co-located. In the physio space, from a B2C perspective, there's a far more joined-up story to tell, okay? If you think about MSK in the context of needing some self-help, probably got a minor injury, right through to needing a hip, knee replacement, etc., etc.
Up to the point at which we were acquired, it could be said that Spire only on the back end of that. In the context of picking up the referral for somebody who thought they already needed an orthopedic intervention, this is about taking the customer far earlier in the journey. In the context of how we're set up, it's pretty much exactly as you see here. Just go back to the, sorry, previous slide. When Vita was acquired, Vita had 74% NHS business. That's the bit that's on the left-hand side of this. Effectively, we've structured ourselves so we've got a business lead for these three pieces.
It took pretty much 10 months kind of reconstructing the team and bringing some new people in that would enable us to have the, I suppose, the bandwidth and the firepower to be able to deliver growth in each of these areas. Vita for the NHS on the left-hand side is still, is all of the NHS stuff to be brought over from Vita. There is about GBP 70 million of that. It is about 75%, 70% of the total business. 25% of the Vita business was corporate business. I will come on to a minute in terms of list of customers and stuff that we have in that space. That has been spun into the Spire for Business arm, okay? We have got a focus around Spire for Business.
It is pretty obvious from this, but clearly we are going for a focus around customer groups rather than service line focus, which is obviously another way we could have gone. On the right-hand side where you have got clinics, that is really about a B2C sort of EMI-focused business. Now, that is primarily going to be, as I said, where we are located in hospitals. There is a physio network within our hospitals already. There is a physio network outside of our hospitals that Vita ran. It would be madness not to join them up, right, and create a single physio portfolio through the hospitals and outpatient. Getting that mix right between what is the focus on inpatient, what is the focus on outpatient, and how you do that is something that we are kind of focusing on at the moment.
There are obviously the larger clinics, which Peter has spoken about in the market, which are more geared towards hospital services and more, I suppose, populated by consultant services, okay? Three customer groups: NHS, corporate, and B2C. At the moment, we're talking about primarily four service lines, okay? We're talking about talking therapies, physio, occupational health, and GP. There is one thing to say about occupational health before we go on. Occupational health traditionally has been an advice service, okay? If you want advice on how to get people back to work, or if you want advice on how to treat people who are off sick, you go to an occupational health company, and they give you advice on what to do. They generally do not provide the intervention, okay?
They do not say, "Oh, and by the way, if you come here, we'll make the person better," or, "You could make a referral in here and we'll make them better." As Peter said already, rough, well, it depends which stat you look at, but roughly somewhere between 66% and 80% of absences from work are either musculoskeletal or mental health, right? In effect, in-house, we have the ability to solve at least two-thirds of the problems that are driven by the advice that would be given for people being off sick. I think that creates a differential for us in the marketplace in the context of how we do it. It gives us a chance to cross-sell and cross-pollinate services. As I said, this is primarily geared towards having a focus by customer grouping, okay?
If we just move on to the next slide, and this is just to kind of give people a kind of a sense of the customers that we serve already. The occupational health business is not the biggest part of the business. When you add in the Vita stuff, it is probably about GBP 35 million of revenue. These are some of the customers that, in fact, we were just saying before in the room, this is the type of thing you kind of take for granted, right? You do not really think about it or look at it in the context of consolidating it, but there are some good names on there, and it is a fairly, you know, it is a decent list of kind of customers to have. Obviously, we will look to expand that. On to the next slide.
Okay, so this is just a sense check to where we are. Amy's mentioned it already. You know, we're a little over GBP 10 million of EBITDA in 2024, 2025. We'll progress from there. We've put a target up of hitting GBP 40 million. I'm going to flick on to the next slide where we're going to talk about how we believe we're going to get to that GBP 40 million. Getting a business, to be honest with you, getting a business from nothing, from break even to GBP 10 million was quite tough. I think getting a business from GBP 10 million to GBP 40 million poses probably some different challenges. Because we're inside of the group and because we've got the backing of the group, I think those options are better options in the context of how you get from one to the other.
In broad terms, we're looking at continuing our success, particularly in talking therapies in the NHS, looking at new services, and these would be services across both. We would look for services that have a relevance for both the NHS, corporate, and B2C. Two of those services that we're looking at at the moment are children's and young persons' mental health. For those of you who are unlucky enough to have kids who need to access those services, you'll probably appreciate just how difficult it is, right? That has a strong relevance in the corporate market because you're getting a lot of people who work for corporates having those problems and not knowing where to go, and therefore having access into that market is very important. In the B2C world, unfortunately, I do have the experience of having a daughter who had some mental health issues.
I tried to access this market myself without using my contacts. Even if you wanted to pay for services, it's super difficult to find what you're looking for, right? I think there's a big market in the B2C space for those services. The other service that we're looking at is neurodiversity. It's probably coming through with stronger demand. If I'm honest, probably stronger demand because there was a lot of it that wasn't dealt with for people my age who, when they were at school, weren't diagnosed. Therefore, there's this big unmet need in the context of diagnosis and what it means and how you manage it and stuff like that. We think both of those are a good addition to sort of what we already have in terms of the talking therapies inside of the NHS.
We are going to look at small M&A, right? We have already completed an at-one acquisition in occupational health that is embedding well as we sit. We sort of remain active in that space, not just for occupational health, but we are also going to look for sensible places to buy small groups of clinics to give us a kind of a head start in that space. A, we will look at good value, you know, in the context of where we can get good value. As importantly, we are going to look at spaces where it augments into our hospital provision so that you can start to create some of that kind of joined-up proposition. I think one of the obvious questions, which I will preempt now, which is kind of, have we got any areas where we have joined that up? The answer is yes, right?
We have an NHS MSK service in the Greater Manchester area in Oldham. We have managed to, through patient choice and through giving the patient a choice and kind of offering an enhanced journey, managed to divert some of the customers from that who were due for surgery into a Manchester hospital. That is running, it is not a massive number, but it is kind of GBP 600,000 a year of revenue off the back of one contract. It kind of gives you the sense that, A, it is possible. Secondly, and I think most importantly, for those of you who know the Manchester area, traveling from Oldham to kind of Didsbury is a big thing in Manchester, right? You know what I mean? It is not a huge distance, but it is a big thing. People were willing to make that journey.
That does give us some confidence that when you can kind of augment the journey and kind of make it a little bit better for people, speed it up, etc., that they will make a choice towards that. Continue to success in talking therapies, particularly, but in the NHS. Look at new services where they make sense to kind of augment and do kind of small tactical kind of M&A work, primarily in the clinics and the OHPs. If you just flick on to the last slide, this is how, it's just pictorially how we get there. I still think existing business and new contracts that we win. The difference between the two of those being, and we'll see how the NHS pans out with all of the pandemonium that's kind of playing out in the market at the moment, right?
How it plays through at the moment is mental health is one of the areas of focus. There has been a lot of stuff in the press. To this point, we've got contractual obligations to increase our throughput on most of our mental health contracts. In other words, if you're seeing 12,000 this year, you need to see 13,000 next year. Funding comes with that, okay? You get some growth in revenue because your volumes are expected to go up when you get a commensurate increase in volume. We are going to try them in new contracts. Derby is an example of one of those that goes live July 1, 2024.
The new clinic rollouts will be, I'll say, a combination of stuff, but we're going to open up new clinics, so green site, brown site, whatever you want to call them, new clinics where we don't think there's an acquisition opportunity in there. We're going to open them. Now, it's not going to be the larger end MRI and loads of diagnostics and stuff like that. Think smaller, right? You know, think about going to your local physio and kind of having five to seven rooms, right, which are structured around kind of simple care, for want of a better description, right? And we can add stuff into that. I think one of the things I haven't spoken about yet is what do those centers become?
Because if you can grow them, right, there's a need for, it's a dermatology that sort of, you know, the provision is a bit disparate and a bit broken and stuff like that. Can you come up with a proposition that works in that space? Men's health, women's health, I've mentioned health assessments. You know, there's a space for primary care to play in the longer term. I think sometimes those centers are something slightly different. At the moment, then in the medium-term view, think physio and think of kind of adding, augmenting that with smaller services that make sense as we move forward. As I say, there will be some M&A. There has been some M&A already this year. We're expecting some more as we push forward.
I do not feel, I feel excited about the GBP 40 million rather than awkward or thinking actually it's a huge thing. I think we've got a big market opportunity to go at. I think it's a fragmented market. We've shown inside of the talking therapies market that when we get it right, you can make headway, fairly significant headway. We're going to try and use that skill set to kind of continue to grow that, augment it with additional services, and then grow it again. That's pretty much what that says, isn't it? I'm not going to repeat that again. Yeah, I'm supposed to say, look, it's always a worry when you kind of come into a new business. We're 18 months in now. We're not new anymore, right? It's working well.
You know, the link-ups with hospitals and kind of how we work, it's working really well. It's working way better than I thought it would. If I'm honest, I thought it'd be much more of a struggle, but it hasn't been. That is really encouraging. I only thought it was a struggle after I met Peter. Everyone else is really nice. That is it. That is the story of what we do at the moment, how we do it, how good we are, and I suppose how we think we're going to get to the GBP 40 million.
Okay. Thank you. Let's start with some Q&A, Seb. Do you want to start?
Hi, Seb Johns here with Panmure Liberum. Just want to start off with a question just to kind of clarify something you said.
You said that the kind of, if you think of the Vita for NHS was about GBP 70 million, and then the Vita for business was about GBP 30-35 million. Can you just break that GBP 30-35 million down for me a little bit in terms of what offerings you have in that business space? Because it is a bit bigger than I thought it was going to be, that part.
Yeah. Broadly speaking, this is that acquisition. I was going to tweak a little bit from here, right? 75% of our business is NHS and 25%. There is a tiny bit of B2C in there, right? But it is like 2 or 3%, right? So 20-odd percent is corporate and 2 or 3% is B2C. If you look at it by service line, it is broadly the same breakdown. 75% of it is mental health, 25% of it is MSK.
Those percentages hold pretty true by market. Okay. You're already doing quite a lot of kind of mental health and MSK that are for the businesses already. Some of our best contracts in MSK are. Effectively, how the business grew, if you go back to kind of RehabWorks back in the early noughties, was around blue-collar businesses like BT, like Severn Trent, right? Where the sick pay was fairly generous, right? Therefore, getting people back to work was a big thing. It grew up in a space of getting people back to work was the main focus, right? When I joined the business first, it was quite evident that that was something we were very good at, right? It still stays in the mid-90s now.
For people who come into our service, either in MSK or mental health from a corporate perspective, when they complete the course, you know, the course of treatment, 90-odd percent, 95, 93, 95% will get back to full duties, right? There is quite an established book in there in the context of what we do in corporate, and we're pretty good at it.
Just flipping then, obviously NHS England in the middle of being kind of, you know, what they're doing with it, but anyway, it's kind of disappearing and everything's going back into other places. What does that, what do you think that does to decision-making over the next 12-18 months in terms of contract awards and, you know, people kind of moving jobs and everything else?
On the ground now, the only thing that we've seen is a bit more activity, right? The people in the integrated care boards are maybe a little bit more eager to kind of prove their worth, right? Because there's a lot of change going on there at the moment. The activity that we normally face, and we always did face activity around being more effective and being more efficient. That's a constant theme, right? Regardless of what's going on in the NHS, the intensity of that has probably upped a little bit, you know, and the kind of, I suppose, they're being slightly more assertive, and we're being slightly more assertive back. I think it hasn't changed significantly how NHS England plays into it and what impact that has in the longer term, we'll wait and see.
You know, we're in the running for a big kind of talking therapy contract at the moment. We'll hear about it in a few weeks' time. I'm fairly confident. In the context of the machine continuing to turn, the machine is continuing to turn, right? Whether that changes in three, six, twelve months' time, you know, I hope you probably have a better idea than I will, right? There's no sign of it at the moment.
Okay. I'll just ask one more and then I'll kind of come back to others. You talked about opening new clinics. Interesting, you're talking about doing things like dermatology there. If I think back to your kind of hospital business, you know, it's always been unattractive to do private dermatology in a hospital, right?
Does that mean there's an opportunity for you to start feeding some private work into those kind of clinics? Yeah, I think if you think about, one, we know dermatology is a massive growth area. You're right, it's not something we necessarily want to put a huge amount into hospitals. If there's an opportunity, definitely it's into our clinics. That work can be done across the full suite of clinics. It doesn't have to be in the outpatient clinics. It can be done in other settings as well. I think there's also an element, and Derrick will be able to talk about this better than I can. It's also about mental health as well and dermatology. You need to link the two together. Derrick, do you want to give a bit of a flavor on that?
Yeah. I took some convincing on this, right?
Can you see it in my face?
Yeah, yeah, yeah. We've got a small dermatology business that I haven't spoken about, but we've got three small contracts in dermatology from an NHS perspective, right? I probably should have mentioned that earlier, but it's a fledgling business that we're looking to kind of grow. My director looking after business development came to me and said, "We need to go into dermatology." I'm like, "Talking nonsense. Dermatology, come on, come on." He showed me a spec from the NHS, right? Of the first five pages, I'd say two of them were dedicated to how you're going to handle and deal with the mental issues associated with having a skin condition, right? If you think, the easiest example is think of young kids, right?
Think of kids at school, acne, skin stuff going on that's very visible and the context of how that makes them feel. Build that into later life, the issues become way more embedded. There is a huge thing about, it's not just about physically making people look better or making them feel better about themselves, but the feeling better about themselves becomes a huge part of it, right? There was a strong link. In fairness, I'd say us winning the ones that we did win were because we were a very strong mental health provider and we could actually demonstrate the links between one and the other. It would not have been about our pedigree because it could not have been because we did not have a pedigree, right?
We had a pedigree of turning NHS contracts around and taking a poorly performing service to a decent performing service or good performing service. We did not do it in dermatology. Yet we were given the remit to go and do it, A, because we had that, but secondly, because we had the links into mental health.
Big learning and opportunity.
Okay.
Could we look at that waterfall chart again? Sorry if you could bring that up. Maybe just a few questions on this. In terms of the pathway there, I guess from a growth and a margin perspective, there is a growth. What is the sort of organic growth you are targeting? Is it sort of similar to the sort of, obviously in the past,
you did quite a lot? I am allowed to say that? Am I allowed to say?
Am I allowed to answer that one? Should I take this one?
You take that one. Okay.
Do you want to do all the parts? And then I can link them up.
Yeah, just organic. It looks like, obviously, I have not given a scale there, but it looks like M&A is quite decently proportioned to existing business. Is there quite a sort of advanced deal pipeline you have got, or is it just a case of the big market with a lot of opportunity? Just margin, I think if I recall, you are targeting a little bit of expansion, but obviously new openings will sort of impact that. Where is the sort of medium-term margin? Is it sort of low, double digit?
Yeah, understood. Okay. I will take one and three. Then do you want to talk about M&A pipeline and those pieces? Yeah. Okay.
Yes, on the organic existing business, there is no reason that you should not expect that to kind of continue compounding, right, at the rate that you have already seen it. Because the drivers there, the scaling, you know, by and large, Derrick and the team, they are already on with that. That continues as it is, supported by new contracts. You get nice leverage coming through there. CapEx investment is quite minimal to kind of add that revenue. That accretes and builds, I would say, on a fairly steady, consistent basis. When we look at the new clinic rollout, that is a bit more of a delayed delivery. Because if we do those de novo, you have to go through a couple of years of putting the cost in, opening the clinic up, and then the revenue and the profit builds out of that.
You have kind of got your organic going like this under the surface. The clinics, although smaller, will come through more of that hockey stick curve. You will not see a lot of EBITDA delivery out of them the next couple of years, but then you would start to see them kicking more from 2027 forwards. The M&A, yes, will be, it is kind of immediately accretive. We are looking at buying them up at single-digit multiples. You get that delivery immediately, and it is just a matter of how opportunistic we can be. That denotes how long people will be. Yeah, when you translate that into, how does margin look? You are right, Kane, we have talked about it a little bit before, but it is not unreasonable therefore to look at double-digit EBITDA margins in this business in the medium term.
I think what's slightly more interesting about it is the way it drops through to EBIT, because that drop through is quite a bit stronger than what you see in the hospital business because of the CapEx profile not being quite so thirsty.
In terms of profile and kind of M&A activity, it's quite a lot out there, right? And we're being quite targeted, right? We're looking to create occupational health is one of those businesses where you kind of need a national footprint if you're going to go after the big contracts, right? Having bought something where we've bought something, we look somewhere else to buy something else, right, and plug it together so that we can get a national network around OH and we can start going after those larger contracts.
There's quite a few of those smaller valued, as Amy said, kind of with the right multiple, you know, with an accretive multiple that allows us to kind of buy and create that footprint. In terms of the clinics piece, we're looking around the hospitals, right? Where can we add value in the context of what happens in the hospital? Where can we join up the journey? You know, there's a percentage of people who go and see an orthopod that do not end up having done anything with an orthopod. Where do they go afterwards? Send them back to our clinics. There's primary care clinics that will be sending people on because they've done the injections, they've done everything they can do, and they now need a knee replacement, a hip replacement.
Actually, if you can kind of join up that journey, there's a definite value both ways in that stream. We will be looking at targeting M&A in those spaces.
The emphasis, again, on the clinic side would be in terms of volume, be a lot more of the smaller size clinics. There are a couple of areas I'm still looking at in terms of more of the larger outpatient clinic size, but you're looking at a handful, two or three, not 10 of those. Yeah. Okay.
Should we go miles then, John?
If I could ask about the evolution of the occupational health offering, I mean, my recollection of this is it very much started out public sector, extension of HR. It's about return to work. Clearly, the mental health is the big element that's changed over the last 20 years.
How does that differ in terms of what your client list you put up? I saw some big public sector contracts. Clearly, they do not necessarily want the same service offering that, you know, a high street bank would want, for instance. How is that changing now in terms of how you think about each of the customers and what they want? Do you have units which you drop in for some and drop out for others?
There are two main elements to occupational health, right? One is about health surveillance. That tends to happen in more of a blue-collar environment where you go along and you have to kind of measure the risks and make sure everybody is okay and stuff like that. That tends to be about 40-50% of the business. The rest of it is about sickness absence management, right?
It's a bit about sickness absence management. I was involved 20 years ago in the occupational health business. When you kind of come back to it 20 years later, you kind of go, wow, it hasn't kind of moved on that much from where it was. I think there's an element of this which is about providing, and we're finding this, two things we're finding as we're going out and talking to customers about the solutions that we have. It's not quite like a light bulb goes on because they're not silly people and they know that it's there, but to be offered it in the same envelope is proving really successful in the context of them seeing an outcome, right? Rather than just covering themselves in the context, because that's how occupational health came about, right?
You know, the legal risks of kind of health and how it plays into the workplace. Actually finding a way to actively manage people back to work is kind of quite, it's like, oh wow, okay, so we can actually physically do something here. It's not ridiculous spend, you know what I mean? It's not a crazy number. Even when the sick pay isn't quite as generous as it would have been for the likes of Severn Trent and BT, it's still worth doing it. You know, it's still, and you're doing the right thing for your employee. The other thing we're finding, which is a very nice plus and not something I was necessarily kind of expecting to find, Spire brands make a big difference. It's made a really big difference. You know, we're having people come to us, if you know what I mean.
We're not, not that we're not out there looking for a business, but we're actually having quite a lot of people come to us and they've come across the website, they've seen the thing, and they get inquiries in that way. There are a few encouraging bits happening. In the context of that employer thing, it's given them the option, right? Do you want to get this person back to work? Because there's a 95% chance of getting them back to work in four weeks, six weeks if you go down this route. If you do not want to go down that route, then that's fine as well. You know, you can stick with the kind of core offering.
I mean, is it still too high growth to look at the ebb and flow between public and private?
Because presumably subject to, you know, what the demands are on the businesses, that's going to change.
I think it will change. I think the economically inactive figure is probably, it's not going to be smaller,
is it? It seems to be a big focus for the government. Southern Bex have actually been talking about,
well, what do we need to change? How do we need to influence policy and what needs to change?
However this thing plays through, and even with, I would say maybe driven by some of the turmoil in the NHS and kind of what's happening there, it feels inevitable the government are going to try and push more to business, right? You know, in the context of that number, in the context of the illness number and kind of trying to be more proactive and kickstart the economy.
What form it takes, you know, God knows at this point.
Peter, if I can just ask you about the, you talked at the top about the idea of having more contact points with patients, physios, GPs. Is there a natural tension between doing that and your PMI contracts, for instance? Because they're increasingly, I mean, firsthand experience, they genuinely do not want you to have multiple follow-ups.
They do not want you to have any maneuvers. No, I do not think so. First of all, we can lean into the insurance. The insurers have a variety of different networks, whether that be physio, they are desperately trying to sort out their dermatology problem. It is one of their biggest claims areas. There is opportunity for us. Derrick and I are closely working with a number of partners on how we can help them with their GP networks, their physio networks.
Therefore, there's an opportunity for us to get into that market that they are also developing. Secondly, I think, you know, people don't, I've talked to you about this before, they don't operate in swim lanes. You're not just a PMI patient. You're a patient who then chooses the area of least resistance. If you can get into your NHS pathway, you'll go into your NHS pathway and then you might slow down, you might then swap over. We need to be in all the pathways. Some people will start at a self-pay and they'll come in on a self-pay physio and then they might choose to then switch over to their PMI. I think we need to continue to be in all the pathways.
What I need to do and what we're working on as part of the transformation program is we're also looking at our CRM platform. That CRM platform is not solely just for private patients, it's all patients. We will capture patients, we will understand them, and then we'll be able to navigate them and manage them through the pathway. It's about creating that value piece again. It's looking at a patient, a household, and saying what are the interactions we're having with them throughout the whole business and then making sure we're seamlessly managing them. That's part of the transformation program that will start to roll through next year.
I think where we've come from as a business in terms of our culture and stuff like that is, and how we run our contracts is Lowe's point of intervention, right?
It's to try and provide. Now, what that means is you can set the culture up at the business as much as you want, right? That's probably, you can't guarantee that. Let your clinicians do it. Let your clinicians set up the pathways that are right. Therefore, the only patients who get through to a hospital are the ones that absolutely need that, right? I think it's those clinical pathways that will give comfort where comfort is required, right? I'd certainly put our kind of clinical efficacy up against anybody, right? You know, in terms of number of sessions, in terms of, you know, people getting back to work, people getting better after what they do, all of that stuff. I'm quite happy to kind of sit down in front of the PMIs and have that chat.
I think also what you'd say is that primary care is about capturing people closer to their home as well. We need to be close to people. It's more of a convenient transactional relationship. Whereas you may know in your own experience, if you would need surgery, you're willing to travel further for that to a specialist center. One of the things we're working with is just to make sure that we're present, we're available, we're close to people, make sure we're locating and where Derrick's looking at acquisitions, but also where we're looking at other clinics is we're making sure we're in conversations that we can effectively be close to people's homes or work and make sure we get them as part of that pathway.
On the GP services that you offer, I've got a sort of multi-part question about that.
The patients that are coming to you, are they coming from private medical insurance or out of pocket or through independent contracts with different corporates? That is kind of the first question, where are they coming from? The second question is, how are you paid? Are you paid on a fee for service or do you have any sort of capitated payment arrangements? Is that indicative of the sort of services that you actually provide? Are you managing any chronic health issues or do people still really need to still have their NHS GP for that element?
Payor mix, I will take first, is mainly out of pocket. There is a small bit, so we have linked in.
What the PMIs and others are finding now is that having a virtual network is one thing, but actually they need to augment that with a physical face-to-face because some people are now saying, "I want to go and see a GP. I do not want the thing online." They will pay a little bit extra, you know, to go and see a face-to-face GP. We are seeing some of the work kind of come through in that way. The vast majority is B2C, okay? Not PMI funded or funded in another way. In terms of how we develop our service, the second question is an interesting one. At the moment it is fee for service. You come in, you have the service, you go away, you come back in if you need to, etc. It is a fee for service.
How we might develop that service and proposition, we'll have to take a look at, you know, capitation models, etc. But at the moment, we don't have that in play.
Okay, cool. Just to re-emphasize, it's all private. All private work. So it's no NHS.
Okay.
Yeah.
Okay. So generally people have both?
Yes.
NHS. So there's no risk selection going on in the gym.
There is an interesting thing happening, which you guys are going to see from all the statistics, right? Younger people are now, I'm going to say younger people, not like me. So people of my age tend to have this thing about the NHS will look after us, right? The younger person is having less of a, that's less of a view, right?
They seem to be, and as seen by some of the stats that came out last week, they're paying for more of it, right? The age demographic of the people coming through to see our GPs, particularly in London, is probably lower than you expect it to be.
Okay. Thank you.
Julian and Adam,
you touched on this slightly there. How much does virtual care fit into what you're doing? Because particularly with the mental health services, I mean, that can be quite a big proportion of.
If you look from the left to the right in the context of the thing that I had up there, our talking therapy service is 80% remote, 80-90% dependent upon which area you're looking at.
When you think about the CapEx light model that we were talking about, that comes partly from the fact that a lot of people are working from home, right? We do have centers that augment our service in the areas where we provide those services, but they tend to be smaller centers and not big units, etc., etc. If you go into occupational health, that is pretty, apart from the health surveillance, but that means you're going out to the workplace rather than having a big set piece. Management referrals tend to be pretty much all remote. There's a good chunk of physio that's done remotely, right?
Initial assessment, there's a lot of ongoing care now that happens where people aren't that severe, where you can talk them through exercises where they're online and they can do an exercise and they're all, "Oh, all right, okay, what you need to do is this." That became a bit of a thing through COVID and it's kind of hung on a little bit through that. Some services and GP services have seen a kind of a strong return to a strong desire for people to return back to face-to-face, right? Seeing all the stats kind of in the NHS, we haven't seen that in talking therapies. People have not reverted back. Now we were 95-5 through COVID. It has gone back a little bit, but it's staying steady at 80 and above.
Thank you.
Yeah, just back on this sort of M&A, you said there was sort of lots of stuff out there. Is it safe to make an assumption that because there's lots of stuff out there, these are generally kind of not very competitive processes that you kind of go for in your M&A or you'll be able to offer people bidding up the price?
Yeah, it varies. It varies, I'll say. I can't give too much detail because Amy sat me here. I sat down to you around the table. I didn't see you. I think it's so she can kick me. It varies. We tend, because of the way we choose to engage in these and because we're a trade buyer, right? We've got advantages and disadvantages, right?
It depends who's selling and the motivation for selling as to whether they're more likely to come in our direction and go in a different direction, right? If they're younger and want to go again, then maybe private equity is a better option, right? If you're not looking to do that and you're looking to do something else, then actually we're probably a better home for the business. You know, that's proven to be like a real factor in these conversations, right? The fact that I can sit there and say, "Actually, I've committed this bar. I committed this bar 18 months ago." By the way, here's two businesses that I bought while we were part of Vita, and you can go and talk to them and ask them how they landed. How are you landing a business?
For a lot of people, it's like their third child or their fifth child or however many, you know, it's like a thing that they want to, yes, they want to realize a gain for it because they realize they've added value, but they also want to find a good home for the business. That is becoming kind of a fairly central tenet of the conversations that are ongoing at the moment. I think there are those two factors, right? What do you want out of the business and where do you want the business to end up? I'd say they then guide the person to where they need to be. We haven't been unsuccessful with one, as in with conversations where I really wanted to kind of push it. So far, so good.
Just in terms of your NHS contracts, are they all sort of standardized or have they evolved over time? Would you see them evolving over time in terms of structure and all this kind of stuff, you know?
The NHS contract, every year the NHS comes out with a standard contract. You cannot vary that standard contract, right? You either sign up to the standard contract or you do not work with the NHS. That is effectively how they work, right? It has evolved over time and there are nuances included in each contract that are slightly different than the other contract, right? But 90%-95% of every contract is pretty similar.
Yeah. Thank you very much.
Just following on from the contracts, I was interested about the average kind of contract length also with the corporates as well. I think you talked about a GBP 10 million contract you'd signed and I think in the previous results you talked about a GBP 90 million secured contract. So be able to just talk about the average length.
Yeah, no problem. So the GBP 10 million was per annum, the GBP 90 million would have been a kind of over the life of the contract, right? Generally speaking, it's either a 3 plus 2 or a 5 plus 2. That's generally how the NHS works, right? It's proven to be a pretty balanced mix of both, right? You get five years or you get seven years. I mean, in one of our contracts, which is one of the first ones we signed, it was 10 years, right?
That's unusual, right? It can happen. Yeah, the rundown, that's generally the period that they're underpinned by, five or seven years. That's not changing, you know, as people are coming to the market now. In the monitors, it takes you a year to a year and a half to actually get the contract to work properly, right? Anything less than three years you wouldn't want. Actually, you'd want kind of a minimum of five, if you know what I mean, or at least a target, to be able to target a minimum of five. The good thing is, I suppose, last year we had three of our significant contracts up for renewal and they all renewed. Okay, as in they all renewed for a longer, you know, for the same period again.
I think Bromley went for seven years and Goodwills went for five years, you know. Yeah, it's rolling.
It's the attractiveness of the contracting market in this particular area, healthcare. It gives us certainty. It gives us the ability to plan and then over perform.
Thank you. Just switching to synergies as well. I mean, you've talked a lot about the cross-referrals, but on the cost side, are you able to talk a bit about the cost synergies there and you're benefiting from the efficiencies put through from the group as a whole?
Yeah, there's two areas I'll talk about. One is we've got greater buying power, right? And the areas where we're buying normal stuff, be that putting Microsoft licenses or whatever else, right?
You're getting stuff a bit cheaper because you're now part of a bigger organization and you can kind of see some of that coming through. To work around, the biggest area where we could get some cost savings is around back office functions, bookings and admin and stuff like that. Obviously, the group, the hospital group have undergone project Willow, which is still ongoing. We're going to tag on the back of that, right? Let them get settled, let them get into thing and then see what works in the context of how we can get some cost savings kind of coming through. In the context of how we operate, it's an interesting one, right? Because I want to keep us separate, right? I don't want to integrate the operations of the business because our business is a different business to hospitals, right?
The thing I obsess about and the thing that therefore the team obsesses about is clinician efficiency, right? It's patient-facing time. How much patient-facing time are each individual and every one of our contracts doing? We spend a lot of investment making sure that we've got really clear line of sight on that. Hospitals run in a slightly different way, right? They're a slightly different animal. Therefore, keeping it separate has its advantages. Plus, our entry points into the market tend to be slightly different, right? Therefore, keeping that slightly separate focus probably makes sense. The back office stuff, I think we can definitely do, you know, do some stuff.
We've already made some progress, haven't we? There are some areas that we've already started to integrate marketing, for example.
We've got two dedicated teams, but they're integrating to get the buying power of the one group. That's a really, you know, an easy example of where that's happening. It gives us the advantage to drive more volume in more efficiently into the non-hospital business. I think we've made some progress. There's probably a little bit more we can go at, which is encouraging beyond Microsoft licenses.
I think just to Peter's point, right? You run a reasonable small to medium-sized business. You know what you know. You don't know what you don't know, right? Being able to tap into a wider breadth of experience is really important, right? The marketing one is
insights, you know, the corporate relationships we've got, which we can leverage. There's all sorts of things that we're continuing to leverage.
Yeah, that's quite cool.
I'm cool.
I didn't say that.
I'll be honest.
I think we'll take last ones from Beatrice and then we'll probably have to wrap up. Yeah, no, I just had one. So on the kind of clinic openings, is there kind of a number that you have before you kind of reach the kind of midterm target? I know you mentioned that it was minimal CapEx required, but would you be able to put a number around that at all? I suppose it's kind of two questions. I was going to say, is there any question before it breaks? Yeah, exactly. One question by far. What's the kind of strategy for choosing locations and kind of insurance and efficient capacity utilization?
Okay. So number of clinics. In the medium term, there's probably a different number than I'm just about to describe, right?
Because I think if you had three or four clinics around the hospital, that's about as much as you could probably handle, right? So three times 38, that probably gives you a maximum number, right? I think in this medium term, you're not going to get to that in the medium term, right? So the medium term is half of that number, probably a bit less than that, right? I think that numbers wise, that's what you're kind of talking about. In CapEx terms, so one of the things that's different between small clinics and physiotherapy and consulting rooms and all of that, the biggest difference is air change, right? So when you do a procedure in a room, you have to ensure the airflow is sufficient that you, and I'm not a clinician, but it's to do with infection control and all that sort of good stuff, right?
The mechanical side of the CapEx mortgage, right? Because you have to ensure that all of that airflow is in there and everything else. In a GP room, in a physio room, you do not. We will probably have one room that is a procedure room, but every other room will be a normal physio room. You know, in that context, you are probably talking about GBP 30,000-GBP 40,000 a room, right? You know, including aircon. That is the kind of standard, whereas obviously in a hospital environment, that is a very different number, right? That sort of cost in terms of, and I am sorry, I forgot the last part.
I can take my way. That is one of the cool things he gets, is that actually we have got a very sophisticated model called SPOTS, Spire Opportunity Tool.
It's a gravity model that looks at a whole heap of data, right? Down to postcode level, looking at wealth and opportunity, the flows of patients between NHS and private, the competitor landscape, etc., etc. We obviously now use that model not just to continue to look at opportunities to grow the core hospitals, but actually it's the first tool that we go to when Derrick's looking at new opportunities around the hospital. We're able to then look at where the patients reside back to the point around making sure we're close to the patients.
Where are they living and making sure that then when we start to look at new clinics or even acquisitions, are they going to be able to attract the right type of person that's going to be, one, interesting to create value and even EBITDA from the existing patient, but also are they going to be the people who could then flow into the hospitals as well? The gravity model is something we've built up over eight years now. It's pretty sophisticated and it's something that, you know, we're deploying already with Derrick and his team.
Great. Thank you. I think that perfectly takes us to time. We haven't had any written questions online that haven't already overlapped in the room, so we don't need to take any from the Zoom. I'll just say thank you, really, to everyone. Thank you.
Thank you guys for presenting and questions and coming to join us this morning.