Circle Property PLC – CRC – Interim Results

Circle Property PLC – CRC – Interim Results

Circle Property Plc (AIM:CRC) ("Circle", the "Company" or the "Group"), which invests in, develops and actively manages well-located regional office assets, announces its interim results for the six months ended 30 September 2020.

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

"During the period, we have continued to benefit from our innovative approach and close relationships with our tenants, which has resulted in very strong rent collection rates of over 90% and a 10% increase in total rental income.

"We believe that demand, particularly in good locations in the regions, will rebound after a short-term contraction as a result of Covid-19. The established position we have in our chosen markets, with a portfolio of assets selected on the strength of location and letting prospects, leaves us well-placed to generate income and value over the medium term."

Financial highlights:

·    Strong rental receipts throughout the year and since lockdown in March, running at an average of 92.5% of rents due for March and June quarters

·    10% increase in total rental income to £3.9m (30 September 2019: £3.6m)

·    12% increase in operating profit before property revaluations to £2.7m (30 September 2019: £2.4m)

·    Unaudited estimated NAV per share of £2.83 (30 September 2019: £2.78; 31 March 2020: £2.85 per share), representing a 90% increase since admission to AIM in February 2016

·    Proposed interim dividend of 2.5p per share for the six months ended 30 September 2020 (30 September 2019: 3.3p)

Chief Executive Statement

Despite the recent impact of the second lockdown, which saw a further decrease in demand within the wider commercial office market, we have seen the benefits of the quality of our assets and our long-term experience in actively managing them, evidenced through our strong rental collection. We work hard to identify high calibre tenants unlikely to default prior to leasing with them, meaning that our rental income is robust even in the current climate.

During the period to 30 September 2020, it has been pleasing that we have continued to let space, in this case to two new tenants, demonstrating that we remain able to build value and generate additional income. At Elizabeth House, London Road, Staines, DES Group have taken a 5-year lease with a break at the third year on the first floor at £32,500 p.a (£20.95 psf) and at Park House, Pavilion Drive, Northampton, NAK Consulting have taken a 10-year lease (with a 5-year break clause) at £34,000 p.a. on 2,373 sq ft (£14.33 psf).

It is the Board's view that further implemented lockdowns and the requirement to work from home, will lead to a rising number of commercial property tenants exercising break options across the market. Some businesses are downsizing as a result of more staff working from home on a permanent or part time basis. We have seen evidence of this in two small lettings within our portfolio but have worked with them to secure smaller suites, demonstrating our ability to actively manage the asset base.

As reported previously, we are of the view that working from home will, in the medium term, prove to be unpopular and more unproductive, and that offices will prove their worth when there is a return to something like normality. In the meantime, the recent news about the roll-out of Covid-19 vaccines is encouraging, yet it remains difficult to call when we may see a significant improvement in occupational demand.

Whilst the general market backdrop is challenging, we are seeing the predominant take-up of vacant offices being for those that are fully-fitted, either by virtue of the previous tenant having vacated, or because the landlord has undertaken a category B fit-out, specifically to encourage tenants that do not want to commit to that capital expense.

In order to respond to this shifting demand for 'plug and play' offices that are ready to move into, with telephony and broadband already connected, we are undertaking fit-outs of our vacant offices in Bristol (One Castlepark - 7,000 sq ft), Birmingham (36 Great Charles Street - 2,341 sq ft) and Maidenhead (6,400 sq ft).  It is anticipated that these projects, together with the redevelopment of 135 Aztec West, Bristol when pre-let, will account for approximately £2 million of our working capital. Again, our ability to adapt and flex around tenant requirements continues to serve us well.

As reported in our Final Results in September 2020, we remain committed to reduce gearing from the current level by opportunistic sales. We have a number of assets that have benefited from our active management approach and added value following redevelopment, lease restructures or renewals which we expect to be highly sought after.

The Board declares an interim dividend of 2.5p, which will be paid on 8 January 2021 to shareholders on the register on 4 December 2020, with an ex-dividend date of 3 December 2020.

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

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