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Circle Holdings PLC  -  CIRC   

Full Year 2016 Audited Results

Released 07:00 29-Mar-2017

RNS Number : 8179A
Circle Holdings PLC
29 March 2017
 

FOR IMMEDIATE RELEASE                                                                         29 MARCH 2017

 

Circle Holdings plc

(the "Company" or "Circle")

 

Full year audited results

For the year ended 31 December 2016

 

Circle Holdings plc (LSE: CIRC), the healthcare group, today announces its final results for the year ended 31 December 2016.

 

Financial highlights

 

·     Group revenue up 4.4% with total revenue increased to £133.6m (2015: £127.8m)

·     Group EBITDA1 losses for the year cut to £3.1m (2015: £4.9m)

·     All business segments remain EBITDA positive, excluding Head Office

·     Patient volumes up 2% to 346,905

 

Operational highlights

 

·     Clinical performance consistently high, with patient recommendation rate above 98% across the Group, above NHS and private averages

·     Circle Rehabilitation, our joint venture with European rehabilitation specialists VAMED, was formed, introducing a new model of high-technology medical rehabilitation for physical and neurological conditions to the UK

·     Circle Reading hospital rated "Good" overall in its 2016 CQC inspection

·     Recently signed a £84.7m, five-year contract with Greenwich CCG to manage musculoskeletal (MSK) services in the Greenwich area

·     Progress toward the development of the next acute hospital in Birmingham, with construction expected to commence in April

 

Paolo Pieri, CEO of Circle Holdings, said:

 

"Circle's commercial agenda is a simple one: to increase scale. We have developed a range of core competencies, in hospital management, contracting for healthcare services and we are now introducing mainstream medical rehabilitation. We are building on these platforms already in 2017 with our next hospital, in Birmingham, our Greenwich contract and our rehabilitation joint venture."

            

Michael Kirkwood, Chairman of Circle Holdings, said:

 

"Last year was a busy year for Circle. While our financial results were not as strong as we would have liked, it was a very important year in terms of positioning the group for the future. As I mentioned in last year's report, we concluded an extensive review of our business. Consequently, the past year resulted in some of the identified opportunities coming to fruition, with the group adopting an increasing emphasis towards more capital-efficient activities, including service provision and rehabilitation."

                                                                                                                             

 

For further information, please contact:

 

Circle Holdings plc                                                                           +44 (0)20 7034 5258

Michael Kirkwood, Chairman
Paolo Pieri, Chief Executive Officer

Alex Singleton, Head of Communications and Marketing

 

Numis Securities Limited                                                                +44 (0)20 7260 1000

Michael Meade, Richard Thomas, Nominated Adviser

Ben Stoop, Corporate Broking

 

 

About Circle

 

Established in 2004, Circle Holdings plc is an employee co-owned group dedicating to empowering clinicians and healthcare professionals to redefine the delivery of healthcare in the UK. Circle's NHS and independent healthcare operations include two independent hospitals, Circle Bath and Circle Reading, the Nottingham NHS Treatment Centre, and the management of Bedfordshire's integrated musculoskeletal (MSK) service on behalf of local commissioners.

 

For more information please visit www.circleholdingsplc.com and www.circlehealth.co.uk

 

 

Footnotes:

1 Earnings before interest, tax, depreciation and amortisation ('EBITDA') before exceptional items and IFRS 2 share based payment charge for share options granted ('Project Reset items').

 

 

Chairman's letter

 

Healthcare in the UK is manifestly under significant pressure. Rises in patient demand, the challenges of government budgets, technological change and an overdue shift towards more integrated healthcare are changing how healthcare services are managed. These create opportunities as well as challenges for Circle, but we believe the group is well-placed to capitalise on them.

 

Last year, 2016, was a busy year for Circle. While our financial results were not as strong as we would have liked, due to operational matters discussed in the CEO's report, it was a very important year in terms of positioning the group for the future. As I mentioned in last year's report, we concluded an extensive review of our business. Consequently the past year resulted in some of the identified opportunities coming to fruition, with the group adopting an increasing emphasis towards more capital-efficient activities, including service provision and rehabilitation.

 

Our partnership with one of the leading European rehabilitation providers, VAMED, signed in December 2016, is a direct outcome of our strategic review and is potentially a game-changer for the group. Rehabilitation services are a critical missing piece in UK healthcare. Our joint venture, Circle Rehabiliation, seeks to position itself at the forefront of filling this important gap. It will provide patients who have undergone, for example, a musculoskeletal operation or have a neurological condition the opportunity to accelerate their recovery or manage their condition more effectively. It will help many patients to be fit enough to have the independence of living home, rather than be sent to care homes or remain as "bed blockers" in acute hospitals. Our pilot rehabilitation centre is already open in Reading and treating patients.

 

The widespread recognition is that state of-the-art rehabilitation is an important void across the UK healthcare economy, and this initiative is providing us with a much more open door to discuss partnerships and service provision with the public sector. There is demonstrably more engagement compared with some of the other services we offer, as the potential for this style of rehabilitation to improve the efficient flow of patients through NHS hospitals is substantial.

 

Our successful stewardship of the Bedfordshire MSK pathway, on behalf of local NHS commissioners, provided us with the opportunity in August 2016 to become preferred bidder for managing the MSK services in Greenwich and Lewisham. We were delighted to have finalised this partnership in March 2017 and are looking to add further scale in this area.

 

The formalisation of our Chinese joint venture, Circle Harmony, affords us exciting entry into a huge healthcare market. We are expecting Circle Harmony's first facility in Shanghai, along with our clinical partnership with the Ruijin Hospital, to be complete in the third quarter of 2017. The investment commitment has come from private and state investors in China and the objective is to create a network of small facilities aimed at premium end of market. This joint venture was announced in June 2016.

 

As I mentioned last year, we had expected to commence construction of Circle Birmingham Hospital in 2016. The detailed planning and design was delayed to accommodate our entry into rehabilitation, and construction will now commence imminently. This exciting new project will also look to incorporate a purpose built Rehabilitation facility.

 

The realisation of full value for our land in Manchester, announced in February 2017, will enable the group to reallocate these funds to more capital efficient activities.

 

In November, Steve Melton stood down as CEO. The board is grateful to him for his work and his dedication to the group, which he joined in 2008, and wish him well for the future.  The board was unanimous in support of Paolo Pieri to take on the CEO role at a time when the group is well-positioned to build on its core expertise, to execute the new initiatives and to achieve greater scale.

 

A strategic challenge for the board and management is the highly concentrated shareholder register that results in inadequate liquidity in our shares. Mindful of this, the board regularly considers the options available to mitigate this situation, with a view to enhancing shareholder value.

 

Finally, let me thank our patients and partners for their support and loyalty over the past year. Last year 346,904 patients came through our doors, up 2 per cent on the previous year, and the feedback we have received from them is outstanding. The commitment and hard work of Circle's partners - from consultant surgeons and nurses to hospitality staff - continues to be recognised in our exceptional patient satisfaction levels. All of our facilities across our estate have consistently good Care Quality Commission ratings. We thank them for their trust and support. Likewise, I must thank my board colleagues for their wise counsel and commitment over the past year.

 

Michael J. Kirkwood, CMG

Chairman

28 March 2017

 

 

CEO report

 

Circle's commercial agenda is a simple one: to increase scale. We have developed a range of core competencies, in hospital management, contracting for healthcare services and we are now introducing mainstream medical rehabilitation. We are building on these platforms already in 2017 with our next hospital, in Birmingham, our Greenwich MSK contract and the signing of our rehabilitation joint venture.

 

In terms of performance in 2016, there were a number of issues affecting our results that are being resolved. We had inpatient staffing shortages at Circle Bath Hospital, which meant high agency usage and mid-year there was an impact of the lengthier than planned engagement process with our consultants prior to the introduction of new NHS fees. With those behind us, I am pleased to say that we are seeing a more positive financial trend to the start of 2017.

 

Our joint venture with the European rehabilitation specialists VAMED to form Circle Rehabilitation is significant. We have a pilot rehabilitation centre now running in Reading, and our plan is to add a 120-bed rehabilitation centre to our future private hospital in Birmingham. However, the great growth potential here is to build dedicated rehabilitation hospitals close to large NHS trusts.

 

At present, NHS trusts are unable to deal with the flow of patients through their hospitals because there are too many patients left in precious beds unnecessarily because they are not yet fit to go home. A 500-bed NHS trust could save millions of pounds a year by moving patients to dedicated rehabilitation facilities, using the latest technology, which would give them better patient outcomes.

 

We were recently awarded the contract to manage the Greenwich musculoskeletal service, on behalf of local NHS commissioners. The five year contract, which is renewable for up to a further two years, is worth £84.7m and we will be responsible for serving 276,000 Greenwich residents. This achievement is a reflection of the success we have made of running a similar service in Bedfordshire. We believe there will be other opportunities in the future to expand this to other localities.

 

Circle's 20-year management agreement with Chinese investors was signed in summer 2016 reflecting the expertise that Circle has built up in running private hospitals. We expect to see good developments in this venture in the coming year.

 

We continue to examine ways to increase efficiencies across our business. For example, new inpatient beds in our Nottingham Treatment Centre, which we run on behalf of the NHS, have increased utilisation in this already busy hospital. At the same time, the group has added to its cash position, after selling its Manchester land at the end of January 2017 for a premium above book value.

 

In closing, I must thank the contributions Circle partners have made during 2016. Their focus and determination to ensure our patients receive better quality healthcare never tires and our overall "good" CQC ratings along with our consistently high patient satisfaction rates are proof that we are achieving what we always set out to do; to deliver a great company dedicated to our patients.

 

Paolo Pieri

Chief Executive Officer

28 March 2017

 

 

Chief Financial Officer's Report

 

Financial review

                       

2016 has been a year of continued financial progress in the face of some operational difficulties. We maintained revenue growth and improved gross profit margins across all sites. Combined with an exceptional gain of £2.2 million, this resulted in a 30% reduction in total losses. 

 

The Group generated an operating loss before exceptional and Project Reset* items of £7.0 million, an improvement of 12% on 2015. The financial progress made in 2016 has been encouraging whilst extremely high patient satisfaction levels of 98% have been achieved.

 

Patient Procedures 

 



Year to


Year to


Change



31 Dec-16

31-Dec-15



Number


Number


 








 

Day case and inpatients


50,985


48,433

5%








 

Outpatients


295,919


292,472


1%








 

Total procedures


346,904


340,905


2%

 

 

Patient volumes have shown good growth across the group versus 2015. This is largely due to an increase in NHS volumes with patients requiring both Inpatient and Daycase procedures selecting Circle as their healthcare provider of choice. We have also seen an encouraging 23% rise in self-pay volumes this year.

 

Overall PMI volumes have fallen compared to prior year, an area in which we had not expected growth.

 

The most encouraging growth in admitted patient care is at Circle Nottingham which has achieved year on year growth in this area of 7%. Total volume growth (including Outpatient activity) at Circle Bath grew by 3% to 50,503, Circle Reading increased by 1% to 65,050 and Circle Nottingham increased by 2% to 231,351.

 

Although the growth achieved has not quite been the level that we had anticipated we are encouraged by the continuing steady growth at all of our hospital sites.  Good progress has been made on all operational issues, and with a clear plan for revenue growth and further efficiencies, we are on track for strong results in our core business during 2017, along with new opportunities in our MSK Service and Rehabilitation partnership coming on stream.

           

Group results

 

EBITDAR (Earnings Before Interest, Tax, Depreciation, Amortisation and Rent) increased by 30% this year to £7.2 million, and continuing the trend of positive growth from 2015, 2016 EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) loss before exceptional items and Reset costs reduced by 36% as the Group continued to grow in its core operations while achieving operating efficiencies. 

 

Revenue increase for the year was 4% reflecting the strength of our core business. Volume increases accounted for 2% of this with improved complexity and case mix accounting for the remainder.

 

Gross margin, whilst not as high as anticipated, has been improved from 29% to 30%.  One-off operational issues at Bath and Reading, including inpatient staffing shortages, high agency usage and the impact of a delay to the renegotiation of consultant NHS activity fees, all contributed in varying degrees to this during the year.

 

Cash balance as at end of December was £7.4 million (2015: £15.0 million) with no restricted cash reserves. The sale of the land in Manchester increased this balance by a further £9.1m during January 2017.

 



Year to


Year to


Difference

% Difference



31-Dec-16

31-Dec-15






£'000


£'000


£'000

%









Group revenue


133,452


127,790


5,662

4%









Earnings before interest, tax, depreciation and amortisation and rent ('EBITDAR') before exceptional items and Project Reset charge


7,166


5,530


1,636

30%









Earnings before interest, tax, depreciation and amortisation ('EBITDA') before exceptional items and Project Reset charge


-3,145


-4,915


1,770

36%









Total operating loss before exceptional items and Project Reset items


-6,978


-7,967


989

12%









Exceptional items


2,181


-389


2,570

661%









Loss and total comprehensive loss for the financial year


-8,131


-11,656


3,525

30%









Net assets


20,033


25,411


-5,378

-21%









 

 

The Company issued further allocations of options under its Partnership Incentive Plan (PIP) share schemes during 2016. The total share option charge recognised in 2016 amounted to £2.8 million.

 

With the aid of future plans to maximise scale and also current strategies to attract more patients, and improve efficiencies whilst simultaneously maintaining our high quality clinical care, we are confident that we have the resources to achieve sustainable growth.             

 

Exceptional Items

 

During 2016, a net exceptional gain of £2.2 million was recognised in relation to an impairment reversal on land in Manchester. This land was purchased in 2011 and impaired in 2012 following an external valuation. At the year end we had made significant progress with a buyer at a significantly higher value than the carrying value, therefore the impairment was reversed.  This transaction was then completed during January 2017 at a sale price of £9.1 million.

 

Cashflow

 

Net cash outflow from operating activities amounted to £1.3 million (2015: £4.6 million) showing an improvement on prior year as a result of improved operational performance.

 

At 31 December 2016, the only borrowings relate to finance leases of clinical equipment. Our cash flow forecasts have been prepared based on the expected cash flows from the Group's existing operating businesses and the commitments associated with new projects as discussed in the Chairman's and CEO's reports. Following the sale of the land in Manchester as mentioned above, the Group is in a strong cash position and has sufficient funding to carry out its current business plans.

 

 

Sarah Marston

Interim Chief Financial Officer

28 March 2017

 

 

* - Project Reset items relate 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 year ended 31 December 2016










2016


2015




£'000


£'000







Revenue


133,452


127,790

Cost of sales


(93,055)


(90,335)






Gross profit


40,397


37,455






Administrative expenses before exceptional items


(49,961)


(47,934)







Operating loss before exceptional items


(9,564)


(10,479)







Exceptional operating items


2,181


(389)







Operating loss


(7,383)


(10,868)







Finance income


25


5

Finance costs


(773)


(793)







Loss before taxation


(8,131)


(11,656)

Income tax


-


-






Loss for the financial year


(8,131)


(11,656)







Basic and diluted loss per ordinary share (pence)


(3.3)


(4.7)







There is no other comprehensive income arising in the Group (2015: £nil) and therefore no separate Statement of other comprehensive income has been prepared.

 

Circle Holdings plc







Consolidated balance sheet
As at 31 December 2016

2016


2015




£'000


£'000







Non-current assets












Intangible assets



5,170


5,340

Property, plant and equipment



14,237


17,550

Trade and other receivables



2,500


2,500










21,907


25,390

Current assets












Inventories



1,650


1,876

Trade and other receivables



14,325


14,692

Assets held for sale



7,623


-

Cash and cash equivalents



7,431


14,998










31,029


31,566

Total assets



52,936


56,956







Current liabilities












Trade and other payables



(21,775)


(19,902)

Loans and other borrowings



(2,424)


(2,332)










(24,199)


(22,234)

Non-current liabilities












Trade and other payables



(1,886)


(1,979)

Loans and other borrowings



(6,818)


(7,282)

Provisions



-


(50)










(8,704)


(9,311)

Total liabilities



(32,903)


(31,545)

Net assets



20,033


25,411



















Share capital



4,956


4,956

Share premium



236,795


236,795

Other reserves



22,182


22,182

Warrant reserve



22,703


22,703

Share-based charges reserve



7,288


4,535

Treasury share reserve



(9,587)


(9,587)

Retained deficit



(264,304)


(256,173)







Equity attributable to owners of the parent



20,033


25,411







Total equity



20,033


25,411







 

Circle Holdings plc











Consolidated statement of changes in equity
For the year ended 31 December 2016























Share capital

Share premium

Other reserves

Warrant reserve

Treasury share reserve

Share-based charges reserve

Retained deficit

Total equity



£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'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 year

-

-

-

-

-

-

(11,656)

(11,656)

Transactions with owners:









Share-based charges

-

-

-

-

-

2,693

-

2,693











At 1 January 2016

4,956

236,795

22,182

22,703

(9,587)

4,535

(256,173)

25,411

Loss and total comprehensive loss for the year

-

-

-

-

-

-

(8,131)

(8,131)

Transactions with owners:









Share-based charges

-

-

-

-

-

2,753

-

2,753











At 31 December 2016

4,956

236,795

22,182

22,703

(9,587)

7,288

(264,304)

20,033











 

Circle Holdings plc







Consolidated statement of cash flows
For the year ended 31 December 2016










2016


2015




£'000


£'000







Cash flows from operating activities





Net cash outflow from operating activities


(1,328)


(4,642)

Interest paid


(773)


(793)







Net cash used in operating activities


(2,101)


(5,435)







Cash flows from investing activities





Purchase of computer software


(45)


(51)

Purchase of property, plant and equipment incl. assets held for sale


(5,074)


(1,998)







Net cash used in investing activities


(5,119)


(2,049)







Repayment of finance lease


(3,292)


(2,019)

Issuing of new finance lease


2,920


-

Interest received


25


5







Net cash (outflow) from financing activities


(347)


(2,014)







Net (decrease) in unrestricted cash and cash equivalents


(7,567)


(9,498)

Unrestricted cash and cash equivalents at the beginning of the year


14,998


24,496







Unrestricted cash and cash equivalents at the end of the year


7,431


14,998







Cash and cash equivalents consist of:





Cash at bank and in hand


7,431


14,998







Unrestricted cash at bank and on hand


7,431


14,998







 

Circle Holdings plc

 






 

Notes to the consolidated financial statements
For the year ended 31 December 2016

 






 

1a

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 listed on the Alternative Investment Market of the London Stock Exchange and is incorporated in Jersey, however it is resident in the UK for tax purposes. The registered office is 12 Castle Street, St Helier, Jersey, JE2 3RT.

 

 






 

1b

Significant accounting policies

 






 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to both years presented, unless otherwise stated.

 

Basis of preparation

 






 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and International Financial Reporting Interpretations Committee ('IFRIC') interpretations, Companies (Jersey) Law 1991, on a going concern basis and under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative financial instruments). In their preparation, management must make certain critical accounting estimates and exercise judgement in the process of applying the Group's accounting policies.

 

Items included in the results of each of the Group's subsidiaries are measured using the functional currency, which in all instances is Sterling. The Group's consolidated financial statements and parent company statements are presented in Sterling. All financial information presented has been rounded to the nearest thousand.

 






 

2

Going concern

 






 

The Directors consider it to be appropriate for the financial statements to be prepared on a Going Concern basis.

 






 

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 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. Measures of assets and liabilities for each reportable segment is not reviewed by the Board in the Group's internal reporting. All measures are prepared 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 Circle Reading, Circle Bath and Circle Nottingham. 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.                                                                                                                                                                                                                                                                                                                           











2016

Circle hospital services


Other Circle services


All Other Segments and Unallocated Items


Total Group



£'000


£'000


£'000


£'000










Revenue from external customers

103,995


29,457


-


133,452

Cost of sales

(68,200)


(24,855)


-


(93,055)










Gross Profit

35,795


4,602


-


40,397

Administrative expenses before exceptional items, depreciation and amortisation

(34,734)


(3,059)


(9,008)


(46,801)










EBITDA before exceptional items

1,061


1,543


(9,008)


(6,404)










Depreciation and amortisation charge

(3,004)


(38)


(118)


(3,160)










Operating (loss)/profit before exceptional items

(1,943)


1,505


(9,126)


(9,564)

Exceptional items

-


-


2,181


2,181










Operating (loss)/profit

(1,943)


1,505


(6,945)


(7,383)

Finance income







25

Finance costs







(773)










Loss before taxation







(8,131)










 










2016

Circle hospital services


Other Circle services


All Other Segments and Unallocated Items


Total Group

Other information








- Capital additions

841


107


4,579


5,527





































2015

Circle hospital services


Other Circle services


All Other Segments and Unallocated Items


Total Group



£'000


£'000


£'000


£'000










Revenue from external customers

           98,952


         28,771


                     67


        127,790

Cost of sales

(65,511)


(24,824)


                     -


(90,335)










Gross Profit

33,441


3,947


67


37,455

Administrative expenses before exceptional items, depreciation, amortisation and charge recognised in respect of amounts recoverable on contract

(32,904)


(2,641)


(9,338)


(44,883)










EBITDA before exceptional items

537


1,306


(9,271)


(7,428)










Depreciation, amortisation and charge recognised in respect of amounts recoverable on contract

(2,782)


(16)


(253)


(3,051)










Operating loss before exceptional items

(2,245)


1,290


(9,524)


(10,479)

Exceptional items

-


-


(389)


(389)










Operating (loss)/profit

(2,245)


1,290


(9,913)


(10,868)

Finance income







5

Finance costs







(793)










Loss before taxation







(11,656)




















Circle hospital services


Other Circle services


All Other Segments and Unallocated Items


Total Group

Other information








- Capital additions

1,653


56


1,182


2,891



















 

 






 

4

Revenue




 






 



2016


2015

 



£'000


£'000

 






 

Provision of healthcare services

132,785


127,321

 

Other miscellaneous income

667


469

 






 



133,452


127,790

 

5

Operating loss




 






 

Operating loss is stated after charging / (crediting):

2016


2015

 



£'000


£'000

 






 

Amortisation of intangible assets

215


273

 

Depreciation of property, plant and equipment

2,945


2,779

 

Auditors' remuneration (see below)

289


291

 

Movement in provision for bad debts

(135)


222

 

Operating lease rental

10,984


10,445

 

Exceptional operating items

(2,181)


389

 






 






 






 

Auditors' remuneration payable to PricewaterhouseCoopers LLP:

2016


2015

 


£'000


£'000

 

Fees payable to Company's auditors for the parent Company and consolidated financial statements

98


98

 

Fees payable to the Company's auditors for other services




 

-  The audit of Company's subsidiaries

162


182

 

-  Tax advisory services

29


11

 






 



289


291

 






 






 







6

EBITDA and exceptional items










Exceptional operating items




2016


2015




£'000


£'000







Reversal of impairment of property, plant and equipment

(2,181)


-

Share-based charges

-


552

Other exceptional expense / (income)

-


(163)










(2,181)


389







The reversal of impairment relates to land in Manchester that was purchased in 2011 and impaired by £2,181,000 in 2012. As this land was sold in January 2017 for greater than the original purchase price, this impairment has been reversed, in accordance with IAS36. The reversal has been included as an exceptional item which is where the original impairment was charged.







7

Finance costs











2016


2015



£'000


£'000







Finance lease interest


704


745

Other bank charges


69


48










                 773


             793


















 

8

Finance income

 



2016


2015

 



£'000


£'000

 






 

Bank interest receivable

25

5

 

 

25

5

 






 

9

Loss per share

 






 

Basic loss per ordinary share is calculated by dividing the loss attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year. Diluted loss per ordinary share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume the conversion of all potentially dilutive ordinary shares. Share warrants and options in issue represent the only category of potentially dilutive ordinary shares for the Group.

 






 

The following table sets out the computation for basic and diluted net loss per share for the year:

 






 



2016


2015

 






 

Total comprehensive loss for the year attributable to owners of the parent (£000's)

(8,131)


(11,656)

 






 

Weighted average number of ordinary shares in issue (number)

247,797,188


247,797,188

 






 

Basic and diluted loss per ordinary share (pence)

(3.3)


(4.7)

 






 

There is no difference in the weighted average number of ordinary shares used for basic and diluted net loss per ordinary share as the effect of all potentially dilutive ordinary shares outstanding is anti-dilutive.

 






 

10

Taxation

 






 

i

Analysis of income tax charge  in year




 



2016


2015

 


£'000


£'000

 

Current tax




 

UK corporation tax on profit

-


-

 






 

Deferred tax




 

Originating and reversal of timing differences

-


-

 






 

Income tax charge on loss for the year

-


-

 






 

 






ii           Factors affecting the current tax charge for the year                                





Although the parent company is registered in Jersey, it is resident in the UK for tax purposes and is subject to UK corporation tax. The tax assessed on the Group's loss before taxation per the consolidated income statement differs from the rate of UK corporation tax of 20% (2015: 20.25%).  The differences are explained below:








2016


2015



£'000


£'000






Loss before taxation

(8,131)


(11,656)






Loss before taxation multiplied by the rate of corporation tax in the UK of 20% (2015: 20.25%)

(1,626)


(2,360)






Effects of:




Expenses not deductible for tax purposes

78


440

Temporary differences for which no deferred tax recognised

448


456

Tax losses for which no deferred tax recognised

1,100


1,463

Effect of Jersey tax at 0.0%

-


1






Total income tax charge for the year

-


-
















iii             Factors that may affect future tax charges

 

The following tax rates had been substantively enacted at the balance sheet date and their effects have been included in these financial statements: 20% effective from 1 April 2015 reducing to 19% effective from 1 April 2017 and 17% effective from 1 April 2020.

 






The proposed rate changes may affect future tax charges. In addition the utilisation of any tax losses and temporary differences for which no deferred tax asset has been recognised may also affect future tax charges.

 

iv          Deferred tax



















UK deferred tax has been calculated at the rates of tax at which assets / (liabilities) are expected to reverse based on enacted tax rates. Deferred tax has been calculated at a rate of 17% (2015: 18%). The net deferred tax recognised in the balance sheet is as follows:







2016

2015







£'000

£'000









At 1 January





-

-

Recognised during the year





-

-









At 31 December





-

-

















The deferred tax asset not recognised in the financial statements is as follows:












2016

2016


2015

2015




Tax value

Gross


Tax value

Gross




£'000

£'000


£'000

£'000








Tax losses carried forward


26,999

158,818


27,662

153,677

Deductible temporary differences


2,882

16,953


2,876

15,977












29,881

175,771


30,538

169,654









A deferred tax asset has not been recognised in the financial statements due to the uncertainty over the availability of suitable future taxable profits against which the asset will reverse.





















 















11

Property, plant and equipment

























Cost


Freehold and leasehold land


Assets under construction


Leasehold improvements


Clinical equipment


Furniture, fittings and office equipment


Total




£'000


£'000


£'000


£'000


£'000


£'000















At 1 January 2015


11,842


3,376


3,353


10,362


16,367


45,300

Additions


-


1,128


116


1,231


365


2,840

Disposals


-


-


-


(7)


(2)


(9)















At 1 January 2016


11,842


4,504


3,469


11,586


16,730


48,131

Additions


-


1,244


407


381


2,601


4,633

Disposals


-


-


-


(112)


(2)


(114)

Reclassifications


(7,181)


-


-


-


-


(7,181)















At 31 December 2016


4,661


5,748


3,876


11,855


19,329


45,469





























Accumulated depreciation and impairment


Freehold and leasehold land


Assets under construction


Leasehold improvements


Clinical equipment


Furniture, fittings and office equipment


Total




£'000


£'000


£'000


£'000


£'000


£'000















At 1 January 2015


2,420


3,072


2,509


4,534


15,267


27,802

Depreciation charge for the year


35


-


113


2,189


442


2,779















At 1 January 2016


2,455


3,072


2,622


6,723


15,709


30,581

Depreciation charge for the year


60


-


128


2,119


638


2,945

Reversal of impairment charge


(2,181)


-


-


-


-


(2,181)

Disposals


-


-


-


(113)


-


(113)















At 31 December 2016


334


3,072


2,750


8,729


16,347


31,232















Net book amount



























At 31 December 2016


4,327


2,676


1,126


3,126


2,982


14,237















At 31 December 2015


9,387


1,432


847


4,863


1,021


17,550















At 1 January 2015


9,422


304


844


5,828


1,100


17,498














The depreciation charge for the year is included in the income statement within administrative expenses before exceptional items.

Freehold and leasehold land were valued at 31 December 2012 by a third party valuer.  Management believe these to be appropriate on the basis that there have not been decreases in land values in the areas since.

The land impairment charge of £2,181,000 has been reversed. This impairment related to land in Manchester that was sold in January 2017.








 

Assets held under finance leases have the following net book amounts:

 








 




2016


2015

 




£'000


£'000

 








 

Leasehold land



4,327


4,237

 

Clinical equipment



2,278


3,994

 

Furniture, fittings and office equipment



163


395

 








 





6,768


8,626

 








 

The additions during the year comprise lease agreements with Shawbrook Bank Limited and Close Leasing Limited to finance the purchase of clinical equipment at the Circle Reading and Circle Nottingham hospitals.

 








 

Freehold and leasehold land can be split into the following net book amounts:

 








 




2016


2015

 




£'000


£'000

 








 

Freehold



-


5,150

 

Leasehold



4,327


4,237

 








 





4,327


9,387

 








 








 















 

12

Share capital, share premium and other reserves









 















 

Authorised










2016


2015

 












£'000


£'000

 















 

Ordinary shares of £0.02 each




6,500


6,500

 

Convertible shares (18 months) of £0.02 each




250


250

 

Convertible shares (36 months) of £0.02 each




250


250

 












7,000


7,000

 















 















 











Number


Number

 

Ordinary shares of £0.02 each




325,000,000


325,000,000

 

Convertible shares (18 months) of £0.02 each




12,500,000


12,500,000

 

Convertible shares (36 months) of £0.02 each




12,500,000


12,500,000

 















 











350,000,000


350,000,000

 















 

Allotted and fully paid up













 















 



Par value

Shares


Share capital


Share premium


Treasury shares


Other
reserves


Total

 

Ordinary shares:


(number)


£'000


£'000


£'000


£'000


£'000

 















 

At 1 January 2014


130,785,122


2,616


193,145


-


22,182


217,943

 

Fundraise - 9 January 2014 (net of costs)

£0.02

55,000,000


1,100


25,120


-


-


26,220

 

Shares issued - 16 June 2014 2014 (net of costs)

£0.02

62,769


1


-


-


-


1

 

Project Reset - ordinary shares issued - 8 December 2014 (net of costs)

£0.02

38,855,367


777


7,560


(9,587)


-


(1,250)

 

Project Reset - convertible shares issued - 8 December 2014 (net of costs)

£0.02

23,093,930


462


10,970


-


-


11,432

 















 

At 31 December 2014


247,797,188


4,956


236,795


(9,587)


22,182


254,346

 















 

At 31 December 2015


247,797,188


4,956


236,795


(9,587)


22,182


254,346

 















 

At 31 December 2016


247,797,188


4,956


236,795


(9,587)


22,182


254,346

 















 











 

13

Warrants

 











 

The Group issues warrants which give the holders the right to purchase shares for a specific price at a future date. The warrants are treated either as equity instruments and recorded in the warrant reserve, or as financial liabilities and recorded in liabilities, depending on certain criteria, as outlined in the Group's accounting policies. There are no remaining warrants issued as financial liabilities.

 











 

Warrants treated as equity instruments







 











 

Movements in the warrant reserve during the year are as follows:





 











 









2016

2015

 









£'000

£'000

 











 

At 1 January and at 31 December





22,703

22,703

 











 

The following table details all share warrants issued by the Group which are recognised in equity, none of which have been exercised to date:

 




Exercise price

Original warrants

Modified

Revised warrants




 




Warrant reserve:

 



At 1 January 2016

Share-based charges

At 31 December 2016

 

Beneficiary


£

(number)

(number)

(number)

£'000

£'000

£'000

 











 

Warrants issued in 2008:









 

-

Balderton Capital

b

£1.52

523,460

-

523,460

4,111

-

4,111

 

-

Lansdowne Partners

b

£1.52

99,630

-

99,630

783

-

783

 

-

JCAM


£10.31

238,930

-

238,930

1,616

-

1,616

 











 

Warrants issued in 2009:









 

-

Balderton Capital

b

£1.52

172,355

-

172,355

675

-

675

 

-

Lansdowne Partners

b

£1.52

172,355

-

172,355

479

-

479

 

-

BlueCrest Capital Management

b

£1.52

75,510

-

75,510

296

-

296

 











 

Warrants modified in 2011:








 

-

Health Trust (Jersey)

a, b

£1.52

-

2,340,765

2,340,765

14,743

-

14,743

 











 





1,282,240

2,340,765

3,623,005

22,703

-

22,703

 











 

a

The 2,340,765 share warrants vested over a 24 month period from May 2011 until May 2013 and were exercisable from the date they vest (1/24 every month from May 2011) and do not have any expiry date.  None of the warrants were exercised during 2016 (2015: nil).

 











 

b

In May 2011 after the Initial Public Offering ('IPO') the existing share warrants, which consisted of warrants issued in 2008 and 2009 to Health Trust (Jersey) and Health Trust (Jersey) option pool were modified adjusting both the exercise price and vesting conditions. Under the terms of the modification the existing share warrants were replaced with warrants issued exclusively to Health Trust (Jersey) and the exercise price was set to the IPO price of £1.52 per new ordinary share issued. The modified share warrants do not have any expiry date or any conditions attached. A fair value assessment was completed based on the value of the existing warrants prior to IPO and the fair value of the modified warrants determined using Black-Scholes on a diluted pricing basis. The incremental fair value of the modification was recognised on a straight-line basis over a 24 month period from May 2011 until May 2013, in line with the revised vesting timetable (1/24 every month from May 2011).

 











 








 

14

Net cash outflow from operating activities






 





2016


2015

 





£'000


£'000

 








 

Loss before taxation


(8,131)


(11,656)

 

Finance costs



773


793

 

Finance income



(25)


(5)

 

Amortisation of intangible assets


215


273

 

Depreciation of property, plant and equipment


2,945


2,779

 

Loss on sale of tangible fixed assets


-


9

 

Reversal of impairment of property, plant and equipment


(2,181)


-

 

Share-based charges


2,753


2,693

 

Movements in working capital:






 

-

(Increase)/decrease in inventories



226


(70)

 

-

(Increase)/decrease  in trade and other receivables



367


1,990

 

-

Increase/(decrease) in trade and other payables



1,780


(1,448)

 

-

Increase/(decrease) in provisions



(50)


-

 








 

Net cash outflow from operating activities



(1,328)


(4,642)

 








 

15

Reconciliation and analysis of net debt






 





2016


2015

 





£'000


£'000

 








 

Increase / (Decrease) in unrestricted cash in the year



(7,567)


(9,498)

 

(Decrease) in restricted cash in the year



-


-

 

Issuing of new finance lease



(2,920)


-

 

Repayment of finance lease



3,292


2,019

 







 

Movement in net debt from cash flow



(7,195)


(7,479)

 







 

Other non-cash movements



-


(842)

 







 

Movement in net debt



(7,195)


(8,321)

 







 

Net debt at 1 January



5,384


13,705

 







 

Net debt at 31 December


(1,811)


5,384

 








 








 












 

2016

At 1 January


             Cash flow


Reclassifi-cations


Other non-cash changes


At 31 December 2016

 



£'000


£'000


£'000


£'000


£'000

 












 

Liquid resources










 

Unrestricted cash

14,998


(7,567)


-


-


7,431

 












 

Debt due within one year










 

Finance leases

(2,332)


372


(464)


-


(2,424)

 












 

Debt due after one year










 

Finance leases

(7,282)


-


464


-


(6,818)

 












 

Net debt

5,384


(7,195)


-


-


(1,811)

 












 

2015

At 1 January


             Cash flow


Reclassifi-cations


Other non-cash changes


At 31 December 2015

 



£'000


£'000


£'000


£'000


£'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

 



 

16

Events after the balance sheet date







 












 

In January 2017, the sale of land held by Health Properties (South Manchester) Limited was completed for £9.1m plus VAT. This land had a carrying value of £7.6m at 31 December 2016.

 



 

 


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Full Year 2016 Audited Results - RNS