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Margins slump at Circle

Margins are under pressure at hospital operator Circle
August 28, 2015

Staff shortages have weighed on margins at hospital operator Circle (CIRC) during the first six months of the year. The group has acknowledged the need to take its margins "closer to industry standard" and admitted progress on this front was slower than expected in the first half. Chief executive Steve Melton said margins should recover by mid-2016 but pushed back the target for profitability across all sites from the end of 2015 to mid-to-late 2016.

IC TIP: Hold at 43p

The group grabbed headlines earlier this year when it pulled out of its contract to run the Hinchingbrooke Hospital in Huntingdon, Cambridgeshire - the first NHS hospital to be run by a private company. The Care Quality Commission (CQC) later published a report on the hospital which highlighted "significant failings" and rated it "inadequate".

Now, Circle is hoping to put the debacle behind it. Revenues across the Bath, Reading and Nottingham sites grew 13.3 per cent, 13.4 per cent and 18.9 per cent, respectively, as patient volumes grew 12 per cent in the first half. But squeezed margins and higher staffing costs still left the group in the red. That said, operating losses shrank by 43 per cent to £5.7m.

Analysts at broker Numis Securities expect losses of £9.7m this year, compared with losses of £14.7m in 2014.

CIRCLE (CIRC)
ORD PRICE:43pMARKET VALUE:£97m
TOUCH:41.5-44.8p12-MONTH HIGH:69pLOW: 34p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:13pNET CASH:£17m 

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201448.9-10.6-3.8nil
201562.5-6.1-2.7nil
% change+28---