Interim report

Circle Holdings plc

Interim report

For the six months ended 30 June 2011

London, 20 September 2011: Circle Holdings plc (the "Company"), the vehicle that enables financial institutions to invest in Circle, the healthcare enterprise co-owned by the largest partnership of doctors, nurses and healthcare professionals in the UK (the "Circle Partnership"), today announces its interim report for the six months ended 30 June 2011.

Financial Highlights

·; Revenue on existing facilities* up 28.1% to £40,743,000 (2010: £31,796,000)

·; Total revenues up 9.0 % to £40,743,000 (2010: £37,379,000)

·; Private patient revenue increased by 193.1% to £6,108,000 (2010: £2,084,000)

·; EBITDA loss before exceptional items reduced to a loss of £6,800,000 (2010: loss of £9,177,000)

·; Basic and diluted loss per share of £0.84 (2010: £1.43 loss per share)

·; Compelling operating model attracted £53,077,000 new investment during the period, including an AIM listing in June 2011

Operational Highlights

·; Patient procedures on existing facilities* up 35.9% to 80,732

·; Increasing revenues at flagship hospital CircleBath with expansion in specialties and attraction of consultants from beyond catchment area

·; First mover advantage in NHS hospital management as preferred bidder for first contract (Hinchingbrooke) and selected partner for Foundation Trust shortlisted to manage second contract (Epsom)

·; Business strategy progressing well:

o CircleReading on track for opening in the second half of 2012, with an anticipated base build cost per square metre markedly lower than CircleBath

o Land acquired for development of CircleManchester in the UK's second largest healthcare market

*existing facilities defined as those existing as at 30 June 2011, which includes Circle's Burton NHS Treatment Centre but excludes Circle's Bradford NHS Treatment Centre

Michael Kirkwood, Chairman of Circle Holdings, commented:

"I was delighted and honoured to become Chairman of Circle Holdings plc upon its listing in June. As with our principal investors, the management team, the partnership and the non-executive directors, I am compelled by Circle Holding's operating model and the opportunity this company has to contribute to significant improvements for patients, doctors, staff and backers of health services in the UK. We are fortunate to have committed institutional backers who clearly see the potential of the Circle model. In our founders, Ali Parsa and Massoud Fouladi, we are working with visionaries who are supported by a very able executive team. I am also delighted to be working with a very strong independent Board in Lorraine Baldry, Peter Cornell and Andrew Shilston who, along with shareholder representatives Tim Bunting and Jamie Wood (Julian Wolfson as Alternate) will provide insightful governance and strategic direction. I look forward to working with the Board, the executive team, our shareholders and the Circle Partnership to deliver the potential of this enterprise."

Ali Parsa, Chief Executive Officer of Circle Holdings, commented:

"Circle Holdings is the capital investment vehicle that backs the largest partnership of clinicians in the UK with the aim of reinventing the delivery of healthcare for their patients. When our investors decided to float on a public market, some observers questioned whether it was possible to merge the social mission of our partnership with the financial requirement of public investors. For us this was never an issue, since we believe that our social mission can only be maintained if we are a business that delivers sustainable results; there are two words in "social enterprise" and to us a "social mission" is inseparable from a "successful enterprise", which adds even more weight to the founding principles of our Credo; to be above all the agents of our patients and to continue re-engineering the services they need, proven by the fact that the more we do this, the more our patients reward us with their loyalty and recommendations.

"But re-engineering healthcare is not an overnight event. Long-term, sustainable change, like any innovative process, can often mean taking two steps forward and one step back, making mistakes along the way and then fixing them which is exactly what we have been doing, slowly, relentlessly and purposefully reinventing everything we do and consolidating what we learn in the process to create something worth having. This has been a good half year for Circle, not just because of the milestones we achieved, but because the steps we accomplished were part of the long march to create a long-term sustainable, world beating social enterprise in healthcare. I could not therefore be more grateful for the support of our extraordinary investors, the wisdom of our board members and the hard work and entrepreneurial spirit of our partnership."

For further information, please contact:

Chief Executive Officer's overview

Introduction

I am pleased to present the Group's first interim report as a publicly listed company. On 17 June 2011 the Group was successfully listed on the Alternative Investment Market ('AIM') of the London Stock Exchange and raised £25,580,000, bringing the total amount raised so far this year to £53,077,000 before costs. All this was achieved at a time of intense political risk and stock market volatility, which is testament to the strength of the Group's operating model. The listing forms part of the overall fundraising strategy and demonstrates the Group's increasing maturity and success.

Background

Circle, the healthcare enterprise co-owned by the largest partnership of doctors, nurses and healthcare professionals in the UK, was established in 2004 with the aim of empowering clinicians and healthcare professionals to redefine healthcare delivery in the UK, by giving them the ownership and control to deliver services as they judge best for their patients. Within the Circle Partnership (the employee share ownership vehicle), more than 2,500 consultants and Circle employees are empowered to achieve the greatest levels of patient care and efficiency through active participation in managing Circle's operations.

Investing

The additional funding raised from the current shareholders and AIM listing outlined above means the Group now has net assets of £35,462,000 as at 30 June 2011 (previously net liabilities of £5,223,000 at 31 December 2010) positioning the Group well to pursue further expansion opportunities.

The Group's new build strategy is progressing, with the timely construction of the second hospital, CircleReading, marked by a recent topping out ceremony. The build continues on plan with a budgeted cost base per square metre less than CircleBath for the same quality and product, demonstrating that we are gaining competitive advantage. In May 2011, the Group entered into an agreement to buy a 5.3 acre site in Didsbury, Manchester, for Circle's third new-build hospital, in the second largest private healthcare market in the country. This was partially financed by a loan from Vinci, secured against the land.

The Group maintained its first mover advantage in NHS provision as preferred bidder for the Hinchingbrooke franchise contract. While completion of the Hinchingbrooke contract has been delayed, we continue to expect the contract to be signed shortly. In addition, following a competitive selection process, leading Foundation Trust, the Royal Surrey County Hospital, which is one of two NHS organisations shortlisted to manage the Epsom NHS Hospital in Surrey, has chosen Circle as their partner in their bid to manage the hospital.

Results

* The number of procedures in the six months ended 30 June 2010 exclude Circle's Bradford NHS Treatment Centre, to enable a comparison of the Group's existing facilities (defined as the facilities that exist at 30 June 2011).

*Exceptional items in the six months ended 30 June 2011 of £1,353,000 (six months ended 30 June 2010: £11,854,000) consist largely of share-based charges in respect of warrants issued, and AIM listing costs. Exceptional finance costs of £10,709,000 (six months ended 30 June 2010: £1,046,000) were incurred primarily due to fair value adjustments of warrant instruments and interest rate swaps in the period.

The period has been one of continued progress for the Group, with revenues increasing by 28.1% in continuing facilities to £40,743,000. In total, revenues increased year on year by 9.0% despite the loss of the contract to run the Bradford NHS Treatment Centre in June 2010, when the five year contract came to an end following a five month extension. Total revenues are up on last year primarily as a result of the increasing performance of CircleBath, proving the concept of clinician engagement in new-build hospitals, and the growth in Circle's Nottingham NHS Treatment Centre, one of the largest outpatient and day surgery centres in Europe.

CircleBath, which opened in March 2010, continued to show impressive growth with the hospital attracting acclaim from its GP and patient customers, achieving 97.3% patient satisfaction ratings in the six months ended 30 June 2011. Circle's Nottingham NHS Treatment Centre is in its third full year of trading and continues to show significant growth, with the number of patients treated increasing by 17.4% to 43,376 and revenue increasing by 17.9% to £25,335,000. Group EBITDA before exceptional items improved by 25.9% from a loss of £9,177,000 to a loss of £6,800,000.

Current trading

CircleBath continues to gain market share in core specialities, specifically demonstrated by the growth in hip and knee replacement procedures. However, operating activity in July and August has shown slower than anticipated increases in consultant private revenues, in parallel with a general slowdown in private patient revenues within the overall market. There are signs this lag in growth of additional private consultant revenue may continue for the short to medium term, partly offset by increasing growth and mix of NHS treatments. Circle's Nottingham NHS Treatment Centre is continuing to perform strongly although NHS spending constraints may cause commissioners to attempt to delay patient flows. Overall, operating results for the first six months are in line with plan and the business continues to ensure central costs are aligned to business growth.

Outlook

I am encouraged by the Group's results for the first six months against a difficult economic background, its continued focus on its future expansion plans and the recent preliminary findings of the Office of Fair Trading regarding competition in the private healthcare market. In addition, I am also encouraged by the recent positive ruling by the NHS Co-operation and Competition Panel which will allow the Group to continue its growth in NHS treatments. I am confident that increasing visibility of NHS opportunities and the proven strength of the operating model will deliver growth in the long-term, although the short-term outlook is subject to the prevailing economic and political uncertainty.

Ali Parsadoust

Chief Executive Officer

19 September 2011

Financial review

Circle Independent

The Circle Independent segment comprises privately owned hospitals and clinics which derive their revenues from providing healthcare services to privately insured patients, self-pay private patients and NHS patients. Specifically it comprises CircleBath, Circle Clinic Stratford, Circle Clinic Windsor and related head office costs.

Segment revenue grew by 193.1% to £6,108,000 (six months ended 30 June 2010: £2,084,000) primarily due to CircleBath which was opened in March 2010, where volumes have continued to grow, driven by the introduction of new consultant partners and an increase in the number of specialties offered to both private and NHS patients.

Circle NHS

The Circle NHS segment comprises business units which have NHS sponsored contracts and derive the majority of their revenues from providing healthcare services to NHS referred patients. Circle NHS comprises Circle's Nottingham NHS Treatment Centre, Circle's Burton NHS Treatment Centre and related head office costs.

In March 2011, the Group was notified that the original contract to run the Burton NHS Treatment Centre would not be put out to tender for renewal and would cease on 10 July 2011, after which the treatment facility would automatically revert to Burton Hospitals NHS Foundation Trust. As part of the handover, the Group transferred all operating assets and provided training and mobilisation services to ensure the Burton NHS Treatment Centre was able to continue operating over the transition period.

Segment revenue decreased by 2.2% to £34,507,000 (six months ended 30 June 2010: £35,295,000) primarily due to the loss of the contract to run the Bradford NHS Treatment Centre. Circle's Nottingham NHS Treatment Centre increased revenue by 17.9% and Circle's Burton NHS Treatment Centre increased revenue by 9.9%. Operating profit for this segment improved from £280,000 to £2,300,000 for the six months ended 30 June 2011.

Daycase and outpatient numbers increased during the year at Circle's Nottingham NHS Treatment Centre by 17.4%. There was also an increase in outpatient numbers at Circle's Burton NHS Treatment Centre of 33.1% and a small reduction in daycase patient numbers of 7.2%.

Other Segments and Unallocated Items

The Other Segments and Unallocated Items segment comprises property companies and the head office entities not involved in the operation of hospitals or treatment centres. Specifically it comprises head office costs, interest income, interest expenditure and corporation tax which are not allocated to reporting segments as they are managed on a Group wide basis.

Financing

During the period, the Group continued to successfully raise finance to fund business growth. In addition to the £25,580,000 the Group raised on AIM, which brought the total amount raised from investors so far this year to £53,077,000 before costs, the Group secured a short-term loan facility of £5,000,000 from Vinci, repayable in December 2011, to enable the purchase of land in Didsbury, Manchester.

In May 2011, the Group secured an extension of the James Caird Asset Management ('JCAM') facility of £13,300,000 from August 2012 to February 2013. As a consequence of moving its tax residency to the UK in May, the Group is in technical breach under the loan agreement with JCAM which has resulted in the loan being disclosed within current liabilities. The Group is in active discussions with JCAM to remedy this breach and is otherwise compliant with all other obligations under the loan agreement.

The Group continues to explore further financing for its real estate development in challenging financial markets. For a more detailed understanding of the Group's financing and associated risks, reference can be made to the Group's AIM Admission Document.

Paolo Pieri

Chief Financial Officer

19 September 2011

Notes to the consolidated interim financial information

For the year ended 30 June 2011

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. The registered office is 12 Castle Street, St Helier, Jersey. Following a resolution on 17 May 2011 passed by the Board of Directors, the Company is now domiciled in the UK for tax purposes.

2 Basis of preparation and accounting policies

Basis of preparation

The Interim Report for the six months ended 30 June 2011 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 should be read in conjunction with the Annual Report and Financial Statements for the year ended 31 December 2010, 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 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 2010 were approved by the Board of Directors on 13 June 2011. The report of the auditors on those accounts was unqualified and did not contain an emphasis of matter paragraph or a statement under Section 498 of the Companies Act 2006. The condensed set of consolidated interim financial information was approved by the Board of Directors on 19 September 2011.

Going concern

The consolidated financial statements have been prepared on a going concern basis which assumes that the Group will continue in operational existence for the foreseeable future. The Directors have prepared cash flow forecasts for a period of not less than 12 months from signing the financial statements for the six months ended 30 June 2011. Existing cash balances and cash flows from the operating businesses are sufficient to fund head office costs necessary to sustain the current operations, cost of financing (as detailed in the Financial Review) over the next 12 months and future growth plans. These plans include taking on the management of NHS Hospitals and funding the commissioning and start up losses of the projected private hospital roll out programme. On this basis, the directors conclude that it is appropriate for these accounts to be prepared on a going concern basis.

Significant accounting policies

The accounting polices adopted in the preparation of the condensed set of consolidated financial information is consistent with those of the Group's Annual Report and Financial Statements for the year ended 31 December 2010. 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 2011 but have not had a material impact on the results or financial position of the Group:

- IFRS 7 'Financial Instruments: Disclosures' - Amendments resulting from May 2010 Annual Improvements to IFRSs;

- IAS 1 'Presentation of Financial Statements' - Amendments resulting from May 2010 Annual Improvements to IFRSs; and

- IAS 24 'Related Party Disclosures' - Revised definition of related parties.

IFRS standards in issue, not yet effective as at 30 June 2011, but which will apply in the future are as follows:

- IFRS 7 'Financial Instruments: Disclosures' - Amendments enhancing disclosures about transfers of financial assets (applies to annual periods beginning on or after 1 July 2011);

- IFRS 9 'Financial Instruments: Classification and Measurement' (applies to annual periods beginning on or after 1 January 2013); and

- IAS 12 'Income Taxes' - Limited scope amendment re recovery of underlying assets (applies to annual periods beginning on or after 1 January 2012).

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 these consolidated interim financial statements are consistent with those reported in the Annual Report and Financial Statements for the year ended 31 December 2010. In addition the following key estimate has been made in this financial period:

i Equity instruments

The issuance of equity instruments, in particular warrants, are valued dependent on the specific terms and conditions of each instrument. Warrant valuations are calculated using several assumptions (eg: share price volatility, probability of vesting events and time constraints) included within an option pricing model. Where the value of any equity instrument is conditional on a number of potential outcomes, Monte-Carlo valuation techniques may be used. In the event that estimates are wrong, this may impact the charge in future years.

3 Segmental reporting

Segment information is divided into three business segments based on the Group's management and internal reporting structure. Each business segment contains a number of operating segments. Geographic factors are not considered as all of the Group's operations take place within the United Kingdom. Revenue charged between segments has been charged at arm's length. Revenue from external customers in the segmental analysis is measured in a manner consistent with the income statement.

The following tables present revenue, EBITDA and the other elements of the income statement regarding the Group's business segments for the six months ending 30 June 2011 and 2010 respectively and for the year ending 31 December 2010:

4 EBITDA and exceptional items

The shareholder warrant expense relates to the fair value movement on the warrant instruments issued as part of equity raises.

This information is included here as it provides useful information to the reader of the accounts for understanding operational performance.

5 Finance income

6 Finance costs

(i) James Caird Asset Management loan facility of £13,300, expiring February 2013

(ii) James Caird Asset Management loan facility of £2,500, expired May 2010

During the period ended 30 June 2011, £55,000 of interest in relation to the Vinci Construction loan was capitalised (six months to 30 June 2010: £nil, year to 31 December 2011: £nil).

During the period, there was an extension of the JCAM (i) loan agreement from August 2012 to February 2013 and the Group made an advanced payment of £6,204,000 under the loan. In addition, following an extension of the AIB loan facility from March 2011 to June 2012, interest payable until the due date of £354,000 was paid in advance.

7 Loss per share

Basic loss per ordinary share is calculated by dividing the loss attributable to equity holders of the Company 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 dilutive potential ordinary shares. Share warrants in issue represent the only category of dilutive ordinary shares for the Company.

The following table sets out the computation for basic and diluted net loss per share for the six months ended 30 June 2011 and 2010 and the year ending 31 December 2010:

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 Share capital, share premium and other reserve

On 1 June 2011, pursuant to special resolutions passed by the shareholders of the Company at an Extraordinary General Meeting, it was resolved that each issued and unissued ordinary share of the Company of £0.10 be sub-divided into five ordinary shares of £0.02 each, effective 14 June 2011.

Allotted and fully paid up