Palace Capital PLC Preliminary Results for year ended 31 March 2024

RNS Number : 3133R

Palace Capital PLC

06 June 2024

6 June 2024

PALACE CAPITAL PLC

("Palace Capital", the "Group" or the "Company")

Preliminary Results for the year ended 31 March 2024

DELIVERING ON OUR STRATEGY FOR SHAREHOLDERS

Palace Capital (LSE: PCA) announces its audited preliminary results for the year ended 31 March 2024.

Steven Owen, Executive Chairman, commented:

"Notwithstanding challenging property and financial markets, we have continued to successfully progress our disposal strategy with the result that the Company is now in a substantial net cash position. Since 1 April 2023, the Company has exchanged or completed on the sale of 24 investment properties for £112.9 million and exchanged or completed on £4.4 million of sales of unencumbered residential units at Hudson Quarter, York. During FY24, the Company proactively reduced gross debt by £56.0 million to £8.3 million and the significant de-leveraging of the balance sheet has resulted in a net cash position of £11.5 million as at the year end which has increased to £19.7 million as at 5 June. Proforma net cash, assuming that all exchanged properties complete, is currently £30.1 million. The results below reflect the disposals and debt reduction strategy as well as the good progress made with our asset management activities.

"Since July 2022, cash returned to shareholders from share buyback programmes totals £21.9 million. Following the announcement of these results today, the Company will shortly be launching a tender offer to return capital of approximately £22 million to shareholders and a further announcement to shareholders will be made later this month with the details provided in a circular. Subject to shareholder approval at a specially convened General Meeting, the Company expects to complete the tender offer and return cash to shareholders during July 2024.

"Assuming that the properties currently under offer are sold, the Company will have six investment properties remaining valued at £54.4m. Each of these properties has its own asset management initiatives which are required to be completed in order to be ready for sale. In addition there are 13 apartments remaining at Hudson Quarter valued at £6.6 million assuming that the two under offer are sold. Sales of these will continue subject to market conditions which have materially improved since the start of 2024.

"An additional tender offer is likely to take place later in the year as further property sales are completed."

Income statement metrics	Year ended 31 March 2024	Year ended 31 March 2023	Change
Net rental income	£9.6m	£15.6m	(38.5%)
Adjusted profit before tax	£5.4m	£7.6m	(28.9%)
Adjusted earnings per share	13.8p	17.1p	(19.3%)
IFRS loss before tax	(£9.3m)	(£35.8m)
Basic earnings per share	(23.7p)	(80.2p)
Dividends
Dividend per share	15.0p	15.0p
Balance Sheet and operational metrics
EPRA NTA per share	262p	296p	(11.5%)
Net asset value	£97.8m	£128.5m	(23.9%)
Share buybacks	(£15.2m)	(£6.7m)	126.9%
Like-for-like portfolio valuation decrease	(15.5%)	(18.6%)
Total accounting return	(6.4%)	(20.4%)
Total shareholder return	13.7%	(15.9%)
EPRA occupancy rate	82.0%	87.7%
Debt
Loan to value	nil	31%
Total gross debt	£8.3m	£64.3m	(87.1%)
Total net (cash)/debt	(£11.5m)	£58.8m	(119.6%)
Average cost of debt	2.9%	5.8%	(290 bps)
Average debt maturity	2.3 years	2.0 years

Financial highlights

· Adjusted profit before tax of £5.4 million (2023: £7.6 million) reflecting the reduction in income following disposals, offset in part by the reduction in associated interest costs and recurring administrative expenses.

· IFRS loss before tax of £9.3 million (2023: £35.8 million loss) primarily due to the portfolio revaluation deficit of £15.4 million.

· Adjusted EPS of 13.8 pence (2023: 17.1 pence) reflecting the movement in adjusted profit before tax but partly mitigated by the accretive share buyback programmes.

· Total dividends paid or declared for the year of 15.0 pence per share (2023: 15.0 pence per share).

· EPRA NTA per share decreased by 11.5% to 262 pence (2023: 296 pence) due to the portfolio revaluation deficit, offset by the 8.0 pence per share buyback accretion.

· Total property portfolio valuation reduced by 15.5% on a like-for-like basis (2023: 18.6% decrease).

· Net cash position of £11.5 million (2023: Net debt £58.8 million, LTV 31%). In the twelve months to 31 March 2024, gross debt reduced by £56.0 million to £8.3 million. Net debt to net cash movement £70.3 million.

· Annualised administration cost savings of £0.9 million (2023: £1.4 million) following the Board changes and the relocation of the Company's head office, together with other cost reduction measures.

· During FY24, further share buyback programme announced with 6.2 million shares purchased for £15.2 million. Total cash returned to shareholders from buyback programmes to date is £21.9 million.

· A resolution proposing the renewal of the share buyback authority to purchase up to 15% of shares will be proposed at the 2024 AGM.

Operational highlights

· Successful disposal of 21 investment properties for £93.7 million, 4.4% ahead of the 31 March 2023 book value.

· Sale of seven apartments at Hudson Quarter, York for £3.2 million.

· Post 31 March 2024, exchanged contracts or completed the sales of three investment properties totalling £18.5 million, and also conditionally exchanged on an office unit at St James' Gate, Newcastle for £0.7 million. These sales were in aggregate 1.5% ahead of the 31 March 2024 book value.

· Apartment sales at Hudson Quarter, York have continued post 31 March 2024, with a further two apartment sales having exchanged to the value of £1.2 million. There are 13 units remaining and two units under offer.

· An additional £1.3 million of annualised net rental income was created during FY24 through leasing and review activity and the associated reduction in non-recoverable property costs which was, on average, 5% ahead of the 31 March 2023 ERVs. Annualised net rental income lost from lease expiries and breaks totalled £1.2 million resulting in a net additional annualised increase of £0.1 million from active asset management activity. Net rental income lost following disposals totalled £6.6 million per annum resulting in a net loss in annualised net rental income of £6.5 million.

· Rent collection for the 12 months to 31 March 2024 of 98% (2023: 99%).

· EPRA occupancy at 31 March 2024 increased on a like-for-like basis from 81.2% at 31 March 2023 to 82.0% at 31 March 2024. Proforma occupancy as at 5 June is 87.6%, reflecting post year end lettings and contracted disposals.

· WAULT of 5.4 years to break and 7.5 years to expiry reflecting asset management activities and resilience of portfolio (2023: 4.8 years to break and 6.5 years to expiry).

· Portfolio asset management activity and disposals continue to improve the EPC (Energy Performance Certificate) profile across the portfolio: 100% are now rated A-D and 81.0% are rated A-C (2023: 96.2% and 72.2% respectively).

PALACE CAPITAL PLC

Steven Owen, Executive Chairman
info@palacecapitalplc.com

Financial PR

FTI Consulting

Dido Laurimore/ Giles Barrie

Tel: +44 (0)20 3727 1000

palacecapital@fticonsulting.com

Palace Capital plc

For further information on Palace Capital plc (LSE: PCA) please visit www.palacecapitalplc.com.

The Annual Report and Accounts together with the Notice convening the 2024 Annual General Meeting will be published and posted to Shareholders in June 2024.

Cautionary Statement

This announcement does not constitute an offer of securities by the Company. Nothing in this announcement is intended to be, or intended to be construed as, a profit forecast or a guide as to the performance, financial or otherwise, of the Company or the Group whether in the current or any future financial year. This announcement may include statements that are, or may be deemed to be, ''forward-looking statements''. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'', ''plans'', ''target'', ''aim'', ''may'', ''will'', ''would'', ''could'' or ''should'' or, in each case, their negative or other variations or comparable terminology. They may appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the directors, the Company or the Group concerning, amongst other things, the operating results, financial condition, prospects, growth, strategies and dividend policy of the Group or the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's ability to control or predict. Forward-looking statements are not guarantees of future performance. The Group's actual operating results, financial condition, dividend policy or the development of the industry in which it operates may differ materially from the impression created by the forward-looking statements contained in this announcement. In addition, even if the operating results, financial condition and dividend policy of the Group, or the development of the industry in which it operates, are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to, general economic and business conditions, industry trends, competition, changes in government and other regulation, changes in political and economic stability and changes in business strategy or development plans and other risks.

Other than in accordance with its legal or regulatory obligations, the Company does not accept any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

Executive Chairman's statement

Update on delivery of strategic objectives

Notwithstanding challenging property and financial markets, the past year was again transformational for the Group as it continued to successfully deliver on its disposal and debt reduction strategy resulting in a significantly de-leveraged balance sheet which has put the Company into a substantial net cash position. Since 1 April 2023 to date the Company has exchanged or completed on the sale of 24 investment properties for £112.9 million and exchanged or completed on £4.4 million of sales of unencumbered residential units at Hudson Quarter, York. During FY24 the Company completed the sale of 21 investment properties for £93.7 million which is 4.4% ahead of the 31 March 2023 valuation and completed the sales of seven residential units at Hudson Quarter, York, for £3.2 million, 5.3% ahead of the 31 March 2023 valuation.

During FY24, the Company proactively reduced gross debt by £56.0 million to £8.3 million and the significant de-leveraging of the balance sheet resulted in a net cash position of £11.5 million as at the year end which has increased to £19.7 million as at 5 June. Proforma net cash, assuming that all exchanged properties complete, is currently £30.1 million.

Since July 2022, cash returned to shareholders from share buyback programmes totals £21.9 million of which £15.2 million was returned during FY24. As part of its strategy of returning cash to shareholders, following the announcement of these results today, the Company will be consulting with major shareholders regarding the terms of a tender offer to return capital of approximately £22 million to shareholders. It is expected that a further announcement will be made later this month of a tender offer via a circular to shareholders. Subject to shareholder approval at a specially convened General Meeting the Company expects to complete the tender offer during July 2024.

As mentioned above, disposal activity has continued since the year end and we have exchanged contracts or completed the sales of three investment properties totalling £18.5 million, and also conditionally exchanged on an office unit at St James' Gate, Newcastle for £0.7 million. These sales were in aggregate 1.5% ahead of the 31 March 2024 book value.

Total investment properties sold since the change of strategy in July 2022 amount to £124.0 million or £135.9 million including residential apartments.

Assuming that the properties currently under offer are sold, the Company will have six investment properties remaining, each of which have their own asset management initiatives that are required to be completed in order to be ready for sale. Additionally, conditions in the investment market for certain types of assets, particularly leisure assets, are such that, in the Board's view, the sale of these assets should be deferred until market demand and pricing improve, particularly given the high income yield and long unexpired lease terms. Market conditions are continually assessed in order to determine the optimum time to sell a property assuming all appropriate asset management initiatives have been completed in relation to such properties. Further commentary on each of the six investment properties can be found in the Operational Review.

Operationally, the business remains robust. The team has been proactive in implementing asset management plans to increase income, reduce void costs and improve our ESG performance, including EPCs, as set out in the Operational Review. Rent collection remains high and current occupancy levels remain resilient.

Palace Capital continues to reduce its level of administrative expenses in line with its strategy, with measures implemented in the financial year saving £0.9 million. This includes reducing headcount and relocating its head office to a smaller office in Victoria, London in December 2023. Annual occupancy costs of the Company's premises are £0.25 million lower than those of its former offices in Bury Street, SW1.

Annualised cost savings are now over £2.3 million compared to 2022. These cost savings represent 51% of FY22 administrative expenses and 31% of FY22 EPRA earnings. We now have a Board of two members and an executive team of six including myself focused on executing the strategy.

Overview of results

The Group's adjusted profit before tax decreased to £5.4 million (2023: £7.6 million) as a result of income lost through disposals. Investment property sales during the year period realised a profit of £2.3 million (2023: £0.8 million) whilst trading profits from the sale of residential units contributed £0.2 million (2023: £0.5 million).

The deficit on the revaluation of the portfolio for the year of £15.4 million was due principally to softening yields across the whole portfolio but particularly during the second half of the financial year in relation to the two leisure assets which accounted for approximately half of the deficit. An analysis of the valuation deficit is provided in the Operating Review.

Contractual payments to the former Chief Financial Officer and staff of £0.6 million, including associated costs, have been treated as an exceptional item.

A provision of £0.6 million in relation to the Short Term Incentive Plan ("STIP"), which was introduced during FY24, has been made although no payment will be due until the Completion Date has been determined in accordance with the rules of the STIP.

Together with other items totalling £0.6 million, the aggregation of the profits and losses described in the preceding paragraphs account for the IFRS loss before tax for the year of £9.3 million (2023: £35.8 million loss).

Principally as a result of the revaluation deficit on the portfolio equivalent to 39 pence per share, offset by the 8 pence per share share-buyback accretion, EPRA NTA per share decreased by 11.5% to 262 pence per share (2023: 296 pence per share).

As noted above, the Group's balance sheet has been significantly strengthened following the £56.0 million reduction in gross debt during the year and the Company being in a net cash position at the year end of £11.5 million (2023: net debt £58.8 million, LTV 31%).

Board changes and Director Remuneration

I was appointed as Executive Chairman from the AGM held on 26 July 2023, having previously been (Non-executive) Interim Executive Chairman. Due to the reduced size of the Company and repayment of bank debt, Matthew Simpson stepped down from the Board as Chief Financial Officer on 14 November 2023. Contractual payments to the former Chief Financial Officer of £0.4 million, including associated costs, have been treated as an exceptional item. Details are provided in the Directors' Remuneration Report in the Annual Report.

The performance of the 'STIP approved by shareholders at the 2023 AGM and predicated on the successful disposal of assets in a timely manner is explained in the Directors' Remuneration Report. Payments, in cash, were made under the Rules of the STIP to good leavers and these have been accounted for in the period.

Dividend

The Group paid or declared dividends of 15.0 pence per share in relation to the year ended 31 March 2024 (2023: 15.0 pence per share), including a proposed final fourth quarter dividend of 3.75 pence per share. The fourth quarter final dividend of 3.75 pence per share will be paid, subject to shareholder approval at the AGM being held on 24 July 2024, on 23 August 2024 to shareholders on the register at 26 July 2024. The ex dividend date will be 25 July 2024. Of this, 1.35 pence per ordinary share will be paid as a Property Income Distribution ('PID') and 2.40 pence per ordinary share will be paid as a Non-Property Income Distribution ('Non-PID').

Outlook

Commercial property and financial markets remain challenging but there are indications that UK interest rates will reduce over the next year following the sharp fall in inflation over recent months. Until interest rates reduce and confidence returns to some sectors of the real estate market it is unlikely that there will be a material upward re-pricing of assets. Given the reduction in property values seen since the peak of the last cycle in the Spring of 2022 it is considered that valuations may be close to the bottom of this current cycle.

At an operational level, the Company continues to make good progress with its asset management activities despite the difficult and uncertain conditions in financial and property markets.

Given its strong cash position, the Company remains well placed in terms of flexibility and optionality regarding the timing of its disposal programme and other strategic initiatives, including the tender offer referred to above.

Steven Owen

Executive Chairman

5 June 2024

OPERATIONAL REVIEW

SUMMARY OF THE YEAR

The business continues to perform well operationally. The team has been proactive in implementing asset management plans to increase income, reduce void costs and improve our ESG performance, including EPCs. Rent collection remains strong and occupancy levels remain resilient. Total rent collection for the 12 months to 31 March 2024 was 98% (2023: 99%).

During the year ended 31 March 2024, the Company disposed of 21 investment properties for £93.7 million, 4.4% ahead of the 31 March 2023 book value. Seven apartments at Hudson Quarter, York were sold during the year for £3.2 million leaving 13 units remaining at the year end.

ASSET MANAGEMENT

During FY24 there were 23 lease events completed totalling 162,000 sq ft of space, 5% above the 31 March 2023 ERV ('FY23 ERV'), generating £0.9 million of additional annualised income, principally from eight new lettings at 5% above ERV, generating £0.8 million of additional annualised income.

In addition, void savings from new lettings was £0.4 million, resulting in a total of £1.3 million of annualised net rental income created.

Portfolio asset management activity and disposals continue to improve the EPC (Energy Performance Certificate) profile across the portfolio: 100% are now rated A-D and 81.0% are rated A-C (2023: 96.2% and 72.2% respectively).

New lettings in the year included:

· 2 St James' Gate, Newcastle, where Orega, a premium, flexible, serviced office workspace provider, entered into a 15 year management agreement to take the second and third floors totalling 22,500 sq ft of the seven storey, 82,500 sq ft building. Following a comprehensive refurbishment the operation opened in January 2024, providing c.400 workstations. This letting significantly increased the occupancy at the property and, together with the letting to Softcat plc in December 2022, were the first two major lettings at St James' Gate since the property was acquired in 2017.

· Broad Street Plaza, Halifax, where Calderdale and Huddersfield NHS Foundation Trust entered into a new 15 year lease and took an additional 6,000 sq ft unit increasing their occupation to over 27,000 sq ft. The rent of £0.4 million per annum on the combined space is over £14 psf and is 41% higher than the March 2023 ERV. The NHS now accounts for 19% of the net income from the property.

· Boulton House, Manchester and King's Park House, Southampton where three lettings totalling £0.2 million rent per annum were achieved at an average premium to the FY23 ERV of 4%.

Other initiatives during FY24 included the following:

· East Grinstead - new 15 year reversionary lease at Unit A (21,500 sq ft) from August 2027 to Wickes Group plc at a rent of £0.4 million per annum, in line with FY23 ERV.

· Salisbury - new 10 year reversionary lease from September 2025 to Booker Limited at a rent of £0.25 million per annum, which was 22% above the FY23 ERV.

· HQ York - GRJ occupy the 4^th and 5^th floors at rent of £0.32 million per annum expiring November 2031 with a tenant break in December 2027. We successfully removed the tenant's break in December 2027, thereby increasing the building's WAULT from 4.9 to 6.5 years.

Since the year end, a key letting has been achieved at Imperial Court, Leamington Spa (20,419 sq ft) where we have completed a 10 year lease with a mutual break in year five to Lighthouse Games Ltd at a rent of £0.38 million per annum, which is in line with the ERV.

Other initiatives since the year end include the agreement in principle with Vue Cinemas at Sol, Northampton to regear their lease which would bring their total term to 20 years expiring in 2044, with a material increase in rent and five yearly upward only rent reviews linked to RPI with a cap and collar structure. In return the Company will make a significant capital contribution towards the comprehensive refurbishment of the cinema, including recliner seating upgrade, associated auditoria decorative works and foyer refurbishment.

These asset management initiatives are part of the process of creating value and preparing assets for sale, the timing of which is firmly within the control of the Company.

PORTFOLIO OVERVIEW

As at 31 March 2024 the portfolio comprised 12 properties (2023: 31) comprising 62% office, 24% leisure, 4% retail and 10% residential.

CBRE independently valued the portfolio as at 31 March 2024 at £88.7 million, resulting in a deficit of 15.5% on a like-for-like basis compared with the valuation as at 31 March 2023. The largest declines were the two leisure assets at 27.2% and offices at 12.5%.

The seven office assets fell 12.5%, which was driven predominantly by a significant softening of yields to reflect the deterioration in the regional office investment market. The largest falls were at Hudson Quarter, York (24.0%), Exeter (19.4%) and Milton Keynes (15.5%) whereas gains were achieved at Leamington Spa (+5.6%), Harlow (+4.9%) and Fareham (+4.5%) as a result of asset management initiatives. The ERVs on individual office properties remained broadly flat with the exception of Milton Keynes where there was an increase of 22.5% which resulted in an overall increase of 3.0% across the office portfolio.

The two leisure assets declined by 27.2% overall reflecting the severely weakened leisure investment market. Sol, Northampton fell 37.5% in value and Broad Street Plaza, Halifax fell 18.1%. The blended leisure NIY and Equivalent yields both increased by c.250 bps to 13.4% and 12.8% respectively. Leisure ERVs increased by 1.3%.

The value of the one retail property was virtually unchanged and residential declined 2.2%.

PORTFOLIO OVERVIEW

	FY24	FY23
Portfolio value	£88.7m	£192.4m
Net initial yield	8.0%	7.4%
Reversionary yield	13.0%	9.6%
Contractual rental income	£8.0m	£15.7m
Estimated rental value	£10.6m	£18.8m
WAULT to break	5.4 years	4.8 years
EPRA vacancy rate	18.0%	12.3%

DISPOSAL AND ASSET MANAGEMENT STRATEGY POST FY24

Since 31 March 2024 we have exchanged or completed on the sale of the following three investment properties for £18.5 million, 0.1% ahead of the 31 March 2024 book value:

· Boulton House, Manchester for £8.8 million, completion due late July 2024

· Kiln Farm, Milton Keynes for £6.4 million

· Sandringham House, Harlow for £3.3 million

We have also conditionally exchanged on a self-contained office unit at 3B St James' Gate, Newcastle to an owner occupier for £0.7 million, 69% above the value as at 31 March 2024 and are under offer to sell Copperfields, Dartford, in an off-market transaction, and Admiral House and Nicholson Gate, Fareham.

The portfolio as at 5 June 2024 consists of nine properties being eight investment properties and one residential property in York.

Apartment sales at Hudson Quarter, York have continued post 31 March 2024, with a further two apartment sales having exchanged to the value of £1.2 million. There are 13 units remaining and two units under offer. Sales of these will continue, subject to market conditions which have materially improved since the start of 2024.

The strategy for the remaining six investment properties, which had a value of £54.4 million as at 31 March 2024, assuming the completion of the sale of those properties currently exchanged and that the agreed sales of Dartford and Fareham complete is as follows:

Broad Street Plaza, Halifax

The investment market for leisure assets is currently difficult with debt finance being hard to obtain for such assets, notwithstanding the diversity and longevity of income from some of these assets, including Halifax. The lack of liquidity in this sector means that valuations can be volatile. The current income yield on a geared basis for Halifax is 35% and the WAULT to expiry is 14.8 years (9.6 years to break).

There are also various ongoing asset management initiatives that are targeted to be completed prior to sale but the key determinant in terms of timing for disposal is an improvement in debt markets and market sentiment for leisure assets.

Sol, Northampton

As noted above, the agreement to regear the Vue lease is transformational for this property and extends the WAULT to 13.4 years on expiry and 13.1 years to break. There are also other negotiations with both existing and prospective tenants for repositioning some of the units with the potential to improve and diversify the overall leisure offering at the property which will contribute towards it being an in-town destination centre.

On the investment side, as is the case with Halifax, the leisure market is weak with a limited pool of buyers and therefore, the focus is on the asset management activity to drive value and the timing for the disposal of Sol will depend on an improvement in debt and property markets.

St James' Gate, Newcastle

Active asset management initiatives are underway and further lettings of the vacant space are required in order to increase the occupancy from its current level of 77% and extend the WAULT prior to the asset being ready for sale. Additionally, a track record of occupancy and operating income under the management agreement with Orega needs to be established before a sale can be contemplated as to sell otherwise will not, in our view, realise full value. The lettings to Softcat plc and Orega demonstrate the potential of this property.

HQ, York (Commercial)

We are under offer on the lower ground vacant office suite (3,660 sq ft) and, assuming the lease is completed, the property will be 90% occupied with only half a floor (2,932 sq ft) remaining available. We have also removed significant lease breaks on the 4^th and 5^th floors thus extending the WAULT from 4.9 to 6.5 years. HQ York is an institutional grade property and subject to market conditions and the level of interest rates, it is expected that it will be marketed in Autumn 2024.

Imperial Court and House, Leamington Spa

This property is now fully let following the recent letting of Imperial Court to Lighthouse Games. Other asset management activities are under way in order to achieve a vacant possession block date in five years' time which will provide an opportunity for a potential redevelopment of the entire site.

It is expected that this property will be marketed in Autumn 2024.

The Forum, Exeter

We are actively exploring the principle of a change of use for this 1970s office building to one that we believe will realise more value on sale. As part of this strategy, we are looking to achieve a vacant possession block date within the next three years and are in the process of preparing a pre-application submission to Exeter City Council.

If these initiatives are successful, we will then market the property for sale which is likely to be in Q4 2024/Q1 2025 subject to market conditions.

Post 31 March 2024, total residential and investment sales exchanged or completed currently stand at £20.4 million and as a result, since the change of strategy announcement on 19 July 2022, investment property disposals (either completed or exchanged) have generated proceeds of £124.0 million at a 17.0% reduction to the March 2022 valuation (which was the peak of the current property cycle) or 3.7% ahead when compared with the relevant March valuation prior to sale.

Daniel Davies, Head of Asset Management

Thomas Hood, Head of Investment

5 June 2024

FINANCIAL REVIEW

Financial Overview

The Group's adjusted profit before tax decreased to £5.4 million (2023: £7.6 million) as a result of income lost through disposals.

Against a backdrop of economic uncertainty, the Group continued to deliver at an operational level, by significantly reducing gross debt in a rising interest rate environment and making substantial progress in reducing administration costs, with £0.9 million of annualised cost savings made in the year.

Investment property sales during the year period realised a profit of £2.3 million (2023: £0.8 million) whilst trading profits from the sale of residential units contributed £0.2 million (2023: £0.5 million).

Contractual payments to the former Chief Financial Officer and staff of £0.6 million, including associated costs, have been treated as an exceptional item.

FINANCIAL HIGHLIGHTS

	2024	2023
Income growth
IFRS loss before tax	(£9.3m)	(£35.8m)
Adjusted profit before tax	£5.4m	£7.6m
EPRA earnings	£4.0m	£5.7m
Basic EPS	(23.7p)	(80.2p)
EPRA EPS	10.1p	12.7p
Adjusted EPS	13.8p	17.1p
Dividend for the year	15.0p	15.0p

Capital growth
Like-for-like valuation decrease	(15.5%)	(18.6%)
Net Asset Value	£97.8m	£128.5m
Basic NAV per share	260p	294p
EPRA NTA per share	262p	296p
Total accounting return	(6.4%)	(20.4%)
Total shareholder return	13.7%	(15.9%)

The summary of the Group financial results are as follows:

Income Statement Summary

Income Statement	31 March 2024 £m	31 March 2023 £m
Gross property income	12.1	17.9
Property operating expenses	(2.5)	(2.6)
Expected Credit Loss provision	-	0.3
Net rental income	9.6	15.6
Recurring administration expenditure	(2.6)	(4.1)
Finance income	0.3	-
Finance costs	(1.9)	(3.9)
Adjusted profit before tax	5.4	7.6
Tax	-	0.1
Adjusted profit after tax	5.4	7.7
Payments to former Directors and Staff (including associated costs)	(0.6)	(1.8)
Short term incentive plan provision (including associated costs)	(0.6)	-
Share based payments	(0.2)	(0.2)
EPRA earnings	4.0	5.7
Loss on revaluations	(15.4)	(42.9)
Trading profit	0.2	0.5
Profit on disposal of investment properties	2.3	0.8
Other income statement movements	(0.5)	0.2
IFRS loss after tax	(9.4)	(35.7)

Net rental income reduced by £6.0 million or 38.5% to £9.6 million (2023: £15.6 million) largely due to net income lost from disposals in the year of £5.0 million. Property operating expenses remained stable at £2.5 million, with void savings from disposals in the year of £0.2 million being offset by a £0.1 million increase in void costs as a result of inflationary pressures on service charge and insurance costs on our remaining vacant units.

The Company has continued to reduce its cost base, with annualised cost savings of £0.9 million in the year. As a result of cost savings implemented in the prior year of £1.4 million, total savings for FY23 and FY24 to date are £2.3 million. Recurring administrative costs in the year reduced by 36.6% to £2.6 million (March 2023: £4.1 million) for the period.

Finance costs reduced by £2.0 million or 51.3% to £1.9 million (2023: 3.9 million) as a direct result of repaying all of its floating rate debt facilities in the year. The Group priorities keeping cash reserves in its instant access deposit account, and during the year, our active cash management enabled us to receive £0.3 million in interest income.

Rent collection remained strong at 98% (2023: 99%) throughout the year as tenant financial covenant health remained robust through the economic uncertainty.

	Quarter starting Mar 23 £m	Quarter starting Jun 23 £m	Quarter starting Sep 23 £m	Quarter starting Dec 23 £m	Year ended 31 Mar 24 £m
Total demanded	3.9	3.0	2.8	2.4	12.1
Total collected	3.9	3.0	2.7	2.3	11.9
Outstanding	-	-	0.1	0.1	0.2
Current collection rates	99%	99%	99%	96%	98%

Shareholder value

EPRA Net Tangible Assets ("NTA") decreased by 34.0 pence per share or 11.5% to 262 pence (2023: 296 pence) during the year. This was largely due to the revaluation deficit of £15.4 million or 38.9 pence per share, equivalent to a 15.5% reduction in the portfolio on a like-for-like basis.

Other movements to note include the buyback of shares of £15.2 million, increasing EPRA NTA by 8.0 pence per share, the profit on disposal of assets and Hudson Quarter trading profit of £2.5 million, contributing 6.3 pence per share. These were offset by the fair value, downward adjustment of trading properties (HQ York residential) of £0.3 million, or 0.7 pence per share, the payments including associated costs to the former Director and Staff of £0.6 million reducing EPRA NTA by 1.5 pence per share, and the Short Term Incentive Plan provision of £0.6 million or 1.6 pence per share. Net adjusted earnings after dividends paid, decreased EPRA NTA by a further 1.2 pence per share. Other movements contributed to a further reduction of 4.4 pence per share.

EPRA Net Tangible Assets Movement

	£m	No. of diluted shares	Pence per share
EPRA NTA at 31 March 2023	129.3	43,728,212	296p
Share buyback	(15.2)	(6,160,000)	8.0p
EPRA NTA after buyback	114.1	37,568,212	304p
Adjusted earnings before tax	5.4		13.8p
Profit on disposal of investment properties	2.3		5.8p
Hudson Quarter trading profit	0.2		0.5p
Loss on revaluation of investment properties	(15.4)		(38.9p)
Cash dividends paid	(6.0)		(15.0p)
Fair value adjustment of trading properties	(0.3)		(0.7p)
Short term incentive plan provision (incl. associated costs)	(0.6)		(1.6p)
Payments to former Directors and Staff (incl. associated costs)	(0.6)		(1.5p)
Other movements*	(0.8)	(13,687)	(4.4p)
EPRA NTA at 31 March 2024	98.3	37,554,525	262p

*Other movements include debt termination costs, shares purchased by EBT, the denominator effect of the reduced number of shares at period end compared with the average for the period and the effect of rounding.

FINANCING

The Group significantly reduced its gross debt in the year by 87.1% to £8.3 million (2023: £64.3 million) and at the year end only one debt facility remained which is at a fixed interest rate of 2.9% until July 2026. The significant de-leveraging of the balance sheet resulted in a net cash position of £11.5 million as at the year end (2023: Net debt £58.8 million, LTV 31%) which has increased to £19.7 million as at 5 June. Proforma cash reserves, assuming that all exchanged properties complete, are currently £30.1 million.

The average cost of debt in the year reduced to 2.9% (2023: 5.8%), as a result of repaying all the floating rate debt facilities. This included full repayment of the Santander, Barclays, NatWest, and Lloyds debt facilities. The Group prioritised repayment of floating rate facilities to minimise the exposure and impact of interest rate increases to the Group. At 31 March 2024, we held £8.3 million of fixed debt (2023: £8.6 million), which was 100% of overall debt (2023: 13%).

Set out below is a table showing the movement in gross debt during the year:

	£m
Gross debt at 31 March 2023	64.3
Repayment of debt from disposals	(54.6)
Amortisation of loans	(1.4)
Gross debt at 31 March 2024	8.3
Amortisation of loans	(0.1)
Gross debt at 5 June 2024	8.2

The Group's key debt metrics are summarised in the table below:

DEBT METRICS

	31 March 2024	31 March 2023
Loan to value	nil	31%
Total gross debt	£8.3m	£64.3m
Total fixed debt	£8.3m	£8.6m
Average cost of debt	2.9%	5.8%
Average debt maturity	2.3 years	2.0 years
NAV gearing	nil	46%

Andrew Wolfe

FINANCIAL CONTROLLER

5 June 2024

RISK MANAGEMENT

RISK FRAMEWORK

The Board has overall responsibility for ensuring that an effective system of risk management and internal control exists within the business and confirms that it has undertaken a robust assessment of the Group's emerging and principal risks and uncertainties.

Risk management is an inherent part of the Board's decision making process. This is then embedded into the business and its systems and processes. The Board reviews its overall risk appetite and regularly considers, via the Audit and Risk Committee, the principal risks facing the company, management's plans for mitigating these and emerging risks. The Committee also considers, at least annually, the effectiveness of the Company's system of risk management and internal control. Further information on the work of the Committee in this area is available in the Audit and Risk Committee report in the Report and Accounts.

Our approach to risk identification and our open and supportive culture means that asset managers and key individuals in the finance team are able to report directly and at an early stage on issues, allowing management to take appropriate mitigating action.

EMERGING RISKS

If economic and geo-political stability remains uncertain or worsens, this could have an impact on the commercial property market with reduced valuations and rental income. Further cost of living issues may negatively impact consumer sentiment and inflation could reduce spending further while direct and indirect costs to the Group may increase further which may not be fully recoverable. A prolonged bout, new variants of COVID-19 or further pandemics may lead to further interruption of large parts of the economy for a significant period.

GOING CONCERN ASSESSMENT

In accordance with the 2018 UK Corporate Governance Code (the Code), the Directors have assessed the Group's position over the:

· Short-term (over the next 12 months to June 2025 as required by the 'Going concern' provision) and;

· Medium-term (a 3 year period to June 2027 as required by the 'Viability statement' provision)

GOING CONCERN

The Directors regularly assess the Group's ability to continue as a going concern. The Strategic report sets out in detail the Group's financial position, cash flows, liquidity position, borrowing facilities and the factors which will affect future performance. In assessing the going concern, the Directors considered:

· The Group's current financial position including cash and drawn debt

· The Group's 12 month 'base case scenario' forecast to June 2025, which is management's best estimate of market and business changes, taking into account:

o Disposal of investment properties

o Residential sales

o Ability to satisfy bank covenants

o Committed capital expenditure

o Rent collection

· Downside scenario on the 12 month base case scenario forecast to June 2025

The Group is in a strong financial position. At 31 March 2024 the Group had £19.8 million of cash and cash equivalents. The fair value of our property portfolio is £88.7 million with net assets of £97.8 million. During the year, the Group repaid £56.0 million of floating rate debt, funded by investment property and Hudson Quarter residential sales, with drawn debt at 31 March 2024 of £8.3 million (31 March 2023: £64.3 million). The Group only has one debt facility remaining, which is at a fixed interest rate of 2.9% and matures in July 2026. The Group was in a net cash position of £11.5 million at year end (31 March 2023: Net debt of £58.8 million, LTV of 31%). During the year, the Group collected 98% of all rents and complied with all ICR and LTV bank covenants, despite rising interest rates. At the date of this assessment, there are no bank facilities expiring within the going concern period. In addition to the strong financial position of the Group at 31 March 2024, the Group continued to strengthen its balance sheet post year end, with three investment properties completed or exchanged for £18.5 million, 0.1% ahead of 31 March 2024 book values. At the date of this assessment, cash of £27.9 million and drawn debt of £8.2 million.

The Directors conducted a detailed 12 month base case scenario forecast to June 2025, making various assumptions over asset sales, rent collection and committed capital expenditure. The forecasts indicated that the Group:

· Has strong sustainable cash flows and would be able to meet its liabilities as they fall due over the next 12 months and;

· Will comply with all ICR and LTV bank covenants

In addition to the detailed 12 month base case scenario forecast to June 2025, the Directors have considered a downside scenario in assessing the Groups' ability to continue as a going concern. Sensitivity analyses were undertaken to assess the impact on the business and in particular the bank covenants.

The downside scenario assumptions used in the assessment included:

• 30% reduction in all property bank valuations

• 15% reduction in rent collection

• Slowdown in residential sales

Even on the downside scenario described above, the Group will still be able to meet its liabilities as they fall due over the next 12 months and will still be compliant on all ICR and LTV bank covenants. As the only debt facility remaining is at a fixed interest rate of 2.9%, rising interest rates will not impact its ICR covenants.

GOING CONCERN STATEMENT

Based on the analysis undertaken on the base case and downside scenario, the Group has sufficient liquidity to meet its ongoing liabilities that fall due over the assessment period. Given the market information available, the Directors are not aware of any material uncertainty that exists that may cast doubt upon the Group's or Company's ability to continue as a going concern. As a result, the Directors consider it appropriate to continue to prepare the financial statements on a going concern basis. The Board notes that it shall take time to prepare assets for possible disposal in line with its stated strategy.

VIABILITY

In accordance with provision 31 of the UK Corporate Governance Code and taking into consideration the current economic uncertainty, the Directors have assessed the prospects of the Group and future viability over a three-year period to June 2027, being longer than the 12 months required by the "Going Concern" provision.

The Board's assessment of the Group's viability for the next three years has been made with reference to:

• The impact of the current economic uncertainties and resulting impact on the Group and our tenants' ability to operate and meet their rental obligations.

• The key principal risks of the business and its risk appetite.

• The impact on business operations, mainly rent collection, and progress on residential sales at Hudson Quarter, in the event of a downturn in the economy.

• The Group's current position and its ability to meet future financial obligations to remain covenant compliant.

REVIEW PERIOD

The Board considers a period of three years to be appropriate over which to assess the long-term viability of the Company for the following reasons:

• It reflects the Group's view on the length of time needed to complete asset management initiatives

• The Group's debt maturity at 31 March 2024 was 2.3 years

• The Group's WAULT to break at 31 March 2024 was 5.4 years

ASSESSMENT

The Directors conducted a detailed 3-Year viability assessment which included a base case scenario forecast to June 2027, making various assumptions over asset sales, rent collection and committed capital expenditure.

In addition to the base case scenario, the Directors have undertaken a robust scenario assessment of the risks which could threaten the 3-year viability or the operational existence of the Group. As part of the reasonable downside modelling, the Directors have stress-tested working capital model and cash flows using the same assumptions as stated above in the Going Concern assessment.

The Group will likely be smaller resulting from asset sales but having assessed the current position of the Group, its prospects and principal risks and taking into consideration the assumptions stated above, the Board has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the next three years.

STRATEGIC RISKS				FINANCIAL RISKS
01 MARKET CYCLE ECONOMIC AND POLITICAL				02 CAPITAL STRUCTURE AND LIQUIDITY
Risk description Failure to react appropriately to changing market conditions and adapt our corporate strategy could negatively impact shareholder returns. A downturn in the market could reduce the appetite in the investment market, leading to lower valuations and affecting our disposal strategy and ability to return capital to shareholders. Uncertainty in the UK economic landscape, global supply chain issues, inflation and interest rates brings risks to the property market, supply chains and to occupiers' businesses. This can significantly impact market sentiment and our ability to extract value from our properties resulting in lower shareholder returns, reduced liquidity and increased occupier failure.				Risk description An inappropriate level of gearing or failure to comply with debt covenants or manage re-financing events could put pressure on cash resources and lead to a funding shortfall for operational activities. Increasing costs of borrowing and increasing interest rates could affect the Group's ability to borrow or reduce its ability to repay its debts
Mitigation The Board monitors macro economic issues, market indicators and reviews the Group's strategy and business objectives on a regular basis. It will tailor the delivery of the Company's strategy in light of current and forecast market conditions. Disposal of other assets will continue if the market conditions allow for value to be achieved, whilst active asset management of the assets will continue to support in delivering returns to shareholders. Third party agent's advice is taken on all disposals. Exco regularly reviews market conditions.				Mitigation The Board regularly reviews its capital risk management policy, gearing strategy and debt maturity profile. The Group's LTV limit is 35%, and capital has been used to repay debt to reduce exposure to interest rate volatility and ensure debt compliance. Management maintains a close relationship with its lender. The Board reviews financial forecasts on a regular basis, including sensitivity against financial covenants. The Audit and Risk Committee considers the going concern status of the Group biannually. The Board considers the allocation of its capital in granular detail to ensure the most efficient use. Sales of assets can be used to repay debt, fund working capital requirements or return to shareholders.
Current position The Board is monitoring and considering the longer term impacts of the cycle including the potential future of the office and the effects of the enhanced ESG requirements.				Current position The Group's weighted average debt maturity is currently c2.3 years. The Group's LTV limit is 35% but current LTV is nil. The Company has repaid £56.0 million of bank debt in the year to 31 March 2024.
Likelihood after mitigation Score 1 (low) - 10 (high) 6				Likelihood after mitigation Score 1 (low) - 10 (high) 3
Impact after mitigation Score 1 (low) - 10 (high) 6				Impact after mitigation Score 1 (low) - 10 (high) 2
Overall Risk Rating Score 1 (low) - 20 (high) 12				Overall Risk Rating Score 1 (low) - 20 (high) 5

		03 PORTFOLIO STRATEGY		04 ASSET MANAGEMENT
		Risk description An inappropriate investment strategy that is not aligned to overall corporate purpose objectives, economic conditions, or tenant demand may result in lower investment returns.		Risk description Failure to implement asset business plans and elevated risks associated with refurbishment could lead to longer void periods, higher arrears and overall investment performance, adversely impacting returns and cashflows.
		Mitigation The Board regularly reviews the Group's investment strategy and asset allocation to ensure this is aligned to the overall corporate strategy.		Mitigation The process for reviewing asset business plans is embedded in the annual budget process. Our experienced management team and use of advisors and property managers supports the execution of asset management strategies..
		Current position The Company is selectively marketing certain assets, as the market stabilisation and recovery continues. Asset management initiatives utilised to maximise value. Appraisals for improving properties e.g. via refurbishment are ongoing for certain assets.		Current position Our refurbishment pipeline is continuously assessed to ensure the right projects are being brought forward at appropriate times ensuring exposure at any one time is limited. The Executive Committee is reviewing the Group's Health and Safety systems and processes to ensure appropriate oversight of assets.

		Likelihood after mitigation Score 1 (low) - 10 (high) 4		Likelihood after mitigation Score 1 (low) - 10 (high) 4
		Impact after mitigation Score 1 (low) - 10 (high) 6		Impact after mitigation Score 1 (low) - 10 (high) 4
		Overall Risk Rating Score 1 (low) - 20 (high) 10		Overall Risk Rating Score 1 (low) - 20 (high) 8

PORTFOLIO RISKS

OPERATIONAL RISKS

VALUATION

TENANT DEMAND
AND DEFAULT

BUSINESS CONTINUITY AND CYBER SECURITY

Risk description

Decreasing capital and rental values could impact the Group's portfolio valuation leading to lower returns. Higher cost of debt can lead to property yields to be pushed out and valuations to fall as a result. Increasing gilt yields, can leave property investment less attractive unless the desired return can be achieved.

Risk description

Failure to adapt to changing occupier demands and/or poor tenant covenants may result in us losing significant tenants, which could materially impact income, capital values and profit. Rising inflation, interest rates and living costs could impact tenant businesses, such as the leisure industry, as demand falls for discretionary spending.

Risk description

Business disruption as a result of physical damage to buildings, Government policy and measures implemented in response to pandemics, cyber attacks or other operational or IT failures or unforeseen events may impact income and profits.

Mitigation

Independent valuations are undertaken for all assets at the half year and year end. These are reviewed by management and the Board. Members of the Audit and Risk Committee meet with the valuers at least once a year to discuss valuations and the valuation process. Management actively review leases, tenant covenants and asset management initiatives to grow capital and rental values.

Mitigation

Management maintain close relationships with tenants understanding their needs and supporting them throughout their business cycle. Managing agents support rent collection and collection of arrears on a regular basis. Tenant due diligence and credit checks are undertaken on an ongoing basis to review covenant strength of existing and prospective tenants. The finance and property teams monitor all current tenant covenants and all future new tenants. All arrears are monitored on an ongoing basis.

Mitigation

Our governance structure and internal control systems ensure sufficient Board oversight, with delegated responsibilities, segregation of duties and clear authorisation processes. A comprehensive programme of insurance is in place which covers buildings, loss of rent, cyber risks, Directors' and Officers liability and public liability. Antivirus software and firewalls protect IT systems and data is regularly backed up.

Current position

Valuations of the portfolio reflect the commercial property market in general. The team continue to work to mitigate against falls in value through active asset management including ESG improvements.

Current position

Rent collection rates remain robust at 98%. The team are closely monitoring tenant covenants in high risk sectors, ensuring we are aware of any tenant distress which can impact the rental collection.

Current position

The Board continues to review the internal control environment and ensure good governance practices are adopted throughout the business. Cyber security arrangements have been kept under regular review to ensure we are deploying the most up to date technologies.

Likelihood after mitigation Score
1 (low) - 10 (high)

Impact after mitigation
Score 1 (low) - 10 (high)

Overall Risk Rating
Score 1 (low) - 20 (high)

ENVIRONMENTAL, SOCIAL AND GOVERNANCE RISKS

PEOPLE

CLIMATE CHANGE

REGULATORY AND TAX

Risk description

An inability to attract or retain staff with the right skills and experience or failure to implement appropriate succession plans may result in significant underperformance or impact the overall effectiveness of our operations. Health and Safety of staff and others including tenants both physically and mentally and providing a safe and healthy environment in our properties is of utmost importance. Failure to do so could lead to staff and tenant ill health, litigation and regulatory issues, negative media and market sentiment against the Company.

Risk description

Longer term failure to anticipate and prepare for transition and physical risks associated with climate change including increasing policy and compliance risks associated with existing and emerging environmental legislation could lead to increased costs and the Group's assets becoming obsolete or unable to attract occupiers.

Risk description

Non-compliance with the legal and regulatory requirements of a public real estate company, including the REIT regime could result in convictions or fines and negatively impact reputation.

Mitigation

We engage with staff regularly and encourage a positive working environment. We maintain an attractive reward and benefits package and undertake regular performance reviews for each employee. Insurance cover is in place for Directors. Health and Safety is undertaken both internally and via the tenants and a key issue for our property managers.

Mitigation

The Group's ESG Committee oversees the execution of ESG related matters and ensures these are integrated into our business model and corporate strategy. Climate related risks are considered as part of our overall corporate risk assessment and ongoing environmental management of our buildings.

Mitigation

The Company employs experienced staff and external advisers to provide guidance on key regulatory, accounting and tax issues. Compliance with the REIT regime is regularly monitored by the Board and the Executive team consider the impact on the regime as part of their decision making.

Current position

A competitive employment market and inflationary pressures are driving increased pay and benefits to ensure attraction and retention of individuals with the skills, knowledge and experience required to implement the strategy. The Group's headcount is now stable with sufficient cover if any key personnel are unavailable. Employee engagement is high with regular meetings between employees and the Directors ensuring that the Board understands the views of the whole workforce.

Current position

There has been an increased focus on environmental management and management have focused on asset management initiatives to increase the EPC ratings of our assets, increasing the marketability of the assets in a cost effective way.

Current position

Emerging corporate governance and audit reforms, require additional processes and procedures to be put in place and additional reporting on the company's resilience. The Board is overseeing these changes.

Likelihood after mitigation Score
1 (low) - 10 (high)

Impact after mitigation
Score 1 (low) - 10 (high)

Overall Risk Rating
Score 1 (low) - 20 (high)

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law, the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as issued by UK adopted IFRS and applicable law and have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for the period. In preparing each of the Group and Company financial statements the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• for the Group financial statements, state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards as issued by UK adopted IFRS and applicable law subject to any material departures disclosed and explained in the financial statements;

• for the Company financial statements, state whether they have been prepared in accordance with UK GAAP, subject to any material departure disclosed and explained in the parent company financial statements;

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business; and

• under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the IAS Regulations.

They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

DIRECTORS' RESPONSIBILITIES STATEMENT

The Directors confirm to the best of their knowledge:

• the financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, international financial reporting standards as issued by UK adopted IFRS and applicable law, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation as a whole;

• the Strategic Report includes a fair review of the development and performance of the business and the financial position of the Company and the undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties that they face; and

• the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group's and Company's performance, business model and strategy.

On behalf of the Board

Phil Higgins

Company Secretary

FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2024

	Note	2024 £'000	2023 £'000
Revenue	1	19,599	32,973
Cost of sales	3b	(9,776)	(17,147)
Movement in expected credit loss	12	-	327
Net property income		9,823	16,153
Administrative expenses	3c	(3,998)	(6,094)
Operating profit before gains and losses on property assets		5,825	10,059
Profit on disposal of investment properties		2,298	819
Loss on revaluation of investment property portfolio	9	(15,383)	(42,900)
Operating loss		(7,260)	(32,022)
Finance income		312	26
Finance expense	2	(1,909)	(3,970)
Debt termination costs		(459)	(15)
Changes in fair value of interest rate derivatives		-	210
Loss before taxation		(9,316)	(35,771)
Taxation	5	(46)	67
Loss after taxation for the year and total comprehensive loss attributable to owners of the Parent		(9,362)	(35,704)
Earnings per ordinary share
Basic	6	(23.7p)	(80.2p)
Diluted	6	(23.7p)	(80.2p)

All activities derive from continuing operations of the Group. The notes form an integral part of these financial statements.

Consolidated Statement of Financial Position

as at 31 March 2024

	Note	2024 £'000	2023 £'000
Non-current assets
Investment properties	9	73,845	176,504
Right of use asset	11	38	132
Trade and other receivables	12	5,625	4,360
Property, plant and equipment	11	-	23
		79,508	181,019
Current assets
Trading property	10	8,126	11,055
Trade and other receivables	12	3,352	4,190
Cash and cash equivalents	13	19,766	5,509
		31,244	20,754
Total assets		110,752	201,773
Current liabilities
Trade and other payables	14	(4,066)	(8,339)
Borrowings	15	(318)	(8,545)
Lease liabilities for right of use asset	18	(39)	(132)
Creditors: amounts falling due within one year		(4,423)	(17,016)
Net current assets		26,821	3,738
Non-current liabilities
Borrowings	15	(7,933)	(55,129)
Short term incentive plan provision		(565)	-
Deferred tax liability	5	(57)	(76)
Lease liabilities for investment properties	18	-	(1,077)
Net assets		97,774	128,475
Equity
Called up share capital	19	3,756	4,639
Treasury shares		-	(7,343)
Merger reserve		3,503	3,503
Capital redemption reserve		1,223	340
Capital reduction reserve		89,931	118,477
(Accumulated losses)/retained earnings		(639)	8,859
Equity - attributable to the owners of the Parent		97,774	128,475
Basic NAV per ordinary share	7	260p	294p
Diluted NAV per ordinary share	7	260p	294p

These financial statements were approved by the Board of Directors and authorised for issue on 5 June 2024 and are signed on its behalf by:

STEVEN OWEN

Executive Chairman

Consolidated Statement of Changes in Equity

for the year ended 31 March 2024

	Note	Share Capital £'000	Treasury Share Reserve £'000	Other Reserves £'000	Capital Reduction Reserve £'000	Retained Earnings/ (Accumulated Losses) £'000	Total Equity £'000
At 31 March 2022		4,639	(717)	3,843	125,019	44,420	177,204
Total comprehensive loss for the year		-	-	-	-	(35,704)	(35,704)
Share-based payments	20	-	-	-	-	177	177
Exercise of share options		-	71	-	-	(71)	-
Issue of deferred bonus share options		-	-	-	-	37	37
Dividends paid	8	-	-	-	(6,542)	-	(6,542)
Share buyback		-	(6,697)	-	-	-	(6,697)
At 31 March 2023		4,639	(7,343)	3,843	118,477	8,859	128,475
Total comprehensive loss for the year		-	-	-	-	(9,362)	(9,362)
Share-based payments	20	-	-	-	-	137	137
Exercise of share options		-	161	-	-	(273)	(112)
Dividends paid	8	-	-	-	(6,045)	-	(6,045)
Share buyback		-	(15,179)	-	-	-	(15,179)
Shares purchased by employee benefits trust		-	(140)	-	-	-	(140)
Cancellation of treasury shares		(883)	22,501	883	(22,501)	-	-
At 31 March 2024		3,756	-	4,726	89,931	(639)	97,774

The share capital represents the nominal value of the issued share capital of Palace Capital plc.

Treasury shares represents the consideration paid for shares bought back from the market. On 27 March 2024 all shares held in Treasury were cancelled.

Other reserves comprise the merger reserve and the capital redemption reserve.

The merger reserve represents the excess over nominal value of the fair value consideration for the acquisition of subsidiaries satisfied by the issue of shares in accordance with S612 of the Companies Act 2006.

The capital redemption reserve represents the nominal value of cancelled preference share capital redeemed.

The capital reduction reserve represents distributable profits generated as a result of the share premium reduction and cancellation of shares.

Consolidated Statement of Cash Flows

for the year ended 31 March 2024

	Note	2024 £'000	2023 £'000
Operating activities
Loss before taxation		(9,316)	(35,771)
Finance income		(312)	(26)
Finance expense	2	1,909	3,970
Changes in fair value of interest rate derivatives		-	(210)
Loss on revaluation of investment property portfolio	9	15,383	42,900
Profit on disposal of investment properties		(2,298)	(819)
Debt termination costs		459	15
Depreciation of tangible fixed assets	11	23	30
Amortisation of right of use asset	11	119	82
Share-based payments	20	137	177
Increase in receivables		(2,536)	(1,140)
Decrease in payables		(3,369)	(415)
Decrease in trading property		2,929	9,233
Net cash generated from operations		3,128	18,026
Interest received		312	26
Interest and other finance charges paid		(2,339)	(3,427)
Corporation tax paid in respect of operating activities		-	(171)
Net cash flows from operating activities		1,101	14,454
Investing activities
Capital expenditure on refurbishment of investment property		(1,544)	(1,371)
Proceeds from disposal of investment property		92,217	15,410
Purchase of property, plant and equipment	11	-	(8)
Net cash flow generated from investing activities		90,673	14,031
Financing activities
Bank loans repaid	17	(56,022)	(37,419)
Loan issue costs paid	17	-	(461)
Dividends paid	8	(6,045)	(6,542)
Share buyback		(15,179)	(6,697)
Payment of share options exercised		(271)	-
Net cash flow used in financing activities		(77,517)	(51,119)
Net increase/(decrease) in cash and cash equivalents		14,257	(22,634)
Cash and cash equivalents at beginning of the year		5,509	28,143
Cash and cash equivalents at the end of the year	13	19,766	5,509

Notes to the Consolidated Financial Statements

BASIS OF ACCOUNTING

Basis of preparation

These preliminary results have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority and in accordance with International Accounting Standards, in conformity with the requirements of the Companies Act 2006, and International Financial Reporting Standards, as issued by the IASB (IFRS-UK) and applicable law.

The financial information does not constitute the Group's financial statements for the periods ended 31 March 2024 or 31 March 2023, but is derived from those financial statements. Financial statements for the year ended 31 March 2023 have been delivered to the Registrar of Companies and those for the year ended 31 March 2024 will be delivered following the Company's Annual General Meeting. The auditor's reports on both the 31 March 2023 or 31 March 2024 financial statements were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

The Directors continue to adopt the going concern basis in preparing the Group's financial statements. The consolidated financial statements of the Group comprise the results of Palace Capital plc ("the Company") and its subsidiary undertakings.

The Company is quoted on the Main Market of the London Stock Exchange and is domiciled and registered in England and Wales and incorporated under the Companies Act. The address of its registered office is Thomas House, 84 Eccleston Square, London, SW1V 1PX.

BASIS OF PREPARATION

The Group financial statements have been prepared in accordance with UK-adopted International Accounting Standards, (the 'applicable framework'), and have been prepared in accordance with the provisions of the Companies Act 2006 (the 'applicable legal requirements'). The Group financial statements have been prepared under the historical cost convention as modified by the revaluation of investment properties, the revaluation of property, plant and equipment, pension scheme and financial assets held at fair value.

EXEMPTION TO THE AUDIT OF SUBSIDIARY ACCOUNTS UNDER SECTION 479A OF THE COMPANIES ACT 2006

The following subsidiaries which consolidate into the Group accounts are exempt from being audited under section 479A of the Companies Act 2006:

Palace Capital (Leeds) Limited (Registered number: 06068651)

Palace Capital (Northampton) Limited (Registered number: 04982121)

Palace Capital (Properties) Limited (Registered number: 07866050)

Palace Capital (Developments) Limited (Registered number: 09849073)

Palace Capital (Manchester) Limited (Registered number: 09937194)

Palace Capital (Signal) Limited (Registered number: 06991031)

Property Investment Holdings Limited (Registered number: 00582889)

Palace Capital (Newcastle) Limited (Registered number: 05348319)

Palace Capital (York) Limited (Registered number: 12080228)

Palace Capital (Dartford) Limited (Registered number: 10523678)

GOING CONCERN

The Directors have made an assessment of the Group's ability to continue as a going concern which included the current economic headwinds created by rising inflation and rising interest rates, coupled with the Group's cash resources, borrowing facilities, rental income, disposals of investment properties, committed capital and other expenditure and dividend distributions.

The Group's business activities, together with the factors likely to affect its future performance and position, are set out in the Strategic Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in these financial statements. In addition, note 26 to the financial statements includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposures to credit risk and liquidity risk.

As at 31 March 2024 the Group had £19.8m of unrestricted cash and cash equivalents and a property portfolio with a fair value of £88.7m. At 31 March 2024 the Group has £8.3m of debt, which was all at a fixed interest rate of 2.9% until July 2026, resulting in the Group being in a net cash position of £11.5m. The Directors have reviewed the forecasts for the Group taking into account the impact of rising inflation and rising interest rates on trading over the 12 months from the date of signing this annual report. The forecasts have been assessed against a downside scenario incorporating lower levels of income. See Going Concern and Viability Statement of the Annual Report for further details.

The Directors have a reasonable expectation that the Group have adequate resources to continue in operation for at least 12 months from the date of approval of the financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

NEW STANDARDS ADOPTED DURING THE YEAR

New standards effective for the year ended 31 March 2024 did not have a material impact on the financial statements and were
not adopted.

New standards issued but not yet effective

There are no other standards that are not yet effective that would be expected to have a material impact on the Group in the current or future reporting periods and on the foreseeable future transactions, other than IFRS 18 which was recently issued by the IASB and management are still considering if and how this will impact the presentation of the Statement of Comprehensive Income.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of Palace Capital plc and its subsidiaries as at the year-end date.

Subsidiaries are all entities over which the Company has control being: power to direct the activities of the entity; exposure to variable returns from the entity; and the ability of the Company to use its power to affect those variable returns. Where necessary, adjustments have been made to the financial statements of subsidiaries and associates to bring the accounting policies used and accounting periods into line with those of the Group. Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the Consolidated Financial Statements.

The results of subsidiaries acquired during a year are included from the effective date of acquisition, being the date on which the Group obtains control until the date that control ceases.

The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. This fair value includes any contingent consideration. Acquisition-related costs are expensed as incurred.

If the consideration is less than the fair value of the assets and liabilities acquired, the difference is recognised directly in the Statement of Comprehensive Income.

Where an acquired subsidiary does not meet the definition of a business, it is accounted for as an asset acquisition rather than a business combination. A business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities.

Revenue

Revenue is primarily derived from property income and represents the value of accrued charges under operating leases for rental of
the Group's investment properties. Revenue is measured at the fair value of the consideration received. All income is derived in the United Kingdom.

Rental income from investment properties leased out under operating leases is recognised in the Statement of Comprehensive Income on a straight-line basis over the term of the lease. Contingent rent reviews are recognised when such reviews have been agreed with tenants. Lease incentives, rent concessions and guaranteed rent review amounts are recognised as an integral part of the net consideration for use of the property and amortised on a straight-line basis over the term of lease. Judgement is exercised when determining the term over which the lease incentives should be recognised.

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the Group Statement of Comprehensive Income when the right to receive them arises. Surrender premium income are payments received from tenants to surrender their lease obligations and are recognised immediately in the Group's Consolidated Statement of Comprehensive Income.

Insurance commissions are recognised as performance obligations are fulfilled in terms of the individual performance obligations within the contract with the insurance provider. Revenue is determined by the transaction price in the contract and is measured at the fair value of the consideration received. Revenue is recognised once the underlying contract between insured and insurer has been signed.

Revenue from the sale of trading properties is recognised when control of the trading property, along with the significant risks and rewards, have transferred from the Group, which is usually on completion of contracts and transfer of property title.

Service charge income relates to expenditure that is directly recoverable from tenants. Service charge income is recognised as revenue in the period to which it relates as required by IFRS 15 Revenue from Contracts with Customers. Dividend income comprises dividends from the Group's listed equity investments and is recognised when the Shareholder's right to receive payment is established. Revenue is measured at the fair value of the consideration received. All income is derived in the United Kingdom.

The disposal of investment properties is recognised when significant risks and rewards attached to the property have transferred from the Group. This will ordinarily occur on completion of contract, with such transactions being recognised when this condition is satisfied. The profit or loss on disposal of investment property is recognised separately in the Consolidated Statement of Comprehensive Income and is the difference between the net sales proceeds and the opening fair value asset plus any capital expenditure during the period to disposal.

Deferred income

Where invoices to customers have been raised which relate to a period after the Group year end, being 31 March 2024, the Group will recognise deferred income for the difference between revenue recognised and amounts billed for that contract.

Cost of sales

Cost of sales includes direct expenditure relating to the construction of the trading properties, capitalised interest, and selling costs incurred as a result of residential sales. Selling costs includes agent and legal fees. Cost of sales is expensed to the income statement and is recognised on completion of each residential unit. The cost for each unit is calculated using the ratio of the unit selling price, over the total forecasted sales proceeds of all residential units. This ratio is then applied to the total forecasted development cost to get the cost of sale per unit.

Service charges and other such receipts arising from expenses recharged to tenants are as stated in note 3b. Notwithstanding that the funds are held on behalf of the occupiers, the ultimate risk for paying and recovering these costs rests with the Group.

Borrowing costs

Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. After initial recognition, loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses are recognised in profit or loss in the Consolidated Statement of Comprehensive Income when the liabilities are derecognised, as well as through the amortisation process.

Interest associated with trading properties is capitalised from the start of the development work until the date of practical completion. The rate used is the rate on specific associated borrowings. Interest is then expensed through the income statement post completion of the development.

Financial assets

The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:

Fair value through profit or loss

This category comprises in-the-money derivatives (see "Financial liabilities" section for out-of-the-money derivatives classified as liabilities). They are carried in the Consolidated Statement of Financial Position at fair value with changes in fair value recognised in the Consolidated Statement of Comprehensive Income in the finance income or expense line.

Amortised cost

Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the Consolidated Statement of Comprehensive Income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the Consolidated Statement of Financial Position.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Group's accounting policy for each category is as follows:

Fair value through profit or loss

This category comprises out-of-the-money derivatives (see "Financial assets" for in-the-money derivatives where the time value offsets the negative intrinsic value). They are carried in the Consolidated Statement of Financial Position at fair value with changes in fair value recognised in the Consolidated Statement of Comprehensive Income.

Amortised cost

Trade payables and accruals are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.

Other financial liabilities

Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the Consolidated Statement of Financial Position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payment while the liability is outstanding.

Contributions to pension schemes

The Company operates a defined contribution pension scheme. The pension costs charged against profits are the contributions payable to the scheme in respect of the accounting period.

Investment properties

Investment properties are those properties that are held either to earn rental income or for capital appreciation or both.

Investment properties are measured initially at cost including transaction costs and thereafter are stated at fair value, which reflects market conditions at the balance sheet date. Surpluses and deficits arising from changes in the fair value of investment properties are recognised in the Consolidated Statement of Comprehensive Income in the year in which they arise.

Investment properties are stated at fair value as determined by the independent external valuers. The fair value of the Group's property portfolio is based upon independent valuations and is inherently subjective. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm's length transaction at the date of valuation, in accordance with Global Valuation Standards. In determining the fair value of investment properties, the independent valuers make use of historical and current market data as well as existing lease agreements.

The Group recognises investment property as an asset when it is probable that the economic benefits that are associated with the investment property will flow to the Group and it can measure the cost of the investment reliably. This is usually the date of completion of acquisition or completion of construction if the development is a mixed-use scheme.

Investment properties cease to be recognised on completion of the disposal or when the property is withdrawn permanently from use and no future economic benefit is expected from disposal.

The Group evaluates all its investment property costs at the time they are incurred. These costs include costs incurred initially to acquire an investment property and costs incurred subsequently to add to, replace part of, or service a property. Any costs deemed as repairs and maintenance or any costs associated with the day-to-day running of the property are recognised in the Consolidated Statement of Comprehensive Income as they are incurred.

Trading properties

Trading property is developed for sale or held for sale after development is complete, and is carried at the lower of cost and net realisable value. Trading properties are derecognised on completion of sales contracts. Costs includes direct expenditure and capitalised interest. Cost of sales, including costs associated with off-plan residential sales, are expensed to the Consolidated Statement of Comprehensive Income as incurred.

Current taxation

Current tax assets and liabilities for the period not under UK REIT regulations are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and the tax laws used to compute the amount are those that are enacted or substantively enacted, by the balance sheet date.

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.

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.

Dividends to equity holders of the parent

Interim ordinary dividends are recognised when paid and final ordinary dividends are recognised as a liability in the period in which they are approved by the Shareholders.

Share-based payments

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. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that ultimately the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair values of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Equity

The share capital represents the nominal value of the issued share capital of Palace Capital plc. Share premium represents the excess over nominal value of the fair value consideration received for equity shares net of expenses of the share issue. Treasury share reserve represents the consideration paid for shares bought back on the open market. The merger reserve represents the excess over nominal value of the fair value consideration for the acquisition of subsidiaries satisfied by the issue of shares in accordance with S612 of the Companies Act 2006. The capital redemption reserve represents the nominal value of cancelled share capital redeemed. The capital reduction reserve represents distributable profits generated as a result of the share premium reduction or cancellation of shares.

Critical accounting judgements and key sources of estimation and uncertainty

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Information about such judgements and estimation is contained in the accounting policies or the notes to the accounts, and the key areas are summarised below.

Estimates

Property Valuation

The key source of estimation uncertainty rests in the values of property assets, which significantly affects the value of investment properties in the Consolidated Statement of Financial Position. The investment property portfolio is carried at fair value, which requires a number of estimates in assessing the Group's assets relative to market transactions. The approach to this valuation and the amounts affected are set out in the accounting policies and note 9.

Trading properties are held at the lower of cost and net realisable value. Net realisable value is the value of an asset that can be realised upon the sale of the asset, less a reasonable estimate of the costs associated with the eventual sale or disposal of the asset.

The Group has valued the investment properties at fair value. To the extent that any future valuation affects the fair value of the investment properties and assets held for sale, this will impact on the Group's results in the period in which this determination is made.

Short term incentive plan

The amount recognised as the short term incentive plan ('STIP') provision is management's estimate of the total expected payout when the plan comes to an end, which has been assumed as when all of the assets are sold. As the STIP is "backend loaded" and only pays out when the Remuneration Committee has determined that the performance period has ended under the Rules of the STIP, the total estimated provision has been calculated over the three year period to June 2027, consistent with that adopted for the Viability Statement. As a result, the provision recognised on the balance sheet for the year ended 31 March 2024 represents 12 months of this total estimated provision which has been calculated by reference to sales achieved to date and the assumed sales of the remaining assets to reflect the uncertainty around financial and property markets. The timing and success of future sales will impact the timing and quantum of the total payment.

1. RENTAL AND OTHER INCOME

The chief operating decision maker ("CODM") takes the form of the Group's Executive Committee which is of the opinion that the principal activity of the Group is to invest in commercial real estate in the UK.

Operating segments are identified on the basis of internal financial reports about components of the Group that are regularly reviewed by the CODM.

The internal financial reports received by the Group's Executive Committee contain financial information at a Group level as a whole and there are no reconciling items between the results contained in these reports and the amounts reported in the financial statements. Additionally, information is provided to the Group's Executive Committee showing gross property income and property valuation by individual property. Therefore, each individual property is considered to be a separate operating segment in that its performance is monitored individually.

The Directors have considered the requirements of IFRS 8 as to aggregation of operating segments into reporting segments. All of the Group's revenue is generated from investment and trading properties located outside of London. The properties are managed as a single portfolio by an asset management team whose responsibilities are not segregated by location or type but are managed on an asset-by-asset basis.

The route to market is determined by reference to the current economic circumstances that fluctuate through the life cycle of the portfolio. The Group holds a diversified portfolio across different sectors including office, retail, leisure, and residential. The Group has from time to time engaged in development projects such as Hudson Quarter, York. This is not regarded as a separate business or division.

The Directors therefore consider that the individual properties have similar economic characteristics and therefore have been aggregated into a single reportable segment under the provision of IFRS 8.

All of the Group's properties are based in the UK. No geographical grouping is contained in any of the internal financial reports provided to the Group's Executive Committee and, therefore, no geographical segmental analysis is required.

Revenue - type	2024 £'000	2023 £'000
Gross rental income	11,603	17,425
Dilapidations and other property related income	453	401
Insurance commission	58	68
Gross property income	12,114	17,894
Service charge income	4,286	4,974
Trading property income	3,199	10,105
Total revenue	19,599	32,973

No single tenant accounts for more than 10% of the Group's total rents received from investment properties in the year. The biggest tenant is 14.8% of the rent roll as at 31 March 2024. Similarly, there was no individual or corporate that accounts for more than 10% of the trading property income.

2. INTEREST PAYABLE AND SIMILAR CHARGES

	2024 £'000	2023 £'000
Interest on bank loans	1,655	3,643
Amortisation of loan arrangement fees	213	317
Other finance charges	41	10
	1,909	3,970

3. PROFIT FOR THE YEAR

a) The Group's profit for the year is stated after charging the following:

	2024 £'000	2023 £'000
Depreciation of tangible fixed assets and amortisation of right of use assets:	142	112
Auditor's remuneration:
Fees payable to the Auditor for the audit of the Group's annual accounts and subsidiaries' annual accounts	192	231
Additional fees payable to the Auditor in respect of the 2022 audit	-	15
Fees payable to the Auditor and its related entities for other services:
Audit related assurance services in respect of the interim results	-	11
	192	257

b) The Group's cost of sales comprise the following:

	2024 £'000	2023 £'000
Void property costs	1,871	2,076
Legal, lettings and consultancy costs	601	502
Property operating expenses	2,472	2,578
Service charge expenses	4,286	4,974
Trading property cost of sales	3,018	9,595
	9,776	17,147

c) The Group's administrative expenses comprise the following:

		2024 £'000	2023 £'000
	Recurring staff costs	1,675	2,560
	Short term incentive plan provision (including associated costs)	640	-
	Payments to former Directors and Staff (including associated costs)	611	1,835
	Accounting, tax and audit fees	280	318
	Other overheads*	249	624
	Share-based payments	137	177
	Stock Exchange costs	132	207
	Amortisation of right of use asset	119	82
	PR and marketing costs	79	108
	Legal and professional fees	40	82
Depreciation of tangible fixed assets		23	30
	ESG costs	13	71
		3,998	6,094

*Other overheads comprise of rent, rates, service charge, consulting, and other office costs

d) EPRA cost ratios are calculated as follows:

	2024 £'000	2023 £'000
Gross property income	12,114	17,894

Administrative expenses	3,998	6,094
Property operating expenses	2,472	2,578
Movement in expected credit loss	-	(327)
EPRA costs (including property operating expenses)	6,470	8,345
EPRA cost ratio (including property operating expenses)	53.4%	46.6%

Less property operating expenses	(2,472)	(2,578)
EPRA costs (excluding property operating expenses)	3,998	5,767
EPRA cost ratio (excluding property operating expenses)	33.0%	32.2%
Total expense ratio	3.6%	3.0%

4. EMPLOYEES AND DIRECTORS' REMUNERATION

Staff costs during the period were as follows:

	2024 £'000	2023 £'000
Non-Executive Directors' fees	151	300
Wages and salaries	1,181	1,828
Pensions	124	147
Social security costs	219	262
Total recurring staff costs	1,675	2,537
Payments to former Directors and staff (incl. NI and pension contributions)	564	1,677
Short term incentive plan provision (incl. NI)	565	-
Share-based payments	137	177
	2,941	4,391

The average number of employees of the Group and the Company during the period was:

	2024 Number	2023 Number
Directors	2	3
Senior management and other employees	6	8
	8	11

Key management are the Group's Directors. Remuneration in respect of key management was as follows:

	2024 £'000	2023 £'000
Emoluments for qualifying services	398	711
Social security costs	74	117
Pension	25	35
Total recurring key management costs	497	863
Payments to former Directors and Staff (incl. NI and pension contributions)	357	1,677
Short term incentive plan provision (incl. NI)	256	-
Share-based payments	16	32
	1,126	2,572

5. TAXATION

	2024 £'000	2023 £'000
Tax underprovided in prior year	65	-
Deferred tax	(19)	(67)
Tax charge/(credit)	46	(67)

	2024 £'000	2023 £'000
Loss on ordinary activities before tax	(9,316)	(35,771)
Based on loss for the period: Theoretical Tax at 25% (2023: 19%)	(2,329)	(6,797)
Effect of:
Net expenses not deductible for tax purposes	40	41
Deferred tax released to profit and loss on Hudson Quarter residential sales	(19)	(67)
Tax underprovided in prior year	65	-

REIT exempt income	(1,135)	(1,775)
Non-taxable items	3,424	8,531
Tax charge/(credit) for the period	46	(67)

As a UK REIT, the income profits of the Group's UK property rental business are exempt from corporation tax, as are any gains it makes from the disposal of its properties, provided they are not held for trading. The Group is otherwise subject to UK corporation tax at the prevailing rate.

Deferred taxes relate to the following:

	2024 £'000	2023 £'000
Deferred tax liability - brought forward	(76)	(143)
Overprovided in prior year	-	(21)
Deferred tax release on sale of trading property	19	88
Deferred tax liability - carried forward	(57)	(76)

2024

£'000

2023

£'000

Investment property unrealised valuation gains

(57)

(76)

Deferred tax liability - carried forward

(57)

(76)

The deferred tax liability of £57,000 relates to investment properties transferred into trading stock, prior to the Group becoming a REIT. As at 31 March 2024 the Group had approximately £5,915,000 (2023: £5,915,000) of realised capital losses to carry forward. There has been no deferred tax asset recognised as the Directors do not consider it probable that future taxable profits will be available to utilise these losses.

Finance Act 2021 sets the main rate of UK corporation tax at 19%, with an increase in the main rate to 25% with effect from 1 April 2023. The deferred tax liability relates to trading properties and has been calculated on the basis of 25%.

6. EARNINGS PER SHARE

Basic earnings per share

Basic earnings per share and diluted earnings per share have been calculated on the loss after tax attributable to ordinary Shareholders for the year (as shown on the Consolidated Statement of Comprehensive Income) and for the earnings per share, the weighted average number of ordinary shares in issue during the period (see table below) and for diluted weighted average number of ordinary shares in issue during the year (see table below).

2024

£'000

2023

£'000

Loss after tax attributable to ordinary Shareholders for the year

(9,362)

(35,704)

	2024 No. of shares	2023 No. of shares
Weighted average number of shares for basic earnings per share	39,524,282	44,525,518
Dilutive effect of share options	-	-
Weighted average number of shares for diluted earnings per share	39,524,282	44,525,518
Earnings per ordinary share
Basic	(23.7p)	(80.2p)
Diluted	(23.7p)	(80.2p)

Key Performance Measures

The Group financial statements are prepared under IFRS which incorporates non-realised fair value measures and non-recurring items. Alternative Performance Measures ("APMs"), being financial measures which are not specified under IFRS, are also used by management to assess the Group's performance. These include a number of European Public Real Estate Association ("EPRA") measures, prepared in accordance with the EPRA Best Practice Recommendations reporting framework the latest update of which was issued in November 2019. The Group reports a number of these measures (detailed in the glossary of terms) because the Directors consider them to improve the transparency and relevance of our published results as well as the comparability with other listed European real estate companies.

EPRA EPS and EPRA Diluted EPS

EPRA Earnings is a measure of operational performance and represents the net income generated from the operational activities. It is intended to provide an indicator of the underlying income performance generated from the leasing and management of the property portfolio. EPRA earnings are calculated taking the profit after tax excluding investment property revaluations and gains and losses on disposals, changes in fair value of financial instruments and one-off finance termination costs. EPRA earnings is calculated on the basis of the weighted average basic number of shares in line with IFRS earnings as the dividends to which they give rise accrue to current Shareholders.

Adjusted profit before tax and Adjusted EPS

The Group also reports an adjusted earnings measure which is based on recurring earnings before tax and the weighted average basic number of shares. This is the basis on which the Directors consider dividend cover. This takes EPRA earnings as the starting point and then adds back tax and any other fair value movements or one-off items that were included in EPRA earnings. This includes share-based payments being a non-cash expense, as well as payments to former Directors and Staff, and the Short Term Incentive Plan provision ('STIP'), which are one-off exceptional items. The STIP was excluded from adjusted earnings as the provision is deemed not to be in the ordinary course of business and the performance criteria of the plan is based on the selling of assets. The plan was designed to be back end loaded in terms of paying out in order to be aligned with shareholders' interests and is therefore deemed to be an exceptional item as it does not reflect earnings from trading in the portfolio as it is capital in nature. The corporation tax charge (excluding deferred tax movements, being a non-cash expense) is deducted in order to calculate the adjusted earnings per share, if the charge is in relation to recurring earnings.

The EPRA and adjusted earnings per share for the period are calculated based upon the following information:

	2024 £'000	2023 £'000
Loss after tax for the year	(9,362)	(35,704)
Adjustments:
Loss on revaluation of investment property portfolio	15,383	42,900
Profit on disposal of investment properties	(2,298)	(819)
Trading profit	(181)	(510)
Debt termination costs	459	15
Changes in fair value of interest rate derivatives	-	(210)
EPRA earnings for the year	4,001	5,672
Payments to former Directors (including associated costs)	611	1,835
Share-based payments	137	177
Short term incentive plan provision (including associated costs)	640	-
Adjusted profit after tax for the year	5,389	7,684
Tax excluding deferred tax on EPRA adjustments and capital gain charged	46	(67)
Adjusted profit before tax for the year	5,435	7,617
EPRA and adjusted earnings per ordinary share
EPRA Basic	10.1p	12.7p
EPRA Diluted	10.1p	12.7p
Adjusted EPS	13.8p	17.1p

7. NET ASSET VALUE PER SHARE

The Group has adopted the EPRA NAV measures which came into effect for accounting periods starting 1 January 2020. EPRA issued best practice recommendations (BPR) for financial guidelines on its definitions of NAV measures. The NAV measures as outlined in the BPR are EPRA net tangible assets (NTA), EPRA net reinvestment value (NRV) and EPRA net disposal value (NDV).

The Group considered EPRA Net Tangible Assets (NTA) to be the most relevant NAV measure for the Group and we are now reporting this as our primary NAV measure, replacing our previously reported EPRA NAV and EPRA NNNAV per share metrics. EPRA NTA excludes the intangible assets and the cumulative fair value adjustments for debt-related derivatives which are unlikely to be realised.

As at 31 March 2024

	EPRA NTA £'000	EPRA NRV £'000	EPRA NDV £'000
Net assets attributable to Shareholders	97,774	97,774	97,774
Include:
Fair value adjustment of trading properties	449	449	449
Real estate transfer tax	-	5,294	-
Fair value of fixed interest rate debt	-	-	606
Exclude:
Deferred tax on latent capital gains and capital allowances	57	57	-
EPRA NAV	98,280	103,574	98,829
Number of ordinary shares issued for diluted and EPRA net assets per share	37,554,525	37,554,525	37,554,525
EPRA NAV per share	262p	276p	263p

The adjustments made to get to the EPRA NAV measures above are as follows:

• Fair value adjustment of trading properties: Difference between trading property held on the balance sheet at cost in terms of IAS 2, being £8.126 million and the fair value of that trading property of £8.575 million, resulting in a fair value adjustment of £0.449 million.

• Real estate transfer tax: Gross value of property portfolio as provided in the Valuation Certificate (i.e. the value prior to any deduction of purchasers' costs).

• Fair value of fixed interest rate debt: Difference between any financial liability and asset held on the balance sheet of the Group and the fair value of that financial liability or asset.

• Deferred tax on latent capital gains and capital allowances: Exclude the deferred tax as per IFRS balance sheet in respect of the difference between the fair value and the tax book value of investment property, development property held for investment, intangible assets, or other non-current investments as this would only become payable if the assets were sold.

As at 31 March 2023

	EPRA NTA £'000	EPRA NRV £'000	EPRA NDV £'000
Net assets attributable to Shareholders	128,475	128,475	128,475
Include:
Fair value adjustment of trading properties	730	730	730
Real estate transfer tax	-	11,922	-
Fair value of fixed interest rate debt	-	-	863
Exclude:
Deferred tax on latent capital gains and capital allowances	76	76	-
EPRA NAV	129,281	141,203	130,068
Number of ordinary shares issued for diluted and EPRA net assets per share	43,728,212	43,728,212	43,728,212
EPRA NAV per share	296p	323p	297p

	2024 No of shares	2023 No of shares
Number of ordinary shares issued at the end of the year (excluding treasury shares)	37,554,525	43,718,381
Dilutive effect of share options	-	9,831
Number of ordinary shares issued for diluted and EPRA net assets per share	37,554,525	43,728,212
Net assets per ordinary share
Basic	260p	294p
Diluted	260p	294p
EPRA NTA	262p	296p

8. DIVIDENDS

	Payment date	Dividend per share	2024 £'000	2023 £'000
2024
Interim dividend	29 December 2023	3.75	1,409	-
Interim dividend	13 October 2023	3.75	1,408	-
		7.50	2,817	-
2023
Final dividend	04 August 2023	3.75	1,583	-
Interim dividend	14 April 2023	3.75	1,645	-
Interim dividend	13 January 2023	3.75	-	1,651
Interim dividend	14 October 2022	3.75	-	1,651
		15.00	3,228	3,302
2022
Final dividend	05 August 2022	3.75	-	1,736
Interim dividend	14 April 2022	3.25	-	1,504
		7.00	-	3,240
Dividends reported in the Group Statement of Changes in Equity			6,045	6,542

Dividends (continued)

	2024 £'000	2023 £'000
August 2024 final dividend in respect of year end 31 March 2024: 3.75p (2023 final dividend: 3.75p)	1,408	1,621
April 2024 interim dividend in respect of year end 31 March 2024: 3.75p (2023 interim dividend: 3.75p)	1,408	1,645
	2,816	3,266

Final dividends on ordinary shares are subject to approval at the Annual General Meeting. Such dividends are not recognised as a liability as at 31 March 2024.

9. PROPERTY PORTFOLIO

	Freehold investment properties £'000	Leasehold investment properties £'000	Total investment properties £'000
At 31 March 2022	216,110	16,607	232,717
Additions - refurbishments	1,026	156	1,182
Loss on revaluation of investment properties	(38,663)	(4,237)	(42,900)
Disposals	(14,495)	-	(14,495)
At 31 March 2023	163,978	12,526	176,504
Additions - refurbishments	1,544	-	1,544
Loss on revaluation of investment properties	(15,383)	-	(15,383)
Disposals	(76,294)	(12,526)	(88,820)
At 31 March 2024	73,845	-	73,845

	Total investment properties £'000	Trading properties £'000	Total property portfolio £'000
At 1 April 2022	232,717	20,287	253,004
Additions - refurbishments	1,182	-	1,182
Additions - trading property	-	363	363
Loss on revaluation of properties	(42,900)	-	(42,900)
Disposals	(14,495)	(9,595)	(24,090)
At 1 April 2023	176,504	11,055	187,559
Additions - refurbishments	1,544	-	1,544
Additions - trading property	-	90	90
Loss on revaluation of properties	(15,383)	-	(15,383)
Disposals	(88,820)	(3,019)	(91,839)
At 31 March 2024	73,845	8,126	81,971

The property portfolio has been independently valued at fair value. The valuations have been prepared in accordance with the RICS Valuation - Global Standards July 2017 ("the Red Book") and incorporate the recommendations of the International Valuation Standards and the RICS valuation - Professional Standards UK January 2014 (Revised April 2015) which are consistent with the principles set out in IFRS 13. At 31 March 2024, the Group's freehold properties were externally valued by CBRE, a Royal Institution of Chartered Surveyors ("RICS") registered independent valuer.

The valuer in forming its opinion makes a series of assumptions, which are typically market related, such as net initial yields and expected rental values, and are based on the valuer's professional judgement. The valuer has sufficient current local and national knowledge of the particular property markets involved and has the skills and understanding to undertake the valuations competently.

In addition to the loss on revaluation of investment properties included in the table above, realised gains of £2,298,000 (2023: £819,000) relating to investment properties disposed of during the year were recognised in profit or loss.

The Group developed a mixed-use scheme at Hudson Quarter, York. Part of the scheme consists of commercial units which the Group holds for leasing or has let. As a result of achieving practical completion in April 2021, the commercial element of the scheme is classified as investment properties.

A reconciliation of the valuations carried out by the independent valuers to the carrying values shown in the Statement of Financial Position was as follows:

	2024 £'000	2023 £'000
Property portfolio valuation	88,670	192,355
Adjustment in respect of minimum payment under head leases	-	1,077
Less trading properties at lower of cost and net realisable value	(8,126)	(11,055)
Less lease incentive balance included in accrued income	(6,250)	(5,143)
Less fair value uplift on trading properties	(449)	(730)
Carrying value of investment properties	73,845	176,504

The valuations of all investment property held by the Group is classified as Level 3 in the IFRS 13 fair value hierarchy as they are based on unobservable inputs. There have been no transfers between levels of the fair value hierarchy during the year.

Valuation process

The valuation reports produced by CBRE, the independent valuers, are based on information provided by the Group such as current rents, terms and conditions of lease agreements, service charges and capital expenditure. This information is derived from the Group's financial and property management systems and is subject to the Group's overall control environment.

In addition, the valuation reports are based on assumptions and valuation models used by the independent valuers. The assumptions are typically market related, such as yields and discount rates, and are based on their professional judgement and market observations. Each property is considered a separate asset, based on its unique nature, characteristics and the risks of the property. Only one investment property in the property portfolio was valued on a residual basis.

The Head of Investment, responsible for the valuation process verifies all major inputs to the external valuation reports, assesses the individual property valuation changes from the prior year valuation report and holds discussions with the independent valuers.

When this process is complete, the valuation report is recommended to the Audit & Risk Committee, which considers it as part of its
overall responsibilities.

The assumptions made in the valuation of the Group's investment properties are:

• The amount and timing of future income streams;

• Anticipated maintenance costs and other landlord's liabilities; and

• An appropriate yield

Valuation technique

The valuations reflect the tenancy data supplied by the Group along with associated revenue costs and capital expenditure. The fair value of the investment portfolio has been derived from capitalising the future estimated net income receipts at capitalisation rates reflected by recent arm's length sales transactions. The residential assets reflect the trading properties held at 31 March 2024 as the Group's entire property portfolio was valued.

31 March 2024	Office	Leisure	Significant unobservable inputs
31 March 2024	Office	Leisure	Retail	Residential	Total
Fair value of property portfolio	55,035,000	21,550,000	3,510,000	8,575,000	88,670,000
Area (sq ft)	374,129	304,319	27,019	n/a	705,467
Gross Estimated Rental Value	6,897,920	3,367,812	346,000	n/a	10,611,732
Net Initial Yield
Minimum	2.8%	13.2%	8.5%	n/a	2.8%
Maximum	12.3%	13.7%	8.5%	n/a	13.7%
Weighted average	5.4%	13.4%	8.5%	n/a	8.0%
Reversionary Yield
Minimum	9.1%	10.7%	8.3%	n/a	8.3%
Maximum	15.2%	19.3%	8.3%	n/a	19.3%
Weighted average	11.8%	15.0%	8.3%	n/a	13.0%
Equivalent Yield
Minimum	8.6%	12.4%	8.4%	n/a	8.4%
Maximum	11.8%	13.2%	8.4%	n/a	13.2%
Weighted average	9.7%	12.8%	8.4%	n/a	11.7%

31 March 2023	Office	Industrial	Significant unobservable inputs
31 March 2023	Office	Industrial	Leisure	Other	Total
Fair value of property portfolio	95,615,000	35,855,000	29,290,000	31,595,000	192,355,000
Area (sq ft)	622,905	339,470	304,319	84,851	1,351,545
Gross Estimated Rental Value	11,050,952	2,820,749	3,324,009	1,556,403	18,752,113
Net Initial Yield
Minimum	0.3%	3.7%	10.5%	5.3%	0.3%
Maximum	24.4%	8.1%	12.3%	9.9%	24.4%
Weighted average	6.6%	6.3%	11.5%	7.2%	7.4%
Reversionary Yield
Minimum	6.9%	6.6%	8.7%	5.3%	5.3%
Maximum	26.2%	8.4%	12.0%	10.0%	26.2%
Weighted average	10.8%	7.4%	10.5%	7.2%	9.6%
Equivalent Yield
Minimum	6.8%	6.3%	10.0%	6.0%	6.0%
Maximum	9.9%	7.1%	10.6%	9.8%	10.6%
Weighted average	9.4%	6.6%	10.3%	7.4%	9.0%

The "other" sector includes Residential, Retail and Retail Warehousing sectors.

The following descriptions and definitions relate to valuation techniques and key unobservable inputs made in determining fair values:

Market comparable method

Under the market comparable method (or market comparable approach), a property's fair value is estimated based on comparable transactions in the market.

Unobservable input: estimated rental value

The rent at which space could be let in the market conditions prevailing at the date of valuation (range: £346,000 to £1,970,107 per annum).

Rental values are dependent on a number of variables in relation to the Group's property. These include: size, location, tenant, covenant strength and terms of the lease.

Unobservable input: net initial yield

The net initial yield is defined as the initial gross income as a percentage of the market value (or purchase price as appropriate) plus standard costs of purchase.

Sensitivities of measurement of significant unobservable inputs

As set out within accounting estimates and judgements above, the Group's property Portfolio Valuation is open to judgements inherently subjective by nature.

Unobservable input	Impact on fair value measurement of significant increase in input	Impact on fair value measurement of significant decrease in input
Gross Estimated Rental Value	Increase	Decrease
Net Initial Yield	Decrease	Increase
Reversionary Yield	Decrease	Increase
Equivalent Yield	Decrease	Increase

-5% in passing

rent (£m)

+5% in passing

rent (£m)

+0.25% in net

initial yield (£m)

-0.25% in net

initial yield (£m)

(Decrease)/increase in the fair value of investment properties as at 31 March 2024

(4.00)

4.00

(2.53)

2.70

(Decrease)/increase in the fair value of investment properties as at 31 March 2023

(9.63)

9.63

(6.14)

6.92

10. TRADING PROPERTY

	Total £'000
At 1 April 2022	20,287
Costs capitalised	363
Reversal of impairment of trading properties	(9,595)
At 1 April 2023	11,055
Costs capitalised	90
Disposal of trading properties	(3,019)
At 31 March 2024	8,126

The Group developed a large mixed-use scheme at Hudson Quarter, York. Part of the approved scheme consists of residential units which the Group is in the process of selling. As a result, the residential element of the scheme is classified as trading property.

11. PROPERTY, PLANT AND EQUIPMENT

	IT, fixtures and fittings £'000	Right of use asset £'000
At 1 April 2022	296	461
Additions	8	197
At 1 April 2023	304	658
Additions	-	57
Written off during the year	-	(32)
At 31 March 2024	304	683
Depreciation
At 1 April 2022	251	444
Provided during the year	30	82
At 1 April 2023	281	526
Provided during the year	23	119
At 31 March 2024	304	645

Net book value at 31 March 2024	-	38
Net book value at 31 March 2023	23	132

12. TRADE AND OTHER RECEIVABLES

		2024 £'000	2023 £'000
	Current
	Gross amounts receivable from tenants	1,979	2,550
	Less: expected credit loss provision	(653)	(653)
	Net amount receivable from tenants	1,326	1,897
	Other taxes	165	97
	Other debtors	904	993
	Accrued income	625	783
	Prepayments	332	420
		3,352	4,190
Non-current
Accrued income		5,625	4,360
		5,625	4,360

Total trade and other receivables		8,977	8,550

Accrued income amounting to £5,143,000 as at 31 March 2023 (2022: £3,926,000) was classified previously as a current asset in error rather than allocated between current and non-current assets in line with their expected recovery. The accrued income relates to rents recognised in advance of receipt as a result of spreading the effect of rent free and reduced rent periods, capital contributions in lieu of rent free periods and contracted rent uplifts over the expected terms of their respective leases. The comparatives have been restated accordingly to correct the allocation between current and non-current assets. As such, £4,360,000 of these amounts are classified as non-current assets and £783,000 as current assets as at 31 March 2023 (2022: £3,375,000 and £551,000 respectively). There is no effect on the profit or net assets in any period presented.

The carrying value of trade and other receivables classified at amortised cost approximates fair value.

As at 31 March 2024 the lifetime expected credit loss provision for trade receivables and contract assets is as follows:

	Current £'000	More than 30 days past due £'000	More than 60 days past due £'000	More than 90 days past due £'000	Total £'000
Expected loss rate	9%	4%	4%	58%
Gross carrying amount	603	287	76	1,013	1,979
Loss provision	53	13	3	584	653

Changes to credit risk management

Impairment calculations have been carried out on trade receivables using the IFRS 9 simplified approach, using 12 months of historic rental payment information, and adjusting risk profiles based on forward-looking information. In addition, the Group has reviewed its register of tenants at higher risk, particularly in the leisure and retail sectors, those in administration or CVA and the top 20 tenants by size with the remaining tenants considered on a sector by sector basis.

Concentration of credit risk

The credit risk in respect of trade receivables is not concentrated as the Group operates in many different sectors and locations around the UK, and has a wide range of tenants from a broad spectrum of business sectors. 87% of the ECL provision relates to tenants in the leisure sector.

How forward looking information was incorporated

In calculating the ECL provision, the Group used forward looking information when assessing the risk profiles of each tenant, most notably around the assessment over the likelihood of tenants having the ability to pay rent as demanded, as well as the likelihood of rent deferrals and rent frees being offered to tenants.

Key sources of estimation uncertainty

The Group's risk profile rates form a key part when calculating the ECL provision. Default rates were applied to each tenant based on the ageing of the outstanding receivable. Tenants were classified as either low (default range of 0.5% - 8%), medium (default range of 20% - 50%), high (default range of 65% - 80%), or extremely high risk (set default range of 100%), with default rates applied to each risk profile. These rates have been calculated by using historic and forward-looking information and is inherently subjective.

A sensitivity analysis performed to determine the impact on the Group Statement of Comprehensive Income from a 10% increase in each of the risk profile rates would result in a decrease in profit by £146,000.

The Group does not hold any material collateral as security.

As at 31 March 2023 the lifetime expected credit loss provision for trade receivables and contract assets was as follows:

	Current £'000	More than 30 days past due £'000	More than 60 days past due £'000	More than 90 days past due £'000	Total £'000
Expected loss rate	2%	3%	4%	92%
Gross carrying amount	1,810	39	32	669	2,550
Loss provision	33	1	1	618	653

Movement in the expected credit loss provision was as follows:

	2024 £'000	2023 £'000
Brought forward	653	980
Receivables written off during the year as uncollectable	-	(50)
Provisions released	(146)	(305)
Provisions increased	146	28
	653	653

13. CASH AND CASH EQUIVALENTS

All of the Group's cash and cash equivalents at 31 March 2024 and 31 March 2023 are in sterling.

2024

£'000

2023

£'000

Cash and cash equivalents

19,766

5,509

The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.

14. TRADE AND OTHER PAYABLES

	2024 £'000	2023 £'000
Trade payables	50	508
Other taxes	480	646
Other payables	1,138	1,484
Deferred rental income	1,694	3,359
Accruals	704	2,342
	4,066	8,339

The deferred rental income in the year ended 31 March 2023 of £3,359,000 was recognised as income in the year to 31 March 2024.

The Directors consider that the carrying amount of trade and other payables measured at amortised cost approximates to their
fair value.

15. BORROWINGS

	2024 £'000	2023 £'000
Current liabilities
Bank loans	318	8,563
Unamortised lending costs	-	(18)
	318	8,545
Non-current liabilities
Bank loans	7,993	55,770
Unamortised lending costs	(60)	(641)
	7,933	55,129
Total borrowings
Bank loans	8,311	64,333
Unamortised lending costs	(60)	(659)
	8,251	63,674

The maturity profile of the Group's debt was as follows:

	2024 £'000	2023 £'000
Within one year	318	8,563
From one to two years	318	37,027
From two to five years	7,675	18,743
	8,311	64,333

Facility and arrangement fees

As at 31 March 2024

Secured Borrowings

All in cost

Maturity date

Total Facility

£'000

Unused loan facilities

£'000

Facility drawn

£'000

Unamortised facility fees

£'000

Loan Balance

£'000

Scottish Widows

2.90%

July 2026

8,311

(60)

8,251

8,311

(60)

8,251

As at 31 March 2023

Secured Borrowings	All in cost			Maturity date		Total Facility £'000		Unused loan facilities £'000		Facility drawn £'000		Unamortised facility fees £'000	Loan Balance £'000
Santander Bank plc		6.38%	May 2027		11,750		-		11,750		(337)		11,413
Lloyds Bank plc		6.13%	March 2024		6,845		-		6,845		(18)		6,827
National Westminster Bank plc		6.28%	August 2024		37,724		(20,000)		17,724		(171)		17,553
Barclays		6.13%	June 2024		19,385		-		19,385		(62)		19,323
Scottish Widows		2.90%	July 2026		8,629		-		8,629		(71)		8,558
					84,333		(20,000)		64,333		(659)		63,674

An investment property is subject to a first charge to secure the Group's bank loans amounting to £8,311,000 (2023: £64,333,000).

The Group has unused loan facilities amounting to £Nil (2023: £20,000,000). A facility fee was charged on this balance at a rate of 1.05% p.a. and was payable quarterly. This facility was secured on the investment properties held by Property Investment Holdings Limited, Palace Capital (Properties) Limited and Palace Capital (Leeds) Limited as part of the NatWest loan.

The Group constantly monitors its approach to managing interest rate risk. The Group repaid all of its floating rate debt in the year and as a result, all of its debt is now fixed.

The Group has a loan with Scottish Widows for £8,311,000 (2023: £8,629,000) which is fully fixed at a rate of 2.9%.

During the year, the Group repaid the debt facility with Barclays Bank plc in full. The balance at 31 March 2023 was £19,385,000.

During the year, the Group repaid the debt facility with Santander plc in full. The balance at 31 March 2023 was £11,750,000.

During the year, the Group repaid the debt facility with Lloyds Bank plc in full. The balance at 31 March 2023 was £6,845,000.

During the year, the Group repaid the debt facility with National Westminster Bank plc in full. The balance at 31 March 2023 was £17,724,000. At the same time the £20.0m undrawn Revolving Credit Facility was cancelled.

The fair value of borrowings held at amortised cost at 31 March 2024 was £8,857,000 (2023: £64,537,000). The difference in the fair value and carrying value of borrowings reflects the valuation of the fixed rate debt being higher than its carrying value. This is a level 2 fair value valuation of the fixed rate debt and was determined by an independent third party. The valuation is based on a net present value of the difference between the contracted rate and the valuation rate when applied to the projected balances for the period from the reporting date to the contracted expiry date.

The Group's bank loans are subject to various covenants including Loan to Value, Interest Cover and Debt Service Cover requirements. During the year, the Group met all of its covenants.

16. GEARING AND LOAN TO VALUE RATIO

The calculation of gearing is based on the following calculations of net assets and net (cash)/debt:

	2024 £000	2023 £'000
EPRA net asset value (note 7)	98,280	129,281
Borrowings (net of unamortised issue costs)	8,251	63,674
Lease liabilities for investment properties	-	1,077
Cash and cash equivalents	(19,766)	(5,509)
Net (cash)/debt	(11,515)	59,242
NAV gearing	nil	46%

The calculation of bank loan to property value is calculated as follows:

	2024 £000	2023 £'000
Fair value of investment properties	80,095	180,570
Fair value of trading properties	8,575	11,785
Fair value of property portfolio	88,670	192,355
Borrowings	8,311	64,333
Cash at bank	(19,766)	(5,509)
Net (cash)/debt	(11,455)	58,824
Loan to value ratio	nil	31%

17. RECONCILIATION OF LIABILITIES TO CASH FLOWS FROM
FINANCING ACTIVITIES

	Bank borrowings £'000
Balance at 1 April 2022	101,237
Cash flows from financing activities:
Bank borrowings repaid	(37,419)
Loan arrangement fees paid	(461)
Non-cash movements:
Amortisation of loan arrangement fees	317
Balance at 1 April 2023	63,674
Cash flows from financing activities:
Bank borrowings repaid	(56,022)
Capitalised loan fees	(73)
Non-cash movements:
Amortisation of loan arrangement fees	213
Debt termination costs	459
Balance at 31 March 2024	8,251

18. LEASES

Operating lease receipts in respect of rents on investment properties are receivable as follows:

	2024 £'000	2023 £'000
Within one year	7,610	15,524
From one to two years	7,802	13,277
From two to three years	7,385	13,046
From three to four years	5,849	12,030
From four to five years	4,741	8,742
From five to 25 years	30,580	42,755
	63,967	105,374

Lease liabilities are classified as follows:

	2024 £'000	2023 £'000
Lease liabilities for investment properties	-	1,077
Lease liabilities for right of use asset	39	132
	39	1,209

Lease obligations in respect of rents payable on leasehold properties were payable as follows:

	2024			2023 Present value of lease payments £'000
	Lease payments £'000	Interest £'000	Present value of lease payments £'000	2023 Present value of lease payments £'000
Within one year	-	-	-	-
From one to two years	-	-	-	-
From two to five years	-	-	-	1
From five to 25 years	-	-	-	4
After 25 years	-	-	-	1,072
	-	-	-	1,077

Lease obligations in respect of rents payable on right of use assets were payable as follows:

2024

2023

Present value

of lease

payments

£'000

Lease

payments

£'000

Interest

£'000

Present value of lease

payments

£'000

Within one year

(1)

132

The net carrying amount of the leasehold properties is shown in note 9.

The Group has over 70 leases granted to its tenants. These vary depending on the individual tenant and the respective property and demise and vary considerably from short-term leases of less than one year to longer-term leases of over 10 years.

A number of these leases contain rent free periods. Standard lease provisions include service charge payments and recovery of other direct costs.

19. SHARE CAPITAL

Authorised, issued and fully paid share capital is as follows:

2024

£'000

2023

£'000

37,560,295 ordinary shares of 10p each (2023: 46,388,515)

3,756

4,639

3,756

4,639

Reconciliation of movement in ordinary share capital	2024 £'000	2023 £'000
At start of year	4,639	4,639
Treasury shares cancelled in the year	(883)	-
At end of year	3,756	4,639

Movement in ordinary authorised share capital		Number of ordinary shares issued	Total number of shares
As at 31 March 2022 and 31 March 2023			46,388,515
	27 March 2024	(8,828,220)
As at 31 March 2024			37,560,295

Movement in treasury shares		Number of ordinary shares issued	Total number of shares
As at 31 March 2023			2,668,220
Shares repurchased and transferred to Treasury	3 April 2023	75,000
Shares repurchased and transferred to Treasury	17 April 2023	75,000
Shares repurchased and transferred to Treasury	11 May 2023	50,000
Shares repurchased and transferred to Treasury	12 May 2023	52,000
Shares repurchased and transferred to Treasury	16 May 2023	53,000
Shares repurchased and transferred to Treasury	24 May 2023	100,000
Shares repurchased and transferred to Treasury	5 June 2023	100,000
Shares repurchased and transferred to Treasury	20 June 2023	215,000
Shares repurchased and transferred to Treasury	22 June 2023	160,000
Shares repurchased and transferred to Treasury	27 June 2023	350,000
Shares repurchased and transferred to Treasury	29 June 2023	275,000
Shares repurchased and transferred to Treasury	6 July 2023	300,000
Shares repurchased and transferred to Treasury	18 July 2023	75,000
Shares repurchased and transferred to Treasury	9 August 2023	750,000
Shares repurchased and transferred to Treasury	11 August 2023	2,814,495
Shares repurchased and transferred to Treasury	21 August 2023	100,000
Shares repurchased and transferred to Treasury	25 August 2023	300,000
Shares repurchased and transferred to Treasury	5 September 2023	315,505
Cancellation of treasury shares	27 March 2024	(8,828,220)
As at 31 March 2024			-
Total number of shares excluding the number of shares held in treasury at 31 March 2024			37,560,295

Year ended 31 March 2024

On 3 April 2023, 75,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 17 April 2023, 75,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 11 May 2023, 50,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 12 May 2023, 52,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 16 May 2023, 53,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 24 May 2023, 100,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 5 June 2023, 100,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 20 June 2023, 215,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 22 June 2023, 160,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 27 June 2023, 350,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 29 June 2023, 275,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 6 July 2023, 300,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 18 July 2023, 75,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 9 August 2023, 750,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 11 August 2023, 2,814,495 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 21 August 2023, 100,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 25 August 2023, 300,000 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 5 September 2023, 315,505 shares were purchased by the Group on the open market and transferred into treasury reserves.

On 27 March 2024, 8,828,220 shares were cancelled by the Group.

Shares held in Employee Benefit Trust

Authorised, issued and fully paid share capital is as follows:	2024 No. of shares	2023 No. of shares
Brought forward	1,914	458
Transferred under scheme of arrangement	-	40,000
Shares exercised under deferred bonus share scheme	(13,521)	(38,544)
Shares exercised under employee LTIP scheme	(42,440)	-
Shares purchased by EBT	59,817	-
At end of year	5,770	1,914

Share options:

Reconciliation of movement in outstanding share options	2024 No. of options	2023 No. of options
At start of year	537,877	1,078,826
LTIP's exercised in the year	(68,612)	-
Prior period accrued dividends on vested options	-	32,491
Lapsed in the year	(290,147)	(544,727)
Deferred bonus share options issued	-	9,831
Deferred bonus share options exercised	(9,831)	(38,544)
At end of year	169,287	537,877

As at 31 March 2024, the Company had the following outstanding unexpired options:

Description of unexpired share options	2024		2023
Description of unexpired share options	No. of options	Weighted average option price	No. of Options	Weighted average option price
Employee benefit plan	169,287	0p	528,046	0p
Deferred bonus share scheme issued	-	0p	9,831	0p
Total	169,287	0p	537,877	0p
Exercisable	-	0p	-	0p
Not exercisable	169,287	0p	537,877	0p

The weighted average remaining contractual life of share options at 31 March 2024 is 0.6 years (2023: 1.0 years).

20. SHARE-BASED PAYMENTS

Employee benefit plan

The following table illustrates the number and weighted average exercise prices of, and movements in, share options during the period:

	Number of options	Exercise price	Average share price at date of exercise	Grant date	Vesting date
Outstanding at 31 March 2022	1,078,826	0p
Deferred bonus share options issued	9,831	0p	285p	18 August 2022	18 August 2023
Deferred bonus share options exercised	(38,544)	0p	263p	15 June 2021	15 June 2022
Prior period accrued dividends on vested options	32,491	0p
Lapsed in the year (LTIP 2019)	(241,147)	0p
Lapsed in the year (LTIP 2020)	(124,123)	0p
Lapsed in the year (LTIP 2021)	(179,457)	0p
Outstanding at 31 March 2023	537,877	0p
Deferred bonus share options exercised	(9,831)	0p	254.5p	18 August 2022	18 August 2023
Exercised during the year (LTIP 2020)	(68,612)	0p	226.5p	14 October 2020	14 October 2023
Lapsed in the year (LTIP 2020)	(236,175)	0p
Lapsed in the year (LTIP 2021)	(53,972)	0p
Outstanding at 31 March 2024	169,287	0p

LTIP 2021

The options are awarded to employees on achievements against targets on two separate measures over the three-year period. For directors, the options are subject to a two-year holding period following vesting. Half the options will be awarded based on the first target and half based on the achievement of the second.

Total property return growth is calculated as Total Property Return of the Company over the Performance Period beginning on 31 March 2021 and ending on 31 March 2024, using the Total Property Return ("TPR") as calculated by MSCI for the Group as compared with the TPR for the MSCI IPD Index (the "Comparator") over the same period. The TPR for the Group and the Comparator will be its percentage increase over the three-year Performance Period.

Total Shareholder return (TSR) measures the total Shareholder return (price rise plus dividends) over the period from 16 November 2021 to 15 November 2024. The percentage of the TSR metric will be adjusted downwards according to the Company's share price discount to net asset value at the time of vesting. Share Price Discount will be calculated with reference to the closing share price on 15 November 2024 and EPRA Net Tangible Assets as at 30 September 2024. The base price is £2.44 per share which was the market price at the grant date.

Annualised TSR over the TSR performance period	Vesting %	TPR equivalent total over performance period	Vesting %
<5%	0	<0.5%	0
Equal to 5%	20	Equal to 0.5%	20
Between 5% and 9%	20-100	Between 0.5% and 2.5%	20-100
Equal to 9%	100	Equal to 2.5%	100

The fair value of grants was measured at the grant date using a Black−Scholes pricing model for the TPR tranche and using a Monte Carlo pricing model for the TSR tranche, taking into account the terms and conditions upon which the instruments were granted. The services received and a liability to pay for those services are recognised over the expected vesting period. The main assumptions of both the Black−Scholes and Monte Carlo pricing models are as follows:

	Monte Carlo TSR Tranche	Black-Scholes PV Tranche
Grant date	16 November 2021	16 November 2021
Share price	£2.44	£2.44
Exercise price	0p	0p
Term	5 years	5 years
Expected volatility	38.03%	38.03%
Expected dividend yield	0.00%	0.00%
Risk free rate	0.59%	0.59%
Time to vest (years)	3.0	3.0
Expected forfeiture p.a.	0%	0%
Fair value per option	£1.28	£2.44

The expense recognised for employee share-based payment received during the period is shown in the following table:

	2024 £'000	2023 £'000
LTIP 2019	-	15
LTIP 2020	51	87
LTIP 2021	86	75
Total expense arising from share-based payment transactions	137	177

21. RELATED PARTY TRANSACTIONS

Charitable donations amounting to £Nil (2023: £6,000) have been made by the Group to Variety, the Children's Charity, a charity where Neil Sinclair, previously Chief Executive, was a Trustee.

Dividend payments made to Directors amounted to £2,306 (2023: £27,598) during the year. See note 4 for further details of key management remuneration.

22. CAPITAL COMMITMENTS

The obligation for capital expenditure relating to the enhancement of investment properties entered into by the Group amounted to £176,608 (2023: £456,901).

23. POST BALANCE SHEET EVENTS

On 17 April 2024, the Group completed on the disposal of Sandringham House, Harlow, for a total consideration of £3.3m.

On 19 April 2024, the Group completed on the disposal of Kiln Farm, Milton Keynes, for a total consideration of £6.5m.

On 29 April 2024, the Group exchanged on the disposal of the whole share capital of Palace Capital (Manchester) Limited, for a total consideration of £8.8m. Completion of the sale is due to take place by 22 July 2024.

On 5 June 2024, the Group conditionally exchanged on the disposal of unit 3B at St James' Gate, Newcastle for a total consideration of £0.7m. Completion of the sale is due to take within the next three months.

Post year end, the Group exchanged on two residential units at Hudson Quarter for a total consideration of £1.2m.

24. FINANCIAL RISK MANAGEMENT

The Group's principal financial liabilities are loans. The Group has rent and other receivables, trade and other payables and cash and short-term deposits that arise directly from its operations. The Group is exposed to market risk (including real estate risk), credit risk and liquidity risk.

The Group's senior management oversee the management of these risks, and the Board of Directors has overall responsibility for the determination of the Group's risk management objectives and policies and it sets policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:

The Group manages its capital structure, and makes adjustments to it, in the light of changes in economic conditions.

To maintain or adjust the capital structure, the Group may adjust the dividend payment to Shareholders, return capital to Shareholders
or issue new shares.

Capital risk management

The Group considers its capital to comprise its share capital, share premium, other reserves, capital reduction reserves and retained earnings which amounted to £97,774,000 (2023: £128,475,000). The Group's capital management objectives are to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for Shareholders and benefits for other stakeholders and to provide an adequate return to Shareholders by pricing its services commensurately with the level of risk. Within the subsidiaries of the Group, the business has covenanted to maintain a specified leverage ratio and a net interest expense coverage ratio, all the terms of which have been adhered to during the year.

Market risk

Market risk arises from the Group's use of interest bearing, and tradable instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or other market factors.

Interest rate risk

The interest rate exposure profile of the Group's financial assets and liabilities as at 31 March 2024 and 31 March 2023 were:

	Nil rate assets and liabilities £'000	Floating rate assets £'000	Fixed rate liability £'000	Total £'000

As at 31 March 2024
Trade and other receivables	2,230	-	-	2,230
Cash and cash equivalents	-	19,766	-	19,766
Trade and other payables	(2,457)	-	-	(2,457)
Bank borrowings	-	-	(8,251)	(8,251)
Lease liabilities	-	-	(39)	(39)
	(227)	19,766	(8,290)	11,249

	Nil rate assets and liabilities £'000	Floating rate assets £'000	Fixed rate liability £'000	Floating rate liability £'000	Total £'000
As at 31 March 2023
Trade and other receivables	2,890	-	-	-	2,890
Cash and cash equivalents	-	5,509	-	-	5,509
Trade and other payables	(4,334)	-	-	-	(4,334)
Bank borrowings	-	-	(8,558)	(55,116)	(63,674)
Lease liabilities	-	-	(1,209)	-	(1,209)
	(1,444)	5,509	(9,767)	(55,116)	(60,818)

The Group has loans amounting to £Nil (2023: £55,116,000) which have interest payable at rates linked to the SONIA interest rates or bank base rates. A 1% increase in the SONIA or base rate will have the effect of increasing interest payable by £Nil (2023: £551,000).

The Directors regularly review the Group's position with regard to interest rates in order to minimise its risk.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.

The Group has its cash held on deposit with two large banks in the United Kingdom. At 31 March 2024 the cash balances of the Group were £19,766,000 (2023: £5,509,000). The concentration of credit risk held with Barclays Bank plc, the largest of these banks, was £19,262,000 (2023: £2,997,000).

Credit risk also results from the possibility of a tenant in the Group's property portfolio defaulting on a lease. The largest tenant by contractual income amounts to 14.8% (2023: 6.0%) of the Group's anticipated income. The Directors assess a tenant's creditworthiness prior to granting leases and employ professional firms of property management consultants to manage the portfolio to ensure that tenants debts are collected promptly and the Directors in conjunction with the property managers take appropriate actions when payment is not made on time.

The carrying amount of financial assets (excluding cash balances) recorded in the financial statements, net of any allowances for losses, represents the Group's maximum exposure to credit risk without taking account of the value of any collateral obtained. The carrying amount of these assets at 31 March 2024 was £2,230,000 (2023: £2,890,000). The details of the provision for expected credit loss are shown in note 12.

Liquidity risk management

The Group's policy is to hold cash and obtain loan facilities at a level sufficient to ensure that the Group has available funds to meet its medium-term capital and funding obligations. The Group holds cash to enable the Group to manage its liquidity risk.

The Group monitors its risk to a shortage of funds using a monthly working capital model. This process considers the maturity of both the Group's financial investments and financial assets (e.g. accounts receivable, other financial assets) and projected cash flows
from operations.

The tables below summarise the maturity profile of the Group's financial liabilities based on contractual undiscounted payments:

	On demand £'000	0-1 years £'000	1-2 years £'000	2-5 years £'000	Total £'000
As at 31 March 2024
Interest bearing loans	-	550	541	7,735	8,826
Trade and other payables	1,892	-	-	565	2,457
	1,892	550	541	8,300	11,283

	On demand £'000	0-1 years £'000	1-2 years £'000	2-5 years £,000	> 5 years £'000	Total £'000
As at 31 March 2023
Interest bearing loans	-	12,161	38,606	19,598	-	70,365
Lease liabilities	-	54	54	162	5,839	6,109
Trade and other payables	4,334	-	-	-	-	4,334
	4,334	12,215	38,660	19,760	5,839	80,808

Company Statement of Financial Position

as at 31 March 2024

	Note	2024 £000	2023 £'000
Fixed assets
Investments in subsidiaries	2	94,382	104,730
Property, plant and equipment	3	-	22
		94,382	104,752
Current assets
Trade and other receivables	4	30,602	30,155
Cash at bank and in hand		11,483	1,049
		42,085	31,204
Total assets		136,467	135,956
Current liabilities
Creditors: amounts falling due within one year	5	(63,616)	(33,660)
Net current liabilities		(21,531)	(2,456)

Non-current liabilities
Short term incentive plan provision		(565)	-

Net assets		72,286	102,296
Equity
Called up share capital	6	3,756	4,639
Treasury shares		-	(7,343)
Merger reserve		3,503	3,503
Capital redemption reserve		1,223	340
Capital reduction reserve		89,931	118,477
Accumulated losses		(26,127)	(17,320)
Equity - attributable to the owners of the Parent		72,286	102,296

The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The Company's loss after tax for the year was £8,671,000 (2023: £21,688,000).

The financial statements were approved by the Board of Directors and authorised for issue on 5 June 2024 and are signed on its behalf by:

STEVEN OWEN

Executive Chairman

Company Statement of Changes in Equity

as at 31 March 2024

	Share Capital £'000	Treasury Share Reserve £'000	Other Reserves £'000	Capital Reduction Reserve £'000	Retained Earnings/ (Accumulated Losses) £'000	Total Equity £'000
At 31 March 2022	4,639	(717)	3,843	125,019	4,225	137,009
Total comprehensive loss for the year	-	-	-	-	(21,688)	(21,688)
Transactions with Equity Holders
Share-based payments	-	-	-	-	177	177
Exercise of share options	-	71	-	-	(71)	-
Issue of deferred bonus share options	-	-	-	-	37	37
Dividends	-	-	-	(6,542)	-	(6,542)
Share buyback	-	(6,697)	-	-	-	(6,697)
At 31 March 2023	4,639	(7,343)	3,843	118,477	(17,320)	102,296
Total comprehensive loss for the year	-	-	-	-	(8,671)	(8,671)
Transactions with Equity Holders
Share-based payments	-	-	-	-	137	137
Exercise of share options	-	161	-	-	(273)	(112)
Dividends	-	-	-	(6,045)	-	(6,045)
Share buyback	-	(15,179)	-	-	-	(15,179)
Shares purchased by employee benefits trust	-	(140)	-	-	-	(140)
Cancellation of treasury shares	(883)	22,501	883	(22,501)	-	-
At 31 March 2024	3,756	-	4,726	89,931	(26,127)	72,286

Treasury shares represents the consideration paid for shares bought back on the open market. On 27 March 2024 all shares held in Treasury were cancelled.

Other reserves comprise the merger reserve and the capital redemption reserve.

The capital redemption reserve represents the nominal value of cancelled preference share capital redeemed.

The capital reduction reserve represents distributable profits generated as a result of the share premium reduction.

Notes to the Company Financial Statements

Accounting policies

Palace Capital plc is a company incorporated in England and Wales under the Companies Act. The address of the registered office is given on the contents page and the nature of the Group's operations and its principal activities are set out in the Strategic Report. The financial statements of the Company have been prepared in accordance with FRS 102, the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Company's management to exercise judgement in applying the Company's accounting policies (as detailed below). The Statement of Financial Position heading relating to the Company's investments and property, plant and equipment is in accordance with the balance sheet formats of the Companies Act 2006. Assets are classified in accordance with the definitions of fixed and current assets in the Companies Act instead of the presentation requirements of IAS 1 Presentation of Financial Statements

Dividends revenue

Revenue is recognised when the Company's right to receive payment is established, which is generally when Shareholders of the paying company approve the payment of the dividend.

Valuation of investments

Investments in subsidiaries are measured at cost less accumulated impairment. Where merger relief is applicable, the cost of the investment in a subsidiary undertaking is measured at the nominal value of the shares issued together with the fair value of any additional consideration paid.

Current taxation

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and the tax laws used to compute the amount are those that are enacted or substantively enacted, by the balance sheet date.

Deferred taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax balances are recognised in respect of timing differences that have originated but not reversed on the balance sheet date. 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.

Deferred tax balances are not recognised in respect of permanent differences between the fair value of assets acquired and the future
tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax.

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.

Trade and other receivables

Trade and other receivables and intercompany receivables are recognised and carried at the original transaction value. A provision for impairment is established where there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables concerned.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below:

Trade payables

Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.

Equity instruments

Equity instruments issued by the Company are recorded at the fair value of proceeds received, net of direct issue costs.

Parent company disclosure exemptions

In preparing the separate financial statements of the Parent Company, advantage has been taken of the following disclosure exemptions available in FRS 102:

• no cash flow statement has been presented for the Parent Company;

• disclosures in respect of the Parent Company's financial instruments have not been presented as equivalent disclosures have been provided in respect of the Group as a whole;

• disclosures in respect of the Parent Company's share-based payment arrangements have not been presented as equivalent disclosures have been provided in respect of the Group as a whole; and

• disclosure has been given for the aggregate remuneration of the key management personnel of the Parent Company as their remuneration is included in the totals for the Group as a whole.

Judgements in applying accounting policies and key sources of estimation uncertainty

Investments and loans to subsidiary undertakings (see note 2)

The most critical estimates, assumptions and judgements relate to the determination of carrying value of unlisted investments in the Company's subsidiary undertakings and the carrying value of the loans that the Company has made to them. The nature, facts and circumstance of the investment or loan are taken into account in assessing whether there are any indications of impairment.

Provisions provided in the year reflect the reduction in net asset value of subsidiaries for the year ended 31 March 2024. The carrying value of the subsidiaries represents the net asset value (NAV) of the subsidiary as at 31 March 2024. The NAV of the subsidiaries are affected by the fair value of the Group's investment property.

1. PROFIT FOR THE FINANCIAL PERIOD

The Company has taken advantage of section 408 of the Companies Act 2006 and consequently a profit and loss account for the Company alone has not been presented.

2. INVESTMENTS IN SUBSIDIARIES

Cost:	Investments in subsidiaries £'000
At 1 April 2022	180,956
Write-down of investments	-
At 1 April 2023	180,956
Additions	8,851
Disposals	(12,521)
At 31 March 2024	177,286
Provision for impairment:
At 1 April 2022	58,092
Provided during the year	18,134
At 1 April 2023	76,226
Provided during the year	8,341
Disposals	(1,663)
At 31 March 2024	82,904

Net book value at 31 March 2024	94,382
Net book value at 31 March 2023	104,730

During the year, Palace Capital plc waived loans to subsidiaries to the value of £8,851,000. The waived loans were capitalised to the investment in subsidiaries, subsequently an impairment of £8,341,000 was recognised to reflect the reduction in net asset value of subsidiaries for the year ended 31 March 2024. The carrying value of the subsidiaries represents the net asset value (NAV) of the subsidiaries as at 31 March 2024.

During the year a subsidiary, Palace Capital (Liverpool) Limited, was disposed of which resulted in a reversal of an impairment previously recognised of £1,663,000.

The Group comprises a number of companies; all subsidiaries included within these financial statements are noted below:

Subsidiary undertaking:	Class of share held	% shareholding	Principal activity
Palace Capital (Leeds) Limited	Ordinary	100	Property Investments
Palace Capital (Northampton) Limited	Ordinary	100	Property Investments
Palace Capital (Properties) Limited	Ordinary	100	Property Investments
Palace Capital (Developments) Limited	Ordinary	100	Property Investments
Palace Capital (Halifax) Limited	Ordinary	100	Property Investments
Palace Capital (Manchester) Limited	Ordinary	100	Property Investments
Palace Capital (Signal) Limited	Ordinary	100	Property Investments
Property Investment Holdings Limited	Ordinary	100	Property Investments
Palace Capital (Dartford) Limited	Ordinary	100	Property Management
Palace Capital (Newcastle) Limited	Ordinary	100	Property Investments
Palace Capital (York) Limited	Ordinary	100	Property Investments
Associated Company:
HBP Services Limited*	Ordinary	21.4	Property Management
Clubcourt Limited*	Ordinary	40	Property Management

* Held indirectly

The results of the associated companies are immaterial to the Group.

The registered addresses for the subsidiaries across the Group are consistent based on their country of incorporation and are as follows: Thomas House, 84 Eccleston Square, London, SW1V 1PX

On 10 July 2023 the 100% holding in Palace Capital (Liverpool) Limited was disposed of.

On 29 April 2024, contacts were exchanged for the sale of Palace Capital (Manchester) Limited with completion expected in July 2024.

3. PROPERTY, PLANT AND EQUIPMENT

	IT, fixtures and fittings £'000
At 31 March 2022	291
Additions	8
At 31 March 2023	299
Additions	-
At 31 March 2024	299
Depreciation
At 31 March 2022	248
Provided during the period	29
At 31 March 2023	277
Provided during the period	22
At 31 March 2024	299

Net book value at 31 March 2024	-
Net book value at 31 March 2023	22

4. TRADE AND OTHER RECEIVABLES

	2024 £,000	2023 £'000
Amounts owed by subsidiary undertakings	28,581	28,034
Trade debtors	1,582	1,703
Other debtors	39	47
Accrued interest on amounts owed by subsidiary undertakings	309	309
Prepayments	91	62
	30,602	30,155

Trade debtors represent amounts owed from subsidiary undertakings in relation to management charges.

All amounts that fall due for repayment within one year and are presented within current assets as required by the Companies Act. The amounts owed by subsidiary undertakings are repayable on demand with no fixed repayment date, although it is noted that a significant proportion of the amounts may not be sought for repayment within one year depending on activity in the subsidiary undertakings.

A loan amounting to £8,761,009 remains outstanding at 31 March 2024 (2023: £14,023,501) from Palace Capital (Developments) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £142,417 remains outstanding at 31 March 2024 (2023: £1,079,417) from Palace Capital (Halifax) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £7,363,467 remains outstanding at 31 March 2024 (2023: £4,945,582) from Palace Capital (Northampton) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £Nil remains outstanding at 31 March 2024 (2023: £3,084,996) from Palace Capital (Manchester) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £12,313,905 remains outstanding at 31 March 2024 (2023: £3,101,452) from Palace Capital (Newcastle) Limited. No interest is charged on this loan. This loan is repayable on demand.

5. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

	2024 £,000	2023 £'000
Trade creditors	123	124
Amount owed to subsidiary undertaking	62,824	32,143
Other taxes	247	268
Other creditors	-	15
Accruals and deferred income	422	1,110
	63,616	33,660

A loan amounting to £30,280,243 remains outstanding at 31 March 2024 (2023: £19,264,032) to Palace Capital (Signal) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £11,280,188 remains outstanding at 31 March 2024 (2023: £10,612,686) to Property Investment Holdings Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £Nil remains outstanding at 31 March 2024 (2023: £2,146,000) to Palace Capital (Liverpool) Limited. No interest is charged on this loan. This loan was repaid as part of the disposal of the holding in Palace Capital (Liverpool) Limited.

A loan amounting to £76,508 remains outstanding at 31 March 2024 (2023: £120,000) to Palace Capital (York) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £2,601,593 remains outstanding at 31 March 2024 (2023: £153,534 debtor) to Palace Capital (Leeds) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £18,585,423 remains outstanding at 31 March 2024 (2022: £1,645,430 debtor) to Palace Capital (Properties) Limited. No interest is charged on this loan. This loan is repayable on demand.

6. SHARE CAPITAL

The details of the Company's share capital are provided in note 19 of the notes to the Consolidated Financial Statements.

7. LEASES

Operating lease payments in respect of rents on leasehold properties occupied by the Company are payable as follows:

2024

£'000

2023

£'000

Within one year

134

8. POST BALANCE SHEET EVENTS

There are no post balance sheet events.

Officers and Professional Advisors

Directors

Steven Owen Executive Chairman

Mark Davies Independent Non-Executive Director

Secretary

Phil Higgins

Registered office

Thomas House

84 Eccleston Square

London

SW1V 1PX

Registered number

05332938 (England and Wales)

Auditor

BDO LLP

55 Baker Street
London
W1U 7EU

Registrar

EQUINITI LIMITED

Aspect House
Spencer Road
Lancing
West Sussex
BN 99 6DA

Broker

Numis Securities Limited

45 Gresham Street
London
EC2V 7BF

Glossary

Adjusted EPS: Is adjusted profit before tax less corporation tax charge on recurring earnings (excluding deferred tax movements) divided by the average basic number of shares in the period.

Adjusted profit before tax: Is the IFRS profit before taxation excluding investment property revaluations, gains/losses on disposals, acquisition costs, fair value movement in derivatives, share-based payments and exceptional items.

Balance sheet gearing: Is the balance sheet net debt divided by IFRS net assets.

Dividend cover: Is the Adjusted profit before tax plus trading profit divided by dividends paid in the period, expressed as a percentage.

Employee Benefit Trust (EBT): the Employee Benefit Trust, administrator of the Company's share plans.

Expected credit loss (ECL): In accordance with IFRS 9, the risk of recoverability of our rental arrears are assessed. This is done using a probability weighted estimate of credit losses, being the difference between the cash flows that are due in accordance with the contract and the cash flows that the Group expects to receive.

EPRA: Is the European Public Real Estate Association.

EPRA cost ratio (including direct vacancy costs): Is a proportionally consolidated measure of the ratio of net overheads and operating expenses against gross rental income (with both amounts excluding ground rents payable). Net overheads and operating expenses relate to all administrative and operating expenses, net of any service fees, recharges or other income specifically intended to cover overhead and property expenses.

EPRA cost ratio (excluding direct vacancy costs): Is the ratio calculated above, but with direct vacancy costs removed from the net overheads and operating expenses balance.

EPRA diluted EPS: Is EPRA earnings divided by the average diluted number of shares in the period.

EPRA earnings: Is the IFRS profit after taxation excluding investment property revaluations, gains/losses on disposals and changes in fair value of financial derivatives.

EPRA EPS: Is EPRA earnings divided by the average basic number of shares in the period.

EPRA net assets (EPRA NAV): Are the balance sheet net assets according to the definitions of the various NAV measures defined in the EPRA Best Practice Recommendations that came into effect for accounting periods starting 1 January 2020.

EPRA net tangible assets (EPRA NTA): Is the NAV adjusted to reflect the fair value of trading properties and to exclude deferred taxation and derivatives.

EPRA NTA per share: Is EPRA NTA divided by the diluted number of shares at the period end.

EPRA occupancy rate: Is the ERV of occupied space divided by ERV of the whole portfolio, excluding developments and residential property.

EPRA topped-up net initial yield: Is the current annualised rent, net of costs, topped up for contracted uplifts, where these are not in lieu of rental growth, expressed as a percentage of capital value.

EPRA vacancy rate: Is the ERV of vacant space divided by ERV of the whole portfolio, excluding developments and residential property.

Equivalent yield: Is the net weighted average return a property will produce based upon the timing of the income received. In accordance with usual practice, the equivalent yields (as determined by the external valuers) assume rent received annually in arrears.

Estimated rental value (ERV): Is the external valuers' opinion as to the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.

IAS/IFRS: Is the International Financial Reporting Standards issued by the International Accounting Standards Board and adopted by the UK.

Interest cover ratio (ICR): Is the number of times net interest payable is covered by underlying profit before net interest payable and taxation.

Investment Property Databank (IPD): A wholly-owned subsidiary of MSCI producing an independent benchmark of property returns and the Group's portfolio returns.

Key Performance Indicators (KPIs): Are the most critical metrics that measure the success of specific activities used to meet business goals - measured against a specific target or benchmark, adding context to each activity being measured.

Like-for-like net rental income: Is the change in net rental income on properties owned throughout the current and previous periods under review. This growth rate includes revenue recognition and lease accounting adjustments but excludes properties held for development in either period, properties with guaranteed rent reviews, asset management determinations and surrender premiums.

Like-for-like valuation: Is the change in the fair value of properties owned throughout the entire year.

This excludes properties acquired during the year and disposed of during the year, but includes capital expenditure spent on the properties.

Loan to value (LTV): Is the ratio of principal value of gross debt less cash, short-term deposits and liquid investments to the aggregate fair value of properties and investments.

MSCI Inc. (MSCI IPD): Is a company that produces independent benchmarks of property returns. The Group measures its performance against both the Central London Offices Index and the UK All Property Index.

Net asset value (NAV) per share: Is the equity attributable to owners of the Group divided by the number of ordinary shares in issue at the period end.

Net initial yield (NIY): Is the current annualised rent, net of costs, expressed as a percentage of capital value, after adding notional purchaser's costs.

Net rental income: Is the rental income receivable in the period after payment of net property outgoings. Net rental income will differ from annualised net rents and passing rent due to the effects of income from rent reviews, net property outgoings and accounting adjustments for fixed and minimum contracted rent reviews and lease incentives.

Net reversionary yield (NRY): Is the anticipated yield, which the initial yield will rise to once the rent reaches the estimated rental value.

Passing rent: Is the gross rent, less any ground rent payable under head leases.

Peer Group: A selection of small/medium sized property companies within the listed real estate sector with a diversified portfolio.

Proforma: Is a method of calculating financial results using certain projections or presumptions.

Property Portfolio: the total fair value of all investment properties and trading properties as determined by the independent valuer, CBRE.

Portfolio Valuation: The value of the Company's property portfolio, including all investment and trading properties as valued by our independent valuer, CBRE.

Property Income Distribution (PID): A dividend received by a Shareholder of the principal company in respect of profits and gains of the Property Rental Business of the UK resident members of the REIT Group or in respect of the profits or gains of a non-UK resident member of the REIT Group.

Real Estate Investment Trust (REIT): A UK Real Estate Investment Trust must be a company listed on a recognised stock exchange with at least three-quarters of its profits and assets derived from a qualifying property rental business. Income and capital gains from the property rental business are exempt from tax but the REIT is required to distribute at least 90% of those profits to Shareholders. Tax is payable on profits from non-qualifying activities of the residual business.

Tenant (or lease) incentives: Are any incentives offered to occupiers to enter into a lease. Typically the incentive will be an initial rent free period, or a cash contribution to fit-out or similar costs. Under accounting rules the value of lease incentives given to tenants is amortised through the Income Statement on a straight-line basis to the lease expiry.

Total Accounting Return (TAR): Is the increase or decrease in EPRA NAV per share plus dividends paid in the year, and this can be expressed as a percentage of EPRA NAV per share at the beginning of the period.

Total Expense Ratio: Is calculated as total administrative costs for the year divided by total asset value in the year.

Total Shareholder Return (TSR): Is calculated as the movement in the share price for the period plus dividends paid in the year, divided by opening share price

Weighted average debt maturity: Is measured in years when each tranche of Group debt is multiplied by the remaining period to its maturity and the result is divided by total Group debt in issue at the period end.

Weighted average interest rate: Is the loan interest per annum at the period end, divided by total debt in issue at the period end.

Weighted average unexpired lease term (WAULT): Is the average lease term remaining to first break, or expiry, across the portfolio weighted by rental income. This is also disclosed assuming all break clauses are exercised at the earliest date,
as stated.

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