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Results for the year ended 31 March 2017

10th Aug 2017 07:00

RNS Number : 5823N

Circle Property PLC

10 August 2017

Circle Property Plc

("Circle" or the "Group")

10 August 2017

CIRCLE'S REGIONAL OFFICE PORTFOLIO CONTINUES TO DELIVER STRONG INCOME, NAV AND PROFIT GROWTH

Circle Property Plc (AIM: CRC), a specialist regional UK office investment, development and management company today announces its results for the year ended 31 March 2017.

Financial Highlights

· 19.7% increase in value of the Group's portfolio of 15 UK investment properties to £93 million (31 March 2016: £77.7 million) resulting primarily from the Group's successful asset management initiatives.

· 19.9% growth in EPRA NAV per share to £1.83 (31 March 2016: £1.53 per share).

· An operating profit of £2.3 million (4 month period ended 31 March 2016: £0.8 million), combined with revaluation gains and profit on disposals, contributing to a pre-tax profit of £9.9 million (4 month period ended 31 March 2016: £1.1 million) and an increase in earnings per share to 35p (4 month period ended 31 March 2016: 4p).

· Annual contracted rental income for the period was £5.6 million, an increase of 18.6% driven by completed asset management initiatives.

· Based upon the March valuation of £93 million the portfolio reflects a net initial yield of 5.7% and a reversionary yield of 8.9%.

· The weighted average unexpired lease term to break is now 6.85 years (5.6 years at 31 March 2016) and 11.23 years to expiry (7.39 years at 31 March 2016).

· In the year, Circle signed a new £50 million revolving facility with RBS which enabled the refinancing of £39 million of existing facilities at a lower cost, and provides capital for further acquisitions. Consequent to this transaction and as at 31 March the Group's secured debt amounts to £45.7 million with a term to expiry of 1.83 years and a weighted average cost of 2.44% secured on the Company's investment property portfolio.

· The Board has proposed a final dividend of 2.6p per share, an increase of 8.3% over the preceding six months, to bring the annual dividend to 5p.

Operational Highlights

· Three significant lease contracts were secured during the period, adding £648,300 of annualised rent and comprising:

o Compass Group on new 25 year lease at the Kents Hill Conference Centre in Milton Keynes at a commencing rent of £1,500,428 per annum, up 71.48%, with fixed annual increases of 3%.

o 4,350 sq. ft. of vacant space at Powerhouse in Milton Keynes was let to Urgent Technology for 10 years at £70,000 per annum, representing an increase of 8% over the previous tenant's rent.

o At Elizabeth House in Staines, the Group has signed a new 10 year lease to Hardy & Hewitt with rent agreed at £18.95 psf, significantly above the average passing rent of £14.50 psf.

· Significant progress with development pipeline:

o K1, Kents Hill Park, Milton Keynes is refurbished and fully let, with good interest in K2 following our decision to subdivide the newly refurbished building into smaller suites.

o In July 2016 planning permission was obtained for a change of use of the ground floor of Somerset House, Temple Street, Birmingham from offices into two self-contained A3 restaurants totalling 10,950 sq.ft. A lease surrender with the former ground floor tenant was agreed (completed December 2016), and the northern ground floor A3 unit totalling approximately 5,530 sq. ft. was under offer to a national restaurant chain at a rent of £220,000 per annum. The refurbishment of floors 1-6 totalling 36,455 sq. ft. commenced in December 2016 with completion scheduled for September 2017.

o At 36 Great Charles Street, Birmingham the rolling refurbishment of the offices on the Ground to 7th floors totalling approximately 25,000 sq. ft. completed in June 2017. Three tenants were retained and moved into newly refurbished floors and approximately 17,000 sq. ft. is to be offered to the market in summer 2017 with a rent of £18.50 psf. When complete, the ERV of the building will be around £525,000 per annum.

· In addition, Circle has made significant operational progress post the year end, including three new leases:

o The remaining refurbished space at Powerhouse in Milton Keynes has been let to Steven Eagell Limited for 10 years at a rent of £106,256 per annum, equating to £16 psf.

o Having secured planning permission for a change of use on the ground floor of Somerset House, Temple Street in Birmingham's CBD from offices to higher value A3 restaurant in the first half of the year, Circle has agreed a 20 year lease with the popular Latin American restaurant, Las Iguanas, at a rent of £220,000 per annum.

o The Group has also entered into an agreement with Topps Tiles for a new 10 year lease with a five year break option on 4,700 sq. ft. of currently vacant space at the 37,200 sq. ft. Baildon Bridge retail park bringing occupancy at the park to 91%.

John Arnold, Chief Executive at Circle Property Plc, commented: "Our first full year as a public company has been one of significant growth and success. We have delivered strong results across all key metrics and further crystallised the value in the portfolio through our asset management expertise, leading to an impressive uplift in value of 19.7%.

"Despite ongoing uncertainty as a result of the general election in June, our portfolio is well positioned to resist any potential headwinds due to its distribution in strong and undersupplied regional business markets, such as Birmingham and Milton Keynes, and the proven management abilities of our team. Therefore, our focus remains in understanding and meeting the requirements of these occupiers, thereby continuing to maintain our liquidity and deliver meaningful value to our shareholders. To this end, we look to the year ahead with confidence and are working to progress our current pipeline of asset management opportunities, whilst also exploring ways to undertake new acquisitions and grow our portfolio."

Circle Property Plc	+44 (0)20 7930 8503
John Arnold, CEO Edward Olins, COO

Peel Hunt (Nominated Adviser and broker)	+44 (0) 20 7418 8900
Capel Irwin Edward Fox

FTI Consulting	+44 (0)20 3727 1000

Chairman's Statement

Whilst the political and economic uncertainty of 2016 continues to play out, the underlying quality of Circle Property Plc's portfolio of regional offices and the wealth of experience and expertise inherent within its management team has driven a period of growth for the Company.

Circle has successfully realised a year-on-year growth of 19.9% in NAV, delivering a final NAV of 183p per share, as well as a proposed final dividend of 2.6p per share, an increase of 8.3%, to bring the annual dividend to 5p. This growth has come almost entirely through the team's strong asset management and stock picking capabilities, with asset-transforming capex programmes at key sites including K2, Kents Hill Park in Milton Keynes and 36 Great Charles Street in Birmingham, which reached completion in the period, as well as solid progress being made at Somerset House in Birmingham's CBD.

Circle's high level of tenant retention is largely attributable to both the high standards of management that we demand within our multi-let properties and our flexible approach to tenant renewal negotiations. Our vacancy rate in the standing investment portfolio is less than 1% as, where appropriate, we continue to place a greater emphasis upon the certainty of secure income and the creation of longer leases in preference to the maximisation of rents.

It is the strength of Circle's asset management that differentiates the Company from its peers. In order to achieve lettings in a highly competitive market, it is essential to respond swiftly to tenants' ever-changing occupational demands. By listening to tenants and taking advice from agents, the Company remains totally aware of emerging occupier trends, such as the increasing preference towards characterful or individualistic offices, and is able to increase value by providing supply for this demand. This strategy to deliver best-in class office properties in regional locations was further supported by the successful refinancing of Circle's senior debt with RBS following the agreement of a new £50m facility.

Circle is well positioned in this uncertain political and economic environment with a closely managed business, a positive strategy and an entrepreneurial management team ready to exploit emerging opportunities.

Ian Henderson

Chairman

Chief Executive's Statement

Throughout the year we have continued with our asset management programme and have now assembled a core portfolio of high quality regional offices in prime locations which are primarily well let to high quality tenants on medium or long-term leases. As a result, and because of the resilient demand for the type of space we offer, we believe our portfolio will prove less susceptible to any downward valuation shifts arising from any prolonged political and economic uncertainty.

Following the refinancing of our debt facility with RBS, we are currently also reviewing our hedging strategy, including the possibility of entering into longer-term fixed rate funding. Our interest cover is sufficient to cover any potential or anticipated increased interest charges, but we are aware that inflationary pressures are growing as a result of the weaker pound.

It is therefore likely that income will continue to feature as a prerequisite to attract investors but, through continued strong stock selection, appropriate portfolio recycling and strong asset management, we aim to provide a better total return over time, than a purely income driven stock, as evidenced by the 19.9% growth in EPRA NAV in the year under review compared to a 3.9% total return for the MSCI All Property index in 2016.

Most encouragingly, almost all of the increase in NAV within the portfolio is attributable to our asset management. By successfully undertaking lease renegotiations, new lettings and lease renewals we have maximised income and have generated earnings per share of 35p.

In Birmingham, we only recently in July launched 36 Great Charles Street into the letting market and it has been very well received. The façade has just been cleaned while the reception area has been enlarged, decorated and furnished to form a distinctive area for the tenants to meet and greet visitors as well as hold informal meetings, directly off street level.

Also in Birmingham, Somerset House, Temple Street will be available in the autumn. The specification we are implementing enhances and complements the building's many art deco features including the restored parquet flooring that will help to differentiate our offering from many others in the vicinity. Prime rents in the city have now reached £35 psf, so our two buildings at £18 and £20 psf respectively should prove highly attractive to those tenants seeking well located high quality office space.

Although the letting market for requirements over 10,000 sq ft has been noticeably slower in the first half of the 2017 calendar year, we are in negotiations to let a substantial part of our 40,000 sq ft office building, K2 at Kents Hill Park, Milton Keynes to a major occupier and have multiple interest in the remainder, following our decision to further subdivide the building into smaller suites. From the outset we built maximum flexibility into the layout of the property and by a simple repositioning of services, subdivision is possible with minimum loss of net internal area and at a modest additional construction cost.

All of our buildings that are either in the course of refurbishment or completed and available to let are capable of being occupied by tenants seeking less than 5,000 sq ft, which is the most active sector of the market. Our optimism in the economy in the lead up to leaving the EU is being tested by the hung parliament and increasing political uncertainty following the general election. We are mindful that the heightened sense of nervousness may have an adverse effect upon some areas of the property market. However, with a strong cash flow and cash at bank we believe that our business is well placed to capitalise upon a regional office market that has, to-date, remained fairly robust due to sustained demand for offices in the sub 5,000 sq ft range and the continuing loss of much of the lower quality office stock due to obsolescence and residential conversion.

In the short term, Circle Property Plc will concentrate on letting the space within the development portfolio which once fully let, on the basis of current rental levels, has the capability to treble the net operating profits, enhancing the future earnings per share and supporting our progressive dividend policy. We hope this will help drive demand for our shares, facilitating an expansion of our investor base and so creates greater liquidity in our stock.

John Arnold

Chief Executive Officer

Portfolio Review

During the year, we continued to increase the portfolio's income by concentrating on lease renewals and lettings.

In addition, our three key developments are progressing well. Both K2, Kents Hill Business Park and 36 Great Charles Street, Birmingham are complete and we have good tenant interest for both. At Somerset House, Temple Street, Birmingham, planning permission was obtained for change of use of the ground floor for two enlarged restaurant units which attract a higher rental than offices, £40 psf against £20 psf. The offices above are undergoing refurbishment and are due to be completed by autumn 2017.

Our strategy of owning buildings capable of subdivision to provide smaller office suites of up to 5,000 sq ft is paying off, as 70% of all lettings in the cities where we are invested are within this size range. At this smaller end of the letting market, we attract local professionals and SMEs, which are less prone to the uncertainties of BREXIT.

The current uncertainty in the market may give rise to further opportunities which we will endeavour to exploit, should the returns be sufficiently attractive.

As at 31 March 2017, the total portfolio value was £93,025,000, an increase of 19.7% from the previous year, mainly driven by asset management as opposed to yield compression.

The portfolio is made up of 15 assets, primarily well located provincial offices. Our car showroom in Warrington was sold at a price of £1.32m, an increase of 34% above the previous year's valuation.

Portfolio Floor Area (sq ft) by Sector		Portfolio Location by Region and Value

Sector	Floor Area	Region	% of Value
Office	351,843	South East	44%
Conference Facility	163,711	South West	21%
Warehouse	45,319	West Midlands	18%
Retail Warehouse	37,169	East Midlands	8%
Retail	24,236	London	4%
Other	7,706	North of England	4%
Roadside	4,817	East of England	1%

By floor area, 80% of the total portfolio is let and income producing and forms the investment portfolio. For the remaining vacant 20%, 19% is held within our development portfolio which consists of three office buildings, two of which have been refurbished and one is currently under refurbishment. Only 1% of the vacancy is held within the core investment portfolio.

89.7% of the portfolio by value is in the office (and conference) sector which forms the core portfolio. The remaining 10.3% is split across four sectors, being the non-core portfolio, which although providing good high yielding income, are likely to be sold once their business plans are complete.

73.7% of the portfolio by value is located in Milton Keynes, Bristol and Birmingham, an increase of 5% from the previous year end.

Principal tenants within the portfolio include Compass Contract Services Ltd (26.69% 24.5 years to lease expiry), Which? Financial Services Ltd (5.89%), Grant Thornton LLP (5%), B&M Retail Ltd (5%) and New World Trading Company Ltd (4.3%).

As at 31 March 2017, the weighted average unexpired lease term ("WAULT") to first tenant's break option increased from 5.6 years to 7.39 years, whilst to lease expiry increased from 6.85 years to 11.23 years.

The total annual contracted income produced by the portfolio is over £5.6m, (net current annual income of £5.32m) with a reversionary rent based on full ERV and once the development assets are let of approximately £8.9m.

Edward Olins

Chief Operating Officer

Consolidated statement of comprehensive income
for the year ended 31 March 2017

	Note		1 April 2016 to 31 March 2017		4 December 2015 to 31 March 2016
			£		£

Rental income	4		5,265,507		664,392
Other income	4		138,122		595,178
			5,403,629		1,259,570

Property expenses	5		(1,037,375)		(122,529)

Net rental income			4,366,254		1,137,041

Administrative expenses	6		(2,114,965)		(293,255)

Operating profit			2,251,289		843,786

Gains on disposal of investment properties			278,771		-
Gains on revaluation of investment properties	13		7,360,657		-
Negative goodwill on acquisition of CPUT			195,554		3,817,264
Impairment of goodwill on acquisition of CPML			-		(2,117,591)
Listing costs	12		(107,493)		(1,326,054)

Operating profit after revaluation of investment properties and goodwill			9,978,778		1,217,405

Finance income	8		48,511		17,875
Finance costs	9		(1,293,384)		(183,054)
Effective interest rate adjustment on borrowings	16		1,232,304		53,578

Net finance costs			(12,569)		(111,601)

Profit for the year / period before taxation			9,966,209		1,105,804

Taxation	10		(21,912)		(32,399)

Total comprehensive income and profit for the year / period			9,944,297		1,073,405

Earnings per share			0.35		0.04

There is no comprehensive income other than that included in the profit for the year. All of the profit for the year is attributable to the owners of the Company.

All items in the above statement derive from continuing operations.

The Company's profit for the year (non-consolidated) was £989,270.

The notes on pages 30 to 45 form an integral part of these consolidated financial statements.
Consolidated statement of financial position
As at 31 March 2017

		Note		31 March 2017		31 March2016
				£		£
Non-current assets
Investment properties		13		86,054,336		75,780,824
Property, plant and equipment				29,158		22,371
Trade and other receivables		14		6,518,077		1,771,394
Deferred tax		10		1,141,887		914,949
Financial instruments at fair value through profit and loss		17		710		-
				93,744,168		78,489,538

Current assets
Trade and other receivables		14		1,195,372		2,555,037
Deferred tax		10		128,240		104,504
Cash and cash equivalents		15		4,893,807		4,516,153
				6,217,419		7,175,694


Total assets				99,961,587		85,665,232

Equity
Stated capital		19		42,542,179		42,542,179
Treasury share reserve				(380,001)		(380,001)
Retained earnings				9,659,457		1,073,405
Total equity				51,821,635		43,235,583

Non-current liabilities
Loan borrowings		16		45,590,423		40,028,371
Financial instruments at fair value through profit and loss		17		-		94,855
				45,590,423		40,123,226

Current liabilities
Trade and other payables		18		2,549,529		2,306,423
				2,549,529		2,306,423

Total liabilities				48,139,952		42,429,649


Total liabilities and equity				99,961,587		85,665,232


The consolidated financial statements were approved and authorised for issue by the Board of Directors on 9 August 2017 and signed on its behalf by:

Michael Farrow
Director

The notes on pages 30 to 45 form an integral part of these consolidated financial statements.

Consolidated statement of changes in equity
for the year ended 31 March 2017

	Sharecapital	Treasury shares reserve	Retained earnings	Total
	£	£	£	£

As at 4 December 2015	-	-	-	-

Profit for the period	-	-	1,073,405	1,073,405

Issue of ordinary share capital	42,162,178	-	-	42,162,178

Issue of treasury shares	380,001	(380,001)	-	-

As at 31 March 2016	42,542,179	(380,001)	1,073,405	43,235,583

Profit for the year	-	-	9,944,297	9,944,297

Dividends	-	-	(1,358,245)	(1,358,245)

As at 31 March 2017	42,542,179	(380,001)	9,659,457	51,821,635

The notes on pages 30 to 45 form an integral part of these consolidated financial statements.

Consolidated statement of cash flows
for the year ended 31 March 2017

	1 April 2016 to 31 March2017	4 December 2015 to 31 March 2016
	£	£

Cash flows from operating activities
Profit for the year / period before taxation	9,966,209	1,105,804
Adjustments for:
Finance income	(48,511)	(17,875)
Finance expense	1,293,384	129,476
Depreciation	7,414	1,195
Gains on revaluation of investment properties	(7,360,657)	-
Gains on disposal of investment properties	(278,771)	-
Amortisation of loan arrangement fees	40,136	7,223
Fair value movement on interest rate swaps	(95,565)	2,146
Effective interest rate adjustment on loan borrowings	(1,232,304)	(53,578)
Negative goodwill on acquisition of CPUT	(195,554)	(3,817,264)
Impairment of goodwill on acquisition of CPML	-	2,117,591
(Increase) / decrease in trade and other receivables	(3,409,020)	1,712,781
Decrease in trade and other payables	(103,177)	(580,888)

Cash generated from operating activities	(1,416,416)	606,611

Interest paid	(1,416,942)	(60,158)
Interest received	70,513	4,107

Net cash from operating activities	(2,762,845)	550,560

Cash flows from investing activities
Cost of additions to investment properties	(3,520,046)	(266,755)
Proceeds from disposal of investment properties	1,278,770	-
Cost of additions of property, plant and equipment	(14,200)	(15,150)
Acquisition of subsidiaries, net of cash acquired	-	3,891,568

Net cash from investing activities	(2,255,476)	3,609,663

Cash flows from financing activities
Repayment of borrowings	(39,775,343)	(827,790)
Drawdown of borrowings	46,529,563	-
Proceeds of issue of shares	-	1,183,720
Dividends paid	(1,358,245)	-

Net cash used in financing activities	5,395,975	355,930

Net increase in cash and cash equivalents	377,654	4,516,153
Cash and cash equivalents at the beginning of the year / period	4,516,153	-
Cash and cash equivalents at the end of the year / period	4,893,807	4,516,153

The notes on pages 30 to 45 form an integral part of these consolidated financial statements.

Notes to the consolidated financial statements
for the year ended 31 March 2017

1 General information

These financial statements are for Circle Property Plc ("the Company") and its subsidiary undertakings (together referred to as the "Group"). Notes in respect of the Company's subsidiary undertakings are outlined in note 23.

The Company's shares are admitted to trading on AIM, a market operated by the London Stock Exchange plc. The Company is domiciled and registered in Jersey, Channel Islands. The address of its registered office is 3rd Floor, Standard Bank House, 47-49 La Motte Street, St Helier, Jersey, JE2 4SZ.

The nature of the Company's operations and its principal activities are that of property investment in the UK.

2 Principal accounting policies

The Group financial statements show a true and fair view and have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and the Companies (Jersey) Law 1991. The financial statements have been prepared in pounds sterling, which is the Group's functional currency, and under the historic cost convention as modified by the revaluation of investment property and derivative financial instruments which are measured at fair value.

Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive's Statement on page 3. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in these financial statements. In addition note 22 to the financial statements includes the Group's financial management objectives, details of its financial instruments and its exposures to credit, liquidity and market risk. The Group's policy for managing capital is included in note 20.

The Group has adequate financial resources together with long term rental contracts with a wide range of tenants. As a consequence, the Directors believe that the Group is well placed to manage its business risks.

The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they have adopted the going concern basis in preparing the financial statements.

Basis of consolidation and business combinations
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries, as outlined in note 23.

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has variable returns from, its involvement with the entity and has the ability to affect those returns through its power over the entity. Intragroup balances and any unrealised gains and losses arising from intragroup transactions are eliminated in preparing the Consolidated Financial Statements.

The results of subsidiaries acquired during the year are included from the effective date of acquisition, being the date on which the Group obtains control. They are deconsolidated on the date that control ceases.

If the consideration transferred for the acquisition of a subsidiary is more than the fair value of the assets and liabilities acquired, the difference is recognised as goodwill and is written off directly in the Statement of Comprehensive Income if there is no future economic benefit associated with the goodwill.

If the consideration transferred for the acquisition of a subsidiary is less than the fair value of the assets and liabilities acquired, the difference is recognised as negative goodwill and is reflected directly in the Statement of Comprehensive Income.

Acquisition-related costs are expensed as incurred.

Adoption of new and revised IFRSs
New standards, amendments to standards and interpretations which came in to effect for accounting periods starting on or after 1 April 2016 have not had a significant impact on the preparation of these financial statements.

New standards and interpretations
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2017, and have not been applied in preparing these consolidated financial statements.

IAS 12, 'Income taxes' was amended to clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset's tax base. This amendment is effective for annual periods beginning on or after 1 January 2017.

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. The standard is effective for accounting periods beginning on or after 1 January 2018.

IFRS 15, 'Revenue from contracts with customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted.

IFRS 16, 'Leases' was issued in January 2016. For lessees, it will result in almost all leases being recognised on the statement of financial position, as the distinction between operating and finance leases will be removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low value leases. The accounting for lessors will not significantly change. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted.

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. The Group does not intend to apply any of these pronouncements early.
Estimates and judgements
The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenue and expenses during the period. The nature of the estimation means that actual outcomes could differ from those estimates. Estimates and judgements are continually evaluated and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised prospectively.

Significant estimates
Fair value of investment property
Investments in property and property-related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date. The Directors employed professional valuers Savills (UK) Limited to perform valuations of the investment property using Royal Institute of Chartered Surveyors ("RICS") valuation standards as at 31 March 2017. Volatility in the economic environment is reflected in commercial real estate markets. In arriving at their estimate of market value as at 31 March 2017, the valuers used their market knowledge and professional judgement and did not rely solely on comparable historical transactions. There is an inherent degree of uncertainty when using professional judgement in estimating the market values of investment property.

The significant methods and assumptions used by the valuers in estimating the fair value of investment property are set out in note 13.

Significant judgements
Fair value of interest rate contracts
The fair values of interest rate contracts have been calculated and provided by the relevant counterparty bank using recognised valuation techniques. Details of the interest rate contracts are set out in note 17.

Operating lease commitments - Group as lessor
The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains all the significant risks and rewards of ownership of these properties and therefore accounts for them as operating leases.

Revenue recognition
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the lease. The term of the lease is the full lease period where there is a reasonable expectation at the inception of the lease that the tenant will not utilise the lease break clause. Lease incentives granted are spread evenly over the term of the lease.

Property service charges
The properties service charge accounts are managed by third parties and therefore the Group considers that it is acting in the capacity of an agent. Service charges receivable from tenants and related costs are not recognised by the Group. Service charge costs in relation to void areas are recognised within property expenses on an accruals basis.

Administrative fees, listing costs and other expenses
Administrative and other expenses are recognised in profit or loss in the period in which they are incurred.

Finance income and finance costs
Finance income comprises bank and loan interest income. Finance costs comprise interest expense on borrowings and net interest on interest rate swaps. Finance income and finance costs are recognised on an effective interest rate basis.

Investment property
Property that is held for long-term rental yields or for capital appreciation or both, is classified as investment property in accordance with IAS 40 'Investment Property'.

Investment properties, including properties under development, are initially recognised at cost, being the fair value of consideration given, including associated transaction costs. Any subsequent qualifying capital expenditure incurred in improving investment properties is capitalised in the period in which the expenditure is incurred and included in the book cost of the properties.

After initial recognition, investment properties are measured at fair value, with unrealised gains and losses recognised in the statement of comprehensive income. The fair value is based on valuations provided by Savills (UK) Limited at the balance sheet date using recognised valuation techniques.

An investment property shall be derecognised on disposal or at a time that no benefit is expected from future use or disposal. Any gain or loss is determined as the difference between the net disposal proceeds and the carrying amount and is recognised in the consolidated statement of comprehensive income.

Recognition and derecognition occurs on the completion of a sale between a willing buyer and a willing seller. Any investment properties on which contracts for sale have been exchanged but which had not completed at the year end are disclosed as properties held for sale and stated at fair value. At 31 March 2017 and 2016 none existed.

In accordance with IAS 40 'Investment Property' property that is being constructed or developed for future use as investment property is classified as investment property during its construction or development. At 31 March 2017 and 2016 none existed.

Technique used for valuing investment properties
The Traditional Method converts anticipated future cash flow benefits in the form of rental income into present value. This approach requires careful estimation of future benefits and application of investor yield or return requirements. One approach to value the property on this basis is to capitalise net rental income on the basis of an Initial Yield, generally referred to as the 'All Risks Yield' approach or 'Net Initial Yield' approach.

These fair values are based on active market prices where possible, adjusted if necessary, for any difference in the nature, location or condition of the specific assets.

The fair value of investment properties is measured based on each property's highest and best use from a market participant's perspective and considers the potential uses of the property that are physically possible, legally permissible and financially feasible.

Operating leases
Properties leased out under operating leases, where the Group is the lessor, are included in investment property in the consolidated statement of financial position. Please refer to revenue recognition for the discussion of recognition of rental income.

Financial instruments
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of 3 months or less. These are carried at cost.

Trade and other receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Trade and other payables
Trade payables are not interest bearing and are recognised initially at fair value. The subsequent carrying amount of these liabilities approximates their fair value.

Loan borrowings
Loan borrowings are recorded initially at fair value, net of direct issue costs incurred. Loan borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised, within finance costs, in the income statement over the term of the borrowings using the effective interest rate method.

Derivative financial instruments
The Group uses derivative financial instruments to hedge its risk associated with interest rate fluctuations. The Group's policy is not to trade in derivative instruments. The Group does not apply hedge accounting.

Recognition of the derivative financial instruments takes place on the date at which a derivative contract is entered into. Such derivative financial instruments are measured initially and subsequently at fair value; transaction costs are included as incurred in the statement of comprehensive income under finance costs. Gains or losses on derivatives are recognised in the statement of comprehensive income in net gain or loss from financial instruments at fair value through profit or loss. Interest expenses on derivative financial liabilities are included as incurred in the statement of comprehensive income in finance costs.

Impairment
The Group considers evidence of impairment for financial assets at both an individual asset and a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Group uses historical information on the timing of recoveries and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss is calculated as the difference between an asset's carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss.

Taxation
The Company, Circle Property Unit Trust ("CPUT") and CPUT's subsidiary investments are registered in Jersey, Channel Islands. The Company and CPUT's subsidiaries are taxed at the Jersey company standard rate of 0%. CPUT is not subject to tax in Jersey.

Circle Property Management Limited ("CPML") was registered in the United Kingdom and subject to corporation tax at a rate of 20%. No corporation tax was incurred during the year (2016: nil) and CPML was dissolved on 30 May 2017.

The Company is registered under the Non-Resident Landlord Scheme and is liable to United Kingdom taxation at a rate of 20% on net rental income from its investment properties.

Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in profit or loss, except when it relates to items charged or credited directly to other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Share capital
Ordinary share capital is classified as equity. Dividends are recognised as a liability in the year in which they are approved.

Treasury shares
Treasury shares are equity shares of the Company held for the purpose of awarding shares in the 2016 Long Term Incentive Plan ("LTIP"). The shares are recorded at cost and are deducted from equity.

Share based payments
The Group has applied the requirements of IFRS 2 share based payment to share options. To the extent that the Directors assess this to be material, the fair value of the share options are determined at the grant date and are expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included within intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Negative goodwill recognised in the year relates to the recognition of additional capital allowances, available to the Group to carry forward against future profits, on the acquisition of Circle Property Unit Trust in the prior period.

3 Operating segments

The Group has adopted IFRS 8 "Operating segments" which requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker ("CODM") to allocate resources to the segments and to assess their performance. For the purposes of IFRS 8 the CODM takes the form of the two executive Directors of the Company.

The CODM considers that there is only one geographical segment, which is the United Kingdom, and one reporting segment, which is investment in commercial property. Therefore no segmental reporting is required.

4 Revenue									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Rental income									4,743,974	614,024
SIC 15 adjustment (spreading of lease incentives)									521,533	50,368
									5,265,507	664,392

Insurance recovery									118,647	18,884
Other income									19,475	576,294

									5,403,629	1,259,570

5 Property expenses									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Property expenses									260,705	18,450
Property service charges									337,635	35,828
Property repairs and maintenance costs									25,960	41,103
Property insurance									144,276	19,157
Property rates									68,799	7,991
Lease surrender payment									200,000	-

									1,037,375	122,529

6 Administrative expenses									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Staff costs									1,060,222	77,913
Administration fees									251,829	30,797
Legal and professional fees									564,685	110,117
Audit fees									65,724	32,500
Accountancy fees									9,918	1,733
Rent, rates and other office costs									57,219	5,696
Other overheads									97,954	33,304
Depreciation of tangible fixed assets									7,414	1,195

									2,114,965	293,255

7 Employees and Directors' Remuneration									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Staff costs during the year / period were as follows:
Non-executive directors' fees									130,000	15,874
Wages and salaries									797,000	50,083
Social security costs									66,009	7,826
Pension contributions									31,948	-
Other employment costs									35,265	4,130

									1,060,222	77,913

8 Finance income									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Bank interest									5,220	4,107
Loan interest									43,291	13,768

									48,511	17,875

9 Finance costs									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Swap interest									70,880	16,749
Loan interest									1,060,234	164,159
Loan commitment fees									42,699	-
Loan arrangement fees									215,136	-
Fair value movement on interest rate contracts									(95,565)	2,146

									1,293,384	183,054

10 Taxation									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Current tax									77,031	-
Deferred tax									(55,119)	32,399

									21,912	32,399

A reconciliation of the current tax charge applicable to the results at the statutory income tax rate to the charge for the year / period is as follows:

Current taxation									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Profit for the year / period before tax									9,966,209	1,105,804

UK income tax at a rate of 20%									1,993,242	221,161

Effects of:
Non-taxable negative goodwill on acquisition of CPUT									(39,111)	(763,453)
Non-taxable impairment of goodwill on acquisition of CPML									-	423,518
Non-taxable effective interest rate adjustment on borrowings									(246,461)	-
Non-taxable gains on investment properties									(1,527,886)	-
Non-taxable fair value movement on interest rate contracts									-	429
Non-taxable income									(9,702)	(128,197)
Expenses not deductible for tax purposes									120,376	278,168
Utilisation of capital allowances									(168,761)	(31,626)
Utilisation of losses brought forward									(44,666)	-

									77,031	-

Deferred taxation									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Deferred taxes at 31 March relates to the following:

Deferred tax asset
Capital allowances available to carry forward									1,270,126	1,019,453

Deferred tax asset brought forward									1,019,453	-
Deferred tax recognised on the acquisition of CPUT									195,554	1,051,852
Deferred tax credit/charge for the year/period									55,119	(32,399)

Deferred tax asset carried forward									1,270,126	1,019,453

At 31 March 2017, the Group had capital allowances of £6,350,633 (2016; £5,097,266) available to carry forward against future profits. A deferred tax asset of £1,270,126 (2016; £1,019,453) has been recognised as it is expected to be utilised in the foreseeable future.

11 Earnings per share

Basic earnings per share has been calculated on profit after tax attributable to ordinary shareholders for the period (as shown on the Consolidated Statement of Comprehensive Income) and the weighted average number of ordinary shares in issue during the year.

									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Profit for the year / period									9,944,297	1,073,405

Weighted average number of shares (excluding treasury shares)									28,296,762	28,165,517


Earnings per ordinary share:									0.35	0.04

For the purposes of the above calculation the comparative period is deemed to start from 16 February 2016 being the date on which operating revenue and expenditure commenced.

In the opinion of the Board, treasury shares held to satisfy share awards to management, as disclosed in note 21, currently do not have any material value and hence do not have any dilutive effect. Therefore no diluted earnings per share has been presented.

12 Listing Costs									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Nomad fees									-	307,193
Legal and professional fees									72,285	450,987
Audit and advisory fees									-	232,700
Administration fees									-	168,114
Tax and accountancy fees									10,350	65,000
Valuation fees									-	49,000
Other fees									24,858	53,060

									107,493	1,326,054

The costs listed above related to the Company's admission to AIM. The costs may also include some elements relating to the acquisition of the subsidiary entities. However, as the acquisition of the subsidiary entities was conditional on the company listing and, due to the combined nature of the fees payable, they have all been presented as listing costs in the consolidated statement of comprehensive income.

Listing costs recognised in the year relate to expenses incurred in the period ended 31 March 2016 but, presented to the Company during the year ended 31 March 2017.

13 Investment properties									31 March 2017	31 March 2016
									£	£

Opening fair value									77,735,000	-
Fair value of investment properties acquired									-	77,264,267
Cost of additions to investment properties									3,912,856	420,365
Disposal of investment properties									(1,000,000)	-
Gain on revaluation of investment properties									7,360,657	-
Lease incentive amortisation									5,016,487	50,368

Fair value of investment properties per valuation report									93,025,000	77,735,000

Unamortised lease incentives									(6,970,664)	(1,954,176)

Closing fair value									86,054,336	75,780,824

No properties were held for sale at 31 March 2017 and 2016.

As at 31 March 2017 the fair value of investment properties under development included in the above amount was nil (2016; nil).

£89,025,000 (2016; £73,735,000) of the above properties' value, estimated by the valuer, relate to property held on a freehold basis and £4,000,000 (2016: £4,000,000) on a long leasehold basis.

The fair value of the Group's investment properties per the Valuation Report amounted to £93,025,000 (2016; £77,735,000). The difference between the fair value of the investment properties per the Valuation Report and the fair value per the balance sheet of £6,970,664 (2016; £1,954,176) relates to unamortised lease incentives which are recorded in the financial statements within non-current and current assets.

The Group has pledged all of its investment properties to secure banking facilities granted to the Group as detailed in note 16.

The fair value of the Group's investment properties at 31 March 2017 has been arrived at on the basis of valuation carried out by Savills (UK) Limited. The valuation was carried out in accordance with the Practice Statements contained in the Appraisal and Valuation Standards as published by the RICS. In forming their opinion of the fair value, the independent valuers had regard to the current best use of the property, its investment attributes and recent comparable transactions. The valuation was carried out using the "All Risks Yield" method taking into consideration both sales and rental evidence and formulating the opinion of market value taking into account the properties' locations, specifications and specific characteristics.

All investment properties are categorised as Level 3 fair values as they use significant unobservable inputs. There were no transfers between Levels during the year.

The following table shows the valuation technique used in measuring the fair value of investment properties, as well as the significant unobservable inputs used.

Sector		Valuation£	Valuation technique	Significant unobservable inputs			Inter-relationship between key unobservable inputs and fair value measurement
Office			All Risks Yield	Estimated void periods range from 6 months to 24 months after the end of each lease. (2016: no change)			The estimated fair value would increase / (decrease) if:
	2016	67,150,00					The estimated fair value would increase / (decrease) if:
	2017	83,450,00
Retail							void periods were shorter / (longer);
Warehousing				Market rents have been based on the specific circumstances of each property.
	2016	3,725,000					market rents were higher / (lower);
	2017	3,800,000
							rent free periods were shorter / (longer);
Retail
	2016	1,800,000		Estimated rent free periods range from 6 to 12 months on new leases. (2016: no change)			letting fees were lower / (higher);
	2017	1,700,000
							rent per square foot were higher / (lower);
Industrial
	2016	1,125,000		Letting fees have been estimated on vacant units.			equivalent yields were lower / (higher); or
	2017	1,125,000		Letting fees have been estimated on vacant units.
							market conditions were to improve / (decline).
				Rent per square foot ranges from £3 to £46. (2016: £2 to £46)			market conditions were to improve / (decline).
Other
	2016	3,935,000
	2017	2,950,000		Net equivalent yields range from 5.97% to 8.74%. (2016: 5.66% to 9.63%)

Total
	2016	77,735,00		Market conditions are considered based on the property's location.
	2017	93,025,00


The ranges are based on averages per property. Individual tenancies within properties may fall outside these ranges.

14 Trade and other receivables									31 March 2017	31 March 2016
									£	£

Non-current
Lease incentives									6,518,077	1,771,394

Current
Circle Property Trading (Maidstone) Limited									-	1,526,167
Loan interest due from Circle Property Trading (Maidstone) Limited									-	22,002
Lease incentives									452,587	182,782
Amounts due from property agents									68,767	100,956
Amounts due from tenants									153,123	135,276
VAT									352,717	387,031
Other receivables									168,178	200,823

									1,195,372	2,555,037

On 29 September 2016 Compass Contract Services (UK) Limited ("Compass") surrendered their existing 10 year lease, relating to land and buildings at Kents Hill Park, and entered into a new 25 year lease for the same property. The Group made a payment of £4,494,955, inclusive of SDLT and land registry fees, to Compass in relation to the surrender of their 10 year lease. This payment is recognised as a lease incentive and spread evenly to the statement of comprehensive income over the term of the lease.

The Group was party to a loan facility agreement with Circle Property Trading (Maidstone) Limited ("CPTML"). The purpose of the loan was to finance CPTML's acquisition of a 999 year lease of the residential elements of the Group's property located at 69-77 Week Street, Maidstone, Kent and its subsequent refurbishment and development works. Rent is charged under the lease at a rate of one peppercorn (if demanded). The loan was secured by a first legal mortgage over the property and a fixed charge over the assets of CPTML. The loan was interest bearing at a rate of 8% per annum. The loan and all interest thereon was repaid on 2 February 2017.

15 Cash and cash equivalents									31 March 2017	31 March 2016
									£	£

Royal Bank of Scotland International									4,641,977	3,176,679
National Westminster Bank plc									251,830	1,339,187
Other cash									-	287

									4,893,807	4,516,153

As at 31 March 2017 £377,027 (2016; £382,335) of cash was held on blocked accounts. Of this, £125,204 (2016; £131,048) relates to deposits received from tenants and £251,830 (2016; £251,287) was held on an interest deposit account in relation to the loan borrowings disclosed in note 16.

16 Loan borrowings									31 March 2017	31 March 2016
									£	£

Brought forward									40,028,371	-
Fair value of loans acquired									-	40,902,516
Loan repayments								(39,775,343)		(827,790)
Loan drawdowns									46,529,563	-
Effective interest rate and amortisation adjustment									(1,232,304)	(53,578)
Amortisation of lending costs									170,068	7,223
Unamortised lending costs									(129,932)	-

									45,590,423	40,028,371

The Group was party to a revolving credit facility (the "previous facility") with National Westminster Bank Plc ("Natwest") for a total commitment of £39,200,000. The facility was secured by the investment properties and rental income detailed in notes 13 and 4 and a security interest agreement over the issued share capital of the wholly owned subsidiaries, Circle Property (Milton Keynes) Limited and Circle Property (Warrington) Limited. Interest was charged at a rate of 2.95% over LIBOR.

On 21 June 2016 the Directors agreed a £50 million revolving facility (the "new facility") with Natwest for the purpose of refinancing the previous facility. The new facility has a three year term with two options, at the absolute discretion of Natwest, to extend for a further year. Where the loan to value is less than 55% of the Group's gross portfolio value an interest rate of 1.85% over LIBOR is charged, where the loan to value equals or exceeds 55% an interest rate of 2.75% over LIBOR is charged. The new facility was drawn down on 22 June 2016 and the previous facility repaid.

The new facility is secured by a first and only legal charge over the Group's investment properties, an assignment of rental income, charges over specified bank accounts of the Group and a floating charge granted over all assets of the Group.

The financial covenants relating to the previous facility were 55% loan to value, 2.25:1 interest cover and 11:1 debt to rent cover. In relation to the new facility the financial covenants are 65% loan to value, 1.75:1 interest cover to the second anniversary of the date of the facility agreement and 2.00:1 thereafter and 11:1 debt to rent cover to the second anniversary of the date of the facility agreement and 10:1 thereafter. There were no breaches of any of these covenants during the year.

The undrawn facility as at 31 March 2017 was £4,279,645.

17 Financial instruments at fair value through profit and loss									31 March 2017	31 March 2016
									£	£

Fair value brought forward									(94,855)	-
Fair value of financial instruments acquired									-	(92,709)
Fair value gain / (loss)									95,565	(2,146)

Fair value carried forward									710	(94,855)

The Group uses interest rate caps and swaps to manage its exposure to interest rate movements on a proportion of its variable rate borrowings. An interest rate swap entered into with The Royal Bank of Scotland plc. ("RBS"), had a notional value of £10,000,000, and a fixed interest rate of 1.98% to maturity on 29 September 2016. An interest rate cap, entered into with RBS, has a notional value of £10,000,000 and a strike rate of 3% from 15 October 2016 to maturity on 31 January 2019.

At 31 March 2017 the fair value of the interest rate cap resulted in an asset of £710 (2016; liability of £94,855). The interest rate cap is fair valued using recognised valuation techniques and the movement in fair value has been recorded in profit and loss.

18 Trade and other payables									31 March 2017	31 March 2016
									£	£

Trade payables									384,092	489,873
Property improvement costs									471,375	184,333
Wages and salaries									411,948	-
Deferred income									760,364	639,269
Rental deposit accounts									129,591	137,705
Finance costs									215,243	62,756
Valuation Fee									36,000	28,000
Listing costs									63,885	338,888
Current taxation									77,031	-
Final distribution due to CPML shareholders									-	396,670
SWAP interest payable									-	28,929

									2,549,529	2,306,423

Deferred income relates to deferred rental income of £689,711 (2016; £532,444) and deferred insurance recharges of £70,653 (2016; £106,825).

19 Stated capital

Issued and fully paid share capital is as follows:
									31 March 2017	31 March 2016
									£	£

Issued and fully paid shares of no par value									42,542,179	42,542,179

Number of shares in issue
Brought forward (at £1.49 per share)									28,551,796	-
Issued in the year / period									-	28,551,796

Carried forward									28,551,796	28,551,796

The Company has one class of Ordinary Share which carry no rights to fixed income. Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company.

On admission to AIM, the Company issued 255,034 Ordinary Shares at a price of £1.49 each to be held in treasury subject to award under the LTIP described in note 21. Whilst held in treasury, these shares are not entitled to dividends and have no voting rights.

20 Capital management

The Group's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The objective is to ensure that it will continue as a going concern and to maximise return to its equity shareholders through appropriate levels of gearing. The Group is not subject to any externally imposed capital requirements with the exception of the loan covenant requirements as disclosed in note 16.

The Group's debt and capital structure comprises the following:
									31 March 2017	31 March 2016
									£	£

Total liabilities									48,139,952	42,429,649
Less: cash and cash equivalents									(4,893,807)	(4,516,153)
Net debt									43,246,145	37,913,496

Total equity									51,821,635	43,235,583
Net debt to equity ratio									0.83	0.88

21 Share based payments

2016 Long Term Incentive Plan ("LTIP")
By a resolution of the Board dated 29 January 2016, the Company adopted the LTIP for the purpose of properly motivating and rewarding key employees of the Group in a manner that aligns their interests with that of the Shareholders by measuring performance against shareholder returns over the three financial years ending 31 March 2019.

On admission to AIM, the Company issued 255,034 Ordinary Shares at a price of £1.49 each to be held in treasury subject to award under the LTIP.

A key employee of the Company may be invited to join the LTIP scheme, the purpose of which is to align the long longer term objectives of shareholders and management. Awards take the form of a conditional right or nil cost option to acquire Ordinary shares. These follow a three year vesting period over which the performance of the Group must satisfy the targets in order that the awards will vest at the end of that period.

There are two equally weighted targets, being Total Shareholder Return ("TSR") and a fixed hurdle rate for NAV. TSR is a comparison of share price plus dividends paid with a bespoke basket of peer companies and REITs. The NAV target is fixed such that a NAV Total Return ("NAVTR") of less than 8% will not attract a vesting but where the NAVTR is between 8% and 14% the amount vesting will be calculated on a straight line basis between 30% and 100%.

The quantum of LTIP awards is restricted to 100% of the equivalent salary of the executive which will alter from time to time in line with the salary and share price. In numeric terms the awards previously granted are capped at 255,034 shares (at a price of £1.49 per ordinary share).

There are standard good and bad leaver provisions included in the LTIP terms. Where awards vest the beneficiary will be entitled to the notional dividends accrued over the three year period. Standard "claw back" provisions are included as is the absolute discretion of the Board to deal with unvested shares.

At the reporting date no Ordinary Shares had vested and the board have concluded that the fair value of the options at the grant date and the period end are not material to these financial statements.

22 Financial risk management

The strategy of the Group is to invest in United Kingdom commercial property with a view to holding it for capital appreciation whilst enhancing rental and capital growth opportunities.

Consistent with that objective, the Group holds UK commercial property investments. In addition the Group's financial instruments during the year comprised interest bearing receivable and payable loans, cash and cash equivalents and trade receivables and payables that arise directly from its operations. The Group does not have any exposure to any derivative instruments other than the interest rate cap entered into to hedge the interest paid on the interest bearing bank loans.

The Group is exposed to various types of risks that are associated with financial instruments. The most important types are credit risk, liquidity risk, interest rate risk and market price risk. There is no foreign currency risk as all assets and liabilities of the Group are maintained in pounds sterling.

The Directors review and agree policies for managing its risk exposure. These policies are summarised on the following pages.

These disclosures include, where appropriate, consideration of the Group's investment properties which, whilst not constituting financial instruments as defined by IFRS, are considered by the Board to be integral to the Group's overall risk exposure.

Credit risk
Credit risk is the risk that an issuer or counterparty to an asset will be unable or unwilling to meet a commitment that it has entered into with the Group.

In the event of default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs including: legal expenses; and in maintaining, insuring, and re-letting the property. The Board produces regular reports on any tenant arrears which are monitored by the Directors in order to anticipate, and minimise the impact of, defaults by occupational tenants.

The carrying amount of financial assets, including cash balances, recorded in the financial statements represents the Group's maximum exposure to credit risk. The carrying amount of these assets at 31 March 2017 was £5,283,875 (2016; £6,501,377). There were no financial assets which were past due or considered impaired at 31 March 2017 and 2016.

All of the Group's cash is placed with financial institutions with a Moody's long-term credit rating of A3. Bankruptcy or insolvency of such financial institutions may cause the Group's ability to access cash placed on deposit to be delayed or limited. Should the credit quality or the financial position of the banks currently employed significantly deteriorate, cash holdings would be moved to another bank.

Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The Group's investments comprise UK commercial property. Property and property-related assets in which the Group invests are not traded in an organised public market and may be illiquid. As a result, the Group may not be able to liquidate quickly its investments in these properties at an amount close to their fair value in order to meet its liquidity requirements.

The Group's liquidity risk is managed on an ongoing basis by the Directors. In order to mitigate liquidity risk the Group aims to have sufficient cash balances (including the expected proceeds of any property sales) to ensure that the Group is able to meet its obligations for a period of at least twelve months.

At the reporting date, the maturity profile of the Group's financial assets and financial liabilities were (on a contractual basis):

				Contractual Value
			Carrying Amount	Within one year	1-2 years		2-5 years		More than 5 years	Total
			£	£	£		£		£	£
31st March 2017
Financial assets
Trade and other receivables			390,068	390,068	-		-		-	390,068
Financial instruments at fv			710	-	710		-		-	710
Cash and cash equivalents			4,893,807	4,893,807	-		-		-	4,893,807
			5,284,585	5,283,875	710		-		-	5,284,585

Financial liabilities
Trade and other payables			1,789,165	1,789,165	-		-		-	1,789,165
Loan borrowings			45,590,423	999,904	999,904		45,944,991		-	47,944,799
			47,379,588	2,789,069	999,904		45,944,991		-	49,733,964

				Contractual Value
			Carrying Amount	Within one year	1-2 years		2-5 years		More than 5 years	Total
			£	£	£		£		£	£
31st March 2016
Financial assets
Trade and other receivables			1,985,224	1,985,224	-		-		-	1,985,224
Cash and cash equivalents			4,516,153	4,516,153	-		-		-	4,516,153
			6,501,377	6,501,377	-		-		-	6,501,377

Financial liabilities
Trade and other payables			1,604,398	1,604,398	-		-		-	1,604,398
Financial liabilities at fair value			94,855	-	98,053		(3,198)		-	94,855
Loan borrowings			40,091,127	1,441,378	1,378,622		40,121,911		-	42,941,911
			41,790,380	3,045,776	1,476,675		40,118,713		-	44,641,164

Interest rate risk
Some of the Group's financial instruments are interest bearing. They are variable rate instruments with differing maturities. As a consequence, the Group is exposed to interest rate risk due to fluctuations in the prevailing market rate.

The Group's exposure to interest rate risk relates primarily to the Group's bank borrowings. As detailed in note 16 the Group uses an interest rate cap to manage exposure to the interest on its bank borrowings. The cap has been entered into with The Royal Bank of Scotland plc on a notional amount of £10,000,000.

As a result the Group is exposed to changes in prevailing interest rates on the remaining balance of its borrowing detailed in note 16. Having assessed the level of risk the Directors have concluded that it is within acceptable limits.

The interest profile of the Group's financial assets and financial liabilities after the impact of the interest rate contracts held at the year end are as follows:

					Floating rate		Fixed rate		Interest free	Total
					£		£		£	£
31st March 2017
Financial assets
Trade and other receivables					-		-		390,068	390,068
Financial instruments at fair value					-		710		-	710
Cash and cash equivalents					4,893,807		-		-	4,893,807

Financial liabilities
Trade and other payables					-		-		1,789,165	1,789,165
Loan borrowings					45,720,355		-		-	45,720,355

					Floating rate		Fixed rate		Interest free	Total
					£		£		£	£
31st March 2016
Financial assets
Trade and other receivables					-		1,526,167		459,057	1,985,224
Cash and cash equivalents					4,516,153		-		-	4,516,153

Financial liabilities
Trade and other payables					-		-		1,667,154	1,667,154
Financial instruments at fair value					-		94,855		-	94,855
Loan borrowings					28,966,135		10,000,000		-	38,966,135

When the Group retains cash balances, they are ordinarily held on interest bearing deposit accounts. The benchmark which determines the interest income received on interest bearing cash balances is the bank base rate which was 0.25% as at 31 March 2017 (2016; 0.5%). The Group's policy is to hold cash on variable rate bank accounts.

The Group has borrowings amounting to £45,720,355 which have interest rates linked to the 3 month LIBOR interest rates. A 1% increase in the LIBOR rate will have the effect of increasing interest payable by £457,204 (2016; £298,661). A decrease of 1% would have an equal but opposite effect.

Market price risk
The Group holds a portfolio of UK commercial properties. The Group invests in properties which the Directors believe will generate a combination of long-term growth in income and capital for shareholders. Investment decisions are based on analysis of, amongst other things, prospects for future income and capital growth, sector and geographic prospects, tenant covenant strength, lease length and initial and equivalent yields.

Investment risks are spread through letting properties to low risk tenants. The management of market price risk is part of the investment management process and is typical of commercial property investment. The portfolio is managed with an awareness of the effects of adverse valuation movements through detailed analysis, with an objective of maximising overall returns to shareholders. Investments in property and property-related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date. Such risk is managed through the appointment of independent external property valuers, Savills (UK) Limited.
Any changes in market conditions will directly affect the profit or loss reported through the Consolidated Statement of Comprehensive Income. Details of the Group's investment portfolio held at the balance sheet date are disclosed in note 13. A 10 per cent increase in the fair value of the properties at 31 March 2017 would have increased net assets and profit for the year by £9,302,500 (2016; £7,773,500). A decrease of 10 per cent would have an equal but opposite effect.
The calculations are based on the investment property valuations at the respective balance sheet dates.

Fair values
Accounting standards recognise a hierarchy of fair value measurements for financial instruments which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The classification of fair value measurements depends on the lowest significant applicable input, as follows:

-	Level 1: Unadjusted, fully accessible and current quoted prices in active markets for identical assets or liabilities.

-	Level 2: Quoted prices for similar assets and or liabilities, or other directly or indirectly observable inputs which exist for the duration of the period of investment.

-	Level 3: External inputs are unobservable. Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instruments. All investments in property would be included in level 3.

All of the Group's investment properties are classified as level 3. There have been no transfers of investment properties in or out of level 3 during the year. The Group determines transfers between levels at the end of each accounting period. A table reconciling opening and closing balances of level 3 properties is included in note 13 of the financial statements.

The fair values of the Group's financial instruments are not materially different from their carrying values. The classification of the fair value of the interest rate cap outstanding at the year end, as detailed in note 17, is deemed level 2.

23 Investment in subsidiaries						Country of incorporation			Ownership interest
						Country of incorporation			31 March 2017	31 March 2016

Circle Property Unit Trust						Jersey			100%	100%
Circle Property (Warrington) Limited						Jersey			-	100%
Circle Property (Milton Keynes) Limited						Jersey			100%	100%
Circle Property Management Limited						England			100%	100%

Circle Property (Warrington) Limited was dissolved on 15 February 2017.

Circle Property Management Limited was dissolved on 30 May 2017.

24 Commitments under construction contracts

As at 31 March 2017 the Group had contracted capital expenditure on existing properties of £2,156,704 (2016; £533,318). This was committed but not yet provided for in the financial statements.

25 Operating leases

The Group leases out its investment properties under operating leases.

As at the reporting date, the future minimum lease payments under non-cancellable leases are receivable as follows (based on annual rentals):
									31 March 2017	31 March 2016
									£	£

Less than one year									5,325,385	4,279,104
Between two and five years									15,339,579	13,700,180
Over five years									26,142,360	11,053,958

Total									46,807,324	29,033,242


Operating lease payments in respect of rents payable on leasehold properties were payable as follows:

									31 March 2017	31 March 2016
									£	£

Less than one year									137,105	16,829

26 Ultimate controlling party

In the opinion of the Directors there is no ultimate controlling party as no one individual is deemed to satisfy this definition.

27 Related party disclosures

Consortia Partnership Limited ("CPL") and Consortia Trustees Limited ("CTL") are joint Trustees of CPUT and provide administration and accounting services to the Group. Michael Farrow and Richard Hebert are Directors of CPL and CTL. During the year CPL and CTL charged and received a total of £251,829 (2016; £30,797) for administration and accountancy services and nil (2016; £168,114) for administration services in relation to the admission to AIM.

As disclosed in note 14, the Group was party to a loan facility agreement with Circle Property Trading (Maidstone) Limited ("CPTML"). John Arnold, Edward Olins, The Duke of Roxburghe and James Hambro are all Directors and Shareholders of CPTML. The loan and all interest thereon was repaid on 2 February 2017.

Directors' interests in the shares of the Company, including relevant family interests:

										Ordinary shares
John Arnold										977,971
Edward Olins										128,089
The Duke of Roxburghe										2,483,069
James Hambro										3,267,656

There have been no changes in the Directors' shareholdings since the year end.

The remuneration of the Directors who are key management personnel of the group, is set out below in aggregate. Further information about the remuneration of individual directors is provided in the Remuneration report on pages 23-24. Key personnel of the Group are those persons who have responsibility for planning, directing and controlling the activities of the Group either directly or indirectly, including any director, whether executive or otherwise.

									1 April 2016 to 31 March 2017	4 December 2015 to 31 March 2016
									£	£

Directors remuneration									953,870	66,020

A bonus was awarded to the executive directors ("Executives") of the Company for the year ended 31 March 2017. The Key Performance Indicators (KPIs") comprise the Net Asset Value, Earnings (EBITDA) and maintenance of a progressive dividend policy, each evenly weighted. The bonus awards, against KPIs, takes regard of the individual performance of the Executives and of the business as a whole but remain at the absolute discretion of the Board. Due to the performance of the Group over the year the bonus has achieved the capped amount of 100% of salary.

On 11 February 2016 two Directors were granted options under the company Long Term Incentive Plan ("LTIP") as described in note 21. John Arnold was granted an Option by Deed to acquire 134,229 Shares and Edward Olins was granted an Option to acquire 120,805 Shares both at nil cost.

28 Subsequent events

There have been no events subsequent to the year end which require disclosure in the financial statements.

Officers and professional advisers


Directors
Ian Henderson	Non-Executive Chairman
John Arnold	Chief Executive
Edward Olins	Chief Operating Officer
The Duke of Roxburghe	Non-Executive Director
James Hambro	Non-Executive Director
Michael Farrow	Non-Executive Director
Richard Hebert	Non-Executive Director

Company Secretary
Consortia Secretaries Limited

Registered Office
3rd Floor
Standard Bank House
47-49 La Motte Street
St Helier
Jersey
JE2 4SZ

Independent Auditor
KPMG Channel Islands Limited
37 Esplanade
St Helier
Jersey
JE4 8WQ

Nominated Adviser and Broker
Peel Hunt LLP
Moor House
120 London Wall
London
W1G 0JD

Independent property valuer:
Savills
33 Margaret Street
London
W1G 0JD

Independent tax advisors
Lubbock Fine
Paternoster House
65 St Paul's Churchyard
London
EC4M 8AB

Administrator
Consortia Partnership Limited
3rd Floor
Standard Bank House
47-49 La Motte Street
St Helier
Jersey
JE2 4SZ

UK Legal Advisers
Charles Russell Speechlys LLP
5 Fleet Place
London
EC4M 7RD

Jersey Legal Advisers
Pinel Advocates
32 Commercial Street
Jersey
JE2 3RU

Registrars
Computershare Investor Services (Jersey) Limited
Queensway House
Hillgrove Street
St Helier
Jersey
JE1 1ES

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR EAKPNEADXEFF

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