SET FOR CONTINUED GROWTH CIRCLE PROPERTY PLC Annual Report and - PDF document

SET FOR CONTINUED GROWTH CIRCLE PROPERTY PLC Annual Report and Accounts 31 March 2018

CIRCLE PROPERTY IS A DEVELOPER AND MANAGER OF OFFICES IN KEY LOCATIONS THROUGHOUT THE UK. STRATEGIC REPORT GOVERNANCE FINANCIALS 1-23 24-32 33-59 [1] Overview [24] Board of Directors [33] Auditor’s Report [2] At a glance [26] Governance Report [36] Consolidated statement of comprehensive income [4] Chairman’s Statement [29] Directors’ Report [37] Consolidated statement of [6] Chief Executive’s Statement [31] Remuneration Committee fjnancial position Report [8] Market Overview [38] Consolidated statement of [10] Business Model changes in equity [12] Our Strategy [39] Consolidated statement of [14] Portfolio Review cash fmows [22] Principal Risks [40] Notes to the consolidated fjnancial statements [59] Glossary of terms [ibc] Offjcers and Professional Advisers OUR EMPHASIS IS UPON LETTING OF OUR EXISTING DEVELOPMENT STOCK. IAN HENDERSON, CHAIRMAN WWW.CIRCLEPROPERTY.CO.UK/AR2018

OVERVIEW STRATEGIC REPORT FINANCIAL HIGHLIGHTS £114 .075 m — Profjt before tax of £13.99m refmecting a combination of operational profjt and revaluation gains. PORTFOLIO OF 17 ASSETS PRIMARILY COMPRISING — 22.63% growth in property portfolio value to WELL-LOCATED REGIONAL OFFICES £114.075m (31 March 2017: £93.025m) GOVERNANCE — 25% growth in NAV per share to £2.30 22 .63 % (31 March 2017: £1.83) — Increase in operating profjt to £3.2m (31 March 2017: £2.3m) INCREASE IN PROPERTY PORTFOLIO VALUE (UP £21.05M) — Earnings per share increased to 51p FROM 31 MARCH 2017 TO 31 MARCH 2018 FINANCIAL STATEMENTS (31 March 2017: 35p) — Proposed fjnal dividend per share of 3p to bring the annual dividend to 5.2p. 21 .49 % OPERATIONAL HIGHLIGHTS — Secured two new 20 year leases to Las Iguanas and Camerons Brewery at Somerset House, INCREASE IN CONTRACTED RENTAL INCOME Birmingham at an initial combined rent of FROM YE MARCH 2017 TO YE MARCH 2018 £395,000 pa — Powerhouse, Milton Keynes – let the refurbished 26 .21 % offjce suite of 6,641 sq ft to Steven Eagell Limited at £106,256 pa equating to £16 psf — Baildon Bridge Retail Park, Shipley – Let the two vacant units to Topps Tiles and Sue Ryder at an AMOUNT THE LET OFFICES AT THEIR CONTRACTED RENTS ARE initial combined rent of £104,005 pa UNDER RENTED AGAINST THEIR ERV POST YEAR END HIGHLIGHTS PERFORMANCE — A new 15 year letting to B E Group Limited of the Growth in NAV entire offjces at Somerset House in Birmingham 2018 2017 at an initial rent of £795,729 pa (equating to £20.50 psf overall) 25 .4% 19 .8% VS — One Castlepark, Bristol – a lease renewal to JISC for 10 years on the 3rd fmoor rear at an initial rent of £156,216 pa (equating to £23 psf overall) — Elizabeth House, Staines – a lease renewal on part Profit before tax ground fmoor for 2 years to ARM Holdings Ltd 2018 2017 at an initial rent of £23,000 pa (equating to £27.40 psf overall) £13 .99m £9 .97m VS 1 Circle Property Plc Annual Report and Accounts 2018

AT A GLANCE PRIME REGIONAL OFFICES +£1.2 m CONTRACTED RENTAL INCOME UPLIFT EQUATING TO 21.49% £6.829M YE 31 MAR 2018 £5.621M YE 31 MAR 2017 OUR PORTFOLIO The Group’s portfolio consists of 17 commercial property investments and developments in the UK with a current value at 31 March 2018 of £114.075m. The portfolio totals approximately 654,860 sq ft of accommodation, the majority of which, by fmoor area, is in the offjce sector, some of which are outlined below. 2/4 6 1 The map shows the 6 properties that the Board considers to be prime in the context of their 3/5 local markets. KENTS HILL PARK SOMERSET HOUSE, ONE CASTLEPARK, TOWER HILL 1 2 3 MILTON KEYNES TEMPLE STREET BRISTOL BIRMINGHAM Comprises two elements, regional A refurbished multi let city centre conference centre (173,372 sq ft), A city centre refurbished mixed use offjce building providing 78,778 sq ft including a completed refurbishment property providing 38,805 sq ft of of accommodation. of 70,000 sq ft business park. offjces and 10,956 sq ft of restaurant and leisure use. 36 GREAT CHARLES STREET AZTEC WEST BUSINESS PARK NORTHAMPTON BUSINESS PARK 4 5 6 BIRMINGHAM BRISTOL NORTHAMPTON Refurbished 25,787 sq ft city centre Three reversionary self-contained Two offjce buildings totalling offjce building located within the business park properties providing a 65,904 sq ft located within Birmingham offjce core. total fmoor area of 34,811 sq ft. Northampton’s well established business park. All of the properties are currently held by Circle Property Plc or Circle Property Unit Trust and/or the Jersey Subsidiaries. 2 Circle Property Plc Annual Report and Accounts 2018

OUR CURRENT PORTFOLIO STRATEGIC REPORT 25 % INCREASE IN NET ASSET VALUE PORTFOLIO OF 17 ASSETS PRIMARILY GOVERNANCE COMPRISING WELL-LOCATED REGIONAL OFFICES PORTFOLIO VALUE BY LOCATION FINANCIAL STATEMENTS 3% Bristol Milton Keynes 21% Other Birmingham 21% Northampton London – Staines London – City 10% 7% 3% 35% £2,950,000 PORTFOLIO VALUE BY SECTOR £4,800,000 3% 4% £1,300,000 1% Office (incl. Conference Facility) £1,700,000 1% Retail Industrial Retail Warehousing Other £103,325,000 91% 3 Circle Property Plc Annual Report and Accounts 2018

CHAIRMAN’S STATEMENT A YEAR OF STRONG GROWTH BY FOCUSING OUR ATTENTION UPON REFURBISHING OUR WELL LOCATED REGIONAL OFFICE STOCK WE HAVE ONCE AGAIN BEEN ABLE TO DELIVER A STRONG NAV UPLIFT BY REPORTING A 25% GAIN THIS YEAR. WE EXPECT TO DELIVER ADDITIONAL GAINS AS WE CAPITALISE ON FURTHER LETTINGS THAT ARE CURRENTLY UNDER NEGOTIATION. IAN HENDERSON, CHAIRMAN Over the twelve months from April 2017, NAV per share as at 31 March 2018 increased from £1.83 54 % to £2.30 which is a very strong performance that has been achieved primarily through asset management. Furthermore, this has only been possible as a result of our policy of buying well located regional offjce stock where we can INCREASE IN NAV SINCE JOINING AIM IN FEB 2016 identify a clear opportunity to add value and by PORTFOLIO OF 17 ASSETS PRIMARILY COMPRISING WELL-LOCATED placing an emphasis on total returns rather than REGIONAL OFFICES the sole criteria of maximising the initial rental yield. The growth in rental returns fmowing from the letting activities and asset management that we undertake are also now being positively refmected in our income statement. While the ongoing Brexit uncertainty is slowing the pace of letting activity in the wider market to some degree, our offjce investments have proven to be suffjciently well located and of high enough quality to remain attractive to tenants. The continued leasing momentum we have achieved also refmects the supportive dynamics of a supply constrained regional offjce market space which gives us further confjdence to look for and undertake further redevelopment opportunities. 4 Circle Property Plc Annual Report and Accounts 2018

COMPANY HISTORY STRATEGIC REPORT NAV PER SHARE 2018 31 March 2017 30 September GOVERNANCE 2017 31 March 2016 £2.30 30 September 2016 31 March £2.11 2016 16 February FINANCIAL STATEMENTS £1.83 £1.79 £1.53 54 % £1.49 NAV GROWTH SINCE IPO These market factors, as well as our own Circle Property Plc’s (“Circle”) tenant retention asset management initiatives, have allowed remains high as the management continues us to signifjcantly improve contracted rental to maintain close contact with our occupiers income to £6.829 million (which exclude rent- and remains fmexible in its approach in free periods and other incentives) in the year negotiations. The vacancy rate within our under review (up 21.49% from £5.62 million portfolio, remains at less than 1% excluding last year). As a result, and refmecting the board’s completed developments. The Board is confjdence in the Company’s prospects the committed to enlarging the Company’s capital Directors are recommending a dividend payment and shareholder base in order to increase liquidity of 3p a share to bring the annual dividend in the stock and ultimately reduce the current to 5.6p per share (2017: 5p per share). discount in the share price versus NAV. We are confjdent that our opportunistic approach and specialisation in the provincial offjce market will continue to yield higher total returns from which our investors can continue to benefjt. IAN HENDERSON CHAIRMAN 5 Circle Property Plc Annual Report and Accounts 2018

CHIEF EXECUTIVE’S STATEMENT RESILIENCE THROUGH THE CYCLE WE BELIEVE THAT WITH OUR TOTAL RETURN OUTPERFORMANCE, THE LATENT EARNING AND INCOME POTENTIAL, THE GROUP REPRESENTS A HIGHLY COMPELLING INVESTMENT OPPORTUNITY. JOHN ARNOLD, CHIEF EXECUTIVE OFFICER In just over two years since our IPO on AIM, Circle Property Plc has consistently achieved its 26 % objective of delivering strong NAV and income returns. In total since IPO we have achieved 54% NAV growth on behalf of shareholders, including a 25% uplift in NAV for the year under review. In line with this, Circle has increased its dividend GROWTH IN NET RENTAL INCOME income return to shareholders by 8% to 2.6 pence PORTFOLIO OF 17 ASSETS PRIMARILY since it was fjrst declared in May 2016. The Board COMPRISING WELL-LOCATED REGIONAL OFFICES is recommending a further dividend of 3 pence per share to bring the annual dividend to 5.6 pence. There is also a clear prospect of further growth as we continue to capture the reversion in the portfolio and lease the remaining space across our pipeline of newly refurbished assets. 6 Circle Property Plc Annual Report and Accounts 2018