CRC.L Regulatory News (CRC)

23 August 2016

Circle Property Plc

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

Maiden results reflect growing momentum after successful flotation

Circle Property Plc (AIM: CRC), a specialist regional UK property investment, development and management company today announces its results for the four months to 31 March 2016.

Financial Highlights

· On 16 February 2016, Circle successfully listed on AIM with the stock being taken up at a price of £1.49 which reflected the full Net Asset Value at that time

· The performance of the Company since its incorporation in December 2015 and subsequent admission to AIM in February 2016 reflects a solid start. The Company is well positioned to provide shareholders with a progressive dividend yield as core assets produce stable long-term income together with an appreciation in capital value

· In the period from incorporation, profit before tax £1.1m, which reflects basic earnings per share of 3.8p

· On 16 May 2016 the Company paid a maiden dividend of 2.4 pence per share, based on performance to 31 March 2016, the Company's financial period end, while acknowledging that the Company had only been in existence for four months

· At 31 March 2016 the market value of the Group's investment property portfolio was £77.73m

· Net Assets attributable to shareholders at 31 March 2016 was £43.2m which reflects Net Asset Value per share of £1.53p

· At 31 March 2016 the Group's borrowing facility amounted to £39.2m. Subsequent to the period end the Group agreed a new £50 million revolving facility with National Westminster Bank plc for the purpose of refinancing the existing facility. The new facility agreed on 21 June 2016 is on improved terms and will provide the Group with additional liquidity to pursue further investment opportunities

Operational Highlights

· The letting of the entire first floor of K1 in Milton Keynes to Trafficmaster enabled progress on the refurbishment of K2 to proceed

· Rolling refurbishment continues at 36 Great Charles Street, Birmingham, retaining existing tenants and extending leases to meet tenant requirements.

· At Somerset House in Temple Street Birmingham pre-lets have been secured on the two ground floor restaurants, for which planning has now been granted. The strip out is underway and will be followed by a refurbishment of the upper floors completing in Spring 2017.

· The group's portfolio now consists of 16 commercial property investments and developments in the UK with a current value of £77.73 million. . The portfolio totals approximately 640,148 sq ft of accommodation, the majority of which, by floor area, is in the office sector.

Ian Henderson, non-executive chairman at Circle Property Plc, commented: "The Executive team is well experienced in dealing with difficult times having successfully brought Circle Property Unit Trust through the market recession of 2008. Although our team is small they are working hard to identify the right opportunities and secure funding and on this note we are very pleased with the recent success in securing a significant line of debt funding from our bankers."

John Arnold, Chief Executive at Circle Property Plc added: "Since listing on AIM earlier this year, we have made solid progress and remain optimistic that the economy has the strength to withstand the short term stresses and strains imposed by the prospect of leaving the European Union, and that demand will continue for good quality offices at economic rents in the right locations."

"The fundamentals for Circle Property Plc remain attractive, given the continuing strength in provincial offices which the Company holds at reversionary rents, principally let to strong covenants in prime locations and the earnings generated by the developments in progress, and we look forward to continuing to progress and source both value and income accretive opportunities for our shareholders."

Chairman's Statement

Welcome to our inaugural report.

On 16 February 2016, Circle Property Plc successfully listed on AIM with stock being taken up at a price of £1.49 which reflected the NAV with no discount. As expected, on 16 May 2016 we were in position to pay a maiden dividend of 2.4 pence per share, based on performance to 31 March 2016, the Company's financial period end, while acknowledging that the Company had been in existence for a mere four months.

Despite the recent political and economic uncertainties, culminating in the United Kingdom's decision to leave the European Union, the share price has proven to be remarkably resilient. This is largely as a result of our shareholders being long-term investors who share our confidence in the earnings' potential of this quality commercial property portfolio and, as per our branding, our active investment within it. On 31 March 2016 the net asset value attributable to shareholders amounted to £43.2 million translating into a net asset value per share of approximately £1.53.

The Executive team is well experienced in dealing with difficult times having successfully brought Circle Property Unit Trust through the market recession of 2008. Although our team is small, they are working hard to identify the right opportunities and secure funding. We are delighted to note that we have secured a significant line of debt funding from our bankers. I would like to thank the Royal Bank of Scotland for getting this facility in place, notwithstanding the turbulence created around the Brexit referendum.

The governance of the Company is evolving to match both changing regulation and the needs of the Company. We have established Remuneration and Audit Committees and deal with any nomination issues through the Board as a whole. I am confident that the Audit Committee has the requisite skills and the Remuneration Committee is focussed on rewarding fairly and motivating the Executive within constraints of the property improvement programme and a progressive dividend policy.

I am committed to ensuring the Company operates at the highest level of integrity and embraces the challenges of an ever-changing regulatory environment. We have prepared a policies and procedures manual for board approval which includes, but is not limited to, policies on Anti- Bribery and Corruption, Gifts and Entertainment, Code of Conduct, Insider Dealing, Risk, Financial Procedures, Meetings, Whistleblowing and the additional requirements regarding the insider dealing rules via the Market Abuse Regulations which recently came into effect. We are on budget and on target with our stated aims to enhance value through strategic acquisition in improving areas and to expend c £8m on capital improvements by actively investing in property. I thank the Board for its support and the Executive team for their energy and focus but, most importantly, I thank you the shareholders for backing our efforts and we will strive to reward that trust.

Ian Henderson - Non-Executive Chairman 

Chief Executive's Statement

The refinancing of our debt facility with RBS has improved our flexibility and reduced our interest charges, the benefit of which we expect to be passed on to our shareholders given our commitment to a progressive dividend policy. We are sure that income will continue to prevail as the key consideration by investors with NAV performance being a secondary driver.

We will continue to advance and progressively let our three key developments in Milton Keynes and Birmingham all of which, when fully let, will contribute an additional £2 million per annum to the rent roll to show a rental return on total cost approaching 10%. This level of return would not be achievable by buying those completed investments in the open market. We have a developer mentality but instead of selling the completed investments, they are retained and held within our investment portfolio. Valuation uplifts allow further advances from the RBS loan to facilitate further purchases.

We remain optimistic that the economy has the strength to withstand the short term stresses and strains imposed by the prospect of leaving the EU and that demand will continue for good quality offices at economic rents in the right locations. The media have focused attention on a relatively small number of funds that have down-valued their units overnight as a knee-jerk reaction to the post BREXIT political fallout rather than an economic collapse. We suspect that their actions were driven by a need to try and create some liquidity but this has heightened the sense of nervousness and accelerated the rush for the exit door.

Auction houses are often quoted as the barometers of the commercial property markets and after their successful auction on the 7th July 2016 Acquitus' auctioneer, Richard Auterac, reported that; "There was no apparent difference in pricing between our pre and post Brexit auctions". This is not to say that prices will continue to hold firm and we are mindful that that there is a risk of contagion from property funds spreading to multi-asset funds and there may be some modest softening of property values at least in the short term, but are optimistic that internal progress within the portfolio should moderate or negate any downward pressure.

We continue to take a cautious approach and will be ensuring that our level of debt is contained or offset by valuation uplifts from elsewhere within the portfolio. Our letting agents confirm that although the level of enquiries were down in the lead up to the referendum, there is still unsatisfied occupational demand and viewings are continuing. We are also pleased to report that all of our tenants appear happy to remain in occupation and are renewing leases in line with our opinion of market rents. We expect that the markets will recover any lost ground over the remainder of the financial year which may prove to be a buying opportunity so we are poised, as ever, to make opportunistic acquisitions where the upside is evident and there is modest downside risk.

We have a number of "legacy" properties where we are carrying out lease re-gears or renewal negotiations prior to sale. The proceeds from these sales are anticipated to be at prices ahead of the valuations and will, in-part, fund our refurbishment programme.

The fundamentals for Circle Property Plc remain attractive, given the continuing strength in provincial offices which the company holds at reversionary rents, principally let to strong covenants in prime locations and the more dynamic earnings generated by the developments in progress.

John Arnold - Chief Executive Officer

Market Review

Although the market drew breath in the lead up to Brexit and was slightly "winded" by the somewhat surprising outcome, we are seeing a gradual resumption of normal working with occupiers continuing to sign leases and investors competing to buy buildings with a living yield. As gilt yields harden, property yields for longer let property should follow.

Our share price reflects the strength of our well located portfolio with strong tenant covenants and low rental base offering scope for rental growth - or insulation from any future weakness in rental values. The combination of our strong income stream from the investment portfolio and projected future income from the development stock produces the prospect for a dynamic total return when all lettings complete. The focus of the company will remain targeted upon value added where the location justifies the risk.

Portfolio Overview

The refurbishment of K1, Kentshill Business Park, Milton Keynes went well and the property is now fully let and income producing. The refurbishment of K2 is complete and we are actively seeking tenants in what is arguably Milton Keynes best out of town office accommodation.

Three further buildings were acquired by Circle Unit Property Trust ("CPUT") in the six months preceding its acquisition by Circle Property Plc.

As of 31st March 2016, the total portfolio value was £77.73m made up of 16 assets, primarily being well-located provincial offices. By floor area, 68% of the total portfolio is income producing investment assets, whilst the remaining 32% are office developments.

The void rate within the total portfolio is 13% which includes the developments, decreasing to 3% when the developments are excluded. 85% of the portfolio by value is in the office and conference sector which forms the core portfolio. The remaining 15% is split across four sectors, being the non-core portfolio, which provides good high yielding income. 66% of the portfolio by value is located in three provincial cities, being Milton Keynes, Bristol and Birmingham. Principal tenants within the portfolio include Compass Contract Services Ltd (15%), Which? Financial Services Ltd (6%), Grant Thornton LLP (5%), B&M Retail Ltd (5%) and New World Trading Company Ltd (4.3%). The total annual contracted income produced by the portfolio is over £5.8m, with a reversionary rent based on full ERV and once the development assets are complete of approximately £8m.

Circle's existing portfolio

1. Park House, Northampton Business Park, Northampton

2. Units A & B, Chapel Lane, Great Blakenham

3. Baildon Bridge Retail Park, Shipley

4. Solstice Park Avenue, Amesbury

5. Winwick Road, Warrington

6. 141 Moorgate, London

7. Power House, Knowhill, Milton Keynes

8. Week Street, Maidstone

9. Victory House, Northampton Business Park, Northampton

10. Cheltenham House, Temple Street, Birmingham

11. Elizabeth House, London Road, Staines

12. One Castlepark, Bristol

13. Kents Hill Business Park, Milton Keynes

14. 36 Great Charles Street, Birmingham

15. 135 Aztec West, Bristol

16. Somerset House, Temple Street, Birmingham

Consolidated Statement of Comprehensive Income

For the period from 4 December 2015 to 31 March 2016

Consolidated Statement of Financial Position

As at 31 March 2016

Consolidated Statement of Changes in Equity

For the period from 4 December 2015 to 31 March 2016

Consolidated statement of cash flows

For the period from 4 December 2015 to 31 March 2016

Notes to the consolidated financial statements

For the period from 4 December 2015 to 31 March 2016

1. GENERAL INFORMATION

These financial statements are for Circle Property Plc ("the Company") and its subsidiary undertakings.

The Company was admitted to the AIM market of the London Stock Exchange ("AIM") on 16 February 2016 having been incorporated in Jersey on 4 December 2015 as a Jersey Public Company. The address of its registered office is 3rd Floor, Standard Bank House, 47-49 La Motte Street, St Helier, Jersey, JE2 4SZ.

Upon admission to AIM the Company acquired all of the units of Circle Property Unit Trust ("CPUT"), a Jersey closed ended unlisted Unit Trust in exchange for the issue to Unitholders of Ordinary Shares. At the same time the company acquired 100% ownership of the subsidiary entities of CPUT namely Circle Property (Milton Keynes) Limited ("CPMKL") and Circle Property (Warrington) Limited ("CPWL"). Both CPMKL and CPWL are registered in Jersey and hold certain properties in a nominee capacity on behalf of CPUT. The company also acquired 100% ownership of Circle Property Management Limited ("CPML") a UK registered company who acted as property manager for CPUT on an exclusive basis to provide property management services in respect of the day-to-day management of all of the properties within CPUT's portfolio. The provision of property management services to the Group has now been internalised and it is intended to place CPML into liquidation as soon as possible. Further information relating to the acquisitions are detailed in the consolidated financial statements.

The nature of the Company's operations and its principal activities are set out in the CEO review.

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 CEO review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in these financial statements. In addition note 23 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 21.

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 risk successfully.

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 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 Consolidated Financial Statements.

The results of subsidiaries acquired during the period 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

All standards effective as at the first reporting date have been applied in the preparation of the consolidated financial statements.

NEW STANDARDS AND INTERPRETATIONS

As of the date of the approval of these financial statements the following Standards and Interpretations, some of which have not been endorsed by the EU, have not been applied in these financial statements but were in issue but not yet effective:

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.

FAIR VALUE OF INVESTMENT PROPERTY

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 2016. Volatility in the global financial system is reflected in commercial real estate markets. In arriving at their estimate of market value as at 31 March 2016, 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 14.

FAIR VALUE OF INTEREST RATE SWAP

The fair values of interest rate swaps have been calculated and provided by the relevant counterparty bank using recognized valuation techniques. Details of the interest rate swaps are set out in note 18.

BUSINESS COMBINATIONS

In determining whether to account for a property acquisition in a special purpose vehicle as a business combination or as an acquisition of an investment property, management make an assessment based on the application of IFRS 3 "Business Combinations". Management make a professional judgement on the inputs, processes and outputs of the property prior to acquisition and whether these elements represent an acquisition of a fully functioning business or whether these are limited and represent solely an asset purchase.

In respect of business combinations during the period, estimation and judgement was applied in assessing the fair value of the assets and liabilities at the date of acquisition. The significant methods and assumptions applied are disclosed in note 13.

IMPAIRMENT OF GOODWILL

The Group is required to test whether goodwill arising on the business combinations has suffered any impairment. The assessment and quantification of any such impairment charges are determined by key management judgements in terms of:

-The extent to which the goodwill is, in substance, a cost to the company; and

-an assessment of the expected future life of the cash generating unit on which goodwill arises, being goodwill's indefinite useful economic life.

As detailed in note 13 goodwill on the acquisition of Circle Property Management Limited has been tested for impairment and written down to a value of nil.

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.

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. Listing costs as detailed in note 12 are recognised in profit and 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.

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, 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. 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 period end are disclosed as properties held for sale and stated at fair value. At 31 March 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 2016 none existed.

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.

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 transactions 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 these 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, 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%. The Unit Trust is not subject to tax in Jersey.

Circle Property Management Limited ("CPML") is registered in the United Kingdom and is subject to corporation tax at a rate of 20%. From the date of the acquisition of CPML the company is no longer in receipt of income and it is anticipated that no further corporation tax will be payable.

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. No provision for taxation has been included in these financial statements as capital allowances reduce the tax payable to nil.

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 period in which they are approved.

TREASURY SHARES

Treasury shares held are equity shares of the Company issued to Circle Property Plc 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. 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.

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

5. PROPERTY EXPENSES

6. ADMINISTRATIVE EXPENSES

7. EMPLOYEES AND DIRECTOR'S REMUNERATION

8. FINANCE INCOME

9. FINANCE COSTS

10. TAXATION

At 31 March 2016, the Group had capital allowances of £5,097,266 available to carry forward against future profits. A deferred tax asset of £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 period.

For the purposes of the above calculation the 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 22, 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

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 described in note 13. 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.

13. BUSINESS COMBINATIONS

Circle Property Unit Trust ("CPUT")

On 16 February 2016 the Group acquired 100% of the Units of CPUT for a consideration of £39,884,764. The consideration was satisfied by issuing 26,768,298 ordinary shares at a price of £1.49. CPUT is a closed-ended unit trust in Jersey regulated under the Control of Borrowings ( Jersey) Order 1958 and was purchased in order to acquire CPUT's property portfolio.

The acquired subsidiary contributed £869,864 to the profit of the Group.

The fair value of the investment properties at acquisition of £77,264,267 was based on a valuation performed by Savills (UK) Limited ("Savills") at the time of the acquisition amounting to £73,928,000. This was compared to the subsequent valuation prepared by Savills as at 31 March 2016 which confirmed that between 16 February 2016 and 31 March 2016 there were no material property events and that the unrealised gains on property revaluation amounting to £3,336,267 should be included in the fair value of the investment properties acquired.

The fair value of the loan borrowings was calculated at the date of acquisition using a discounted cash flow model and applying a rate of interest to the loan borrowings of 1.85% over LIBOR as the Directors believe this rate is representative of a market rate at the date of acquisition.

The deferred tax asset arises at the date of acquisition in respect of the capital allowances pool attributable to the previous unitholders of CPUT which will transfer to the Company under a section 198 CAA 2001 election.

Of the trade and other receivables totalling £5,782,155, £4,324,210 pertain to contractual amounts due. None of these were deemed to be uncollectable at 16 February 2016. The remaining £1,457,945 related to a debtor due to CPUT by the Company which is considered to be fully recoverable.

The consideration for the purchase of CPUT of £39,884,764 was calculated based on CPUT's net asset value as at 30 September 2015 of £42,614,315 discounted for the value of the consideration for the purchase of Circle Property Management Limited of £2,122,077 and a distribution to Unitholders on CPUT's register at 30 September of £669,207. The price per Unit of £1.49 was rounded to the nearest pence resulting in a rounding difference of

£61,663, which is not considered material.

The difference between the purchase consideration and the fair value of net assets at the date of acquisition resulted in negative goodwill of £3,817,264 which has been recognised in profit and loss for the period.

Circle Property Management Limited ("CPML")

On 16 February 2016 the Group acquired 100% of the share capital of CPML, who were contracted by CPUT to manage CPUT's portfolio of properties under a contract which was due to expire in October 2016. The purpose of the purchase of CPML was to facilitate the internalisation of the management team and to compensate them for the loss of opportunity under the contract. The acquisition was completed at a negotiated price which was corroborated by Lubbock Fine Limited, an independent firm of Chartered Accountants.

The purchase consideration of £2,122,007 was satisfied by issuing 734,023 ordinary shares at a price of £1.49 and by cash of £1,028,313.

The acquired subsidiary contributed nil to the profit of the Group.

The trade and other receivables comprise gross contractual amounts due of £243,288 all of which are expected to be recoverable.

The difference between the consideration and the carrying value of net assets at the acquisition date represents goodwill on acquisition. It is anticipated that subsequent to the period end the remaining assets of CPML will be transferred to the Company and that CPML will be dissolved.

Goodwill is tested annually for impairment and the goodwill on the acquisition of CPML has been written down to a value of nil. Such write down is recognised as an impairment loss in profit and loss.

14. INVESTMENT PROPERTIES

No properties were held for sale at 31 March 2016.

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

£73,735,000 of the above properties' value, estimated by the valuer, relate to property held on a freehold basis and £4,000,000 on a long leasehold basis. The fair value of the Group's investment properties per the Valuation Report amounted to £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 £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 17.

The fair value of the Group's investment properties at 31 March 2016 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 period.

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

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

15. TRADE AND OTHER RECEIVABLES

On 20 January 2016 the Group entered into a loan facility agreement with Circle Property Trading (Maidstone) Limited ("CPTML") for an amount of £1,425,000. 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 is secured by a first legal mortgage over the property and a fixed charge over the assets of CPTML. The loan is interest bearing at a rate of 8% per annum and is due for repayment on 19 January 2017. On 17 March 2016 a deed of variation was entered into increasing the facility amount to £1,625,000.

16. CASH AND CASH EQUIVALENTS

As at 31 March 2016 £382,335 of cash is held on blocked accounts. Of this, £131,048 relates to deposits received from tenants and £251,287 is held on an interest deposit account in relation to the loan borrowings disclosed in note 17.

17. LOAN BORROWINGS

On 16 February 2016 a term loan and revolving credit facility liability of £38,796,067 with National Westminster Bank Plc and a credit facility liability of £827,790 with HSBC Bank Plc were taken on by the Group on acquisition of CPUT. The fair value at the date of acquisition of these facilities has been estimated at £40,902,516. The facility with HSBC Bank Plc was repaid in full on 10 March 2016. The National Westminster Bank Plc loan facility is for a total commitment of £39,200,000 and is secured by the investment properties and rental income detailed in notes 14 and 4. There is also a security interest agreement over the issued share capital of the CPUT's wholly owned subsidiaries, Circle Property (Milton Keynes) Limited and Circle Property (Warrington) Limited who hold certain properties in a nominee capacity on behalf of CPUT. The term loan element of the facility is fully drawn down in the sum of £19,100,000 and bears interest at 2.95% over LIBOR. The revolving credit facility is drawn down in the sum of £19,866,135 and bears interest at 2.95% over LIBOR. The term loan and revolving credit facility have a repayment date of 31 January 2019.

The financial covenants in place relating to the facility are 55% loan to value, 2.25% interest cover and 11% debt to rent cover. There were no breaches of any of these covenants during the period.

On 21 June 2016 the Directors agreed a new £50 million revolving facility with National Westminster Bank plc for the purpose of refinancing of CPUT's existing facility. The new facility has a three year term with two options to extend for a further year, with a drawdown loan to value of up to 55% of the gross portfolio value and an interest rate of 1.85% over LIBOR. The new facility was drawn down on 22 June 2016 and the existing facility repaid.

18. FINANCIAL LIABILITY AT FAIR VALUE THROUGH PROFIT AND LOSS

The Group uses interest rate swaps to manage its exposure to interest rate movements on a proportion of its bank borrowings (see note 17). The contracts entered into with The Royal Bank of Scotland plc., have a notional value of £10,000,000, a fixed interest rate of 1.98% from 25 August 2015 to 29 September 2016 and a cap strike rate of 3% from 15 October 2016 to maturity on 31 January 2019.

At 31 March 2016 the combined fair value of the interest rate swaps resulted in a liability of £94,855. The interest rate swaps are fair valued using recognised valuation techniques and the movement in fair value has been recorded in profit and loss.

19. TRADE AND OTHER PAYABLES