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CIRC Rize Circular

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Circle Holdings PLC Half Year Results for period ended 30 June 2016 (0736I)

25/08/2016 7:01am

UK Regulatory


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RNS Number : 0736I

Circle Holdings PLC

25 August 2016

Circle Holdings plc

("Circle", the "Company" or "Group")

Half year results

For the period ended June 2016

London, 25 August 2016: Circle Holdings plc (LSE: CIRC), the employee co-owned health group, today announces its results for the half-year ended 30 June 2016.

Highlights

Core business highlights

   --     Group revenue increased by 6% to GBP66.5million from H1 2015 
   --     Group gross profit margin improved by 3% to 30% 
   --     Excluding Head Office recharges, net EBITDA from Circle operations increased 60% to GBP4.2m 
   --     Patient satisfaction consistently high at 99% across Circle hospitals 

-- Patient choice driving NHS growth with over 87% of NHS work coming through the e-Referral system

   --     Circle Bedfordshire won HealthInvestor's Public/Private Partnership of the Year award 

Growth highlights

-- Announced 20-year management agreement with a Chinese investor group to develop and operate a state-of-the-art medical facility in Shanghai

-- Selected as preferred bidder by Greenwich CCG to manage a five-year MSK integrated services contract, Circle's second

   --     Pilot rehabilitation offering planned to open in Q1 2017 

Chairman's statement

"In the midst of a volatile UK health economy, I am happy that Circle has made a number of significant steps forward, but acknowledge that we still have more work to do.

Existing sites continue to further embed themselves in their local areas. CircleBath and CircleReading have maintained high clinical standards throughout the start of this year, but further EBITDA enhancement is clearly necessary. CircleNottingham has had another positive period, securing several local contracts and increasing patient volumes, particularly of inpatients, which has led the hospital to explore adding more inpatient beds to cope with the increased demand. The MSK service in Bedfordshire again proved itself to be a model of collaboration as it enters its third year of operation.

The last six months have been tumultuous in national politics, which has exacerbated uncertainty around the public funding of healthcare. This does not alter increasing demand for healthcare services: Circle's model is based more on long-term demographics than short-term policy, and we are pleased that we have maintained a healthy balance between NHS and private patients across the Group.

Looking forwards, we are delighted to have been confirmed as the preferred bidder to manage MSK services for the adult population in Greenwich and look forward to finalising contractual terms with commissioners before the end of the year.

Circle's experience in MSK and orthopaedic procedures has enabled us to identify a gap in the market for rehabilitation services in the UK. In many European countries, rehabilitation services are provided on an inpatient basis and typically in a lower cost setting than in the UK. In light of growing demand for rehabilitation services (orthopaedic, neurology and cardiology) and the emergence of a national "bed blocking" problem within the NHS, Circle believes there is a significant addressable market for inpatient rehabilitation services and we anticipate rolling out an offering at our Reading facility in Q1 2017.

Finally, we are also broadening our horizons beyond the UK market. This half-year has seen Circle deliver on one of our major new business opportunities, as we announced the signing of a contract with Chinese partners to run a premium integrated health clinic in Shanghai. It has long been our intention to export our recognised standards of patient care to other markets, and the signing of this contract moves us one step closer to that goal.

The Board and management continue to support the business as it evolves and grows. Even as UK healthcare funding remains in a state of flux, we are confident that as Circle continues to pursue its essential ideas of patient focus, clinical leadership and staff engagement, it is well-placed to thrive."

Michael J Kirkwood CMG

Chairman

Chief Executive Officer's Statement

"This half saw Circle increase revenues by 6%, patient volumes by 1%, and reduced EBITDA loss to GBP1.9m.

The strategy we outlined last year was, first to continue to grow our existing sites' revenue and margins; and second, to take the experience and intellectual property that we have developed and apply it to new settings and markets, both on our own and with other organisations who offer a compelling partnership.

The continued growth of existing sites has seen some positives and negatives in performance between sites, but in broad terms, the Group continues to move towards sustainability.

Being selected as preferred bidder to manage a second integrated MSK service contract and the management agreement in China is evidence that the second component of our strategy is also yielding results.

Combined with our innovative rehabilitation product, the expected start to our fourth hospital in Birmingham, I am confident that Circle's strategic direction is correct."

Steve Melton

Chief Executive Officer

For further information, please contact:

Circle Holdings plc Tel: +44 20 7034 5270

Steve Melton, Chief Executive Officer

Paolo Pieri, Chief Financial Officer

Elizabeth Matthews, Investor Relations Lead

Numis Securities Tel: +44 20 7260 1000

Michael Meade, Nominated Adviser

Alex Ham, Ben Stoop, Corporate Broking

An analyst briefing and live conference call will be held at 12:00 BST today at the offices of Numis, 10 Paternoster Square, London EC4M 7LT. If you are unable to attend please contact Elizabeth Matthews on 0207 034 5270 for dial-in details.

Chief Executive Officer's Report

Operating Environment

UK healthcare is seeing an ever increasing demand for healthcare services, a trend that is unlikely to subside in the near future due to the projected population growth, in particular in the over 65 age group.

These unprecedented pressures facing the NHS has seen an increase in 14% of its patients waiting longer than the prescribed 18 weeks for treatment and an increasing number of delayed transfers of care.

The impact of these pressures on the private sector has been an increase in referrals of NHS patients along with growth of the number of patients willing to pay for treatment. In contrast, private medical cover, traditionally the largest funding source for private hospitals, has seen only very marginal growth.

What has become apparent in recent years is that the opportunity for improved efficiency is greatest when considering the whole system, as opposed to individual silos of provision within the system. This is in line with the thinking set out in the NHS Five Year Forward View which advocates a move towards more joined-up healthcare where principles of early care and intervention are applied. Our Bedfordshire MSK service is an excellent example of how this works in practice; delivering cost savings across the system while simultaneously providing the patient with an enhanced experience.

A similar principle underpins the need for a more coherent rehabilitation offering in the UK. Too many patients, capable of independent or supported living, are either leaving hospital without the required onward care or are continuing treatment in a high-cost acute care setting. Rehabilitation can offer cost savings to the healthcare system and better meet the patient needs.

Hospital Services

All Circle hospitals made steady progress in this financial period, with Nottingham in particular performing well.

The attraction of treatment at a premium facility continues to be demonstrated at CircleBath where we have seen continued growth in patient volumes and revenue growth of 4% and 7%, respectively. Furthermore, a majority of CircleBath's NHS patients (82%) were treated at the facility because they chose to be, rather than being transferred from an NHS hospital. We are delighted at the continued recognition CircleBath is receiving from patients, demonstrated by a recommendation rate of 99%.

Previous discussion on CircleBath has highlighted the expenditure on agency staff and to date in 2016 this challenge continues. Efforts to fill permanent nurse vacancies and build up a staff bank have been slower to materialise, with CircleBath seeing an increased expenditure on agency staff to GBP475,000 in this period (H1 2015: GBP326,000). We have been affected by the national nursing shortage more at CircleBath than our other facilities due to its location and a more competitive marketplace. Work continues to ensure CircleBath is an attractive working environment and to ensure that we are innovative in our recruitment methodology to deal with the shortfall of nurses in the area. While we do expect our spending on agency staff to reduce, challenges are likely to continue into the second half of 2016, which will impact margins, with improvements targeted towards the end of the year.

In contrast, CircleReading has reduced its agency spend from GBP328,000 in H1 2015 to GBP209,000 in H1 2016. We maintained a high level of patient satisfaction with 100% of patients recommending the service and over 93% of our NHS patients came to the hospital through their own choice.

CircleReading saw slower-than-expected growth due to discontinuing some of our less profitable specialties which has allowed an increased focus on core specialities. We were pleased to continue our growth in orthopaedics with a 15% increase in the number of joint replacements completed, a trend we expect to see continue into the second half of 2016, contributing to an increased H2 revenue. With an expanding number of doctors with practicing privileges at the facility, the expected introduction of our pilot rehabilitation model in early 2017, and the launch of health screening we expect improved results from prior year and positive full year EBITDA in 2017.

Last year we were delighted to report on CircleNottingham's 'Outstanding' CQC rating for surgery and now we have more recognition of quality offered by the facility and its staff. The GMC have approved Circle Nottingham to offer training to post-graduate NHS doctors, the first independent sector provider to hold this approval.

CircleNottingham continues to go from strength to strength as this period saw another substantial increase in total revenue of 7% over the same period in 2015; driven largely by increased activity in orthopaedics. Consequently, work is underway to expand the short stay unit from the current 11 beds to accommodate an additional 5 beds.

As part of CircleNottingham's continued integration into its local healthcare economy we were delighted that the facility secured two contracts from local CCGs to deliver an integrated clinical assessment and treatment service for orthopaedics. EBITDA for CircleNottingham will continue its positive trend but will be slightly offset by the updated management fee charge which better reflect the use of head office management resources across our Circle facilities.

Other Circle Services

Like CircleNottingham, the Bedfordshire MSK service has also received recognition of its quality and was recently awarded 'Public-Private Partnership of the year' at the 2016 HealthInvestor Awards.

The contract in Bedfordshire is to manage the services for musculoskeletal conditions for the entire local adult population within a capitated budget. During the past six months, more patients have received the most appropriate treatment first time around as we increase the level of referrals directly to our triage hub. All patients receive a choice of where to receive treatment. Patient satisfaction and outcomes remain very high, demonstrating the ability of the service to deliver not only good financial results for the commissioner but also a superior outcome for patients.

Outlook Statements

Each site has contributed to our improved Group financials, where we have seen a further reduction in EBITDA losses of 11%.

On a full year basis, we expect to achieve solid progress in our core business and anticipate overall Group results to deliver strong improvement versus last year. As mentioned, there are some specific operational challenges at CircleBath and CircleReading that may result in a slightly weaker than expected financial performance at those sites, however, with a focussed recovery plan now in place, we believe many of these challenges will be resolved by the end of 2016.

CircleBirmingham

We hope to confirm the commencement of the construction work for our fourth new-build facility, CircleBirmingham, in Q4 2016. There have been delays in commencement to allow for some planning changes in anticipation of a flagship rehabilitation facility to be incorporated into the building and also due to more complex ground conditions than originally anticipated. This facility has been designed to be built as a nucleus hospital, incorporating three theatres initially with potential for expansion at a later date as and when the market dictates. At present, we plan to complete construction and open mid-2018.

Circle Rehabilitation

We have spent time with our clinical partner to adapt our offering to the UK market. We are now looking to finalise the terms of our partnership in Q4 2016.

With a focus on the latest technology and evidence-based outcomes, our rehabilitation model is synergistic with our existing business model as it allows us to extend our service offering to rehabilitation across many of our core specialities. In addition, rehabilitation provides a solution to many current problems facing the wider healthcare system by providing a more appropriate level of treatment at a lower cost.

Current intentions are to introduce a pilot rehabilitation offering in early 2017, utilising space within CircleReading hospital. Designs for our new-build Birmingham hospital are being revised to incorporate a full-scale rehabilitation facility of 120 beds with a view to open in mid-2018.

We are currently assessing other UK locations for rehabilitation facilities, as well as holding a number of discussions with individual Trusts. We envisage that the market for rehabilitative care will see considerable growth in the next 5-10 years, for both the public and private sector.

Circle Harmony

We were pleased to have recently announced our plans for opening premium brand clinics in China through a joint venture, Circle Harmony, with our partner Deep Sea Capital. We believe we have identified a gap in the market to provide a premium service that offers the capacity to meet growing demand for high quality private healthcare in Chinese cities as well as utilising the best quality local doctors in China through partnerships with state hospitals. The service will offer a range of primary care, diagnostic and outpatient services, as well as providing reliable links for patients to leading hospitals, both in China and internationally for specialist treatments

Circle Harmony has entered a 20-year management agreement with a group of investors, who have committed RMB 200 million (c.GBP23million) to support development of the first facility in Shanghai.

The investment comes from an equal split of state-owned and private investment organisations including China Taiping, one of China's largest insurance companies and also XinXing, a global Fortune 500 conglomerate. We anticipate opening the initial facility in Shanghai in late 2017/early 2018 with a view to opening an additional nine clinics within six years.

Circle will provide development and clinical management services to the joint venture and will be able to recover costs associated with these services, roughly GBP700,000 per clinic. Once the facility is operational, Circle will receive a share of profits projected to be circa GBP0.5m per year, per facility. In addition, Circle Harmony has received warrants equal to 20% of the investor-owned entity (of which, Circle's share will be 10%).

By entering this fast growing international market, Circle is able to leverage its considerable experience in providing a premium private healthcare experience for patients, while minimising the risks of operating in an emerging healthcare market by working alongside reputable Chinese organisations that fully understand the financial and clinical environment in which the facilities will operate.

Greenwich MSK Service

Finally, we were pleased to announce recently that Greenwich CCG have confirmed Circle as the preferred bidder to provide integrated musculoskeletal services in Greenwich.

Under the proposed five-year arrangement, which is subject to contract, Circle will be responsible for managing MSK services for 276,000 Greenwich residents. The contract is valued at approximately GBP73.7 million and is expected to deliver estimated savings of GBP12 million for the CCG over the initial five-year term, which is renewable for up to two additional years.

Our approach in Greenwich will see Circle introduce the same kind of innovation and reform that have enabled us to ensure more appropriate and timely clinical care for Bedfordshire patients. Finalisation of the contractual terms will take place over the coming weeks with service commencement expected in Q4 2016.

Steve Melton

Chief Executive Officer

Chief Financial Officer's report

Financial review

Introduction

The first half of 2016 saw Group revenue grow by 6%, gross profit improved by 16% and operating losses(1) reduced by 32% compared to the same period in 2015.

The core operations of the Group continue to experience steady growth while maintaining the delivery of high quality healthcare. Revenue growth at the hospital sites has been driven by a combination of: a larger proportion of the orthopaedic market share being captured; an increase in the number of NHS e-referral slots published to meet heightening patient demand; and the recruitment of new specialist consultants into our Circle partnership. We have seen increases in inpatient and daycase activity as well as improvements in revenue per inpatient/daycase across the Group. We continue to see an increase in activity that is driven by patients choosing to come to our Circle hospitals: this is indicative of the high quality care that we offer to all our patients. Specialised orthopaedic procedures, specifically joint replacements, have increased by 27% on prior year across all our hospital sites. Our growth in the orthopaedic market is reflective of our strong and innovative musculoskeletal expertise.

Group gross profit increased by 16% to GBP19.8 million and gross profit margin by 3% to 30% on the same period in 2015. Our efforts to improve the operational efficiency of the business have produced some positive results, reducing EBITDA(2) loss by 47% on prior year to EBITDA(2) loss of GBP1.9m. EBITDA results have improved on prior year across all Circle facilities and significant cost savings were also achieved at Head Office of approximately GBP0.9m year-on-year. At our operational sites, the net EBITDA profit excluding Head Office management fee was GBP4.2m, 60% higher than the profit achieved in the first half of 2015.

The Group generated an operating loss before exceptional items and Project Reset charge of GBP3.5m, an improvement of 32%, while the 'loss per share' now stands at 2.2 pence, improved from a 'loss per share' of 2.5 pence.

We have achieved some promising results for the first half of 2016 and looking ahead at year end, we anticipate the core business to grow in line with overall expectations while the cost challenges experienced in the first half are expected to wane.

Highlights

 
                               Six             Six            Variance 
                                months          months         % 
                                to              to 
                               30-Jun-16       30-Jun-15 
                               GBP'000         GBP'000 
 
 Group revenue                        66,452         62,509   6% 
 
 Earnings before interest, 
  tax, depreciation 
  and amortisation 
  ('EBITDA') before 
  exceptional items 
  and Project Reset 
  charge(3)                    (1,931)         (3,668)        (47%) 
 
 Operating loss before 
  exceptional items 
  and Project Reset 
  charge                       (3,544)         (5,199)        (32%) 
 
 Loss for the period 
  attributable to equity 
  holders of the parent        (5,514)         (6,085)        (9%) 
 
 Net assets                           21,320         28,849   (26%) 
                              ==============  ============= 
 
 
  Patient numbers 
                            Six months      Six months     Variance 
                             to              to             % 
                            30-Jun-16       30-Jun-15 
                            Number          Number 
 Daycase and inpatients            25,500         24,135   6% 
 
 Outpatients                     159,597        158,407    1% 
 
 Total patients                  185,097        182,542    1% 
 

Review of performance

Patient volumes continue to increase at our Circle hospital facilities, particularly in daycase and inpatient activity. Outpatient activity has increased by a smaller percentage, primarily due to outpatient activity at CircleNottingham, where the number of follow up appointments has significantly reduced. In addition, our telederm service has created an innovative and more efficient method of diagnosing dermatology conditions, enabling the patients to receive care remotely.

CircleNottingham's short stay unit continues to garner recognition in the local market, with increasing number of patients actively selecting CircleNottingham as their favoured provider for treatment. Inpatient volumes increased by 62% from 2015. The increase is primarily in orthopaedic and gynaecology procedures, resulting in inpatient revenues contributing towards 8% of total revenues (H1 2015: 5%). As the Group's most mature asset, we are yet again encouraged by CircleNottingham's continuing strong growth performance. We anticipate that local commissioners will commence in early 2017 the process to re-procure the existing contract to operate the Nottingham Treatment Centre, which ends in July 2018.

Total patient volumes at CircleBath have grown 4% on prior year and total revenues increased by 8% on prior year to GBP13.0m for the first six months of 2016. We envisage a similar level of growth to continue into the second half of 2016. As mentioned in the Chief Executive Officer's Report, we are currently behind our margin targets, a key area of focus that we are working hard to address. Nevertheless, we have seen some positive growth trends in the first half, with average daycase and inpatient revenue per case growing by 4%. The number of joint replacements conducted in H1 2016 is 14% higher than prior year.

CircleReading has also increased patient volumes by 4%, driving revenue growth of 3% on prior year. The increase in activity is attributable to a rise in orthopaedic procedures undertaken while we have also grown our daycase offerings by appointing two new consultants, one specialising in shoulder procedures and the other in gynaecology. We expect this positive growth to further improve in H2 2016 following the roll-out of various plans to extend market reach.

Overall, however, we are seeing a positive trend in increasing the Group's overall gross profit margin and our two largest facilities, Circle Nottingham and CircleReading, each improved gross profit margins by 2% on prior year.

In the first half of 2016, CircleBedfordshire MSK have made further advances in engaging Bedfordshire GPs to utilise the referral process managed by Circle: 95% of system-wide referrals now come through the Circle Hub (H1 2015: 86%). Although we have seen an increase in patient referrals, the combination of greater control of the patient pathway with patients receiving more appropriate treatment leading to an improvement in financial results. CircleBedfordshire has grown in line with management expectations and we plan to continue our focus to reduce circumvention of the Circle triage facility by working closely with Bedfordshire CCG and local providers.

At a Group level, we are pleased with our continual progress to reduce operating overheads. From January 2016, the Group management fee allocation method was revised prospectively to better reflect the use of head office management resources across our Circle facilities. The impact of this is an increase of management fees recharged to Circle hospitals of GBP0.5m.

Closing cash balance as at 30 June 2016 was GBP12.7m. Net cash generated from operating activities was GBP0.7m (H1 2015: GBP3.7m), with the variance on prior year attributable to the timing of working capital.

In the 2015 Annual Report, we noted that the Manchester land owned by Circle was being marketed for sale. Negotiations for sale are now in advanced stages and we expect to complete the sale by the end of 2016.

This month, the latest policy proposals for the 2017 to 2019 NHS national tariff were published by Monitor. One of the most significant changes proposed is a tariff decrease for orthopaedic procedures and outpatient consultation revenue. As in prior years, when similar tariffs have been proposed, we will engage with Monitor, professional bodies and other NHS and independent sector providers in respect of these proposals that we believe could have an adverse impact on waiting times for patients.

The first half of the year demonstrated good growth in our core business and we are now set to further enhance our strategic model with complementary growth options, both in the UK and abroad.

Paolo Pieri

Chief Financial Officer

Footnotes

(1) Operating loss before exceptional items and Project Reset charge.

(2) EBITDA loss before exceptional items and Project Reset charge.

(3) Project Reset charge relates to the IFRS 2 share-based payment charge for share options granted to Circle employees and clinical partners.

 
 Circle Holdings plc 
 
 Consolidated income statement 
  For the six months ended 30 June 2016 
 
                                          Unaudited        Unaudited        Audited 
                                          Six months       Six months       Year 
                                           to              to               to 31 
                                           30 June         30 June          December 
                                           2016            2015             2015 
                                  Notes   GBP'000          GBP'000          GBP'000 
 
 Revenue                                  66,452           62,509           127,790 
 Cost of sales                            (46,671)         (45,390)         (90,335) 
                                         -----------      ---------------  -------------- 
 
 Gross profit                             19,781           17,119           37,455 
 
 Administrative expenses 
  before exceptional items                (24,944)         (22,654)         (47,934) 
                                         -----------      ---------------  -------------- 
 
 Operating loss before 
  exceptional items               4       (5,163)          (5,535)          (10,479) 
 
 Exceptional operating 
  items                           4       -                (138)            (389) 
                                         -----------      ---------------  -------------- 
 
 Operating loss                           (5,163)          (5,673)          (10,868) 
 
 Finance income                   5       2                1                5 
 Finance costs                    6       (353)            (413)            (793) 
                                         -----------      ---------------  -------------- 
 
 Loss before taxation                     (5,514)          (6,085)          (11,656) 
 Tax                                      -                -                - 
                                         -----------      ---------------  -------------- 
 
 Loss and total comprehensive 
 loss for the financial 
 period / year                            (5,514)          (6,085)          (11,656) 
                                         ===========      ===============  ============== 
 
 
 
 Basic and diluted loss 
  per share (pence)               7       (2.2)            (2.5)            (4.7) 
                                         ===========      ===============  ============== 
 
 
 
 
 Consolidated balance sheet 
  As at 30 June 2016 
                                Unaudited   Unaudited   Audited 
                                30 June     30 June     31 December 
                                 2016        2015        2015 
 Non-current assets             GBP'000     GBP'000     GBP'000 
 
 Intangible assets              5,446       5,414       5,340 
 Property, plant and 
  equipment                     19,581      16,717      17,550 
 Trade and other receivables    2,500       2,500       2,500 
 
                                27,527      24,631      25,390 
                               ----------  ----------  ------------ 
 Current assets 
 
 Inventories                    1,647       1,679       1,876 
 Trade and other receivables    20,158      22,924      14,692 
 Cash and cash equivalents      12,683      26,722      14,998 
 
                                34,488      51,325      31,566 
                               ----------  ----------  ------------ 
 Total assets                   62,015      75,956      56,956 
                               ----------  ----------  ------------ 
 
 Current liabilities 
 
 Trade and other payables       (28,427)    (35,024)    (19,902) 
 Loans and other borrowings     (2,215)     (2,022)     (2,332) 
 Provisions for other           -           (134)       - 
  liabilities and charges 
 
                                (30,642)    (37,180)    (22,234) 
                               ----------  ----------  ------------ 
 Non-current liabilities 
 
 Trade and other payables       (3,773)     (2,027)     (1,979) 
 Loans and other borrowings     (6,230)     (7,850)     (7,282) 
 Provisions for other 
  liabilities and charges       (50)        (50)        (50) 
 
                                (10,053)    (9,927)     (9,311) 
                               ----------  ----------  ------------ 
 Total liabilities              (40,695)    (47,107)    (31,545) 
                               ----------  ----------  ------------ 
 Net assets                     21,320      28,849      25,411 
                               ==========  ==========  ============ 
 
 
 Shareholders' equity 
 
 Share capital                  4,956       4,956       4,956 
 Share premium                  236,795     236,795     236,795 
 Other reserve                  22,182      22,182      22,182 
 Warrant reserve                22,703      22,703      22,703 
 Share-based charges 
  reserve                       5,958       2,402       4,535 
 Treasury share reserve         (9,587)     (9,587)     (9,587) 
 Retained deficit               (261,687)   (250,602)   (256,173) 
 
 Total shareholders' 
  equity                        21,320      28,849      25,411 
                               ==========  ==========  ============ 
 
 
 
 Consolidated statement of changes in equity 
  (unaudited at 30 June 2016 and 2015) 
  For the six months ended 30 June 2016 
 
                   Share      Share      Other      Warrant    Treasury   Share-based   Retained    Total 
                    capital   premium    reserve    reserve    share      charges        deficit    share-holders' 
                                                               reserve    reserve                   equity 
                   GBP'000    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000       GBP'000     GBP'000 
 
 At 1 January 
  2015             4,956      236,795    22,182     22,703     (9,587)    1,842         (244,517)   34,374 
 Loss and total 
  comprehensive 
  loss for the 
  period           -          -          -          -          -          -             (6,085)     (6,085) 
 Share-based 
  charges          -          -          -          -          -          560           -           560 
----------------  ---------  ---------  ---------  ---------  ---------  ------------  ----------  --------------- 
 
 At 30 June 2015   4,956      236,795    22,182     22,703     (9,587)    2,402         (250,602)   28,849 
 Loss and total 
  comprehensive 
  loss for the 
  period           -          -          -          -          -          -             (5,571)     (5,571) 
 Share-based 
  charges          -          -          -          -          -          2,133         -           2,133 
----------------  ---------  ---------  ---------  ---------  ---------  ------------  ----------  --------------- 
 
 At 31 December 
  2015             4,956      236,795    22,182     22,703     (9,587)    4,535         (256,173)   25,411 
 Loss and total 
  comprehensive 
  loss for the 
  period           -          -          -          -          -          -             (5,514)     (5,514) 
 Share-based 
  charges          -          -          -          -          -          1,423         -           1,423 
 
 At 30 June 2016   4,956      236,795    22,182     22,703     (9,587)    5,958         (261,687)   21,320 
                  =========  =========  =========  =========  =========  ============  ==========  =============== 
 
 
 
 
 Consolidated statement of cash flows 
  For the six months ended 30 June 2016 
 
                                           Unaudited   Unaudited   Audited 
                                           Six         Six         Year 
                                            months      months      to 31 
                                            to          to          December 
                                            30          30          2015 
                                            June        June 
                                            2016        2015 
                                   Notes   GBP'000     GBP'000     GBP'000 
 
 Cash flows from operating 
  activities 
 Cash flows from/(used 
  in) operating activities         8       1,036       4,159       (4,642) 
 Interest paid                             (353)       (413)       (793) 
                                          ----------  ----------  ---------- 
 
 Net cash flows from/(used 
  in) operating activities                 683         3,746       (5,435) 
 
 Cash flows from investing 
  activities 
 Purchase of computer software             (205)       (28)        (51) 
 Purchase of property, 
  plant and equipment                      (1,625)     (574)       (1,998) 
 
 Net cash used in investing 
  activities                               (1,830)     (602)       (2,049) 
 
 Cash flows from financing 
  activities 
 Repayment of finance lease                (1,169)     (919)       (2,019) 
 Interest received                         1           1           5 
 
 Net cash inflow / (outflow) 
  from financing activities                (1,168)     (918)       (2,014) 
 
 Net increase / (decrease) 
  in unrestricted cash and 
  cash equivalents                         (2,315)     2,226       (9,498) 
 Unrestricted cash and cash 
  equivalents at the beginning 
  of the period / year                     14,998      24,496      24,496 
 
 Unrestricted cash and cash 
  equivalents at the end of 
  the period / year                        12,683      26,722      14,998 
                                          ==========  ==========  ========== 
 
 
 
 Notes to the consolidated interim financial 
  information 
  For the six months ended 30 June 2016 
 
 1                                                    General information 
 
 Circle Holdings plc (the 'Company') and 
  its subsidiaries (together, the 'Group') 
  provide healthcare services in the UK. 
 
 The Company is a public limited company 
  and is incorporated in Jersey, but resident 
  in the UK for tax purposes. The registered 
  office is 12 Castle Street, St Helier, Jersey, 
  JE2 3RT. 
 
 2                                                    Basis of preparation and accounting policies 
 
 Basis of preparation 
 
 The Interim report and financial information 
  for the six months ended 30 June 2016 has 
  been prepared on a going concern basis in 
  line with projections of the Group's anticipated 
  results, which show that the Group has adequate 
  resources to continue in existence for the 
  foreseeable future. The Interim report and 
  financial information should be read in 
  conjunction with the Annual Report and financial 
  statements for the year ended 31 December 
  2015, which were prepared in accordance 
  with IFRS and IFRIC interpretations as endorsed 
  by the EU, under the historical cost convention, 
  as modified by the revaluation of derivative 
  financial instruments and the fair valuing 
  of share-based charges and certain loans. 
  As the Group is listed on AIM, it is not 
  required to adopt IAS 34 'Interim Financial 
  Reporting' in preparing the consolidated 
  interim financial information. 
 The Interim report and financial information 
  is unaudited and has not been reviewed by 
  external auditors. The condensed set of 
  financial information in the Interim report 
  does not constitute statutory accounts within 
  the meaning of section 434 of the Companies 
  Act 2006. The Group's Annual Report and 
  financial statements for the year ended 
  31 December 2015 were approved by the Board 
  of Directors on 29 March 2016. The report 
  of the auditors on those accounts was unqualified 
  and did not contain an emphasis of matter 
  paragraph or a statement under Section 498 
  of the Companies Act 2006. The Interim report 
  and financial information was approved by 
  the Board of Directors on 24 August 2016. 
 
 Going concern 
 The consolidated financial statements have 
  been prepared on a going concern basis which 
  assumes that the Group will continue in 
  operational existence for the foreseeable 
  future. The directors have prepared cash 
  flow forecasts for a period of 18 months 
  from the date of the signing of the financial 
  statements for the six months ended 30 June 
  2016. These forecasts have been prepared 
  based on the expected cash flows from the 
  Group's existing operating businesses, as 
  well as the commitments associated with 
  new projects as discussed in the Chief Executive 
  Officer's Report. Management believe that 
  if any significant variances from the underlying 
  assumptions of the forecasts were to materialise, 
  the negative impact to cash flows could 
  be mitigated by undertaking a number of 
  actions including reducing Head Office costs, 
  reducing the scale or timing of investment 
  in new projects, or seeking further funding 
  opportunities. The Directors are also seeking 
  to generate further capital through the 
  sale of land in Manchester. Accordingly, 
  the directors have a reasonable expectation 
  that the Company has adequate resources 
  to continue in operational existence for 
  the foreseeable future and conclude that 
  it is appropriate for these accounts to 
  be prepared on a going concern basis. 
 
 Significant accounting policies 
 
 The accounting policies adopted in the preparation 
  of the Interim report and financial information 
  are consistent with those of the Group's 
  Annual Report and financial statements for 
  the year ended 31 December 2015. In addition, 
  at interim periods, taxes on income are 
  accrued using the tax rate that is expected 
  to be applicable for the full financial 
  year and the impact of other relevant taxes. 
 
 Significant accounting judgements and estimates 
 
 The judgements and estimates which have 
  the most significant effect on the amounts 
  recognised in the Interim report and financial 
  information are consistent with those reported 
  in the Annual Report and financial statements 
  for the year ended 31 December 2015. 
 
 
 3     Segmental reporting 
 
 The chief operating decision-maker has been 
  identified as the Board. The Board reviews the 
  Group's internal reporting in order to assess 
  performance and allocate resources, and to date 
  has divided the Group into three reportable 
  business segments based on the Group's management 
  and internal reporting structure. The Board 
  assesses the performance of the segments based 
  on revenue, gross profit, EBITDA before exceptional 
  items and operating (loss) / profit. These are 
  all measured on a basis consistent with that 
  of the consolidated income statement. Revenue 
  charged between segments has been charged at 
  arm's length and eliminated from the Group financial 
  statements. 
 
 Revenue from external customers in the segmental 
  analysis is also measured in a manner consistent 
  with the income statement. This is split by 
  hospital rather than by patient. Circle hospital 
  services include CircleReading, CircleBath and 
  CircleNottingham. Other Circle Services includes 
  other non-hospital management services such 
  as the contract with Bedfordshire CCG to provide 
  musculoskeletal services ('MSK') to patients 
  in Bedfordshire. Geographic factors are not 
  considered as all of the Group's operations 
  take place within the United Kingdom. 
 
  From January 2016, the Group management fee 
  allocation method was revised prospectively 
  to better reflect the use of head office management 
  resouces across the Circle operations. The impact 
  of this is that a higher proportion of Head 
  Office resources is recharged to Circle operations. 
 
 Six months ended 30             Circle           Other            All                 Total 
  June 2016                       hospital         Circle           Other               Group 
                                  services         services         Segments 
                                                                    and 
                                                                    Unallocated 
                                                                    Items 
   (unaudited) 
                                 GBP'000          GBP'000          GBP'000             GBP'000 
 
 Revenue                         52,158           14,294           -                   66,452 
 Gross profit                    18,025           1,756            -                   19,781 
 EBITDA before exceptional 
  items                          937              114              (4,601)             (3,550) 
 Operating profit / 
  (loss)                         (570)            96               (4,689)             (5,163) 
                                ----------       ----------       -------------       -------- 
 
 Finance income                                                                        2 
 Finance costs                                                                         (353) 
 
 Loss before taxation                                                                  (5,514) 
                                                                                      ======== 
 
 
 Six months ended 30           Circle           Other            All                 Total 
  June 2015                     hospital         Circle           Other               Group 
                                services         services         Segments 
                                                                  and 
                                                                  Unallocated 
                                                                  Items 
   (unaudited) 
                               GBP'000          GBP'000          GBP'000             GBP'000 
 
 Revenue                       49,024           13,481           4                   62,509 
 Gross profit                  16,339           775              4                   17,119 
 EBITDA before exceptional 
 items                         307              (15)             (4,296)             (4,004) 
                              ----------       ----------       -------------       --------- 
 Operating profit / 
  (loss)                       (1,062)          (20)             (4,592)             (5,673) 
                              ==========       ==========       =============       ========= 
 
 Finance income                                                                      1 
 Finance costs                                                                       (413) 
 
 Loss before taxation                                                                (6,085) 
                                                                                    ========= 
 
 Year ended 31 December        Circle           Other            All                 Total 
  2015                          hospital         Circle           Other               Group 
                                services         services         Segments 
                                                                  and 
                                                                  Unallocated 
                                                                  Items 
   (audited) 
                               GBP'000          GBP'000          GBP'000             GBP'000 
 
 Revenue                       98,952           28,771           67                  127,790 
 Gross profit                  33,441           3,947            67                  37,455 
 EBITDA before exceptional 
 items                         537              1,306            (9,270)             (7,427) 
                              ----------       ----------       -------------       --------- 
 Operating profit / 
  (loss)                       (2,245)          1,290            (9,913)             (10,868) 
                              ==========       ==========       =============       ========= 
 
 Finance income                                                                      5 
 Finance costs                                                                       (793) 
 
 Loss before taxation                                                                (11,656) 
                                                                                    ========= 
 
 
 4     EBITDA and exceptional 
        items 
 
 Exceptional operating           Unaudited     Unaudited   Audited 
  items 
                                 Six           Six         Year 
                                  months        months      to 31 
                                  to            to          December 
                                  30            30          2015 
                                  June          June 
                                  2016          2015 
                                 GBP'000       GBP'000     GBP'000 
 Exceptional share-based 
  charges                        -             301         552 
 Other exceptional expense       -             (163)       (163) 
 
   -                                           138         389 
  ============                                ==========  ========== 
 
 
 There are no exceptional operating items 
  for the period to 30 June 2016. Share-based 
  charges for share options granted to Circle 
  partners and employees continue to be recognised 
  as an ongoing cost within administrative 
  expenses. 
 
 
 Operating loss, EBITDA                Unaudited               Unaudited            Audited 
  and EBITDAR before exceptional 
  items 
                                       Six                     Six                  Year 
                                        months                  months               to 31 
                                        to                      to                   December 
                                        30                      30                   2015 
                                        June                    June 
                                        2016                    2015 
                                       GBP'000                 GBP'000              GBP'000 
 
 Operating loss before 
  exceptional items                    (5,163)                 (5,535)              (10,479) 
 Depreciation                          1,514                   1,355                2,779 
 Amortisation of intangibles           99                      176                  273 
 
 EBITDA before exceptional 
  items                                (3,550)                 (4,004)              (7,427) 
                                      ======================  ===================  ====================== 
 
 
 Operating lease rental                272                     443                  776 
 Building rental                       5,149                   4,774                9,669 
 
 EBITDAR before exceptional 
  items                                1,871                   1,213                3,018 
                                      ======================  ===================  ====================== 
 
 
 This information is included here as it provides 
  useful insight to the reader of the accounts 
  for understanding operational performance. 
 
 5      Finance income 
                                       Unaudited               Unaudited            Audited 
                                       Six                     Six                  Year 
                                        months                  months               to 31 
                                        to                      to                   December 
                                        30                      30                   2015 
                                        June                    June 
                                        2016                    2015 
                                       GBP'000                 GBP'000              GBP'000 
 
 Bank interest receivable                                  2                    1                       5 
 
                                                           2                    1                       5 
                                      ======================  ===================  ====================== 
 
 6      Finance costs 
                                       Unaudited               Unaudited            Audited 
                                       Six                     Six                  Year 
                                        months                  months               to 31 
                                        to                      to                   December 
                                        30                      30                   2015 
                                        June                    June 
                                        2016                    2015 
                                       GBP'000                 GBP'000              GBP'000 
 Finance lease interest                353                     413                  745 
 Other bank charges                    -                       -                    48 
 
                                       353                     413                  793 
                                      ======================  ===================  ====================== 
 
 
 
 7       Loss per share 
 
 Basic loss per share is calculated by dividing 
  the loss attributable to equity holders of the 
  parent by the weighted average number of share 
  capital in issue during the year. Diluted loss 
  per share is calculated by adjusting the weighted 
  average number of shares outstanding to assume 
  the conversion of all potentially dilutive ordinary 
  shares. Share warrants in issue represent the 
  only category of dilutive ordinary shares for 
  the Group. 
 
 The following table sets out the computation 
  for basic and diluted net loss per share for 
  the six months ended 30 June 2016 and 2015 and 
  the year ending 31 December 2015: 
 
                                       Unaudited     Unaudited     Audited 
                                       Six months    Six months    Year 
                                        to 30         to 30         to 
                                        June          June          31 December 
                                        2016          2015          2015 
 
 Loss attributable to equity 
  holders of parent (GBP000's)         (5,514)       (6,085)       (11,656) 
 
 Weighted average number 
  of shares in issue                   247,797,188   247,797,188   247,797,188 
 
 Basic and diluted loss 
  per share (pence)                    (2.2)         (2.5)         (4.7) 
                                      ============  ============  ============= 
 
 There is no difference in the weighted average 
  number of shares used for basic and diluted net 
  loss per share as the effect of all potentially 
  dilutive shares outstanding is anti-dilutive. 
 
 
 8       Net cash outflow from 
          operating activities 
                                       Unaudited     Unaudited     Audited 
                                       Six months    Six months    Year 
                                        to 30         to 30         to 
                                        June          June          31 December 
                                        2016          2015          2015 
                                       GBP'000       GBP'000       GBP'000 
 
 Loss before tax                       (5,514)       (6,085)       (11,656) 
 Finance costs                         353           413           793 
 Finance income                        (2)           (1)           (5) 
 Depreciation of property, 
  plant and equipment                  1,514         1,355         2,779 
 Amortisation of intangible 
  assets                               99            176           273 
 Loss on sale of tangible 
  fixed assets                         -             -             9 
 Share-based charges                   1,423         560           2,693 
 Movements in working 
  capital: 
         Decrease / (increase) 
 -        in inventories               229           127           (70) 
         (Increase)/decrease 
          in trade and other 
 -        receivables                  (5,408)       (6,241)       1,990 
         Increase/(decrease) 
          in trade and other 
 -        payables                     8,342         13,721        (1,448) 
 -       Increase/(decrease)           -             134           - 
          in provisions 
 
 Cash flows from operating 
  activities                           1,036         4,159         (4,642) 
                                      ============  ============  ============= 
 
 
 
 9                        Reconciliation of 
                          net debt 
                                                  Six months   Six months   Year 
                                                   to 30        to 30        to 
                                                   June         June         31 
                                                   2016         2015         December 
                                                                             2015 
                                                  GBP'000      GBP'000      GBP'000 
 
 (Decrease)/Increase 
  in unrestricted cash 
  in the period / year                            (2,315)      2,226        (9,498) 
 Repayment of finance 
  lease                                           1,169        919          2,019 
 
 Movement in net debt 
  from cash flow                                  (1,146)      3,145        (7,479) 
 
 Other non-cash 
  movements                                       -            -            (842) 
 
 Movement 
  in net debt                                     (1,146)      3,145        (8,321) 
 
 Net debt 
  at 1 January                                    5,384        13,705       13,705 
 
 Net debt at 30 June 
  / 31 December                                   4,238        16,850       5,384 
                                                 ===========  ===========  ========== 
 
 
 
 
 June 2016             At 1 January    Cash     Reclassifications   At 30 
                        2016            flow                         June 
                                                                     2016 
                       GBP'000        GBP'000   GBP'000             GBP'000 
 
 Liquid resources 
 Unrestricted 
  cash                 14,998         (2,315)   -                   12,683 
 
 Debt due 
  within one 
  year 
 Finance leases        (2,332)        1,169     (1,052)             (2,215) 
 
 Debt due 
  after one 
  year 
 Finance leases        (7,282)        -         1,052               (6,230) 
 
 Net debt              5,384          (1,146)   -                   4,238 
                      =============  ========  ==================  ======== 
 
 
 June 2015            At 1                   Cash    Reclassifications   Other       At 30 
                       January                flow                        non-cash    June 
                       2015                                               changes     2015 
                      GBP'000    GBP'000             GBP'000             GBP'000     GBP'000 
 
 Liquid resources 
 Unrestricted 
  cash                24,496     2,226               -                   -           26,722 
 
 Debt due within 
  one year 
 Finance leases       (1,922)    919                 (1,019)             -           (2,022) 
 
 Debt due after 
  one year 
 Finance leases       (8,869)    -                   1,019               -           (7,850) 
 
 Net debt             13,705     3,145               -                   -           16,850 
                     =========  ==================  ==================  ==========  ========== 
 
 
 December 2015        At 1                   Cash    Reclassifications   Other       At 31 
                       January                flow                        non-cash    December 
                       2015                                               changes     2015 
                      GBP'000    GBP'000             GBP'000             GBP'000     GBP'000 
 
 Liquid resources 
 Unrestricted 
  cash                24,496     (9,498)             -                   -           14,998 
                                 . 
 Debt due within 
  one year 
 Finance leases       (1,922)    2,019               (2,152)             (277)       (2,332) 
 
 Debt due after 
  one year 
 Finance leases       (8,869)    -                   2,152               (565)       (7,282) 
 
 Net debt             13,705     (7,479)             -                   (842)       5,384 
                     =========  ==================  ==================  ==========  ========== 
 
 
 
 10          Related party 
              transactions 
 
 There have been no material changes to the 
  principal subsidiaries and joint ventures as 
  listed in the Annual Report and financial statements 
  for the year ended 31 December 2015. 
 
 All related party transactions between subsidiaries 
  and joint ventures arose during the ordinary 
  course of business and were on an arm's length 
  basis. 
 
 11          Events after the 
              balance sheet date 
 
 There are no events subsequent to balance sheet 
  date which would have a material effect on 
  the Company's financial statements at 30 June 
  2016. 
 
 
 
 
 Statement of directors' responsibilities 
 
 The directors confirm that the condensed set 
  of consolidated financial information in the 
  Interim report has been prepared in accordance 
  with International Accounting Standard 34 'Interim 
  Financial Reporting' as adopted by the European 
  Union and that the Interim report includes 
  a fair review of the information, including: 
 
 -           an indication of important events that have 
              occurred during the first six months and 
              their impact on the condensed set of consolidated 
              financial information; 
 -           a description of the principal risks and 
              uncertainties for the remaining six months 
              of the financial year; and 
 -           material related party transactions in the 
              first six months and any material changes 
              in the related party transactions described 
              in the last Annual Report and financial statements. 
 
 The directors and their positions held during 
  the period were as published in the Annual 
  Report and financial statements for the year 
  ended 31 December 2015. 
 
 On behalf of the 
  Board 
 
 
 
 Steve Melton                                                             Paolo Pieri 
 Chief Executive                                                          Chief Financial 
  Officer                                                                 Officer 
  25 August 2016 
 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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