Editorial Tuesday 4 December 2012: Ali Parsa steps down. Will the Circle be unbroken?

Health Service Journal editor Alastair McLellan has just broken the news on Twitter that Ali Parsadoust, chief executive of Circle Health, has stepped down.

The Circle Holdings property firm announced to investors that he has been replaced by Steve Melton as interim CE.

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Ali Parsa(doust) will remain on the Board of Circle Holdings as founder and a non-executive director. Melton "is currently Circle's Head of Mobilisation, having joined Circle in February 2008. He has been responsible for ... leading the opening of the Bath and Reading hospitals in March 2010 and August 2012 respectively, and the initiation of the Nottingham Treatment Centre contract.  He also led the final phases of bidding, negotiation, and mobilisation of the Hinchingbrooke contract ... Mr Melton, aged 50, holds no Ordinary Shares and no share options in Circle Holdings plc.  Mr Melton has an interest of approximately 1.5 per cent. in the Circle Partnership Limited".

The Nottingham ISTC accounts for £51 million of Circle's £75 million revenues.

I have not been keeping as close an eye on Circle as I might, and missed this announcement from late November that a sub-firm of private equity firm Odey Asset Management "has exercised its right to appoint a director to the board. Anthony Bromovsky has consequently been appointed as a non-executive director, effective immediately.

"Anthony Bromovsky (64) graduated from the University of Toronto in 1972 with an Honours degree in General Arts.  He started his career as a commodities trader for Louis Dreyfus in 1974, followed by similar roles at Woodhouse Drake and Carey and Drexel Burnham Lambert, where he was Senior Vice President and Director of Commodities Trading.  During this period he was also Deputy Chairman of the London Commodity Exchange.  

"Following liberalization of Eastern European economies in the early 1990s, he set up Kilda Investments Ltd, a corporate finance company that advised on and arranged investments in a variety of ventures in Eastern Europe, including food production, micro-finance lending, pharmaceuticals, wineries, and steel privatisation.

"More recently, he was a director of BHE Limited, a UK healthcare company set up in 1999 that secured and managed a number of long term LIFT contracts for the development of major infrastructure projects in partnership with the NHS. BHE also funded, developed and managed several NHS General Hospital retail mall front entrance redevelopments. BHE was sold to the Assura group in 2003.  He is a former director of Union Market Limited, a London-based retail food company that was placed in administration in February 2012.

"Anthony Bromovsky is currently a director of Kilda Investments Limited (since 1991). There are no other matters which are required to be announced pursuant to paragraph (g) of Schedule 2 to the AIM Rules.

"Commenting on the announcement, Michael Kirkwood, Chairman of Circle Holdings plc, said: "I am delighted to welcome Tony to the Board.  Tony will bring a wealth of healthcare industry and investment experience to Circle and we look forward to his valuable contribution as we build our franchise and execute our business plans"."

Circle's share performance can be found here - and it is may be this more than anything that helped Ali decide to step down.

The reports in October that Hinchingbrooke was losing double the expected amount had an evident downward effect on the graph: one that the boost following the 'six-month success' haciographies of August could not avoid.

A recent article by Matthew Goodman in The Sunday Times on 11 November 2012, 'Never mind hot drinks - NHS outsourcing catches a cold', also gave a clue about Circle's challenges. Goodman found that money raised by Circle Holdings (largely from private equity and investment firms, it seems from share declarations) is lent to Circle Health at a interest rate of 7%.

Circle Health shareholders - known as partners - don't see a bean of any future dividend until the Circle Holdings loan is repaid.

There has been widespread scepticism about Circle Health's business model for some time, even among private sector investors and fans. Circle Holdings have of course done the smart thing of being a propco, and so will at least have residual value in their physical assets.

Ali and colleagues were the future once. Will the Circle be unbroken?