Spire Healthcare Group Stock

Hello, and welcome to the Spire Healthcare Full Year Results for 2025. [Operator Instructions] I will now hand over to your host for today, Justin Ash of Spire Healthcare. Justin, over to you.

Thank you, and welcome, everybody, in the room and welcome, everybody, online. Very good to be here today. If you are joining for the first time, I'm Justin Ash, and I'm the Group Chief Executive of Spire Healthcare, and this is Harbant Samra, our CFO. So we're going to talk you through the results, and then we're going to leave lots of time for questions.

So let me start with a review of our strategic progress in 2025, the market context, how we're thinking about 2026 and how we're prioritizing in response. So the results we're sharing with you today demonstrate a resilient performance in the face of significant cost challenges and changes in the NHS commissioning environment towards the end of last year. In response, we focused on consistent delivery of our strategic priorities. Our private focused multi-payor strategy, our transformation program that's delivering efficiencies through standardizing, centralizing and embedding digital and automation, our plan to grow in primary care, an area of accelerating demand and our continuous focus on care quality and innovation to drive an even better patient experience. Together, these priorities allowed us to respond with flexibility in 2025 while strengthening our foundations for the long term.

So looking first at the market, we saw 4 key trends last year. The private market, as previously reported, saw low single-digit percentage volume decline for much of '25. However, I'm encouraged that we saw improving momentum in demand, especially self-pay during the second half of H2 as well as continued growth in primary care. However, we experienced significant labor inflation during 2025, driven by the increase in Employer National Insurance contributions. And of course, in the later parts of H2, there was a sector-wide slowdown in NHS volumes as we began to see the start of activity management plans as integrated care boards faced budget-free restrictions. We responded to these trends with focus in line with our strategic plans.

Looking first at private patient growth. We ended the year with a return to positive volume growth in self-pay. As I said, I'm encouraged to see that is continuing now. There is no doubt some market effect here as the impact of NHS budget constraints both influence local waiting times and patient sentiment more generally. However, we've also spent 18 months building our efficiency and effectiveness in private patient acquisition and response, including actions to strengthen our brand, our speed of access and our mix.

Next, transformation. 2025 was the biggest year of change yet for our business. We drove efficiency, and we delivered our plan of GBP 30 million savings, offsetting rising employment costs. The largest program was transitioning administration for incoming inquiries, bookings, preoperative assessments and self-pay sales into 3 patient support centers. This is already providing a platform to improve patient experience and deliver growth with further benefits to come.

We've also been investing in our sites over a number of years, creating an estate which is attractive to patients and those who work there, and this enabled us to lower our CapEx spend in 2025 without compromising on quality. We made progress in primary care. Our clinic strategy is to open sites in new geographies to attract private patients we could not otherwise access, and in 2025, we opened 5, including in Kingston, Wimbledon and Kings Lynn.

The larger hospital outpatient clinics generated downstream referrals to our hospitals worth GBP 3 million of EBITDA. We also made 2 small acquisitions of a physiotherapy business and an occupational health business, both of which are performing in line with plan.

Lastly, we continued to deliver on our quality strategy, including a focus on reducing average length of stay across several procedures, saving just over GBP 1 million whilst improving patient access and recovery. We are now at 29 surgical robots across the estate, and we added 7 in 2025. These have increased our capacity to provide high-value private care, and they deliver improved outcomes and also contribute to faster recovery times. And our actions underpinned by focus on efficiency and CapEx discipline have resulted in strong adjusted free cash flow growth.

I just want to take a moment to unpack some of the actions we've taken to leverage the self-pay opportunity, in particular, over the last 18 months. So I mentioned improving brand scores and marketing effectiveness on the previous slide. Our private focus targeted local marketing strategy is successfully driving demand and conversion in a competitive and predominantly online marketing environment. So if you look at the chart on the right, our latest data shows our brand scores now lead the market. More people are moving from simple brand awareness at the top to the next level direct service consideration. Our unprompted and prompted awareness are now at their highest levels ever of 35% and 80%, respectively. And consideration, which is key, has driven by 6% to 61%, which in turn drove record levels of inquiries to Spire during the year.

We've continued to apply AI to optimize our pricing locally to ensure we are as competitive as possible versus our competitors whilst also protecting margin. And since moving self-pay sales and bookings to patient support centers, they are consistently delivering call answer rates of around 95% compared to 60% before we move to patient support centers and therefore, converting more inquiries to bookings and bookings on the same day.

And finally, to meet rising demand for diagnostic MRIs, we applied again AI to increase image quality, throughput and capacity in scanners at 21 hospitals, halving the scan times to contribute over GBP 2.5 million EBITDA in 2025 through growth in activity. So all these activities are setting us up well with strong foundations from which to capitalize on the improving self-pay environment.

As we look ahead to the rest of this financial year, I just want to take a moment to frame what is happening with NHS commissioning and the related effect in the private market. The NHS is going through a fairly fundamental restructure as it seeks to ensure financial discipline. You're all aware of the system-wide and well-documented NHS commissioning slowdown of both independent sector and NHS elective work, which is impacting hospitals in our first quarter of 2026. Patient demand remains high, but the budget is not there to fund the demand. And as a result, multiple integrated care boards have imposed activity management plans. I should mention that our primary care business is relatively insulated from this given the long-term nature of the contracting there.

The net effect is we expect NHS revenue to be down about 25% in Q1. At the same time, as I've mentioned, self-pay is responding, partly a consumer reaction to the NHS slowdown as well as our own actions. And in Q1, we expect around 4% growth in private revenue with self-pay up around 6%. Looking ahead, the NHS financial year resets in April, and activity will undoubtedly bounce back from the lower levels of Q1. We are yet to have firm visibility on what activity plans for the period covering our Q2 to Q4 will look like or how they will be managed. So clearly, that is a material uncertainty for the year. And this should become clearer as commissioning discussions progress in the coming months.

But with this in mind, we've developed some scenarios on which to base our 2026 plans for Q2 to Q4. Broadly speaking, these assume significant improvement in NHS activity relative to Q1 as budgets are reset. We've taken a balanced view of continuing NHS budgetary pressures alongside the need to reduce waiting lists. And we also expect faster private patient growth in response. So we also think this is a transitionary period for the NHS as it resets, whilst local relationships between Spire and commissioners remains strong.

Therefore, as we look to the rest of 2026, our strategic priorities set us up well to control the controllables, respond flexibly to the market environment, and we will make delivering sustainable cash flow a priority. We will continue to intensify our focus on private payor growth, capturing the momentum we're seeing in self-pay through targeted local investment in marketing and price optimization. The next phase of our development in our patient support centers will further support self-pay inquiries through to conversion, which together with a new website and CRM system will deliver an even better experience for patients and consultants. And we'll continue to streamline hospital operations to make quick access and treatment for private patients a priority. In transformation, we'll continue to deliver more efficiency improvements. Our track record in delivering such programs has led us to accelerate our 2026 savings program, which will at least mitigate the Q1 NHS commissioning impact.

In primary care, we've built a strong foundation across multiple services, spanning private GP, occupational health, mental health and physiotherapy. This year, we aim to accelerate integrating these services with our hospitals and leverage our existing base to drive organic growth. We anticipate limited M&A. We're also working on unlocking the opportunity for growth with employers, where the growing impetus behind employee health and productivity gives us a platform to provide a wider range of treatment solutions in addition to traditional occupational health. And we'll continue to open a small number of CapEx-light clinics in new geographies.

Finally, of course, we will maintain our focus on care quality that underpins our growth. We aim to maintain or improve our already high ratings from regulators and patient and consultant satisfaction scores.

So the Board announced in September 2025 that the company is actively evaluating actions to drive long-term sustainable shareholder value. That review is ongoing. So as part of this review, we're considering a range of potential options, which may include, but is not limited to, a potential sale of the company, value generation from the hospital property estate and adjustments to our operational and strategic plans. There can be no certainty that any offer will be made for the company nor as to the terms of any offer if made. Many of you will already understand that being in this process and therefore, subject to takeover panel rules means there are limitations to the statements we can make today about the strategic review, our forecasts and the assumptions that underpin them. The Board will make a further announcement on this matter in due course as appropriate. In the meantime, as you can see, we continue to focus on executing our existing strategy to grow our healthcare business. The management team and I are relentlessly focused on delivering our 2026 priorities.

Finally, I'd like to take a moment to talk about the high standard of care that we provide. This is the foundation for our resilient performance, and I'm pleased to say that in 2025, 98% of our sites were rated good or outstanding or the equivalent by regulators. 97% of hospital patients rated as good or very good with a rise in very good ratings. 84% of consultants rated our care very good or excellent on par with last year and with a small increase in excellent ratings.

So this is only possible through the hard work and commitment of our more than 17,000 employees and over 8,000 consultant partners. They have adapted to change as we have significantly transitioned the way we run our business to be more agile and responsive. It required their patience, their input, their professionalism. And I'd like to take this opportunity to thank them profoundly for their collaboration, partnership and professionalism. I've been really delighted to see this professionalism and dedication in action as I and fellow directors have visited sites throughout the year, meeting our DAISY and IRIS award winners for outstanding care and marquee moments such as the opening of our new clinics and the delivery of new surgical robots.

Thank you very much, and I'll now hand over to Harbant.

Thank you, Justin. Good morning, everybody. So I'll start by giving a high-level summary of the financial year. Total revenue for the group has grown 4.5% with hospitals up 4.3%. Underlying this, we saw a strengthening and improving private market, but the NHS business experienced slowing volumes in the second half due to their budgetary pressures. We also saw strong growth in revenue for our Primary Care business.

Adjusted EBITDA was up 3.2% to GBP 268.6 million. This was supported by the successful delivery of our transformation savings target as well as price and mix management. These savings helped to mitigate increased cost pressures, a larger element of which related to the rises in National Insurance and National Minimum Wage from Q2 onwards.

After deducting depreciation and finance charges, both of which were in line with guidance, the group reported an adjusted profit before tax of GBP 46.5 million, 7.4% down on the prior year. We have delivered our CapEx plan, investing in growth projects and transformation and have done so whilst reducing the overall spend by 30% year-on-year to GBP 78.5 million. As a result, I'm pleased to report that our adjusted free cash flow was up 64.9% to GBP 64.3 million.

Finally, ROCE was 8% compared to 8.2% for 2024. On a comparable basis, excluding National Insurance and National Minimum Wage uplift during the year, ROCE increased by 30 basis points to 8.5%.

Now turning to our Hospital Business. Total revenue grew 4.3% to GBP 1.5 billion and is reflective of our strategy where we have targeted growth across both private and the NHS. Overall, total volume across all payors was up 1.4%. Adjusted EBITDA for our Hospital Business rose by 3.9% to GBP 258.8 million, representing a margin of 17.9%, broadly flat to last year's 18%. EBITDA would have grown by more than 7%, excluding National Insurance and National Minimum Wage rises. And the GBP 30 million of new cost savings alongside tight management of price and acuity helped to mitigate the cost headwinds.

Moving on to performance by payor. I will start with self-pay. Overall, revenue saw a minor decline, but notably year-on-year volume growth returned to positive by the end of 2025. This is reflective of our strategy to target this segment. We have invested in the start of the sales funnel with targeted marketing, and we have made big and important changes to our booking processes, centralizing teams into patient support centers. Bearing in mind the scale of these changes, it was not surprising that we saw some operational disruption early on during the summer. But the centers have now bedded down and are making a positive contribution to our self-pay and wider business. We've also continued to optimize price based on local market dynamics at an individual procedure level, resulting in ARPC growth -- growing by 3.9% during the year.

Turning to PMI. The market has remained stable. As we flagged at the half year, insurers continue to manage claims access and issue tenders. Despite this context, we have grown PMI revenue by 3.1%. This is largely driven by our price and mix management towards higher acuity procedures, contributing to above-inflation ARPC growth of 5.3%. Overall, the signs for our private business for both self-pay and PMI are encouraging.

Turning now to the NHS. In the second half of 2025, we saw the initial signs of sector-wide action from the NHS, where it slowed commissioning due to budgetary pressures. This was followed by further tightening in late 2025, where certain integrated care boards requested a stop in activity. The result of this was revenue growth for H1 reaching 16.2% before slowing to 6.8% in H2, taking us to revenue growth for the full year of 11.4%. We also continue to target high acuity procedures and thereby achieved a 3.2% uplift in average revenue per case, slightly ahead of the NHS tariff uplift of 3.1%. Orthopedics continue to account for over 60% of all NHS admissions.

Moving on to our Primary Care business. Revenue increased 7.4% to GBP 133.7 million, driven by organic and new contract growth across talking therapies and occupational health. After including our recent acquisitions of Acorn and Physiolistic, revenue growth was 10.5%, and their revenue and profit contribution were in line with plan. Adjusted EBITDA for our Primary Care business as a whole was GBP 9.8 million, which whilst at a headline level is a reduction, the core business has grown by more than 5% year-on-year. Two of the 3 larger new clinics are already profitable. More importantly, these clinics have also generated GBP 3 million in EBITDA through referrals to our hospitals, which is encouraging given the relatively short period of time that they have been open.

Looking at overall group EBITDA delivery, we can demonstrate the important role that the transformation savings played in our full year outturn with the business delivering on those things in our control. In addition to one-off cost headwinds, which includes National Insurance and Minimum Wage increases, there was also underlying cost inflation, half of which related to salary uplifts. Our transformation savings have mitigated around 2/3 of this cost inflation, which together with price and mix management has underpinned EBITDA growth.

Turning to profitability. We incurred GBP 27.9 million of adjusting items with statutory profit after tax declining to GBP 17.2 million, stated after the impact of National Insurance and National Minimum Wage rises, partially mitigated by a reduction in taxation. This benefit arose from a review we initiated over qualifying capital investments for tax deductions and covers a number of years.

2025 was a significant year for our transformation program. As a result, the adjusting items included around GBP 13 million in one-off costs associated with delivery, covering, for example, redundancy costs and setting up the PSCs. Adjusting items also included certain fees linked to the ongoing strategic review of around GBP 7 million.

Moving on to cash flow. We have grown adjusted free cash flow by around 65%. This outcome evidences our disciplined approach towards CapEx investment. We continue to focus on growth and returns with CapEx increasingly directed towards expanding the private patient business. Alongside this, our transformation program delivered GBP 30 million in savings, helping to support the overall strong cash flow outcome.

Now a deeper dive into CapEx. Total CapEx was GBP 78.5 million, which is 30% lower than last year. We have made significant but targeted investment in our estate over the last few years. As a consequence of this, we have dealt with a backlog and importantly, have become a much more modern and attractive offering for private patients, which is clear from their feedback. This strategy has meant that in 2025, CapEx as a percentage of revenue decreased to 5% compared to 6% to 7% in prior years. Of our total CapEx outlay, GBP 50 million was directed towards our hospitals for maintenance and growth. We also invested GBP 20 million supporting our transformation program and GBP 8 million in primary care, which included new clinic openings. For 2026, we expect the underlying split across these categories will follow a similar pattern to that for 2025.

Moving on to the balance sheet and returns. We have maintained our leverage at 2x, and this is stated after acquiring the Acorn and Physiolistic businesses during the year. We have also extended the maturity of our bank facilities by 18 months to August 2028. The underlying terms are unchanged. The strength of our balance sheet is further underpinned by the quality of our freehold base, where we have a valuable portfolio of 19 hospital properties. We know that this -- we note that the market appetite for healthcare assets remains strong. Having this asset base gives us a wide range of options in terms of strategy and generating future shareholder returns. Our ROCE was 8%. However, I will highlight that after adjusting for the impact of National Insurance and National Minimum Wage rises, our ROCE would have been 8.5%.

Moving on to the outlook. As Justin has mentioned, private patient momentum has continued to improve in the first months of 2026. For the full year, we're expecting percentage growth of mid- to high single digit year-on-year. NHS volumes remain a material uncertainty across the sector and activity from April or the start of the commissioning year has yet to be agreed. As a result, there are a range of scenarios we are planning for, which means we are targeting an adjusted EBITDA outcome for 2026, which is broadly in line with 2025.

Our base planning assumption is for Q2 to Q4 NHS revenue to be down between 5% and 10% year-on-year, a significant improvement versus the Q1 outturn, which will be down around 25% year-on-year. We think this planning assumption is plausible in the context of a new budget and commissioning year. And as a reminder, the provisional NHS tariff for 2026 is close to an annual uplift of 0%.

On savings, we have an existing GBP 30 million target. Over half of this is already underpinned by rollover from programs deployed last year alongside head office restructuring that took place in January. We are planning to deliver ahead of this target to at least offset the impact of the Q1 NHS shortfall. Primary Care is expected to deliver strong organic growth.

Finally, across all scenarios, we will continue to be disciplined around the deployment of CapEx, leading to lower CapEx as a percentage of revenue and maintain our focus on generating free cash flow.

Thank you. With that, I'll now hand back to Justin.

Thank you, Harbant. Okay. So I'm just going to give a short summary, and then we will go to Q&A. So today's results demonstrate a resilient performance against the backdrop of increased employment costs, combined with the changes in the NHS commissioning environment. We've used the levers at our disposal to respond effectively. We focused on growing private and particularly self-pay. We delivered our biggest ever year of transformation, including our planned GBP 30 million in savings. And we improved cash generation while maintaining care quality, optimizing our pricing and exercising discipline across our activity mix and investments. In doing this, we have created a strong platform for improving patient experience and growth.

So looking to the rest of 2026, we'll remain focused on using the levers of our strategy to deliver sustainable cash flow. We will respond to NHS uncertainty by growing private patient revenue, building on encouraging early momentum in self-pay, and this will be enabled by targeted investment and further improvements in our patient support centers. Actions are already underway to accelerate transformation cost savings this year, which will at least offset the Q1 NHS commissioning impact and more. Our transformation program will continue to create greater consistency and ensure that we maintain and improve our high-quality ratings.

In Primary Care, we intend to focus on organic growth and integration in the year ahead. We'll leverage our multiservice platform, step up our engagement with the employer market and build on the momentum from our clinics to continue to drive new referral pathways into our hospitals. In all that we do, we will remain disciplined in deploying CapEx towards higher returning investment and benefit from our already well-invested estate. So we have a solid foundation to deliver sustainable returns as we continue our evolution to meet the U.K.'s growing healthcare needs. We remain excited by the private market opportunities ahead and confident in the medium-term outlook for Spire Healthcare.

Thank you very much for listening. I'm now going to go and join Harbant and take Q&A, and we'll start with questions in the room. Thank you.

Question here. Can you please state your name and your organization?

It's Seb Jantet from Panmure Liberum. So 3 questions, if I may. I'll just start off with one on PMI. Obviously, kind of all of the operators are under pressure from NHS kind of volumes. And I'm guessing that, that kind of is flowing into the PMI kind of discussions on pricing. And I'm just wondering how those are kind of panning out? Are you finding it harder to get decent price increases through? And also in terms of the PMI, are they starting to ask you for broader offerings that go around physiotherapy and some of the more primary care stuff as part of that? Or are they still seeking that from other vendors?

Okay. So I'll take that. Thank you, Seb. So PMI, so I think we're pleased with our relations with PMIs. I think things have moved forward from the last time we talked. I think we think we'll see some of the impact in the NHS as well beginning to filter through in PMI as well. And yes, we have very broad -- Peter may add, but we have very broad strategic discussions. It depends a bit by insurer, but the broader offering is clearly where insurance is going. I mean patients generally by way of backdrop, one of the reasons for our primary care strategy is younger patients, in particular, are accessing both self-pay and PMI and they're accessing it typically through Primary Care. You can see insurers are interested in that, and we have very strong engagements with them on that. So I think overall, a pretty constructive environment. Peter, would you be happy with that?

Yes.

Yes, it's a pretty constructive environment at the moment.

Second question is on I guess, more the shape of the NHS volumes as the year kind of progresses. So we're kind of sitting here in March. You're still not really clear on NHS volumes and what they might be. Is there a risk that the NHS volumes don't end up being equally spread through the year, which would obviously cause you guys a headache in terms of costs and kind of -- and capacity?

Yes is the answer. I mean, first of all, we can't see the future here. And by the way, at this time of the year, we never quite know what it will be. It's just there's a bit more uncertainty than there was. So what are the scenarios around NHS? So I think we've picked a plausible scenario because they've got 2 pressures. If you read the press, let's do NHS generally, you can read a lot about the imposition of enforcement around deficits. So the NHS has clearly decided that it wants financial discipline. And that's the backdrop to this.

I mean, just to be clear, we've not had a single message about relationship with the independent sector. This has been about financial discipline and therefore, looking for places to impose restrictions where they can to hit the fact they're under budgetary pressure. And we work with commissioners on that, and that's clearly important for the NHS.

On the other hand, there's clearly pressure on commissioning boards where their waiting list get too high. So what we've seen in the first quarter is whilst we are down 25%, we're also seeing and a little bit more of what our spot contracts where a commissioning board of particularly a trust calls up and says, we've got to wait in this problem. Can you help us with this cohort of patients, okay? So I suspect the year is going to look a bit like that, which is overall, we think the effect will be what we've described, which is down mid-5% to 10%, but it will probably be made up of indicative activity plans, which are topped up with spot work, okay?

Whether that will be lumpy during the year? I don't know. I really don't know. But remember, it resets 6th of April. So what will definitely happen is the volumes will go up. We know this partly because we've rebooked patients, right? So we've rebooked patients we had to cancel. So it will pick up. Will it bob around? Probably. But I think it's worth saying we do talk to local commissioners all the time. Whilst this may look like a big fracture at the very top level, locally, we're talking to commissioning boards and trust daily. Our hospital directors and our NHS commissioning team have super strong relationships with them. So as far as we'll have visibility, this team will be on it. Is there anything you'd add to that, Peter?

No.

Is that a good description? Yes. So that's pretty much what it looks like. So maybe, but I think overall, our assumption is the numbers we've given you today.

And then last question is just on self-pay. So obviously, it's always been a competitive area, but it's kind of even more competitive now that everyone is trying to make up the backlog, the kind of hole in the revenue line from the NHS. What makes you think that you're going to be able to outperform and accelerate in that market versus your peers when presumably they're all investing in this space as well and all pushing hard there, too?

So I think -- so if you look at our market shares locally, which we spend a lot of time looking at, we held share over the last couple of years, okay? And the truth is in the last couple of years, we weren't hugely differentiated in the way we brought ourselves to market, okay? I think we're differentiated on quality. But in terms of our business processes, they were quite local. They were a bit clunky.

We had good teams, but we had 38 separate hospitals, okay? So what have we done? We've done quite profound research into what really matters to self-pay patients in particular, okay, which is being able to get through on the phone and being able to get booked in on the day they call and ideally get booked in within 2 days for their first consultation. If in particular, their MSK patients, they want to be able to get their MRI within 2 days or on the day that they're there. And that all leads to a high likelihood that they will then have their admission with us, okay? So what do we do? So that's one of the main reasons we put patient support centers in place because we've gone from -- we were holding share when we were answering 60% of calls. We're now answering 95% of calls, number one.

Number two, one of the things which has happened because of patient support centers is that for the vast majority of consultants, we now are able to book directly into their diaries. And therefore, we can get people booked in quickly. And we can start tracking a KPI of how quickly people got their outpatient deployment as apart from it being an aspiration. And AI, which I mentioned a couple of times, is an interest and AI is actually delivering results in the business. Putting that in MRIs means that we literally have every day empty slots in our MRIs. We're able to deal with our underlying volume. But because we've got nearly 50% more capacity, it means that literally you can walk down the corridor and get your MRI if you need scanning.

The hospitals have worked really hard on managing outpatient and theater availability. So I think the answer is we have lined ourselves up to be super effective in the things that matter to our patients as well as then delivering them a really outstanding service. And also, I would be able to say, I think we've probably got the best invested estate because we've been investing consistently. So when they come here, it looks really good and that matters to patients. So I think we've got all those things in place. And Harbant about to add something.

I was going to say, I was going to go on the estates point as well, but I'll add a little bit more color. The look and feel of our estates, I mean, it's visible to anybody, right? It is a more competitive market. I agree with what you said. But in terms of the look and feel of our estates and our facilities, we are very proud of what we've achieved. We've also made a lot of tactical investments to support our consultants. So don't forget how important they are in that conversation as well in terms of where the patient is going to go as well. So a lot of the robotics, for example, that was done with that in mind. So we're moving confidently on that basis.

And then the final part is the marketing. We have really invested under Peter's leadership in super sophisticated digital online marketing. We have a partnership with Google. We know we're getting better hits. We know we're getting better flow through. And we're going to bring them -- our website is okay, but it's not brilliant. We're going to bring in a new website this year, which will make that patient journey much easier. And as it gets up and running, one of the ways you win, as you know, online is we're making your content super attractive so that people search on your site, okay? And that's before the CRM system, which will integrate across all patient types and between primary care and secondary care in time. So I think the answer is because we're super, super focused on this, and we've been working on it for the last couple of years.

It's Kane Slutzkin from Deutsche. Just on the NHS sort of improvement through Q2 to Q4, what are you guys assuming for traffic there? Because I know usually, we sort of see a little uplift late on 0 is obviously pretty low. So just wondering what you...

0 is pretty low. You don't need me to tell you that. But...

What do you -- is that in the 5% to 10%. Is that...

Sorry. That is in the 5% to 10%. So the way to look at it is that they issued their consultation in December. It's not really a consultation. The only reason it will change if there is an exceptional pay award. They've already done their pay award recently. I think they -- was it 3.3%. 3.3%. So I mean that's essentially already factored into the tariff. There is an opportunity for us to continue to do what we've done in the past, which is to tap into higher acuity. And that's what we'll certainly seek to do in this environment if tariff is so, I guess, underwhelming. But the opportunity to outperform 0%, I mean it's not a great deal, but we will obviously do our best.

And by the way, Harbant showed it. We have really focused on hips and knees, and we have focused on higher acuity. And that continues, by the way. So that might give us a little bit of upside from mix on there. Although once you're at 60%, there's obviously a limit to how far you can go, but that focus continues.

All right. Just on energy prices, I know we chat about it earlier, you're saying you're sort of hedged into Q1 now or Q1 '27...

Next year and even beyond that.

Yes. You were hedged partially for '26. I'm just wondering when did you initiate this?

So it's a rolling arrangement we have. Most of that was fixed back in about October and November. We take a pretty conservative approach towards doing it. So all of our energy needs are now under fixed price arrangements through to the end of Q1 2027 and then it tapers down to 50% by the midyear. But clearly, we're watching developments closely, and we'll take more action to continue to work out whether we want to increase that sooner rather than later. We'll see. But we're in a good place.

Great. And just finally, on the property, you guys usually do your sort of annual reevaluation. I assume it's still 1.4. Is there any sort of comfort -- I don't know, maybe you can't actually comment on this part of the review, but not...

I'm looking at IDC.

The lawyers have all poked up in the call.

Can ask just last one on the Primary Care. You mentioned you expect very little M&A this year. It's obviously quite a fragmented market. Is that just because you've got enough sort of going on?

So we may do a little bit. But having put in a number of businesses, the next stage is to integrate it because if you're doing M&A, it's really important you've got a platform, which is aligned to do it. So in order to then accelerate M&A in due time, we want to get the businesses which we've got, which are performing well fully integrated. This is partly to do with also bringing in systems, so CRM. So we have visibility.

So one of the things that we don't have today is easy visibility from going into a clinic and then booking through to a hospital. We want to make that super easy because in order to have really successful M&A, you've got to be able to have all your systems set up smoothly to plug in. Secondly, we think there's quite a lot of organic opportunity that we're going to focus on it. So it's not a change of strategy. It's just we've got plenty to deliver within primary care. It's doing very nicely. We're just going to double down a bit on our organic opportunities for the next few months.

Natalia Webster from RBC. Just a follow-up on the private side on PMI and self-pay. You've talked about sort of the various factors that give you confidence on improvement there, but just curious on what you're expecting in terms of the mix of improvement in volumes versus improvement in pricing and mix as well? And then secondly, on cost efficiencies, you say you're tracking ahead of plan of the GBP 30 million in 2026. While some of that will come from annualization of savings in 2025, are you able to talk a bit more on your plans for 2026 and where you're seeing those additional cost savings?

Sure. Thank you. Well, I would say on private, we won't go into the complete plan of volume versus mix, but we are starting to see volume improvement. So it's not just mix and price. We're definitely seeing volume improvement, particularly in self-pay, which is very encouraging. So I think that's the answer on that one. Harbant, cost efficiencies?

Cost efficiencies. So how we're thinking about '26, I mean, the way I'd do that, Natalia, is break it down into probably 4 buckets. A big chunk of what we're going to deliver in 2026 is actually already linked to the action we took in 2025. So there's an annualization effect from all the actions we took last year. And if you recall some of the things we did in the middle of last year, the restructuring, et cetera, you'll see the full year impact of that. And then just more generally, we've also taken action in the center early this year in January, where we restructured some of our teams. So over half of the savings that we're currently targeting for this year is really underpinned by the actions we've taken.

The other 2 buckets, the way I'd look at those is that we've clearly got our transformation activity, which is underway. So digitalization, for example, and that forms part of the number, which is more than GBP 30 million. Again, I can't give you a specific number, but it's more than GBP 30 million. And then lastly, we brought forward some of the operational efficiencies that are on our list for maybe back end of this year and into next year to help to underpin the overall savings target, which means that we can say with confidence we've got enough there to offset at least or even more than the NHS shortfall during Q1.

Thank you. Any other questions in the room? Let me just check first if there are online questions.

Yes, we have a question from David Adlington.

Can you hear me?

We can.

Firstly, maybe just the government focus on reducing waiting lists. Obviously, I would have thought the private sector would be a key part in addressing those waiting lists. In the short term, at least it seems to have swung around to a bit of hiatus on the NHS commissioning side. I suppose a big picture question is what's more important to the government at the moment, budgetary pressures or waiting list? And do you expect that to change between now and the next election? And then a second one, just want to get your thoughts on the bone cement shortage in the U.K. and whether you thought you might have any impact from that?

Okay. So on the first one, I think you may have to ask the government if there's any. But look, seriously, it's obvious that financial discipline in the NHS is top of the agenda at least this year. That's clearly the case. That's what's happened. It's also clearly the case that waiting lists are of great importance. And waiting list comprises 2 things, right? There's 7.4 million people. Of that, just under 6 million are waiting for a consultation diagnosis and just over 1 million are in treatment, okay? Those over 1 million people in treatment will be very top of mind for the NHS. I know they are. And that's why we've given a balanced guidance because that pressure won't go away. There is financial pressure.

I suppose our guidance says we think the financial pressure slightly outweighs the waiting list pressure. I think our view is that in the medium term, that waiting list pressure will be compelling for any government. And that's why we say we think this is a transitionary period. So I guess we've given our view, but I don't have an official view from anybody else. You'd have to talk to government or NHS. In terms of bone cement, we have multiple suppliers. We found alternative supply just to top up from that supplier, and we just carried on unaffected.

Thank you very much. We have no further raised hands online. So I will hand back to Justin.

So I think we've got another question in the room, Seb.

I'm going to try this one and see if you answer it. So just looking at how the first half might look versus the second half in terms of kind of profit splits. Normally, I'd be quite comfortable having a crack at it, but there's obviously quite a lot of moving parts going around this year in the first half and the second half. So I'm wondering if you're able to give us any sense of what that might look like in terms of shape of the first half versus second half.

Yes, happy to. At a headline level, I would expect to be slightly more weighted towards the second half. One of the reasons for that is whilst we're confident about delivering all the savings, clearly, some of those will appear in the second half. But again, there are a couple of other pretty significant moving parts for NHS, the question you asked earlier in terms of the lumpiness of the commissioning will also determine how that weighting plays out. But that's what I would expect.

Anybody else for questions? Okay. Well, thank you so much for attending both in person and online. Thank you for your questions, and we'll close the session. Thank you very much. Have a good day.