Acquisition of Vita Health Group

Spire Healthcare Group plc (LSE:SPI), a leading independent healthcare group in the UK, announces that it has acquired Vita Health Group Limited ('Vita')], a market-leading provider of mental and physical health services in the UK, for a net cash consideration of c.£74m (the 'Acquisition').

Vita provides a range of NHS outpatient mental health talking therapies, musculoskeletal and dermatology services, with operational hubs in London and four regional centres in Bristol, Orpington, Oldham and Leicestershire. Vita also offers outsourced physiotherapy and counselling services to the corporate and occupational health markets. Vita's services address two of the top causes of illness in the UK. Vita treats mild to moderate mental health conditions such as anxiety and depression. According to MH Foundation, 4-10% of people will experience depression and 1 in 6 adults have had a common mental health disorder. MSK problems are cited by the ONS as the lead cause of economic inactivity along with mental health conditions.

Vita has a strong ESG platform to support its mental health patient pathways through successful collaboration with local third sector organisations such as debt and racism support charities. Vita's patient pathway covers all modalities of care with a strong focus on tech enablement and engagement.

Vita is a successful and highly regarded provider in the mental health talking therapies market, with a track record of consistently delivering market-leading performance and quality measures. It is the largest independent provider of talking therapies. Vita has a diversified customer base of 14 NHS integrated care boards, over 300 corporates and 12 private patient clinics, with c.450k appointments delivered in the year ended 31 December 2022. Vita's revenue split is approximately two-thirds NHS and one-third corporate, with NHS contracts being predominantly 3-5 years. Corporate contracts are in place with major insurance providers, including AXA, Aviva and Bupa, and with corporate clients directly to help them with workforce management.

The acquisition of Vita is complementary to Spire's existing services and aligns well with the Group's strategic ambitions to expand selectively in new verticals to attract customers and meet more of patients' healthcare needs. Vita's experienced leadership team, which is being retained, is supported by a strong management team overseeing 1,600+ employees. The Acquisition enables Spire Healthcare to expand its capabilities into low-acuity mental health while providing synergies in working with corporate and PMI customers, and occupational health businesses.

Based on current performance and recent contract wins, Vita has a run-rate and forecast which will deliver 2024 revenue in excess of £100m, Adjusted EBITDA of c.£10m, with capex of £2-3m. Following the Acquisition, the in-year contribution Vita is expected to deliver to the Group for the remainder of 2023 is revenue of c.£19m. The Acquisition consideration will be settled in cash and will be funded with £50m through the Group's Revolving Credit Facility with the remaining funded through existing cash balances.

Given the nature of Vita's business, its capex requirements are limited, which, combined with its strong revenue growth profile, further underpins the progress being made by Spire Healthcare with respect to earnings growth and achieving its ROCE targets. The Acquisition is expected to be earnings accretive. In addition, Vita adds scale to Spire Healthcare's occupational health offering, building on the acquisition last year of The Doctors Clinic Group, an integrated provider of occupational health and GP services.

Vita is part of a c.£2 billion UK mental health and musculoskeletal market, which is forecast to grow at more than 10% per annum over the period 2021-25 according to PMSI Strategy. Through the acquisition of Vita, Spire Healthcare is further diversifying into a market with favourable underlying dynamics. Vita achieved 37% revenue CAGR over the last five years, driven by nine talking therapies contracts and c.75 new corporate contracts. Vita's outstanding track record of delivering excellent service is driving significant revenue growth.

Justin Ash, Chief Executive of Spire Healthcare, said:

"Vita addresses two of the main reasons for long-term illness and absence from work in the UK: mental health issues and back and joint pain. This acquisition complements our existing business and aligns well with our strategy of developing new services and moving into adjacent markets. The addition of Vita means that we are now able to meet people's physical and mental health needs. Vita fits closely with the services we offer to corporate customers and gives us a good springboard for future growth. With its outstanding patient feedback, strong track record in winning contracts and proven management team, Vita is an excellent addition to our business and I look forward to welcoming our new colleagues to Spire."

Derrick Farrell, Chief Executive of Vita, commented:

"We are delighted to be joining forces with Spire. Our success over the last five years, driven by the values of putting our patients and colleagues at the centre of everything we do, has established us as a leading provider of community-based healthcare solutions and we believe that the commercial synergies, now possible as part of the Spire Healthcare Group, will allow us to stay true to our values, to extend our propositions, move into new spaces and provide more effective solutions right across the expanded Group.

"The cultural alignment across the businesses, as represented by the senior management teams, was a key factor in the transaction. Delivering effective solutions for our customers has been at the core of our success and in the Spire team we found that passion fully reflected.

"We are very excited about the future."

NHS talking therapies

The NHS talking therapies service started in 2008 and is internationally successful as an evidence-based, structured mental health programme. It is recommended by NICE and has been rolled out in several countries in a similar format and is being developed in others.

Additional information on Vita and the Acquisition

Key members of Vita's management team include Derrick Farrell (CEO), Mark Driver (Deputy CEO), Steven Foster (CFO) and Emma Weighill-Baskerville (CCO).

Vita has been acquired from certain funds advised or managed by ARCHIMED, as well as certain current and former employee shareholders of Vita.

The Acquisition constitutes a class 2 transaction for the purposes of the UK Financial Authority's Listing Rules. Vita's total gross assets as of 31 December 2022 were £28.3m and Revenue and Adjusted EBITDA for the year then ended were £63.1m and £4.1m, respectively.