TIDMCIRC
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
END
IR BLGDIXXDBGLS
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