Full Year 2016 Audited Results

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, ChairmanPaolo 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

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.

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.