Circle Property (CRC) floated as recently as February 2016, but its progress since then has been impressive. In the year to March 2018, operating profit jumped by nearly 40 per cent, while annual contracted rental income was up by over a fifth.
Circle identifies and acquires regional offices, and generates rental growth through refurbishment. It differs from other operators in this space because it targets assets that fall in the corridor above individual landlords, but below the big players. Headline profit was boosted by a revaluation uplift on the property portfolio of £12m and, together with higher rental revenue, helped to push net asset value ahead by 26 per cent, or by half over the last two years.
With office space being converted for residential use, increased demand has underpinned rents, and since the year-end the Somerset House redevelopment in Birmingham city centre has now been fully let, and will add nearly £800,000 or 11.6 per cent to the contracted rent roll. And there is plenty of value locked up within the portfolio. For while the net initial yield is 5.62 per cent, the reversionary yield is much higher at 8.16 per cent.
Net debt looks relatively high, but given the significant increase in the portfolio valuation, the loan-to-value ratio remained within the target range at 45.5 per cent. Analysts are currently updating their forecasts.
| CIRCLE PROPERTY (CRC) | ||||
| ORD PRICE: | 222p | MARKET VALUE: | £63m | |
| TOUCH: | 214-230p | 12-MONTH HIGH: | 222p | LOW: 154p |
| DIVIDEND YIELD: | 2.5% | TRADING STOCK: | nil | |
| DISCOUNT TO NAV: | 12% | NET DEBT: | 79% | |
| INVESTMENT PROPERTIES: | £106m | |||
| Year to 31 Mar | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016* | 153 | 1.10 | 4 | 2.5 |
| 2017 | 183 | 9.96 | 35 | 5 |
| 2018 | 230 | 14.0 | 51 | 5.6 |
| % change | +26 | +41 | +46 | +12 |
| Ex-div | 5 Jul | |||
| Payment: | 2 Aug | |||
| *Period from 4 Dec 2015 to 31 Mar 2016 | ||||
