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Final Results

Published: 18/07/2022, 07:00

RNS Number : 7751S

Circle Property PLC

18 July 2022

Circle Property Plc

("Circle", the "Company" or the "Group")

Final Results for the year ended 31 March 2022

Continued delivery of strategy to deliver shareholder returns

Circle Property Plc (AIM: CRC), which invests in, develops and actively manages well-located regional office assets, is pleased to announce final results for the year ended 31 March 2022.

John Arnold, Chief Executive of Circle Property Plc, said:

"Good progress has been made with our disposal strategy during the year. Four properties were sold for an aggregate price of £62 million, £3 million above the aggregate March 2021 valuation. We have now successfully disposed of c.50% of our portfolio by value.

This momentum has continued following the financial year end with the sale of 720 Aztec West in May 2022, £0.32 million ahead of its March 2022 valuation. The proceeds of these disposals were predominantly used to reduce gearing and consequently we are now debt free.

"We remain focused on actively managing our assets and returning capital to shareholders in the most tax efficient manner. There remains a shortage of high-quality, well-located regional offices and we therefore remain confident that the appetite for our assets is set to continue."

Financial Highlights: Strategy delivering strong returns

· 5.54% increase in like for like growth in property portfolio value from 31 March 2021.

· 2.60% increase in Net Asset Value ("NAV") per share to £2.81 (31 March 2021: £2.74).

· Earnings per share of 15p (31 March 2021: loss of 9p).

· Profit before tax of £5.8 million reflecting a combination of operational profit and revaluation gains (31 March 2021: loss of £2.7 million).

· Proposed final dividend of 3.5p per share for the year ended 31 March 2022 (31 March 2021: 4p per share) which together with the interim dividend of 3.5p per share, brings the total annual dividend to 7p per share (31 March 2021: 6.5p per share).

Operational Highlights: Active portfolio management and disposal programme to extract maximum value for our assets

· Four properties sold during the year at an aggregate price of £62 million (£3 million or 5% above the aggregate March 2021 valuation)

o Compass Conference Centre, Milton Keynes: £34.5 million

o 135 Aztec West, Bristol: £3.96 million

o 141 Moorgate, London: £3.56 million

o One Castle Park, Bristol: £20 million

· 80.2% of total portfolio is let and income producing

· High-spec, modern fit-outs undertaken at Concorde Park, Maidenhead and 36 Great Charles Street, Birmingham to improve sustainability attributes and letting attractiveness

· Development project: Refurbishment of K3 Kents Hill, Milton Keynes underway, with a pre-let agreed (ahead of completion of works) with Kuehne + Nagel for the whole property

Post year-end

· In May, the sale of 720 Aztec West for £2.52 million (14.5% increase on the March 2022 valuation of £2.2 million)

· In June, the Company repaid the amount outstanding under its debt facility in full and is now debt free, with a net cash balance of £5.8m

Outlook

· Confident in continuing to deliver our strategy of divestment and maximising total returns

· Anticipate disposing of the balance of the portfolio within the next 18-24 months at aggregate prices expected to show a triple net NAV of no less than £2.75 per share

· The Board remains committed to maximising returns and delivering value to Shareholders, and expects a minimum of two returns of capital will be made to shareholders, the first of which is expected to occur by March 2023.

The annual report and accounts for the year ended 31 March 2022 and the Notice of AGM are expected to be posted to shareholders on 20 July 2022 and will be available on the Company's website: www.circleproperty.co.uk, shortly.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

Enquiries:

Circle Property Plc	+44 (0)207 930 8503
John Arnold, CEO Edward Olins, COO

Cenkos Securities	+44 (0) 207 397 8900
Katy Birkin Mark Connelly

Radnor Capital Partners	+44 (0) 203 897 1830
Joshua Cryer Iain Daly

Camarco	+44 (0) 203 757 4992
Ginny Pulbrook Rosie Driscoll Toby Strong

Chairman's Statement

The Group's regional office portfolio continues to show its resilience. Our assets are selected for their strong locations, asset management potential and letting prospects. This strategy has continued to serve us well, delivering significant returns for shareholders since IPO.

Since the Board took the strategic decision to break up the portfolio and return the capital proceeds to shareholders, the Board is pleased to see the market recognise the underlying value inherent in Circle's property portfolio as evidenced by the material uplift in share price. This decision was not taken lightly given the strong financial and operational performance of the Company since IPO but was ultimately made in the best interests of shareholders.

Notwithstanding this change in strategy, active management continues unabated throughout the portfolio, with refurbishment and lettings adding value prior to individual sales.

We continue to reduce arrears, through negotiations with our tenants with whom we maintain close contact. The office continues to play an essential role for businesses, evidenced by tenants returning post the impacts of COVID-19.

Our de-gearing has been completed with the Group's loan facility having been repaid in full on 22 June 2022. Based on the performance during the year and the positive progress made by the Company, the Board recommends a final dividend of 3.5p, bringing the total dividend for the year to 7p, an increase of 8% on last year.

I would like to thank the Circle Property team for their hard work throughout the year. With our team's expertise in maximising returns from our portfolio from within the regional commercial market, we remain confident of continuing to deliver on our strategy of divestment and total returns.

Chief Executive's Statement

Our regional office portfolio has performed well in the period, with like-for like valuations up 5.54%. As increasing numbers of workers have returned to the office, the importance of having a place to meet and collaborate is clear. As an internally managed company, we take pride in our tenant relationships and the benefits of this model have been particularly apparent during the last few years with the global pandemic.

Following the Board's decision to wind-down the portfolio and return the proceeds to shareholders in an orderly manner, good progress has been made with the disposals programme, extracting maximum value for our assets.

At the start of the year in April 2021, we owned 15 properties at a total value of £132.15 million and by the year end, four properties had been sold at an aggregate price of £62 million (£3 million above the aggregate March 2021 valuation). At the current rate of sale, we anticipate selling the whole portfolio within the next 18 to 24 months at aggregate prices which we expect to show a triple net NAV of no less than £2.75 per share.

In many instances, sales prices (both achieved and projected) continue to be enhanced by lettings and lease renewals. For example, K3 Kents Hill in Milton Keynes, currently undergoing a £2.2 million refurbishment where Kuehne + Nagel have signed an agreement to lease the entire property of 13,200 sq ft at a rent of £316,000 per annum on a ten-year lease without break. The rent achieved creates a new benchmark at Kents Hill Business Park, which will be reflected in the valuation of buildings K1 and K2. Formal sales marketing of Kents Hill Park will commence in advance of completion of the building works.

During the year we also sold One Castle Park, Bristol, for £20 million (a 3.9% increase on the 31 March 2021 valuation) and sold 135 Aztec West, Bristol for £3.961 million, a 62% increase (post refurbishment cost) on the 31 March 2021 valuation of £1.55 million. The proceeds of these were largely used to reduce the Company's gearing.

Following our financial year end, we also exchanged contracts on the sale of 720 Aztec West for £2.52 million, an uplift on the 31 March 2022 valuation of £2.2 million.

As the disposal programme continues, the Board will be returning capital to shareholders in the most tax efficient manner. It is envisaged that this will be done in a minimum of two tranches.

Circle Property Plc

Consolidated statement of comprehensive income
for the year ended 31 March 2022

	Note	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
		£	£

Rental income	4	7,458,236	7,657,830
Other income	4	1,581,773	2,233,842
		9,040,009	9,891,672

Property expenses	5	(2,082,925)	(2,356,221)

		6,957,084	7,535,451

Administrative expenses	6	(3,583,744)	(2,615,926)

Operating profit		3,373,340	4,919,525

Gain on disposal of investment properties		2,070,908	263,446
Gain/ (loss) on revaluation of investment properties	12	1,837,721	(6,224,003)

Operating profit / (loss) after revaluation of investment properties		7,281,969	(1,041,032)

Finance income	8	192	2,094
Finance costs	9	(1,488,907)	(1,696,110)

Net finance costs		(1,488,715)	(1,694,016)

Profit/(loss) for the year before taxation		5,793,254	(2,735,048)

Taxation	10	(1,425,337)	199,729

Total comprehensive profit / (loss) for the year		4,367,917	(2,535,319)

Earnings / (loss) per share		0.15	(0.09)
Diluted earnings / (loss) per share		0.15	(0.09)

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.

Circle Property Plc

Consolidated statement of financial position
As at 31 March 2022

	Note	31 March 2022	31 March 2021
		£	£
Non-current assets
Investment properties	12	32,399,476	121,289,149
Right of use assets	14	75,728	61,039
Property, plant and equipment		49,025	54,410
Lease incentives	15	1,350,524	10,127,528
Deferred tax asset	10	406,612	1,291,615
		34,281,365	132,823,741

Current assets
Investment properties	12	39,994,194	-
Asset held-for-sale	13	2,200,000	-
Trade and other receivables	15	3,858,790	2,982,923
Cash and cash equivalents	16	25,303,400	7,522,804
		71,356,384	10,505,727

Total assets		105,637,749	143,329,468

Equity
Stated capital	20	42,542,179	42,542,179
Share based payment reserve		1,047,684	1,047,684
Retained earnings		36,060,113	33,814,453
Total equity		79,649,976	77,404,316

Non-current liabilities
Loan borrowings	17	-	61,922,684
Trade and other payables	19	1,055,871	-
Lease liabilities for right of use assets	14	47,398	28,601
Deferred tax liability	10	923,046	482,171
		2,026,315	62,433,456

Current liabilities
Trade and other payables	19	2,631,128	3,450,969
Loan borrowings	17	21,305,537	-
Lease liabilities for right of use assets	14	24,793	40,727
		23,961,458	3,491,696

Total liabilities		25,987,773	65,925,152

Total liabilities and equity		105,637,749	143,329,468

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

Director

Circle Property Plc

Consolidated statement of changes in equity
for the year ended 31 March 2022

	Stated capital	Treasury share capital	Share based payment reserve (i)	Retained earnings	Total
	£	£	£	£	£

As at 1 April 2020	42,162,178	380,001	516,048	37,623,126	80,681,353

Loss for the year	-	-	-	(2,535,319)	(2,535,319)

Share-based payments	-	-	531,636	-	531,636

Dividends	-	-	-	(1,273,354)	(1,273,354)

As at 31 March 2021	42,162,178	380,001	1,047,684	33,814,453	77,404,316

Profit for the year	-	-	-	4,367,917	4,367,917

Share-based payments	-	-	437,895	-	437,895

Reclassification	-	-	(437,895)	-	(437,895)

Dividends	-	-	-	(2,122,257)	(2,122,257)

As at 31 March 2022	42,162,178	380,001	1,047,684	36,060,113	79,649,976



(i)					Share based payment reserve
					£

Issue of treasury shares					(380,001)
As at 31 March 2016					(380,001)
As at 31 March 2017					(380,001)
Share based payments					122,514
As at 31 March 2018					(257,487)
Share based payments					178,143
As at 31 March 2019					(79,344)
Share based payments					595,392
As at 31 March 2020					516,048
Share based payments					531,636
As at 31 March 2021					1,047,684
Share based payments					437,895
Reclassification of share-based payment to long-term incentive payment					(437,895)
As at 31 March 2022					1,047,684

Circle Property Plc

Consolidated statement of cash flows
for the year ended 31 March 2022

		1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	Note	£	£
Cash flows from operating activities
Profit/(loss) for the year before taxation		5,793,254	(2,735,048)
Adjustments for:
Finance income		(192)	(2,094)
Finance costs		1,488,907	1,696,110
Depreciation		16,715	14,167
Amortisation of right of use assets		30,196	47,005
(Gain)/loss on revaluation of investment properties		(1,837,721)	6,224,003
Gain on disposal of investment properties		(2,070,908)	(263,446)
Share based payments		437,895	531,636
Increase in trade and other receivables	15	(207,344)	(1,150,266)
Increase in trade and other payables		17,065	185,615

Cash generated from operating activities		3,667,867	4,547,682

Interest paid		(1,332,610)	(1,578,755)
Interest received		192	2,094
Taxation paid		(480,779)	(151,475)

Net cash from operating activities		1,854,670	2,819,546

Cash flows from investing activities
Net proceeds from disposal of investment properties		61,009,583	3,513,446
Cost of refurbishment of investment properties		(2,089,004)	(1,459,489)
Cost of additions of property, plant and equipment		(11,330)	(6,314)

Net cash from investing activities		58,909,249	2,047,643

Cash flows from financing activities
Repayment of borrowings		(40,819,344)	-
Drawdown of borrowings		-	1,000,000
Payment of lease liabilities		(41,722)	(51,360)
Dividends paid		(2,122,257)	(1,273,354)

Net cash used in financing activities		(42,983,323)	(324,714)

Net increase in cash and cash equivalents		17,780,596	4,542,475
Cash and cash equivalents at the beginning of the year		7,522,804	2,980,329
Cash and cash equivalents at the end of the year		25,303,400	7,522,804

Circle Property Plc

Notes to the consolidated financial statements

for the year ended 31 March 2022

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 24.

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. On 28 February 2022, the address of its registered office was changed from 3rd Floor, Standard Bank House, 47-49 La Motte Street, St Helier, Jersey, JE2 4SZ to Oak Group (Jersey) Limited, 3rd Floor, IFC5, Castle Street, St Helier, Jersey, JE2 3BY.

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

2 Principal accounting policies

The Group financial statements show a true and fair view and have been prepared in accordance with International Financial Reporting Standards as adopted by the UK (IFRS) and the Companies (Jersey) Law 1991. The financial statements have been prepared in pound sterling, which is the Group's functional currency, and under the historic cost convention as modified by the revaluation of investment property.

Going concern

On 14 February 2022 the Group announced the disposal of Kents Hill Park Conference Centre and provided an update on its future strategy whereby it would make targeted property sales, whilst investing in and actively managing the remainder of the property portfolio, over an extended period of two to three years. The proceeds of the future disposals were to be utilised to continue to reduce borrowings with the remaining proceeds to be returned to shareholders in an orderly and efficient manner.

Due to the Group's intention to pursue this revised strategy, the financial statements have been prepared on a basis other than going concern.

In preparing the financial statements on an alternate basis, the Board has continued to apply the requirements of IFRS taking into account that the Group is not intended to continue as a going concern in the foreseeable future.

This has resulted in a reclassification of investment properties and associated lease incentive assets that are expected to be disposed of in the year ending 31 March 2023 as current assets in accordance with IAS 1. There has been no impact on the measurement of assets and liabilities as at 31 March 2022. No additional provisions have been recognised as at 31 March 2022 in relation to the costs expected to be incurred in winding down the Group's operations.

Notwithstanding the Board's intention that the Group will not continue for the foreseeable future, at 31 March 2022, the Group's financial statements disclosed a net current asset position with an available cash balance of £25.3 million. The balance of the Group's loan facility with NatWest and HSBC at that date was £21.4m with a final repayment date of 13 February 2023.

Following the disposal of 720 Aztec West in May 2022 the proceeds, net of costs, were fully utilised to partially repay the loan facility resulting in an outstanding facility balance of £19 million.

Having considered the best use of the Group's available cash balance the Directors resolved to fully repay the remaining balance of the loan facility thus saving future interest costs, commitment fees and compliance costs associated with the facility. On 22 June the loan facility was repaid in full.

The remainder of the property portfolio continues to be actively managed with strong rental collections and the timely recovery of any arrears. In assessing the Group's ability to continue operating, the Group's cash forecasts have been modelled based on the circumstances of each tenant on an individual basis and all envisaged development expenditure has been accounted for. Rental collections continue to be monitored on a monthly basis with payment plans agreed for the collection of overdue amounts.

Basis of consolidation

The financial statements incorporate the financial statements of the Company and its subsidiaries, as outlined in note 24.

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 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 less than the fair value of the assets and liabilities acquired, the difference is recognised as negative goodwill and is reflected directly in the Consolidated Statement of Comprehensive Income.

Acquisition-related costs are expensed as incurred.

Adoption of new and revised IFRSs

New and amended standards and interpretations

The Group has adopted all new standards, amendments to standards and interpretations which came in to effect for the Group's accounting period starting on 1 April 2021. These changes have not had a significant impact on the preparation of these financial statements.

New Accounting Requirements not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2022 and have not been early adopted in preparing these financial statements. None of these are expected to have a material effect on the financial statements of the Group.

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 reporting 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 judgements

Going concern

In assessing the appropriate basis for the preparation of the financial statements the Directors concluded that the Board's commitment to the revised disposal strategy, following its approval at the General Meeting in March 2022, means that the Group has no realistic alternative but to pursue this strategy which will ultimately result in the Group being wound up and therefore the non-going concern basis of preparation has been adopted.

Determination of presentation of current and non-current assets

When preparing the financial statements on a basis other than a going concern the Directors have assessed the anticipated timing of the disposal of the remainder of the property portfolio. The assessment has been based on the level of continued active management required in respect of each property and the stage of the sale process for properties which are currently being marketed for sale. Based on this assessment, investment properties which are expected to be disposed of within 12 months of the year end have been classified as current assets along with the lease incentives recognised thereon.

Significant estimates

Long term employee benefit

As disclosed in note 27 to the financial statements the Group has recognised a liability in respect of the incentive payment payable to the Executive Directors on completion of the disposal programme. In measuring the fair value of the liability the Board has considered the anticipated timing of each disposal with the expected gain/loss on each disposal being measured using a range between 10% under and 10% over the 31 March 2022 independent valuation. The weighted average of these measurements has been adjusted to present value using a discount rate of 2.74%.

Fair value of investment property

Investments in property 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 ("Savills") to perform valuations of the investment property using Royal Institute of Chartered Surveyors ("RICS") valuation standards as at 31 March 2022. In arriving at their estimate of market value 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 12.

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 with the lease incentive recognised as a receivable at the year end.

Deferred income

Where tenant invoices relate to a period after the Group's year-end deferred income is recognised for the difference between revenue recognised and amounts billed for that contract.

Property service charges

Service charges and other such receipts arising from expenses recharged to tenants are as stated in Notes 4 and 5. Notwithstanding that the funds are held on behalf of the occupiers, the ultimate risk for paying and recovering these costs rests with the Group.

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 interest income. Finance costs predominantly comprises of interest expense on borrowings. Finance income and finance costs are recognised on an effective interest rate basis.

Employee benefits

In accordance with IAS 19 'Employee Benefits' the cost of providing employee benefits is recognised in the period in which the benefit is earned by the employee, rather than when it is paid or payable.

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 profit or loss. The fair value is based on valuations provided by Savills at the reporting 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 profit or loss.

Recognition and derecognition occurs on the completion of a sale between a willing buyer and a willing seller. Any investment properties which meet the criteria of IFRS5 at the year end are disclosed as properties held for sale and stated at fair value. At 31 March 2022, there was one property classified as held for sale (2021: none).

At 31 March 2022, the property 720 Aztec West, met the IFRS 5 criteria stated below:

Ÿ Management is committed to a plan to sell

Ÿ The asset is available for immediate sale

Ÿ An active programme to locate a buyer is initiated

Ÿ The sale is highly probable, within 12 months of classification as held for sale

Ÿ The asset is being actively marketed for sale at a sales price reasonable in relation to its fair value

Ÿ Actions required to complete the plan indicate that it is unlikely that plan will be significantly changed or withdrawn

Assets held for sale are derecognised when significant risks and rewards attached to the asset have transferred from the group which is on completion of contracts.

None of the Group's other investment properties met all of the above criteria at 31 March 2022 and accordingly continue to be classified as investment properties.

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 2022 and 31 March 2021 there were no properties under construction or development.

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 comparable market prices where possible, adjusted if necessary, for any difference in the nature, location or condition of the specific assets and factors not included in net rental income such as vacancies and lease incentives.

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.

Leases

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.

Group as lessee

The Group leases office space under contracts made for fixed periods.

These leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group.

Right of use assets

Right of use assets are the Group's right to use an asset over the life of asset lease. The asset is calculated as the initial amount of the lease liability, plus any lease payments made to the lessor before the lease commencement date, plus any initial direct costs incurred, minus any lease incentives received. Depreciation of a right-of-use asset is on a straight-line basis over the term useful life of the asset lease.

Lease liabilities

The lease liability is initially measured at the present value of outstanding lease payments, discounted using the Group's incremental borrowing rate.

The lease liability is measured at amortised cost using the effective interest method and is remeasured when there is a change in future lease payments arising from a change in an index or rate or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. A corresponding adjustment is made to the carrying amount of the right-of use asset with any excess over the carrying amount of the asset being recognised in profit or loss. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period.

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, which in the opinion of the Directors is a reasonable approximation of fair value.

Trade and other receivables

Trade and other 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, trade and other and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Trade and other receivables are derecognised where the rights to receive cash flows have expired and substantially all risks and rewards of the asset have been transferred.

Trade and other payables

Trade and other payables are not interest bearing and are recognised initially at fair value. Subsequent to initial recognition trade and other payables are measured at amortised cost which 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 statement of comprehensive income over the term of the borrowings using the effective interest rate method.

The Group derecognises a financial liability when the obligation under the liability is discharged, cancelled or expired.

Impairment

The Group recognises expected credit loss ("ECL") on financial assets measured at amortised cost. The Group measures loss allowance as an amount equal to the lifetime ECL, except for bank balances for which credit risk (i.e. risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

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 Circle Property (Milton Keynes) Limited ("CPMK") are registered in Jersey, Channel Islands. The Company and CPMK are taxed at the Jersey company standard rate of 0%. CPUT is not subject to tax in Jersey.

The Group pays UK corporation tax on its net rental income and realised chargeable gains at a rate of 19%. On 24 March 2020 CPUT made a transparency election under paragraph 8 of Schedule 5AAA TCGA with the effect of property disposals being taxed on the Company and chargeable to UK corporation tax by reference to the higher of the April 2019 valuation or historic cost.

With effect from 6 April 2023, the current tax rate of 19% will increased to 25%. Consideration was taken by management when calculating the deferred tax on chargeable gains and losses as disclosed in note 10.

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 reporting 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.

Stated 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 ordinary shares of the Company held for the purpose of awarding shares in the Circle Property 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 granted under the LTIP as disclosed in note 22.

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 statement of comprehensive income 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.

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 financial information used for decision making purposes is based on the Group's financial statements.

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 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£

Rental income	6,904,275	6,906,571
Lease incentives adjustment	553,961	751,259
	7,458,236	7,657,830

Service charge income	1,324,494	1,633,071
Insurance recovery	125,279	142,762
Other income	132,000	458,009
	1,581,773	2,233,842

	9,040,009	9,891,672

5 Property expenses

	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£

Void property service charges	393,323	331,904
Void property rates	111,387	101,968
Other void property costs	78,485	26,392
Property repairs and maintenance costs	28,753	94,556
Property insurance	146,483	168,330
Recoverable service charge costs	1,324,494	1,633,071

	2,082,925	2,356,221

6 Administrative expenses

		1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	Note	£	£

Staff costs	7	2,167,519	1,657,273
Administration fees		308,302	305,540
Legal and professional fees		589,238	415,687
Audit fees		75,630	67,000
Accountancy fees		6,424	8,016
Rent, rates and other office costs		10,786	26,763
Other overheads		72,941	74,475
Depreciation of tangible fixed assets		16,715	14,167
Amortisation of right of use assets		30,196	47,005
Waiver of rental arrears		200,000	-
Provision for doubtful debts		105,993	-

		3,583,744	2,615,926

7 Employees and Directors' Remuneration

	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£
Staff costs during the year were as follows:
Non-executive directors' fees	153,750	168,750
Wages and salaries	754,421	762,400
Share-based payments (Note 22)	437,895	531,636
National insurance costs	119,547	112,118
Pension contributions	37,784	37,028
Long-term incentive payment	612,861	-
Other employment costs	51,261	45,341

	2,167,519	1,657,273

8 Finance income

	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£

Bank interest	192	2,094

	192	2,094

9 Finance costs

	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£

Loan interest	1,209,950	1,420,734
Loan commitment fees	71,949	22,670
Amortisation of lending costs	202,197	200,844
Annual agency fee	-	45,000
Interest on long-term incentive payment	5,111	-
Interest on lease liabilities	(300)	6,862

	1,488,907	1,696,110

10 Taxation

	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£

Current tax charge for the year	99,459	409,109
Deferred tax charge/(credit) for the year	433,958	(608,838)
Impairment of deferred tax asset	891,920	-

Total charge/(credit) for the year	1,425,337	(199,729)

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

Current taxation	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£

Profit / (Loss) for the year before tax	5,793,254	(2,735,048)

UK corporation tax at a rate of 19%	1,100,718	(519,659)

Effects of:
Non-taxable (gain)/loss on investment properties	(349,167)	1,182,561
Offset of taxable gains on disposals against taxable losses	(393,473)	(9,500)
Expenses not deductible for tax purposes	215,677	105,049
Utilisation of capital allowances	(424,790)	(284,772)
Overprovision of prior year taxation	(49,506)	(64,570)

Current taxation	99,459	409,109

Deferred taxation	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£
Deferred tax asset at 31 March relates to the following:

Capital allowances available to carry forward	47,355	682,917
Unrealised losses on investment properties	359,257	482,171
Share-based payments	-	126,527

	406,612	1,291,615

Deferred tax asset brought forward	1,291,615	1,078,007
Deferred tax credit for the year	6,917	213,608
Impairment of tax asset	(891,920)	-

Deferred tax asset carried forward	406,612	1,291,615

At 31 March 2022, the Group had capital allowances available to carry forward against future profits. Having assessed the potential impact of future tax charges, the Group has recognised a deferred tax asset of £47,355 (2021: £682,917) being the maximum amount of tax relief expected to be available to be utilised against future profits.

The Group has recognised unrealised losses on the revaluation of certain investment properties. A deferred tax asset of £359,257 (2021: £482,171) has been recognised in respect of the expected future tax relief available on these losses. The quantum of the deferred tax relief available has been measured with reference to the future tax rate expected to be in effect at the date of the anticipated disposal of each property.

The quantum of the deferred tax relief available has been measured with reference to the future tax rate expected to be in effect at the date of the anticipated disposal of each property.

Having assessed the future taxable profits of the Group, the deferred tax asset in respect of share-based payments has been derecognised as it is not anticipated that the Group will have sufficient taxable profits at the date the options are exercised.

	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£
Deferred tax liability at 31 March relates to the following:

Chargeable gains on investment properties	923,046	482,171

Deferred tax liability brought forward	482,171	877,401
Deferred tax charge/(credit) for the year	440,875	(395,230)

Deferred tax liability carried forward	923,046	482,171

The Directors have assessed the potential deferred tax liability of the Group as at 31 March 2022, with relation to the chargeable gains which will arise on the disposal of investment properties. Based on the unrealised chargeable gains of £4,619,383 (2021 £2,537,740), if the properties were disposed of at fair value, a deferred tax liability of £923,046 (2021: £482,171) has been recognised.

In the 3 March 2021 UK Budget it was announced that the UK corporation tax rate will increase from 19% to 25% with effect from 1 April 2023. The Directors have estimated the expected timings of investment property disposals in order to establish the appropriate tax rate in which to measure the deferred tax asset and liability on chargeable gains and losses on investment property disposals.

11 Earnings per share

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

	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£

Profit/(loss) for the year	4,367,917	(2,535,319)

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

Profit/(loss) per ordinary share:	0.15	(0.09)

Diluted earnings per share

	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£

Profit/(loss) for the year	4,367,917	(2,535,319)

Weighted average number of shares	29,183,396	29,322,398

Profit/(loss) per ordinary share:	0.15	(0.09)

12 Investment properties

	31-Mar-22	31-Mar-21
	£	£

Opening fair value per valuation report	132,150,000	139,450,000
Cost of refurbishment of investment properties	2,296,994	1,422,744
Disposal of investment properties	(58,938,675)	(3,250,000)
Gain/(loss) on revaluation of investment properties	1,837,721	(6,224,003)
Lease incentive amortisation	553,960	751,259
Reclassification of asset held for sale	(2,200,000)	-

Fair value of investment properties per valuation report	75,700,000	132,150,000

Unamortised lease incentives recorded within trade and other receivables	(3,306,330)	(10,860,851)

Carrying value	72,393,670	121,289,149

Following the amendment of the basis of preparation of the financial statements, investment properties and the unamortised lease incentives thereon have been recognised as current and non-current assets dependent on the anticipated disposal date. At 31 March 2022 £41,950,000 of the total value of the investment property of £75,700,000 has been recognised as a current asset and £33,750,000 has been recognised as a non-current asset.

At 31 March 2022, 720 Aztec West is being classified as held for sale given that it meets IFRS 5 criteria (2021: None).

As at 31 March 2022 the fair value of investment properties under development included in the above amount was nil (2021: nil).

£75,700,000 (2021: £129,300,000) of the above properties' value, estimated by the valuer, relate to property held on a freehold basis and £nil (2021: £2,850,000) on a long leasehold basis, for a peppercorn rent.

The fair value of the Group's investment properties per the Valuation Report, excluding 720 Aztec West, amounted to £75,700,000 (2021: £132,150,000). The difference between the fair value of the investment properties per the Valuation Report and the fair value per the balance sheet of £3,306,330 (2021: £10,860,851) 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 17.

The fair value of the Group's investment properties at 31 March 2022 has been estimated on the basis of valuation carried out by Savills. 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.

Sensitivity analysis

As disclosed in the significant estimates accounting policy, the property valuations prepared by Savills are open to judgements which are inherently subjective. An increase/decrease in ERV will increase/decrease valuation, while an increase/decrease to yield decreases/increases valuations. The table below assess the impact of the sensitivity of the valuation to changes in ERV and yield.

Movement	31-Mar-22	31-Mar-21
	£	£

Increase in ERV by 5%	3,695,000	4,886,156
Decrease in ERV by 5%	(3,202,138)	(4,922,933)
Increase in yield by 0.25%	(2,655,000)	(5,332,137)
Decrease in yield by 0.25%	3,035,000	5,799,355

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. (2021: no change)

The estimated fair value would increase / (decrease) if:

2021

96,800,000

2022

75,700,000

void periods were shorter / (longer);

Conference

Market rents have been based on the specific circumstances of each property.

market rents were higher / (lower);

Centre

2021

35,350,000

rent free periods were shorter / (longer);

2022

Estimated rent free periods range from six to 15 months on new leases. (2021: six to 12 months)

letting fees were lower / (higher);

rent per square foot were higher / (lower);

Total

2021

132,150,000

Letting fees have been estimated on vacant units.

equivalent yields were lower / (higher); or

2022

75,700,000

Net equivalent yields range from 6.01% to 9.15%. (2021: 4.45% to 8.63%)

Market conditions are considered based on the property's location.

13 Assets held-for-sale

	31-Mar-22	31-Mar-21
	£	£

Reclassification of 720 Aztec West	2,200,000	-
Carrying value	2,200,000	-

As at year end, the Directors were satisfied that the property met the relevant IFRS 5 criteria given that:

Ÿ Management is committed to a plan to sell

Ÿ The asset was available for immediate sale

Ÿ The buyer had been found and an offer received

Ÿ The sale was highly probable, within 12 months of classification as held for sale

Ÿ The asset is being actively marketed for sale at a sales price reasonable in relation to its fair value

Ÿ Actions required to complete the plan indicate that it is unlikely that plan will be significantly changed or withdrawn

On 26 May 2022, the Group completed the sale of 720 Waterside Drive, Aztec West, Almondsbury, Bristol, BS32 4UD, with Maybrook Properties Limited for a total gross consideration of £2,520,000.

14 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-Mar-22	31-Mar-21
	£	£

Less than one year	5,071,892	7,024,942
One to two years	4,428,184	7,272,046
Two to three years	4,008,711	6,503,502
Three to four years	3,625,355	6,137,528
Four to five years	3,357,348	5,328,743
Over five years	15,876,770	47,251,404

Total	36,368,260	79,518,164

The amounts disclosed above represent total rental income receivable up to the next lease break point on each lease. If a tenant wishes to end a lease prior to the break point a surrender premium will be charged to cover the shortfall in rental income due. The largest single tenant at the year end accounted for 15.68% (2021: 20.08%) of the current annual rental income.

The Group currently has leased office space at 15 Duke Street in London, which is not part of the investment portfolio stated in Note 12, and has been accounted for in accordance with IFRS 16. Right of use assets have been recognised and measured at an amount equal to the lease liability. During the year the Group terminated the office space lease relating to 12 St James' Place.

Right of use assets	15 Duke Street	12 St James' Place	Total
	£	£	£

Balance at 1 April 2021	16,214	44,824	61,038
Additions	84,907	-	84,907
Termination of lease	-	(40,021)	(40,021)
Amortisation for the year	(25,393)	(4,803)	(30,196)

Balance at 31 March 2022	75,728	-	75,728

Lease Liabilities	15 Duke Street	12 St James' Place	Total
	£	£	£

Balance at 1 April 2021	21,103	48,226	69,329
Additions	84,907	-	84,907
Interest expense	2,256	859	3,115
Lease payments	(36,075)	(5,647)	(41,722)
Termination of lease	-	(43,438)	(43,438)
Balance at 31 March 2022	72,191	-	72,191

Maturity analysis - contractual undiscounted cash flows	15 Duke Street	12 St James' Place	Total
	£	£	£

Less than one year	28,860	-	28,860
One to five years	50,505	-	50,505
More than five years	-	-	-
Total undiscounted lease liabilities at 31 March 2022	79,365	-	79,365
Future finance charges at 31 March 2022	(7,174)	-	(7,174)

Lease liabilities at 31 March 2022	72,191	-	72,191

Non-Current	47,398	-	47,398

Current	24,793	-	24,793

15 Lease incentives and receivables

	31-Mar-22	31-Mar-21
	£	£

Non-current
Lease incentives (1)	1,350,524	10,127,528

Current
Lease incentives (1)	1,955,807	733,323
Amounts held by agents	77,491	-
Tenant deposits	225,351	272,824
Amounts due from tenants	1,426,867	1,695,925
Provision for doubtful debts	(105,993)	-
Other receivables	279,267	280,851

	3,858,790	2,982,923

(1) - During the year the company disposed of a number of investment properties. On disposal, the lease incentive receivable recognised to the date of sale was reversed. Of the total lease incentive movement of £7,554,520, reversal of lease incentives in respect of properties sold was £7,159,464.

Lease incentives consist of £3,306,330 (2021: £6,373,806) being the prepayments for rent-free periods and stepped increases in rental income recognised over the life of the lease and £nil (2021: £4,487,045) relating to incentives paid to tenants.

16 Cash and cash equivalents

	31-Mar-22	31-Mar-21
	£	£

Royal Bank of Scotland International	25,303,218	5,747,804
National Westminster Bank plc	182	1,775,000

	25,303,400	7,522,804

17 Loan borrowings

	31-Mar-22	31-Mar-21
	£	£

Brought forward	61,922,684	60,721,840
Loan repayments	(40,819,344)	-
Loan drawdowns	-	1,000,000
Amortisation of lending costs	202,197	200,844

	21,305,537	61,922,684

The Group was party to a revolving facility, with NatWest and HSBC. The facility was a £60,000,000 revolving facility with an accordion option of up to £40,000,000. During the year, the revolving facility commitment was reduced to £30,000,000, with a total of £5,000,000 having been committed under the accordion option. The facility had a four year term, repayable on 13 February 2023.

On 10 November 2021, the Company entered into a Deed of Amendment and Restatement of the facility agreement whereby the rate of interest chargeable under the facility was amended from being linked to LIBOR to SONIA.

The Group paid an arrangement fee of 0.875% for the facility, which along with other costs of arranging the facility including legal costs have been amortised and will be written off over the 4-year term.

The 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 facility's financial covenants are 60% loan to value, 2.00:1 interest cover looking both forward and backward, the Group shall ensure that the total market value of the charged properties does not fall below £50,000,000 at any time and that no single tenant represents more than 25% of the total contracted rents.

At 31 March 2022 £21,480,656 of the total facility had been drawn down (31 March 2021: £62,300,000). The undrawn facility was £13,519,344 (2021; £2,700,000).

On 26 May 2022, 720 Aztec West was sold, with all of the net proceeds utilised to partially repay the loan facility. The loan balance post repayment was reduced to £19m.

On 22 June 2022 the remaining balance of the loan facility was repaid in full.

18 Reconciliation of movements of liabilities to cash flows from financing activities

	31-Mar-22	31-Mar-21
	£	£

Balance brought forward	61,992,011	60,835,665
Cash flows from financing activities:
Repayment of borrowings	(40,819,344)	-
Drawdown of borrowings	-	1,000,000
Payment of lease liabilities	(41,722)	(51,360)

Non-cash movements:
Amortisation of arrangement fees	202,197	200,844
Recognition of lease liability	84,907	-
Termination of lease	(43,438)	-
Lease liability interest expense	3,115	6,862

Balance carried forward	21,377,726	61,992,011

19 Trade and other payables

	31-Mar-22	31-Mar-21
	£	£

Non-current
Long-term incentive payment	1,055,871	-

Current
Trade payables	166,312	50,467
Property improvement costs	235,423	27,433
VAT	25,307	170,918
Wages and salaries	352,723	338,664
Deferred income	1,210,499	1,745,607
Rental deposit accounts	225,351	272,968
Finance costs	223,458	274,169
Valuation Fee	24,000	30,000
Audit fee	75,630	67,000
Administration fees	66	64
Current taxation	92,359	473,679

	2,631,128	3,450,969

Deferred income relates to deferred rental income of £1,126,026 (2021; £1,645,006) and deferred insurance recharges of £84,473 (2021; £100,601).

20 Stated capital

Issued and fully paid share capital is as follows:

	31-Mar-22	31-Mar-21
	£	£

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	28,551,796
Issued in the year	-	-

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. While held in treasury, these shares are not entitled to dividends and have no voting rights.

21 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 17.

The Group's debt and capital structure comprises the following:

	31-Mar-22	31-Mar-21
	£	£

Total liabilities	25,987,773	65,925,152
Less: cash and cash equivalents	(25,303,400)	(7,522,804)
Net debt	684,373	58,402,348

Total equity	76,649,976	77,404,316
Debt to equity ratio	0.01	0.75

22 Share based payments

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.

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.

During the year, the Group recognised a share-based payment expense of £437,895 in relation to the 2019, 2020 and 2021 LTIP awards. Following the modification of the Executive Directors' remuneration agreements on 9 March 2022 the amounts expected to vest from 1 April 2021 have been replaced by a new long-term benefit with the amount recognised being reclassified from equity to a liability as disclosed in note 27.

In line with the revised remuneration arrangements, the awards granted for 2019 vested at two-thirds of the original 43.75%, being a total number of shares of 129,734. The Directors have not yet exercised their option to acquire shares under the awards.

The awards granted for 2020 vested at one-third of the original 25% being a total number of shares of 37,067. The Directors have not yet exercised their option to acquire shares under the awards.

The awards granted for 2021 lapsed in full and no further awards will be granted for 2022 or subsequent periods.

Awards granted

Year	Grant date	Number of shares granted	Performance period start date	Performance period end date	Percentage of shares vested	Number of shares vested	Date Vested
2016	11-Feb-16	255,034	01-Apr-16	31-Mar-19	87.50%	223,155	20-Aug-19
2017	20-Aug-19	261,410	01-Apr-17	31-Mar-20	87.50%	228,734	16-Oct-20
2018	20-Aug-19	267,944	01-Apr-18	31-Mar-21	100.00%	267,944	14-May-21
2019	20-Aug-19	444,804	01-Apr-19	31-Mar-22	29.17%	129,734	08-Mar-22
2020	16-Oct-20	444,804	01-Apr-20	31-Mar-23	8.33%	37,067	08-Mar-22
2021	07-Jul-21	444,804	01-Apr-21	31-Mar-24	Lapsed	Lapsed	Lapsed

An option may be exercised until the tenth anniversary of the grant date, after which time it will lapse. To date the Directors have not yet exercised their option to acquire any of the shares which have vested.

23 Financial risk management

The Group holds UK commercial property investments. In addition the Group's financial instruments during the year comprised interest bearing 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.

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 minimal foreign currency risk as all transactions, assets and liabilities are 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 Board in order to anticipate, and minimise the impact of, defaults by occupational tenants.

The Group notes that in excess of 28% (2021: excess of 30%) of its contracted rents are from 2 major tenants, however the largest tenant, representing 15.68% of contracted rents, operates serviced offices of which the Group would take over the lettings in the case of a tenant default.

The carrying amount of financial assets, including cash balances, amounts due from property agents, amounts due from tenants and other receivables recorded in the financial statements represents the Group's maximum exposure to credit risk. The carrying amount of these assets at 31 March 2022 was £27,087,025 (2021: £9,499,580). At the reporting date £688,741 (2021: £757,388) of the amounts due from tenants were considered to be overdue. After due consideration, the Directors have recognised a provision for doubtful debts of £105,993 (2021: £nil), representing 50% of the outstanding arrears for 141 Moorgate. The Directors consider the remaining overdue amounts to be recoverable in full.

All of the Group's cash is placed with financial institutions with a Moody's long-term credit rating of A3 or better. 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. The properties 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
	£	£	£	£	£	£
31 March 2022
Financial assets
Trade and other receivables	1,783,625	1,783,625	-	-	-	1,783,625
Cash and cash equivalents	25,303,400	25,303,400	-	-	-	25,303,400
	27,087,025	27,087,025	-	-	-	27,087,025
Financial liabilities
Trade and other payables	2,476,500	1,420,629	-	1,055,871	-	2,476,500
Loan borrowings	21,305,537	22,017,578	-	-	-	22,017,578
	23,782,037	23,438,207	-	1,055,871	-	24,494,078

		Contractual Value
	Carrying Amount	Within one year	1-2 years	2-5 years	More than 5 years	Total
	£	£	£	£	£	£
31 March 2021
Financial assets
Trade and other receivables	1,976,776	1,976,776	-	-	-	1,976,776
Cash and cash equivalents	7,522,804	7,522,804	-	-	-	7,522,804
	9,499,580	9,499,580	-	-	-	9,499,580

Financial liabilities
Trade and other payables	1,705,362	1,705,362	-	-	-	1,705,362
Loan borrowings	61,922,684	1,331,974	63,464,109	-	-	64,796,083
	63,628,046	3,037,336	63,464,109	-	-	66,501,445

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 a result the Group is exposed to changes in prevailing interest rates on the remaining balance of its borrowing detailed in note 17. 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 held at the year end are as follows:

	Floating rate	Fixed rate	Interest free	Total
	£	£	£	£
31 March 2022
Financial assets
Trade and other receivables	-	-	1,783,625	1,783,625
Cash and cash equivalents	25,303,400	-	-	25,303,400

Financial liabilities
Trade and other payables	-	-	2,476,500	2,476,500
Loan borrowings	21,480,656	-	-	21,480,656

	Floating rate	Fixed rate	Interest free	Total
	£	£	£	£
31 March 2021
Financial assets
Trade and other receivables	-	-	1,976,776	1,976,776
Cash and cash equivalents	7,522,804	-	-	7,522,804

Financial liabilities
Trade and other payables	-	-	1,705,362	1,705,362
Loan borrowings	62,300,000	-	-	62,300,000

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 0.75% as at 31 March 2022 (2021: 0.1%). The Group's policy is to hold cash on variable rate bank accounts.

The Group has borrowings amounting to £21,480,656 (2021: £62,300,000) which have interest rates linked to SONIA interest rates. A 1% increase in the SONIA rate will have the effect of increasing interest payable by £214,807 (2021: £623,000). A decrease of 1% would have an equal but opposite effect.

Market price risk

The Group holds a portfolio of UK commercial properties. From 14 February 2022, the Group will mainly focus on targeted property sales, which the Directors will be utilising for reduce borrowings and to return capital to shareholders.

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 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.

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 reporting date are disclosed in note 12.

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 12 of the financial statements.

The fair values of the Group's financial instruments are not materially different from their carrying values.

24 Investment in subsidiaries

Principal Activity

Country of incorporation

Ownership interest

31 March 2022

31 March 2021

Circle Property Unit Trust

Property holding

Jersey

100%

Circle Property (Milton Keynes) Limited

Property holding

Jersey

100%

25 Capital expenditure commitments

As at 31 March 2022 the Group had contracted capital expenditure on existing properties of £1.1million (2021: £1,945,081). This was committed but not yet provided for in the financial statements.

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

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

												Ordinary shares
John Arnold												1,030,122
Edward Olins												138,933
James Hambro												3,217,321
Michael Farrow												28,900

On 13 May 2022 John Arnold acquired 6,276 shares and simultaneously Edward Olins sold 6,276 shares.

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 in the Company' Annual Report & Accounts. 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.

Directors' remuneration

	1 April 2021 to 31 March 2022	1 April 2020 to 31 March 2021
	£	£

Short-term employee benefits	900,683	896,094
Post- employment benefits	37,784	35,784
Share-based payment benefits	437,895	531,636
Other long-term employee benefit	612,861	-

	1,989,223	1,463,514

A bonus was awarded to the executive directors ("Executives") of the Company for the year ended 31 March 2022. The Key Performance Indicators (KPIs") comprise the Net Asset Value and Earnings (EBITDA) performance measures, each evenly weighted. Such bonus awards, against KPIs, will always take regard of the individual performance of the Executive and of the business as a whole but remain at the absolute discretion of the Board. Both performance measures were achieved in the year and the total bonus award was 70.00% of the prevailing salary.

The options granted under the LTIP to the directors are as follows:

		granted	vested
John Arnold	31-Mar-16	134,228	87.50%
	31-Mar-17	137,584	87.50%
	31-Mar-18	141,023	100.00%
	31-Mar-19	234,107	29.17%
	31-Mar-20	234,107	8.33%

Edward Olins	31-Mar-16	120,805	87.50%
	31-Mar-17	123,826	87.50%
	31-Mar-18	126,921	100.00%
	31-Mar-19	210,697	29.17%
	31-Mar-20	210,697	8.33%

In order to incentivise the revised disposal strategy and to compensate the Executive Directors for the reductions of their LTIP awards the Executive Directors are each eligible to receive a cash Incentive Payment worth up to £2.5m per Executive Director.

The Incentive Payment is subject to certain terms and conditions and is capped at a maximum of £2.5m per Executive Director or £5m in totality. The quantum of the Incentive Payment is subject to how quickly and for how much the Company's properties are sold in comparison with the 31 March 2021 valuation. It is anticipated that the disposals will be completed over a three-year period to 31 March 2024.

The Group has recognised a liability in respect of the incentive payment payable to the Executive Directors on completion of the disposal programme. In measuring the fair value of the liability, the Board has considered the anticipated timing of each disposal with the expected gain/loss on each disposal being measured using a range between 10% under and 10% over the 31 March 2022 independent valuation. The weighted average of these measurements has been adjusted to present value using a discount rate of 2.74%.

The Incentive Payment liability as at year end is £1.1million and incorporates the movement of £437,895 relating to the share-based payment benefits and £612,861 relating to the other long-term employee benefit.

A single incentive payment will be made to each Executive Director on completion of the disposal programme.

28 Subsequent events

On 13 May 2022 John Arnold acquired 6,276 shares and simultaneously Edward Olins sold 6,276 shares.

On 26 May 2022, the Group disposed of 720 Aztec West for a consideration of £2.52m. The proceeds, net of costs, were utilised to partly repay the loan facility detailed in note 17.

On 22 June 2022 the loan facility with NatWest and HSBC was repaid in full.

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