7 December 2022

Circle Property Plc

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

Interim Results for the six months ended 30 September 2022

                 DIVESTMENT PROGRAMME CONTINUES

Circle Property Plc (AIM: CRC) is pleased to announce interim results for the six months ended 30 September 2022.

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

"We continue to progress our divestment strategy with a view to returning the net proceeds to shareholders.

The more challenging macroeconomic backdrop impacted the broader property investment market after the period. This has meant our rate of sales has slowed in recent months from the expedited rate achieved earlier in the year and pricing has also been softer. Nevertheless, we are still able to divest assets successfully and remain steadfast in generating the best value possible for shareholders.

Circle is debt free following these well-timed asset disposals and still expects to make the first capital distribution to shareholders in Q1 2023."

Highlights

·    Approximately 60% of the property portfolio, by value, has been disposed of since the announcement of the divestment strategy in February 2022.

·      Proven track record of divesting assets at prices in excess of book valuations to extract maximum value, albeit not at historical premiums during the reported period due to the weakened property market.

·      The Group's loan facility was repaid in full in June 2022, leaving the Group debt free.

·      At the period end, the Group's cash balance was £21 million, ahead of an expected return of capital to shareholders in Q1 2023.

·    Unaudited net asset value ("NAV") of £2.73 per share as at 30 September 2022 (31 March 2022: £2.81; 30 September 2021: £2.74).

·   Asset management continues with the refurbishment of K3 Kents Hill, Milton Keynes. Due to the evolving requirements of the tenant, refurbishment costs have increased from approximately £2.2 million to approximately £2.7 million and completion is expected to take place in December 2022.

Post period end

·      On 6 October 2022, the Group completed the sale of Elizabeth House, Staines for a consideration of £3.5 million.

·    On 23 November 2022, the Group exchanged contracts for the sale of Somerset House, Birmingham for a consideration of £15.180 million. Completion is expected to take place by the end of February 2023.

·      The letting of K3, Kents Hill Business Park was completed and the sale at £4.5 million is expected to complete before the end of December 2022.

Outlook

·    Post period, the disposals below valuation and the issue of 918,793 Ordinary Shares to the Executives under the Company's LTIP announced in October 2022 (the "LTIP Shares"), has impacted the current estimated NAV per share. The issue of the LTIP Shares had a negative dilutive effect on the current estimated NAV of 9 pence per share, reducing it to £2.64.

·     In addition, due to challenging market conditions, the Board anticipates that by the end of the sales programme, the estimated NAV is expected to reduce further. Further announcements will be made as appropriate, as and when further disposals are made.

·     Confident in delivering further asset sales to maximise returns, albeit selling into a more difficult investment market.

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.

About Circle Property Plc

Circle is not a Real Estate Investment Trust (REIT) and has historically actively recycled proceeds from asset sales into its refurbishment and redevelopment pipeline to generate attractive total returns.  Since February 2022, the Group has embarked on an orderly break-up of the portfolio to return maximum value to shareholders.

Chief Executive's Statement

The property market reached record highs in certain sectors earlier in 2022. However, this has since reversed as a consequence of elevated inflation, market uncertainty, the war in Ukraine, the rising cost of capital and other macroeconomic challenges.

Although the property market has weakened considerably after the reported period, we are pleased that the majority of the properties were sold into a more receptive market earlier in the year. We moved quickly following the announcement of the divestment strategy, taking advantage of a buoyant market for regional offices, achieving prices in excess of book valuations. As a result, we expect the aggregate of all disposal prices to be in the region of 95% of the March 2022 valuations when regional office valuations were at their peak.

Disposals during the period included the completion of the sale of K1 & K2 at Kents Hill Business Park, Milton Keynes ("Kents Hill") in August 2022 at a price of £12.73 million, with a further payment of £4.5 million agreed for K3 following completion of the contracted letting to Kuehne+Nagel (subsequently let on 30 November 2022) and expected to complete by the end of December 2022. Moreover, Cheltenham House, Birmingham sold for £4.664 million (completed September 2022) and 720 Aztec West in Bristol sold for £2.52 million (completed May 2022).

The occupational market is challenging but our office portfolio has continued to benefit from workers returning to the workplace, with occupancy and usage high. Consequently, rent collection is no longer a topic as it was during the period of the pandemic, with rent collection at expected levels. The Group's active asset management approach has enabled us to capture demand, lease vacant space and deliver growth, at K3 Kents Hill, where we have added additional refurbishment capex in to meet the requirements of the incoming tenant.  

As we further progress against our programme of asset disposals, the Board remains committed to maximising returns and delivering value to shareholders. Given the divestment strategy and plans for two returns of capital directly to shareholders, with the first expected in Q1 2023, the Board has resolved that there will be no interim dividend.

It is the Board's intention to liquidate all the remaining assets before the end of our current financial year, so long as there remains interested buyers at respectable pricing levels.

Condensed consolidated statement of comprehensive income

for the 6 months ended 30 September 2022

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

All items in the above statement derive from continuing operations.