Good morning. It's 9:00 A.M., so we will kick off. You're all very welcome to our interim results presentation for the half year ended 30th of June 2022. I'm Justin Ash, Chief Executive of Spire. Having seen many of you in our new offices in Dorset Rise, which was a pleasure so recently for our capital markets event in late June, we've decided to revert to a Zoom format for this event, which enables more people to join. Angus Prentice, our Interim Head of Investor Relations, will manage the Q&A session, which will follow this presentation. In the meantime, all attendee lines are muted. If you do wish to ask a question, please submit your name and organization into the Q&A function on your screen. Lastly, if you have any difficulties with your connection, please email Laura Young at the address shown on the screen.
I'm delighted to say that, as you can see, Jitesh Sodha, our CFO, has made a fantastic recovery after the accident he unfortunately suffered earlier in the year. He's with us today. I'm delighted to say he'll be fully taking up the reins again from next week. Great to see you back, Jitesh. Harbant Samra has covered Jitesh's duties admirably in his absence, and he'll be presenting the details of the numbers shortly today as they cover the period when he was acting CFO. We've also announced today that he's promoted to deputy CFO. Harbant Samra, thank you and congratulations. I'll kick off with a brief reminder of our strategy and overview of how we performed in H1 and how H2 has opened.
Those of you who joined us for our capital markets event in June will remember that our purpose is to make a positive difference to people's lives through outstanding personalized care. This is lived in our business and drives our actions. As the population's health care needs change with rising NHS waiting lists and the impact of the pandemic, our aim is to help meet those needs by running great hospitals and developing new services. As you can see here, there are five pillars to the group's strategy. To continue growth in our existing hospitals, maintain our strong quality and safety credentials, in which we've invested so much in recent years. As a people business, to recruit, retain, and develop a great workforce. As a responsible business, to champion sustainability.
To expand our proposition, developing new services which meet the new and changing needs of patients and the population in today's environment. Through this, we will deliver strong financial performance and improving shareholder returns. Now, having talked about the different elements of this strategy just two months ago, I don't propose to go into detail of each of these statements. I will focus on the headlines of our achievements in H1, with some more detail on specific projects after Harbant has expanded on the numbers. Turning to that review, we've made good progress during H1, and I'm pleased with the way the business is performing. In summary, we delivered on our guidance. EBITDA was up compared with H1 2021 and the first half of the last pre-pandemic year, 2019. Revenue was up compared with H1 2021 and the first half of 2019, especially private.
Our savings and efficiencies program is progressing well, our cash position is strong, and our leverage ratio is reducing. I'll now look in a little more detail on what is driving our current performance. The backdrop, of course, is of continuing rises in NHS waiting lists and a sustained switch in consumer attitudes to private hospital care. The most recent figures show waiting lists of over 6.7 million. According to our research, 60% of our target audience are now more likely to consider using a private hospital than they were before as a result of growing NHS waiting lists. This is resulting in continued strong demand. Inquiries from self-pay customers have continued at the historic high levels we've seen since the start of 2021.
The significant new news from this half is that PMI, having been initially relatively slow to recover post-pandemic, has rebounded strongly during H1. We are now seeing greater PMI revenue compared with the pre-pandemic period, and this growth is accelerating. In our NHS work, we are seeing good levels of commissioning coming mainly through ERS. We've worked with local trusts to help achieve the government's target of treating, by the end of July, all NHS patients who'd waited longer than two years, and we continue to focus on more complex work and on orthopedics. We've improved margins from 2021 levels to 17.7%. As you will recall from Capital Markets Day, this is through a model of focusing on private income, increasing ARPCs through complexity and pricing, plus an efficiencies program.
This program is on track, as is our work on minimizing supplier price rises through smart procurement, and our energy commodity prices are, as you'll recall, hedged until 2024. COVID, unfortunately, as we continue to emphasize, continues to bring short-term but material disruption to the business. The high prevalence of the Omicron variants in the community at the start of the year, and again in March and late June, were reflected in patient cancellations and increased colleague and consultant absences, which had a knock-on effect on capacity. The COVID impact during the period was GBP 25 million. This was higher than we planned for, and it is a sign of the robustness of the business that despite this cost burden, performance was in line with expectations, though of course, it ate into some upside.
COVID continued to impact adversely on the business during July, when COVID levels in the community were as high as they were in January and March. With the removal of all social distancing and mask-wearing in society and in the NHS, this proved to be the biggest impact we've seen since 2020. On a typical day, we would lose 20% of bookings and then rebook 10% for a five-week period. However, even in this tough month, EBITDA was above 2021's levels. We then worked really hard to recover in August, and August activity bounced back strongly. The underlying business is looking very resilient. Our good progress in H1 means that we continue to expect to deliver in line with our guidance and see good revenue growth and continued EBITDA growth. I'm also delighted that our CQC scores rose in the first half.
98% of our inspected hospitals and clinics are now rated good, outstanding, or the equivalent in Scotland and Wales. Our patient satisfaction scores show that 96% of patients rate their experience as good or very good, with 92% saying their care was outstanding. With the operational background I've described, this was a real achievement for all our teams. In summary, the first half saw good progress, thanks to quite remarkable efforts by our colleagues, and I'd like to thank them and our consultant partners for all their hard work and commitment as ever. Thank you, and I'll now turn to Harbant to go through the financials in more detail.
Thank you, Justin. The group has made very good progress in the first half of 2022, and it is my pleasure to present our results. As many of you will know, comparing H1 2022 against the prior year is difficult owing to the business impact of the NHS COVID contract in the first quarter of last year. Therefore, I will be referring to 2019 figures as well as those for 2021 to aid comparison. I will start with revenue. This grew to GBP 597.9 million for H1 2022, compared with revenue of GBP 491.6 million in 2019, and was driven by the continued strong performance of our private business. The momentum in revenue growth during the second half of 2021 has been maintained in the current period.
Total revenue during the current period has grown by 9.1% compared against the second half of 2021 and demonstrates that the demand for our services has remained strong. EBITDA for the six months stands at GBP 105.8 million and represents significant growth compared against the H1 2019 outcome of GBP 96.8 million. We are pleased with the progress that the group has made and the EBITDA is in line with our plan. The financial impact from COVID disruption has remained material during 2022, and I'll share more information on these costs later. The group achieved an adjusted EBIT of GBP 54.6 million. This compares with GBP 51.4 million in 2019, or an increase of 6.2%. Adjusted profit before tax was GBP 8.6 million for the current period.
The adjusted profit before tax figure includes a one-off non-cash charge of GBP 3.1 million relating to the refinancing of the group's lending facility. We've also grown EBITDA margin for the first six months to 17.7%. This compares with 16.1% for 2021 full year. This margin is stated before taking into account COVID-related costs, which during the current period have reduced EBITDA by GBP 25 million and compare with a full year cost of GBP 53 million for 2021. After adjusting for these additional costs, the margin for H1 2022 increases from 17.7% to 21.9%. We've continued to make significant investment in the business with CapEx of GBP 38.8 million during the period. This figure aligns with our targeted range of 6%-7% of revenue.
Our adjusted free cash flow of GBP 23.7 million for H1 2022 is in line with our plan. The group has continued to be highly cash generative with an EBITDA cash conversion rate of approximately 91%. Net bank debt stands at GBP 227.8 million and is comparable with the 2021 year-end outcome. As at 30th June 2022, the group held cash of GBP 95.8 million. This figure is stated after paying down bank debt in Q1 2022 by GBP 100 million, down to GBP 325 million. The group's leverage ratio has again fallen. It is now down to 2.2%, which compares with 2.3% at 2021 year-end. This ratio is now at its lowest level since 2016.
The growth in revenue has been driven by a strong performance in our private payor groups and in particular, self-pay. Self-pay revenue was sharply up by 34% compared with H1 2021. The 2021 figure was already 50% up on H1 2019 as the self-pay market expanded after the major peaks of the pandemic and our contracts with the NHS came to an end. PMI revenue both rebounded strongly, meaning greater PMI revenue compared with the pre-pandemic. A strong start to 2022, and inquiries have been equal to the prior period, which demonstrates that the self-pay market remains strong. It is also good to note that the conversion rate has remained steady. As you can see, self-pay consultations have remained strong and revenue has grown to GBP 174 million in H1 2022.
This is only GBP 4 million short of the full year figure in 2019, and so we have effectively doubled the size of our self-pay business. You can also see the significant impact to admissions due to the Jubilee weekend and the subsequent increase in the COVID infection rate and how volumes then recovered in August. One of the most encouraging features was, as we predicted, the recovery in PMI. The start of the year saw very strong performance in new outpatient volumes and admissions. The improved volumes in PMI mean that revenue has grown to GBP 265 million, an increase of GBP 34 million against the prior year, and GBP 18 million versus 2019. With PMI demand recovering strongly after the pandemic, it is becoming more relevant to focus on private as a whole.
This slide contains the equivalent charts for our total private business through to the end of August 2022. You can clearly see how strongly both outpatient consultations and admission volumes have performed for the year-to-date. It is worth highlighting that the admission numbers for 2022 are unadjusted for the fact that some procedures are now no longer conducted in main theater suites in order to create more capacity. Moving on to another key metric for our private business, average revenue per case. At 2021 year end, I reported that we'd seen a material improvement in ARPC versus 2019 levels. ARPC consistently exceeded GBP 3,000 during the last three quarters of 2021, and this compared with ARPC of GBP 2,600 in 2019. It is encouraging that ARPC growth has continued in H1 2022.
ARPC during the current period was GBP 3,197 which is 3% or GBP 96 higher than the last six months of 2021. I'll also highlight that the weighted average across all payor groups after factoring in NHS has risen by 26.8% from H1 2019. This outcome is underpinned by our continuing focus on delivering a more complex mix of work and has also benefited from the increased control we have from our pricing tool. Lastly, turning to payor mix. This is a very important area of focus for us. As set out in the capital markets day, we are targeting to stay in a range of 70%-80%. The H1 2022 mix of 73% was well within this range and significantly up on 2019.
The share of private work has been maintained during a period of high revenue growth against the backdrop of significant macroeconomic uncertainty and supports our view that our targeted customer base is financially resilient and that demand is strong. As I mentioned in my opening comments, the disruption and the additional costs from operating in a COVID environment have remained high. The reduction in H1 2022 EBITDA due to COVID specific issues amounted to GBP 25 million. This compares with GBP 53 million for all of 2021.
As can be seen from this chart, which shows actual net cancellation rates since July 2021 to the end of August 2022 and the COVID infection rate per ONS data, COVID comes and goes in waves, with the most recent peak taking place in July. A peak typically results in approximately four to six weeks of operational disruption. The level of disruption in July was significantly higher as it took place during a popular holiday period, which meant that it was difficult to backfill cancellations with other patients at short notice as they may not be as flexible. Equally, there are fewer consultants and staff members who can cover. As a result, the net COVID impact in July exceeds expectation by GBP 6 million. The business continued to work hard to recover, and as a result, volumes were strong in August.
The fact that we continue to grow turnover and EBITDA despite these challenges demonstrates the underlying strength of the business. We are focused on improving margin, and we are pleased with the progress we have made in an inflationary environment by growing margin from 16.1%- 17.7%. Some of you will recognize this slide from the Capital Markets Day, and it summarizes how we are going about achieving margin improvement. Taking each item in turn, in terms of organic growth, we have comfortably grown revenue beyond our medium term CAGR target of 5%. Private mix at 73% is well within the range of 70%-80%. We have good pricing control over our private business, where we can set self-pay prices and our PMI contracts benefit from inflationary mechanisms.
As for NHS, we have benefited from recent national price increases and also continue to be selective around the work we do to drive ARPC where we have capacity. Our savings program for 2022 is on track. This program will deliver savings of at least GBP 15 million in 2022 and a further GBP 15 million over the course of 2023 to 2024. Turning to inflation risk, this is being managed by the fact that elements of the group's cost base are fixed in the short to medium term. Of course, workforce risk. Workforce is also highly relevant to the topic of inflation risk for both Spire and the wider industry. Notwithstanding this risk is being managed. The overall EBITDA result for H1 2022 was in line with our plan.
We remain positive about the level of demand for our services and our ability in the short term to weather reasonable levels of inflationary risk. Subject to the timing and severity of any further COVID disruption, we expect the coming months to trade to plan and our overall guidance remains unchanged. Before handing back to Justin, I will close by saying we are very pleased with the progress we have made in the first six months of the year. Despite COVID headwinds, the group has performed really well. It has delivered significant revenue and EBITDA growth, improved margin, made significant CapEx investment in our network, reduced bank debt and maintained high levels of liquidity. Thank you. I'll now hand you back to Justin.
Thank you, Harbant. I'll now touch on some of the operational highlights of H1. Quality and patient safety is our highest priority, and as I've mentioned, I'm pleased to see our investment continuing to be reflected in our ratings from regulators. 98% of our inspected hospitals and clinics are now rated good or outstanding by the Care Quality Commission or the equivalent in Scotland and Wales. Four hospitals were inspected during the period and all were rated good, including Spire Murrayfield, Wirral, which was upgraded from Requires Improvement to Good. We've just one hospital now, Spire Alexandra in Kent, which is not rated good or outstanding. It hasn't been inspected since 2016 and so the team haven't had the opportunity to demonstrate to the CQC the excellent work that they and their colleagues are doing there.
We launched our sustainability strategy at the capital markets event in June, and we continue to roll out a range of initiatives which are helping us to move towards our goal of becoming net carbon zero by 2030. I'm pleased we were highly commended in the BusinessGreen Leaders Awards for Net Zero Strategy of the Year in a field where we were up against NatWest, Heathrow and other big names. Due to the global volatility in the current energy market, our supply of electric energy has moved from green to brown. This does not affect price, as that's been hedged, but it's a temporary setback to our progress in becoming carbon neutral. Alternative plans are being developed to keep on track and we will communicate these at our next results meeting. This includes more sustainable energy.
In Cardiff for instance, we've just replaced a gas boiler with an efficient electric steam generator, saving 150 tons of CO2 a year in one site alone. We are in essence a people business and investing in our workforce is core to our success. Our learning and development programs remain strong, which is key if we are to recruit and retain talent in a market where there are national shortages of key professionals. Around 500 of our colleagues are apprentices. That's more than 5% of our permanent workforce. In total, more than 1,000 of our colleagues across the group have taken part in one of our learning and development programs this year.
Our nurse apprenticeship program continues to grow, as does our overseas nurse recruitment program. With the cost of living pressures on our colleagues, we believe it is right that we do all we can to support our teams. We recently announced a comprehensive pay award with a 5% uplift in the salaries of our colleagues from September of this year, a bit less for senior leaders, and the move to ensure that all of our colleagues in and around London are paid at a minimum the London Living Wage. This means that everyone is paid at least the real Living Wage for their local area. For those in the lowest earning roles, this recent award is in addition to rises made earlier in the year, and some have seen increases of more than 16% over the course of this year.
Feedback from colleagues on this recent award has been positive. We've also announced the timetable for moving all colleagues onto a clearer and simpler salary framework linked to role and skills by September next year. We've redoubled our efforts to support the well-being of our colleagues. This, we believe, will help us to remain competitive by being supportive and so find and keep the best people in the sector at a time when clearly healthcare faces significant workforce pressure. We continue to invest in our estate with GBP 38.8 million invested over the period in line with our 6%-7% of revenue target. The aim is to maximize capacity and provide the most modern facilities and equipment for all our patients, consultants, and colleagues, as well as building out our digital transformation.
Our investment program at Shawfair Hospital in Edinburgh continued, and we're now able to welcome overnight patients there. We also begun work at Spire Yale, where we're converting admin buildings into an outpatient center. We're continuing to look for opportunities where we can create additional capacity by adapting existing estate into outpatient facilities and treatment rooms. Our investment plans include the replacement of six CT and MRI scanners with the latest models this year. Turning now to a quick update on some other of the strategic developments through the first half of the year. Digital progress continued, including starting the rollout of automated letters, appointment reminders, and welcome leaflets to patients via MySpire or on paper if required. The project to enable clinical teams to access NHS summary care records more easily was successfully implemented and went live during the period.
This is a major patient safety enhancement and efficiency step. I'd also like to touch on our exciting work to meet more of the needs of our patients and our wider target market by expanding our proposition and developing new services. We continue to build a platform to launch a pilot service for people with type two diabetes, which should go live before the end of the year. Our Spire GP service continues to thrive, with volumes up 69% on H1 2021, and we're currently recruiting additional GPs to meet growing needs. In order for the service to expand and meet more of our patients' needs, the service, which is currently face-to-face only, will be developed to include a digital arm. We've reached agreement in principle with a leading digital partner, and we hope to be able to say more later in the year.
The aim is to develop an integrated offering whereby patients can swap between the existing face-to-face service and the new digital service, dependent whatever suits their needs. As we've said, primary healthcare is an important part of our strategy to make it easier for patients to access private healthcare, and we look forward to launching this enhancement for patients. We've now identified and are planning for the first 10 clinic sites. We're in a position to tender for new sites, and we anticipate the first two of these will open next year. We hope to roll these out at a pace of at least two or three each year as the program builds, and we put in place the team to deliver this. We're laying good foundations on which to build as we seek to become a provider of much more integrated healthcare.
In conclusion, we are pleased with what we've achieved in H1 and the progress we're making on delivering against the strategy we set out at the capital markets event. There's much to look forward to in the remainder of 2022, and we look forward to reporting back to you on this in six months' time. Thank you for listening. I'm now going to open the floor to questions. I'm going to invite John Forrest, our Chief Operating Officer, and Peter Corfield, our Group Commercial Director, to join us for the Q&A. I'm gonna hand over to Angus to handle that. Thank you.
Thank you very much indeed, Justin. Just a reminder, everyone, if you want to ask a question, please place your name in the Q&A function at the bottom of your screen, and then we'll refer to each of you in turn. First question is from Kane Slutzkin at Numis. Kane, go ahead.
Morning, Jess. Can you hear me?
Yes, we can.
Lovely. Hi, guys. Congrats on a good result. Just a few questions if I may. Just on the average revenue per case is now, sort of as Harbant Samra was saying, 27% higher than sort of pre-pandemic. Just wondering if you could comment on how much of that is price versus mix and acuity. I would imagine a lot of it is actually mix and acuity, but maybe just how sustainable is this in your mind? On PMI, have you guys got the data about sort of the demographics of the, I guess, of that growth in PMI membership? Is it younger folk who may be less likely to claim? You know, I'm just trying to think about how should we view it as, is this a long-term underpin to the business?
Thank you very much, Kane.
Just finally on.
Go ahead.
Sorry. I was just saying just lastly, just on margins, you've obviously got a lot of moving parts and clearly the delta could be sort of obviously still that remaining or lingering COVID cost. You mentioned in July unexpectedly, sort of obviously a big impact. August much better. Could you give us a sense for the August run rate or is it just similar to sort of what you saw for the first six months in terms of that rough sort of GBP 4 million a month? Thank you.
Okay, Kane. Thank you. I'll start with ARPC, Harbant. The mix of what comprises the ARPC and where we're headed with it.
Yeah. We don't actually give information, Kane, in terms of the drivers behind ARPC at that level because any year-on-year comparison is pretty difficult when you start getting down into the detail on the services we provide. Clearly, as we said before, we do have good pricing control, so an element of it will come from pricing. Equally, as we've said, we've got good control over the types of work that we choose to do as well. There's clearly gonna be a blend, and I'm not gonna go any further than that. In terms of sustainability of ARPC, again, we are pretty positive.
We made some very similar statements at the beginning of this year in terms of the sustainability of our targeted market, and also our ability to pick and choose the work we do, and I don't see any change in that in any day soon.
Thank you, Harbant. Peter, how much do we know about that composition of what's driving the PMI?
Thanks, Justin. In terms of composition, it's difficult to say in terms of what the books are doing for each individual insurer, but what I can say is that our outlook at the moment is very confident for PMI. We're seeing great outpatient volumes, as you've seen. That's converting well into delivery into the second half as well. And I expect that to continue. Talking to the insurers, they're building up their books, not only in just corporate customers, but they're also building up in the SME market and also individual lives covered. As I mentioned at Capital Markets Day, we are in a unique space which we haven't seen for a number of years, where the insurers are actually seeing growth in their portfolio. No specific detail on the makeup of that, but certainly the indicators I've got are confident and positive looking forward.
Thanks, Peter. I think we should add that new contract with Bupa is working really well. We're working very well with Bupa.
It is, and we've got some real opportunity for that, in the second half and into next year as well.
Great. With regards to August, we won't sort of comment overall on August, it's only just shut. Broadly, the business bounced back really well, as we've said. We put a lot of effort in to make sure August was a big month and momentum continues. Thank you, Kane. Hopefully that answered your question.
Thanks.
Thanks, Kane. Next question is from Grace Lee at Jefferies. Grace, go ahead.
Hi. Thank you for taking my question. On margin, I think you missed on the margin question that Kane asked. Again, I'll just add my question on margin. For example, I can see you've highlighted private mix is up to 73% first half and ARPC is materially higher versus pre-COVID. Can we just for adjusting for that COVID cost, can we sort of assume that EBITDA margin could have been potentially even higher and the delta is the inflationary sort of impact and how sustainable that margin are you sort of thinking going forward is my first question. Then second question on self-pay, you've done significant growth in first half. I just want to get a sense of like how sort of continued opportunity here.
Can you share exit rate for July, for example, or the phasing of that growth that you've seen in first half? Thank you.
Okay. Thank you, Grace. First question, Harbant. Underlying margins-
Sure.
...sustainability and the question of inflation.
Yeah, that's fine. Grace, if you look at our reported EBITDA, as I said earlier, our underlying margin has increased from 16.1%- 17.7%. You're quite right. If you look at the impact of COVID costs, there is a significant upside opportunity because that 17.7% rises to 21.9%. Now, in terms of margin development, I'm not gonna go any further than saying there is clearly opportunity there, and we're targeting, as we said at Capital Markets Day, a medium-term margin of greater than 21%. In that context, I think there is a I would view our performance in this half very positively with upside potential.
In terms of other inflation, inflationary pressures, again, the message is consistent with what we said before. We're managing inflation risk. We are in a good place in terms of the contracts we've got in place on the procurement side. We've got good cover in terms of fixed contracts in the short to medium term. Justin referenced the point around our energy commodity hedge until October 2024. Again, we're shielded from that as well. There clearly are workforce-related pressures, but that's not unique to us. In the round where we are is that we expect to weather what we describe as reasonable rates of inflation. Clearly, the severity of those inflation rates and the period over which they are maintained will obviously potentially cause further challenges, but at the moment, those challenges are being managed.
It might be interesting. Before I talk about the self-pay, see if John's got anything to add on what is essentially the operating environment behind the margin improvement. John?
Thanks, Justin. I mean, I've just had really a combination of all the benefits of what we're seeing as well in terms of the digitization. I mean, that's helping us underpin reducing the variable labor and improving the overall efficiency of the business. The real strength that Harbant talked about in procurement is definitely helping us mitigate the cost on consumables. No, nothing else to add. Thank you.
Thanks. Peter, self-pay.
Good morning, Grace. I'm not gonna give specific details about July and August, unfortunately, but I am gonna say that we are getting continued good inquiry volumes. Our digital inquiry volumes still remain ahead of last year. Our conversion rate from outpatient to admission still is stable. The outlook for self-pay is good, it's positive. I don't expect significant growth half on the current run rate, but there is opportunity for growth. Outlook good, solid self-pay growth coming through as in line with the current levels.
Thank you, Peter. I think just to frame those two questions together, if you look at what I'm looking at, top line is strong and there's lots of opportunity. It's also worth noting that NHS commissioning, particularly through ERS, but also local requests, is beginning to build as well. Top line, it really does look like that demand, that unprecedented demand we talk about is coming through. The self-pay wasn't a bubble. We've sustained those 2021 levels, and we're ticking above them as well. That looks strong. Look, we've worked hard to be in a position to optimize our ability to grow in self-pay. We've worked well with insurers. It's not a coincidence we're seeing a strong top line. To look at the bottom line, many of these lines, we've got really strong smart procurement.
There's a lot of inflation out there, but we're managing it really well. The key to the top line and the bottom line therefore is how we work with our colleagues and workforce. That's our big focus. It's really key to hit the top line because we've got to be able to maintain and increase capacity. When COVID hits, it's largely a workforce issue. We've got people off sick and consultants off sick, and so to grow it's about workforce. In terms of cost management, all the work we've done and establishment, et cetera, is to make sure that we can deliver safely and efficiently. When you sort of cross the top of the bottom line of the equation, the future success that we're gonna see is all down to how we work, support, develop and grow our workforce colleagues.
Grace, hopefully that answers your questions.
Thank you. Very helpful.
Thank you, Grace. Blanka, you had a couple of questions. Blanka Porkolab from Barclays. Please go ahead.
Hi, can you hear me?
Yes, we can.
Great. Thank you for taking my questions. I have two, please. The first one is, could you talk about COVID costs thus far and the split of this, and to what extent you're able to backfill cancellations? How do you expect this to trend over time? The second one is, could you talk about the progression of the mix and when you expect NHS commissioning to take off, and if this could drive a shift back towards NHS? Thank you.
Okay. COVID. I can answer the bit about how do we expect it to progress, which is we've no better idea than anybody else. There could be another wave, there might not be. Omicron was different to other variants quite a lot. Obviously, there was a lot of it, and we saw a lot of people who've not had it before having it in July. That's why it was such a big impact. You could make a case for another wave, which would be tough for us, or you could make a case for there not being another wave. That's why we've put a big question mark on the slide, 'cause we don't have any more ability than anybody else to predict. In terms of the nature of the impact, Harbant Samra.
Yeah, Blanka, as we said, the cost that we've incurred in the first half of the year was GBP 25 million and is directly linked to the costs that we described previously. A chunk of that would have been down to absences and cancellations and the costs that the business has incurred as a consequence of that. There's also a much smaller element, which relates to other costs or what we describe as other COVID costs that year, and if you recall, which talked about changes we made to the patient pathway, including testing and et cetera, which is a much smaller element, and is tracking with the comments that we made at that time.
Thank you. If I then take the point about NHS commissioning. There is no doubt that there is more commissioning coming, not the great big waves that perhaps people predicted, but it is strengthening. There is more need, and we've worked closely to make sure that it's the right sort of commissioning for us, orthopedics, et cetera. Our big challenge is we're coming into our really big months and we've got plenty of private demand, and we've also got to find a way to accommodate that NHS demand as well. There might be more of a shift towards NHS. I don't think that'll be a dramatic feature of the second half of the year. Our really big challenge is to work out how we can further increase capacity to cope with both.
I don't know if John or Peter have got anything to add to that overall observation.
Nothing from me. I think that's spot on.
Great. Blanka, does that answer your question?
Perfectly.
Sorry, John.
No, I think that describes it perfectly. It's different in every one of our hospitals, and we're balancing it on a daily basis.
Great. Thanks very much.
Thank you. Thank you, Blanka. Good morning, Miles. Miles Dixon from Peel Hunt. Please go ahead. I think you're on mute, Miles.
Thank you, Justin. Can you hear me now?
Can.
Brilliant. I was just saying congrats on the results and nice to see you back, Jitesh. Just two questions left from me. On the private patients, you talked to the CMD about the change in the socioeconomic group that's willing to use Spire. Is that now filtering down to the patients that are actually coming in the door? Secondly, Harbant, you've mentioned the macroeconomic backdrop and the markets that we've seen in the first half, the success that you've had in paying down debt. Is this changing the way that you think about reinstating the dividend? Many thanks.
Peter, socioeconomic change in profile, what are we seeing?
Short answer, yes. I mean, we continue to monitor that. As I've said at the Capital Markets Day, we are seeing a broader range of patients, and that's reflective in our results. As I said, demand's strong, and that's converting well, so I'm very excited about what we're seeing in the top line.
Can I just add to that? 'Cause obviously, the underlying question is what's the effect of, the economic background on our patients on demand? We are seeing a change. What we are seeing is patients are very demanding of us. If they're paying, they expect high standards of care. I think the real challenge for us is to keep stepping up. It's why I keep focusing on those patient scores. We're only gonna be successful if we offer them an outstanding experience, 'cause if you've paid for it, you really do expect it to be outstanding. Again, where I'm sitting, it's about continuing to drive excellence, not just clinical quality, but each bit of the journey, and this is where the digitization comes in. 'Cause if we're honest, there are bits of our journey which are still clunky.
You know, you can have to register more than once for different bits of a hospital, and the digitization is about making sure that we can really deliver on the promise around the sort of experience you expect from private, and people are demanding around that. Harbant, net cash and dividend policy.
Yep. As you just heard, Miles, we expect demand to be strong for the foreseeable future. We still expect to be generating good levels of cash. We set out a very clear dividend policy at the Capital Markets Day. We did that intentionally, clearly 'cause we want to be transparent about how we make these decisions. As we said in that policy, we'll assess how we do against plan, and we'll make that assessment as we get closer to the year-end. We said in the slides at the time that we would consider a dividend payment in 2023. That's still, you know, the timeline that we're working towards.
Great. Thanks very much.
Thanks, Miles.
Thanks, Miles. Next question's from Charles Weston at RBC. Charles, please go ahead.
Hello. Thanks for taking the questions and congrats on the CQC results. Three topics if I can, please. First of all, you said that you wouldn't be splitting out like for like versus mix on pricing, but perhaps you could for NHS in particular because that pricing is, I think, a bit more transparent. You've seen increases on ARPC quite consistently now. Is there any reason we shouldn't continue to see progression there across all payer groups? Secondly, on volumes, self-pay and PMI volumes, according to your chart, seem in line with 2021 for the last few months after the very strong growth we saw in the first few months.
So could you just touch on like for like comparisons there, and how can we interpret that in terms of volume for H2 and H1 2023? Lastly, please, you mentioned the exceptional pay rise, which I calculated is worth perhaps roughly GBP 15 million. What's the total increase in staff costs on a sort of like for like basis, sort of excluding hiring new staff through the year? You mentioned all sorts of different changes you've made there, so I'd just like to get a sense of what the overall wage inflation is in the business from beginning to end of year. Thank you.
Great. Thanks, Charles. Can we start with the ARPC future prospects and the NHS component, which is more transparent, Harbant?
The NHS piece, again, Charles, I'm not actually inclined to share that level of detail. I think we already share quite a lot of information in terms of ARPC, and it's not my intention to add any more at this time.
Fair enough. I mean, I think it is worth pointing out, however, that there have been two NHS increases in tariff, which I think between them constitutes something like 3.2% since March. That is clear, and that is published. Sorry, Jitesh has a point.
Yeah, just on the NHS. I suppose there are a couple of other factors when you look at the average price, which is also partially driven by the mix of products that we take, but also what sort of patients we're getting, because if there's higher acuity, then what we'd actually get becomes higher. This mix can have as much an impact as anything else that the NHS is driving.
Absolutely right. On volumes, I'll handle that. I'm not saying the volumes are going to fly away in the final quarter, but the fact that overall they were flat during the period where for a lot of the time we have 20% cancellations and then we're rebooking 10% is sort of the point I was making about the underlying robustness of the business. The fact that we managed to overall achieve between PMI and self-pay a flat performance during that period. Well, first of all, it's a tribute to my colleagues because, I mean, literally during that period, sometimes there was nobody in booking, so there was nobody on the sales team because we had so much COVID plus holidays. I think the way to interpret it is we weathered quite a big disruption storm and still came in at broadly flat.
As I said, it ate into upside, but it's why we're sort of confident about the demand picture. Remember, by the way, none of those patients or few of them are lost. They're just getting rebooked. That's how I'd answer that picture overall. Let's see how we do. Don't want to get carried away, but that's essentially how to read that period as you look forward. Third question, basically the question I think is the weighted average impact of wage costs after also our efficiency savings and digitization. So the net impact, which will become apparent in the full year numbers. But I don't know what we can say about that at this stage, Harbant.
What I would do, Charles, is I'd point you to the disclosures at the back of the results document, which contains information around both wage costs and FTEs, et cetera. You can probably make your own judgment around that. As Justin said, more generally beyond that, we're giving a company-wide increase of 5%, although it's restricted for the most senior members of the team. There are some individuals who, as a consequence of earlier increases during the year, have got a blended increase of 16%.
What I do know is in there is you'll see on clinical staff costs, they're down just a bit as a percentage versus 2021, despite all these various pressures and despite the fact that within that you've got quite a lot of absence costs from COVID and so on. Obviously we are net net driving some efficiencies there. Now, some of these pay rises feed through into the second half. That's a number we look at very closely because obviously that drives a lot of our costs, and it's down slightly despite all of this versus 2021. Hopefully, Charles, that gives you some thoughts on those questions.
Thank you very much.
Moving now to David Adlington at JPMorgan. David, please go ahead.
Morning, guys. Hopefully you can hear me.
We can.
Perfect. A few questions, please. Firstly, just in terms of the GBP 25 million hit from COVID in the first half, just wondered how much of that, you know, to parse it out between patient cancellations because they've got COVID versus staff cancellations or absence because they had COVID. This might be harder to answer, but how much of those cancellations were because of asymptomatic patients who had sort of tested positive, didn't even know they had it. Following on from that, I've seen some reports that the NHS might be considering dropping testing for COVID. Obviously that would help hopefully with the cancellations. Just wondered if you would follow suit on that front. Finally, just in terms of the change in ownership of your biggest shareholder, just wondering if you had any thoughts or any feedback on what their plans for their stake might be?
I'll answer, the last one first. You'll have to ask them. They are a very supportive shareholder. We work closely with them. We share a lot of ideas. It's been really helpful. I think it works in both directions. They're a supportive shareholder, but you'd have to ask them questions about the future. Just working backwards. John, do you want to talk about our current COVID policy?
Yeah, sure. Guidance in England changed on the first of September, Wales this week, and Scotland is reviewing. You're correct, David. Routine testing for patients prior to admission has now ceased across the NHS and Spire. We updated our guidance in line with that change. In Scotland, we still have to test all patients pre-admission. We continue to test, as does the NHS, patients who are in high-risk groups. That's somebody who would, for example, have a planned stay in a critical care unit post-operation or is having oncology treatment and has perhaps a lowered immune system. It is definitely, as you suggest, helping in September to allow us to backfill cancellations more quickly because it's one less hurdle we have to jump in terms of having a clear COVID test. Thanks.
Thank you, John. Harban t, the GBP 25 million, the breakdown as far as we can give it.
Yeah. If you recall, David, at the year-end, we broke it down into two categories, effectively. One was other COVID costs. As I was saying earlier, I think in response to a question from Blanka, that included costs relating to changes to the pathway or to safeguard the pathway. And then there were other, the most significant aspect was to do with absence or cancellation. We’ve not disclosed a split of the underlying root cause of what’s given rise to that absence or cancellation. If it’s consultant or patient driven, et cetera. It’s not our intention to go into that level of detail.
I mean, one thing I will confirm, as I said earlier in response to Blanka's question, that the trajectory of the other non-COVID costs has followed the path that we predicted at the beginning of the year. It's much smaller, it's stabilized, and the piece in relation to absence and cancellations is the bit that's much more variable and dependent upon infection rates.
I think we can add tonally, staff illness was a particular problem in July because we track incidents in our staff versus the community. In all previous waves, because there's been social distancing in the NHS and mask wearing and also in Spire, what you've seen is a lower incidence in colleagues than there is in the community. This time, the two graphs caught up and went ahead. Essentially that was a particular feature of July, which you could read as being good news because it means the vast majority of colleagues have now had it. Of course, we can't predict what the next variant may look like.
All right. Thanks, guys.
Thank you.
Thank you, David. Victoria Lambert at Berenberg, please go ahead.
Thanks for taking my question. I just wanted to follow up on NHS commissioning. They gave the update with the NHS action plan, that using the private sector was a big part of that plan. It just doesn't seem like it's flowing through to the private hospitals yet. There are 500,000 more people on the list from the beginning of the year. I'm just trying to get an understanding of, like, what's going on here. Are commissioners coming under more pressure to refer to the private sector? Thank you.
There's a bit of, you have to ask the NHS because we don't run it, and we do work closely with them. I don't quite know why more isn't flowing through. Now, I do think, by the way, more is going to flow through, right? There's always a lag effect. Between announcements and action, there's always a lag effect, right? The announcements are made long before the action's put in place, typically. The place they're particularly focusing, where we've always focused is the electronic referral system. Rather than going through complex commissioning frameworks, they're focusing on ERS, where we are seeing growth, and we're focused in particularly on orthopedics. There has been an announcement about having an app where you can see how long waiting lists are in trusts versus independent hospitals.
Now, of course, the app hasn't been built yet, but I think the general momentum over the next year will be for growth. Why it hasn't been more than that is the big unanswered question, of course, to which I don't have the answer. Relations are very positive. They're particularly positive on the ground. I think we will see more, and our challenge will be to cope with that and the private demand. Peter, anything you'd add to that picture?
The only thing I'd say is that looking at actual referrals, we're back at 2019 levels now, and actually orthopedics is ahead. It is coming through, but I concur with Justin. I think we'll see more momentum on this as we move into the second half and into next year from NHS. Certainly, with my interactions with them, they're very keen to get moving and very keen to get us to support them.
Does that answer your question, Victoria? Did you have another question or is that it?
No, that's it. Thanks so much.
Thank you.
Super. Just a reminder, if you do have a question, please, place your name in the Q&A function. At this point, I think we've gone through all the questions I can see, Justin.
Okay. We'll wait a second to see if anyone. Thank you. Very good questions and good discussion. Thank you. Anybody else with a question? I think that's a no. Look, thank you very much. Thank you for attending and listening. Thank you to the team for presenting and again to the wider team. We will go back to the day job of patient care and delivery. Thank you very much.
Thank you.