REG - Circle Property PLC - Results for the year ended 31 March 2017 <Origin Href="QuoteRef">CRC.L</Origin> - Part 9
10/08/2017 07:06
- Part 9: For the preceding part double click ID:nRSJ5823Nh
- - - 4,893,807
5,284,585 5,283,875 710 - - 5,284,585
Financial liabilities
Trade and other payables 1,789,165 1,789,165 - - - 1,789,165
Loan borrowings 45,590,423 999,904 999,904 45,944,991 - 47,944,799
47,379,588 2,789,069 999,904 45,944,991 - 49,733,964
Contractual Value
Carrying Amount Within one year 1-2 years 2-5 years More than 5 years Total
£ £ £ £ £ £
31st March 2016
Financial assets
Trade and other receivables 1,985,224 1,985,224 - - - 1,985,224
Cash and cash equivalents 4,516,153 4,516,153 - - - 4,516,153
6,501,377 6,501,377 - - - 6,501,377
Financial liabilities
Trade and other payables 1,604,398 1,604,398 - - - 1,604,398
Financial liabilities at fair value 94,855 - 98,053 (3,198) - 94,855
Loan borrowings 40,091,127 1,441,378 1,378,622 40,121,911 - 42,941,911
41,790,380 3,045,776 1,476,675 40,118,713 - 44,641,164
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 detailed
in note 16 the Group uses an
interest rate cap to manage exposure
to the interest on its bank
borrowings. The cap has been entered
into with The Royal Bank of Scotland
plc on a notional amount of
£10,000,000.
As a result the Group is exposed to
changes in prevailing interest rates
on the remaining balance of its
borrowing detailed in note 16.
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 after the impact of the
interest rate contracts held at the
year end are as follows:
Floating rate Fixed rate Interest free Total
£ £ £ £
31st March 2017
Financial assets
Trade and other receivables - - 390,068 390,068
Financial instruments at fair value - 710 - 710
Cash and cash equivalents 4,893,807 - - 4,893,807
Financial liabilities
Trade and other payables - - 1,789,165 1,789,165
Loan borrowings 45,720,355 - - 45,720,355
Floating rate Fixed rate Interest free Total
£ £ £ £
31st March 2016
Financial assets
Trade and other receivables - 1,526,167 459,057 1,985,224
Cash and cash equivalents 4,516,153 - - 4,516,153
Financial liabilities
Trade and other payables - - 1,667,154 1,667,154
Financial instruments at fair value - 94,855 - 94,855
Loan borrowings 28,966,135 10,000,000 - 38,966,135
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 0.25% as at 31 March 2017 (2016;
0.5%). The Group's policy is to hold
cash on variable rate bank accounts.
The Group has borrowings amounting
to £45,720,355 which have interest
rates linked to the 3 month LIBOR
interest rates. A 1% increase in the
LIBOR rate will have the effect of
increasing interest payable by
£457,204 (2016; £298,661). A
decrease of 1% would have an equal
but opposite effect.
Market price risk
The Group holds a portfolio of UK
commercial properties. The Group
invests in properties which the
Directors believe will generate a
combination of long-term growth in
income and capital for shareholders.
Investment decisions are based on
analysis of, amongst other things,
prospects for future income and
capital growth, sector and
geographic prospects, tenant
covenant strength, lease length and
initial and equivalent yields.
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 and property-related assets
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 (UK) Limited.
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 balance sheet date are disclosed
in note 13. A 10 per cent increase
in the fair value of the properties
at 31 March 2017 would have
increased net assets and profit for
the year by £9,302,500 (2016;
£7,773,500). A decrease of 10 per
cent would have an equal but
opposite effect.
The calculations are based on the
investment property valuations at
the respective balance sheet dates.
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 13 of
the financial statements.
The fair values of the Group's
financial instruments are not
materially different from their
carrying values. The classification
of the fair value of the interest
rate cap outstanding at the year
end, as detailed in note 17, is
deemed level 2.
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