Circle : 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 EBITDA 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 [phone]

Michael Kirkwood, Chairman
Paolo Pieri, Chief Executive Officer

Alex Singleton, Head of Communications and Marketing

Numis Securities Limited [phone]

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 visitwww.circleholdingsplc.com andwww.circlehealth.co.uk

Footnotes:

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.