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Circle raises £25m and extends share scheme to NHS workers

Hospital operator Circle has secured £25 million of new funding and has overhauled its corporate structure to grant its employees and NHS staff working at its sites direct access to its publicly-traded shares.

The restructure will result in Circle Holdings, the listed entity, acquiring Circle Partnership and eliminating over £250 million of intragroup debt from its balance sheet.

In a statement to the stock exchange, Circle said “the current ownership structure of the group is overly complex and costly to administer… [the new scheme] will align the interests of shareholders, group employees, clinicians, and NHS staff, whilst retaining and enhancing the distinctive Circle ‘partnership’ ethos in the business, and will create a simplified group structure comprised of a single listed ownership entity that will be attractive to investors and will facilitate the future growth of the business.”

Circle said it intends to use approximately £19 million of the raised funds on set-up costs, commissioning and working capital for a mix of up to three to generic service lines and/or hospital franchises; potential expansion into large markets such as Manchester and Birmingham with independent hospitals, and to pursue growth opportunity in current operating assets.

The remaining £6 million will be used for costs associated with the placing and subscription, existing working capital/regulatory requirements including funding the existing operations through to EBITDA break even, pre central overheads.

The proceeds will “also assist in demonstrating to the government, NHS and real estate financiers the strength of the group's balance sheet”, Circle said.

Steve Melton, CEO of Circle Holdings, said: "This announcement reflects our ambition to seize the growing opportunities in the public and private health markets, building on our solid achievements to date, and we are delighted by the continued confidence we have seen in the future of our business.

“Additionally, in simplifying our ownership structure, we will give all employees, including those in NHS facilities, access to our share scheme, aligning incentives across our organisation and continuing to build on our proven track-record of employee-led innovation."

In an update on trading performance, Circle said it expects its Hinchingbrooke contract to finish at or near break-even by the end of its financial year (being 31 March 2014). The company believes that between “60-70 NHS Trusts are failing either for financial reasons and/or due to the quality of services being provided”.

Circle said it had “demonstrated [its] ability to transform NHS services in clinical and financial difficulty” and it was “encouraged by the vigour with which many of the newly formed CCGs have grasped challenging financial and clinical issues in their regions”.

Elsewhere, Circle said its private hospitals at Bath and Reading ran at losses of £2.7 million and £3.4 million respectively for the six month period to 30 June 2013. In in its Nottingham ISTC, however, profits improved to £4 million for the period, up from £2.5 million for the same period a year ago. 

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Posted on: 20/12/2013

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