Half Yearly Report

Circle Holdings plc

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

Interim results

For the six months ended 30 June 2013

London, 10 September 2013: Circle Holdings plc (LSE: CIRC), the employee co-owned hospital group, today announces its interim results for the six months ended 30 June 2013.

Financial Highlights

• Revenue under management1 up 23.9% to £97.5m (2012: £78.7m)

• Group revenue up 27.6% to £43.9m (2012: £34.4m)

• EBITDAR2 loss reduced by 52.4% to a loss of £1.0m (2012: loss of £2.1m)

• EBITDA3 (before exceptional items) on a like for like basis4 improved by 31.7% from a loss of £6.3m to a loss of £4.3m

• Result for the financial period improved by 16.4% from a loss of £11.6m to a loss of £9.7m

• Basic and diluted loss per share of 4.7p (2012: 14.9p loss per share)

• Revenue growth in Nottingham NHS Treatment Centre of 11.5% to £29.2m (2012: £26.2m)

• Average monthly revenue in CircleReading for 2013 up 67.9% compared with the first five months of trading in 2012

• Hinchingbrooke Hospital is trading to plan and continues on current trajectory to break even by March 2014

Operational Highlights

• Patient volumes5 excluding Hinchingbrooke up 42.3% to 93,375 (2012: 65,627).

• Patient volumes5 on a like for like basis4 excluding Hinchingbrooke up 6.6% to 69,975 (2012: 65,627).

• Outstanding quality metrics with continuing high rates of patient recommendations at 99.2% across Circle's Independent Hospitals and its Nottingham NHS Treatment Centre.

• Hinchingbrooke Hospital ranked top acute trust in England by patients in the 'Friends and Family' survey, published in July 2013. Over the whole of 2012, Hinchingbrooke's Accident and Emergency was ranked the fourth best in the country for the critical four-hour waiting time target.

• Successfully transitioned to the new five-year contract to provide services at the Nottingham NHS Treatment Centre in August 2013.

• Recently announced a landmark partnership with Capita, the leading provider of business support services in the UK, to bid jointly for upcoming NHS contracts, bringing together the best of the private and public sector, and combining respective core strengths in clinical experience and business transformation to improve care for patients.

• Selected as the preferred bidder for an innovative five-year integrated musculoskeletal ('MSK') Service contract in Bedfordshire.

• Partnering with Capita and Cambridgeshire Community Services for a five-year circa £800m contract to provide integrated services for adults and elderly care across Cambridgeshire and Peterborough.

• Strategic discussions on-going for third-party financing of CircleManchester and further independent hospital developments.

1 includes revenue generated at Hinchingbrooke which is managed by the Group, but not included in the Group's consolidated revenue

2 defined as Earnings Before Interest, Tax, Depreciation, Amortisation and Rent

3 defined as Earnings Before Interest, Tax, Depreciation, and Amortisation

4 excludes results from CircleReading which commenced operations in August 2012

5 includes day case, inpatient and outpatient appointments

Michael Kirkwood, CMG, Chairman of Circle Holdings, commented:

'The Board is pleased to report that the first half of 2013 has witnessed significant achievements across all Circle sites, with a steady flow of encouraging new opportunities emerging.

"Progress in revenue streams at CircleBath and CircleReading, the commencement of an innovative new contract in Nottingham, and being chosen as preferred bidder for delivering MSK services in Bedfordshire all support our view that there are growing opportunities to expand going forward.

"It is clear that Circle's model of clinical leadership, innovation and commitment to excellence are well understood by the private and public health sectors and we are confident that this will continue in the future."

Steve Melton, Chief Executive Officer of Circle Holdings, commented:

"We have cemented our clear track record of transforming healthcare delivery in the last six months.

"Revenues continue to build across all our key facilities, with year-on-year gains in Bath and Reading, despite a challenging market environment. Closing a landmark deal for the construction of CircleManchester will allow us to continue this progress.

"Having made significant improvements to patient experience and clinical quality in our Hinchingbrooke Hospital, we are now making steady progress in tackling its historic deficit and putting the hospital into financial balance for the first time in years.

"We have successfully transitioned services in Nottingham to the new five-year contract. Our innovative contract is based on developing services for local patients through the introduction of an integrated care approach.

"We have also been chosen as preferred bidder for the delivery of a landmark musculoskeletal contract in Bedfordshire, launched a new partnership with Capita, the country's leading supplier of business transformation services, and we are bidding for the contract to provide adult and elderly community services in Cambridgeshire and Peterborough.

"We have always known we need to prove our capability before winning contracts and building more hospitals, and that it would therefore take time before revenue opportunities developed sufficiently to support infrastructure costs.

"Although we continue to invest in our people and facilities, with resulting cash outflows, we have continued to demonstrate the success of our model over the last six months and we believe that the opportunities that lie ahead are extremely encouraging."

For further information, please contact:

Circle Holdings plc Tel: +44 207 034 1278

Steve Melton, Chief Executive Officer

Paolo Pieri, Chief Financial Officer

Tom Muir, Head of Communications

Numis Securities Limited Tel: +44 207 260 1000

Michael Meade, Nominated Adviser

Alex Ham, Corporate Broking

Chief Executive Officer's operating overview

Revenues continue to build across all our key facilities, with year-on-year gains in Bath and Reading, despite challenging market environment. Closing a landmark deal for the construction of Manchester will allow us to continue this progress. Having made significant improvements to patient experience and clinical quality in our Hinchingbrooke hospital, we are now making steady progress in tackling its historic deficit and putting the hospital into financial balance for the first time in years. We have successfully transitioned services in Nottingham to the new five-year contract. This innovative contract is based on developing services for local patients through the introduction of an integrated care approach. We have also been chosen as preferred bidder for the delivery of a landmark musculoskeletal contract in Bedfordshire, launched a new partnership with Capita, the country's leading supplier of business transformation services, and we are bidding on the largest private sector NHS contract in history to provide frail elderly community services in Cambridgeshire and Peterborough.

The Group continues to trend towards a profitable business as each asset matures and proves its respective business model. We have proven concept in our private hospital builds and the expertise gained through this learning curve had been drawn on as we bid for further contracts. As we increase revenues this will enable financial balance to be achieved, allowing Circle to attract more capital for the next phase of growth.

NHS Pipeline

With the latest figures showing that there are more patients on NHS waiting lists than at any time in the last five years and the Department of Health forecasting a £30 billion funding gap by 2020, our proven track record in partnering with the NHS to improve quality of care and speed up efficiency has never been more important. In the last few months, the Bruce Keogh review has helped usher in a new era of transparency and accountability by exposing the persistent failures in quality that have existed in some parts of our NHS for too long. This, coupled with the growing number of Trusts in financial distress, means there is a clear need for additional support to the NHS to deliver substantial performance improvement and to ensure that the tragic cases which resulted from these failures are never repeated. Our well-documented ability to transform services in clinical and financial difficulties will continue to strengthen our unique partnership with the NHS.

Preferred bidder for MSK

Our model of clinical leadership and integrated care has again been endorsed following Circle's selection as preferred bidder for the landmark musculoskeletal integrated service in Bedfordshire. The innovative five-year contract - which includes a partnership with Pennine MSK, the developer of the original integrated model of musculoskeletal services in Oldham, local clinicians and leading charities - is the first of its kind in the country and reflects confidence in our ability to deliver transformational change and improved care for patients. We expect to work on detailed commercial terms with commissioners over the coming months with a view to commencing the contract early next year.

Capita partnership

We have recently embarked upon a unique partnership with Capita. This brings together Circle's clinical and healthcare transformation expertise with Capita's strengths in business process management and professional support services to bid for future health contracts and deliver best-in-class clinical solutions. Like Circle, Capita understands the value of innovation and our proven track record of delivery makes this a strategic partnership with a strong cultural fit and a great platform for future growth.

Cambridgeshire Community Services

In our first joint bid with Capita we will also be partnering with Cambridgeshire Community Services NHS Trust for the contract to provide integrated care services for adults and the elderly across Cambridgeshire and Peterborough. This bid brings together the best of the public and private sectors in an innovative way to support the NHS in meeting the growing financial challenges of the future whilst improving care for patients.

Hinchingbrooke Health Care NHS Trust

It has been another impressive six months at Hinchingbrooke Hospital. Since we first took over the franchise 18 months ago, the Trust has met all cancer targets for the first time in three years, achieved a 50 per cent reduction in Serious Incidents, and is now fully CQC-compliant for the first time since inspections commenced. In the last six months, we have been ranked by patients as the top acute Trust in England for the first time. Over the whole of 2012 Hinchingbrooke's A&E was ranked the 4th best in the country by the critical four hour waiting time target. We have also announced the historic appointment of Dr Hisham Abdel-Rahman as the first joint Chief Executive and Clinical Chairman of Hinchingbrooke Hospital.

Nottingham Treatment Centre

Services in the Nottingham Treatment Centre successfully transitioned to the new five-year contract at the end of July. This innovative contract is based on developing services for local patients through the introduction of an integrated care approach. Over the past five years, we delivered the highest quality of patient care in Nottingham whilst radically improving productivity. We expect profitability under the new contract to rise gradually as we reconfigure services and build inpatient facilities in the centre.

Independent Hospitals

CircleReading has now celebrated its first birthday, since opening on time and under budget, on 1 August 2012. Since then, 3,500 private and NHS procedures have been carried out at the state-of-the-art facility. Private revenues have largely been delivered to plan, with NHS revenues progressing gradually in the early part of the year. We expect NHS revenues to develop in the second half of the year.

In CircleBath the focus of revenue growth plans has seen a slower upturn than expected in private revenues and a shift towards a greater proportion of NHS activity than previously anticipated. Good progress has been made on underlying margin initiatives over the past few months with the related margin benefits likely to be realised in the second half of the year.

We are currently in advanced discussion with financiers on the financing of CircleManchester and our independent pipeline. We believe that the Competition Commission's recent proposed remedies to protect new entrants should be a positive input to these financing discussions.

Partnership Structure

The Group is currently evaluating options to simplify its ownership structure by consolidating Circle Partnership's interest into the Group. The advantages of aligned incentives, simpler governance and greater transparency should benefit all shareholders. The Group expects to report on its findings to shareholders in the near term.

Outlook Statements

Given the year-to-date trading performance at Nottingham and Hinchingbrooke, we remain positive about achieving forecast results. It is encouraging that in the first month of our new Nottingham contract volumes have remained consistent with last year. On the independent side we expect revenues and margins to improve further in H2 2013 with a particular focus on NHS revenue growth.

We have been heartened by the vigour with which many of the newly formed CCG's have grasped challenging financial and clinical issues in their regions. This has led to a number of them already tendering for better integrated services that focus on quality as much as value. Currently there are approximately £5bn of contracts being tendered by the new CCGs. We expect the volume of contracts to rise significantly over the next 18 months as more CCGs acknowledge the issues affecting their local health economies.

We believe our clinically led model and previous track record in quality and financial turnarounds will put us in a uniquely strong position to bid for many of these new tenders.

At a policy level, we believe that the coalition government will continue to look to the private sector for options in reforming many of the existing failing hospitals and specifically those unlikely to achieve Foundation Trust status.

The capital requirement to undertake these significant growth opportunities is something we are constantly evaluating.

Steve Melton

Chief Executive Officer

Financial review

Introduction

The period has been one of continued growth and progress for the Group in pursuing its objectives. The Group has delivered results with better than projected consolidated revenues. Revenue under management on continuing facilities increased by 23.9% to £97.5m, primarily as a result of the commencement of operations in CircleReading in August 2012 and continuing improvements in both CircleBath, now in its third full financial year of trading, and the Nottingham NHS Treatment Centre ("CircleNottingham"). Steady advancements have been made at Hinchingbrooke Hospital which continues on its path to break-even.

Group EBITDAR (Earnings Before Interest, Tax, Depreciation, Amortisation and Rent) loss has reduced by 52.4% to a loss of £1.0m and we expect this to be positive in the second half of the year. On a like-for-like basis (excluding results from CircleReading, which commenced operations in August 2012) Group EBITDAR loss has reduced 95.2% to a loss of £0.1m, primarily driven by improved operating results at CircleBath and Nottingham Treatment Centre, and further cost efficiencies at Head Office.

The Group generated an operating loss before exceptional items of £10.0m, an increase of 26.6% on the

previous year's result. The increase in the Group's admin expenses was mainly caused by rental and general overhead costs in CircleReading, still in its early stages of operations. On a like-for-like basis, before exceptional items, operating loss stands at £6.0m and represents a 24.1% improvement from the first six months of 2012.

Loss before tax has improved 17.9% to £9.6m and the loss per share now stands at 4.7 pence, improved from a loss per share in 2012 of 14.9 pence.

These results, coupled with promising signs from trading in the second half of 2013 to date, place the Group on a solid trajectory to continue to deliver on its full year expectations.

A number of significant developments will impact in the second half of the year. In late July 2013, CircleNottingham commenced the new contract to provide services at the Nottingham Treatment Centre. As a consequence, the £41.0m PFI operating financial asset and the corresponding loan with Barclays will disappear from the Group's balance sheet. The end of the old contract also saw the release of £1.3m cash previously held in escrow for the GE lease. The Group completed the migration of specialist surgical services from its CircleWindsor clinic to its CircleReading facility in March 2013. All outstanding liabilities and loan notes in respect of the clinic were settled in July 2013. Circle will also look to exit the AIB loan in respect of Health Properties Edinburgh before the end of the year, with the view to handing back the land to AIB.

Highlights

* includes revenue generated at Hinchingbrooke which is managed by the Group, but not included in the Group's consolidated revenue

** exceptional items in the six months ended 30 June 2013 of £0.5m (six months ended 30 June 2012: £2.0m) consist largely of share-based charges in respect of warrants issued and restructuring costs offset in part with a gain on the release of the Ashford onerous lease provision.

Patient numbers* (excluding Hinchingbrooke)

* includes day case, inpatient and outpatient appointments

Review of performance

CircleBath revenues have increased by 5.3% to £8.0m and patient volumes by 5.6% to 22,609, with the majority of revenues coming from NHS work. This continues to be the main focus of Bath operations going forward. Overall day case and inpatient volumes have risen by 4.2% compared with the first six months of 2012, while outpatient volumes have risen by 5.8%. CircleReading has seen month-on-month revenue growth since opening in August 2012, with revenue for the first six months of 2013 at £6.5m and patient volumes of 23,400. While the majority of revenue is from privately-funded treatment work, the NHS revenues continue to grow and are expected to contribute significantly in achieving the full year revenue.

Circle Nottingham's Treatment Centre increased revenue by 11.5% to £29.2m, accelerated by a 6.8% increase in patient numbers, and improved its EBITDA before exceptional items from £2.5m to £4.0m for the six months ended 30 June 2013. In late July 2013, Circle entered into the new contract for five years to run the Treatment Centre. Early signs show that the contract continues to be profitable whilst maintaining the exceptionally high quality of patient feedback. Overall day case and inpatient volumes have risen by 7.6% compared with the first six months of 2012, while outpatient volumes have risen by 49.9%.

For accounting purposes, the Group is not deemed to control Hinchingbrooke Hospital and therefore does not consolidate the net assets and results of the Trust. Until such time as surpluses are generated by Hinchingbrooke Hospital, the Group will not recognise any income associated with the running of the hospital. Meanwhile, revenue generated by Hinchingbrooke Hospital will be presented as proforma 'revenue under management' which is a non-statutory term.

During 2013, Hinchingbrooke revenue has totalled £53.6m, supported by increased outpatient and Accident

& Emergency attendances, and admissions. During this time, the Group has focused on quality and safety as a priority, with the result that Hinchingbrooke Hospital has been ranked the top acute Trust in England by patients. Furthermore, Hinchingbrooke Hospital is now trading to plan, with no foreseeable need for additional working capital. For the first four months of Hinchingbrooke Hospital's 2013-2014 financial year income has risen 6.2% to £35.8m compared with the first four months of 2012-2013. For the same period, the deficit has reduced by 68.1% to £1.0m, with the plan to break even by the end of the Hinchingbrooke financial year.

Financing

The Group continues to explore further financing for its real estate development and has received an offer to develop CircleManchester and potentially further developments. The details of the offer are currently under discussion.

The Group remains positioned to bid for further NHS franchise management contracts. Circle is encouraged by the emergence of these and other NHS opportunities, including individual service lines and the delivery of integrated hospital and community care. The current 100% win ratio for bids provides an exciting prospect for the future and the recent partnership with Capita strengthens Circle's ability further to secure a sizeable share of the record £5bn NHS contracts that are out to tender, including seven that are worth more than £100m in value.

As we noted at the time of the May 2012 fundraise, we were focused on proving the concept in each of the areas we operate. We believe we have made significant progress in this aim. The vindication by the Competition Commission in opening up the private model further and the appetite of CCG's and government to find proven innovative solutions are very positive signs for future growth. Such growth opportunities are, however, likely to require a strong balance sheet and we will consider the appropriate options and speed of growth over the coming months.

Paolo Pieri

Chief Financial Officer

Consolidated income statement

For the six months ended 30 June 2013

Consolidated balance sheet

As at 30 June 2013

Consolidated statement of changes in equity

(unaudited at 30 June 2013 and 2012)

For the six months ended 30 June 2013

Consolidated statement of cash flows

For the six months ended 30 June 2013

Notes to the consolidated interim financial information

For the year ended 30 June 2013

1. General information

Circle Holdings plc (the 'Company') and its subsidiaries and joint venture (together the 'Group') provide healthcare services in the UK.

The Company is a public limited company and is incorporated in Jersey, however is 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 2013 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 2012, 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 and therefore it is not fully compliant with IFRS.

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 2012 were approved by the Board of Directors on 17 April 2013. The report of the auditors on those accounts was unqualified and contained an emphasis of matter paragraph or a statement under Section 498 of the Companies Act 2006 in relation to Going Concern. The Interim report and financial information were approved by the Board of Directors on 04 September 2013.

Going concern

The directors have prepared cash flow forecasts for a period in excess of 12 months from the date of signing the interim financial statements for the period ended 30 June 2013.

In considering the ability of the Group to meet its obligations as they fall due, the directors have considered the following matters: the expected trading and cash requirements of the group, the level of overheads likely to accrue, repayment of creditors and the cash outflows associated with the loans outstanding. These forecasts have been prepared to include the following assumptions:

• CircleBath and CircleReading revenue and margin growth assumptions;

• Operation of the Nottingham NHS Treatment Centre contract on revised terms;

• Hinchingbrooke requires no further cash than forecast and continues on their current trajectory to break even; and

• Continued investment in new opportunities within NHS and Independent sectors.

While the directors are confident that the Group can continue to meet its working capital requirements over the next 12 months, at the date of signing these financial statements any additional finance that might be required has not yet been secured. In the event that one or more of the above events fails to occur as expected, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. These circumstances indicate the existence of material uncertainties which may cast significant doubt about the Group's ability to continue as a going concern.

The directors have considered a range of scenarios in respect of each of these variables. Some of these scenarios could indicate that the directors will have to raise some additional finance within the next 12 months, although the level of funding required is highly dependent on the assumptions within each scenario. As such, the directors consider it appropriate for these financial statements to be prepared on a going concern basis. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.

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 2012. 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 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 2012. 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.

The following new standards are effective for accounting periods beginning 1 January 2013 but have not had a material impact on the results or financial position of the Group:

· Amendment to IFRS 13, 'Fair value measurement' - The standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs, excluding the fair value measurement of share-based charges.

IFRS standards in issue, not yet effective as at 30 June 2013, but which will apply in the future are as follows:

· IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument.

· IFRS 11, 'Joint arrangements' and IAS 28 (revised 2011) 'Associates and joint ventures' - These standards provide for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (applies to annual periods beginning on or after 1 January 2014, subject to endorsement by the EU).

· IFRS 12, 'Disclosures of interests in other entities' - The standard requires entities to disclose information that helps financial statement readers to evaluate the nature, risks and financial effects associated with the entity's interests in subsidiaries, associates, joint arrangements and other off balance sheet vehicles (applies to annual periods beginning on or after 1 January 2014, subject to endorsement by the EU).

The above amendments are not expected to materially impact the Group's financial statements in future periods.

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 2012.

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. Geographic factors are not considered as all of the Group's operations take place within the United Kingdom.

Overall, the directors consider that the Group is principally a provider of medical services, that treats privately insured, self-pay and NHS patients. As the Group grows, a significant proportion of the independent hospitals' revenue is likely to derive from NHS patients. Consequently, in the future, the Board may manage the business as a single segment, as the distinction between the type of patient and where they are treated becomes less marked. This would lead to an equivalent change in the disclosures below.

4. EBITDA and exceptional items

5. Finance income

6. Finance costs

(i) James Caird Asset Management loan facility of £14,131,000 (2011: 13,300,000) repaid on 20 June 2012

During the period ended 30 June 2013, £nil of interest was capitalised (six months to 30 June 2012: £nil, year to

31 December 2012: £nil).

7. Loss per share

Basic loss per ordinary share is calculated by dividing the loss attributable to equity holders 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 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 2013 and 2012 and the year ending 31 December 2012:

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.

8. Net cash outflow from operating activities