Final Results for the year ended 31 March 2021

RNS Number : 0927B

Palace Capital PLC

08 June 2021

 

8 June 2021

PALACE CAPITAL PLC

("Palace Capital" or the "Company")

Final Results for the year ended 31 March 2021

ROBUST RENT COLLECTION UNDERPINNING DIVIDEND INCREASE WITH COMPANY WELL POSITIONED FOR ECONOMIC RECOVERY

Palace Capital (LSE: PCA), the Main Market listed UK REIT that has a diversified portfolio of UK commercial real estate in carefully selected locations outside of London, is pleased to announce its annual results for the year ended 31 March 2021.

Resilience and continued portfolio activity despite Covid-19 pandemic disruption  

· 95% of rents due collected during the year, with significant support provided where required to tenants, totalling £1.1m of rent concessions and deferrals. Strong balance sheet with cash reserves and immediately available facilities of £14.4 million.

· £30m disposal programme well underway with £9.4m worth of assets either exchanged or completed since year end, all at a premium to book value. Proceeds to be recycled in accordance with our strict acquisition criteria.

· Flagship development at Hudson Quarter, York completed on budget on 20 April. Over 39% of 127 apartments sold or under offer to date to the value of £14.9m and 4,781 sq ft of office space let at record rent with strong demand for the remaining space.

· 20% increase to proposed final quarter dividend, rising to 3.0p and bringing total dividends paid for the year to 10.5p. Dividend cash-covered, at a sustainable level, with 3.0p expected to be the minimum level of dividend to be paid each quarter for the year ending 31 March 2022.

Financial highlights

· Total Property Return of 1.0% compared to the MSCI UK Quarterly Benchmark of 1.2%, with 4% outperformance over a three-year period.

· 38.5% Total Shareholder Return, reflecting resilient portfolio performance and strong share price recovery following the initial 'Covid impact' in March 2020.

· Portfolio valuation increased to £282.8m (2020: 277.8m), albeit down 4% on a like-for-like basis, largely due to increased vacancy and the impact of Covid-19 on our independent property valuations in the year.

· EPRA earnings for the year were £7.2m resulting in EPRA earnings per share of 15.7p (2020: 23.4p).

· Adjusted profit before tax of £7.5m (2020: £8.0m), with provision made for £0.9m against potential rent and service charge arrears, some of which we expect to recover as restrictions continue to ease.

· IFRS loss before tax of £5.5m (2020: £5.4m loss), largely as a result of the unrealised decline in portfolio fair value of £14.0m.

· IFRS NAV was reduced by 5.1% to £157.8m (2020: £166.3m), reflecting the decline in portfolio fair value and equating to a decrease in net asset value per share to 343p (2020: 361p).

· EPRA NTA per share of 350p (2020: 364p) but an increase on September 2020 (347p), reflecting recovery in the second half of the year.

· LTV remains conservative at 42% (2020: 38%) and weighted average finance costs reduced from 3.1% to 3.0%.

Operational Highlights

· Completed disposal of five non-core assets during the financial year for £5.4m at a blended 23% premium to book value.

· 31 lease events completed in the year at an average 14% premium to ERV, including 14 new lettings, delivering £0.9m of additional annual income.

· Despite the impact of lockdowns on the leisure sector, the Group has delivered three new lettings across the two leisure assets at Halifax and Northampton, as well as one since 31 March 2021, increasing passing rents and EPRA occupancy levels above 90% at both schemes.

· 22,000 sq ft of office space let at Bank House, King Street, Leeds since December 2020.

· WAULT stable at 4.8 years to break and 6.4 years to expiry (31 March 2020: 4.8 years to break and 6.5 years to expiry) as a result of lease renewals and new lettings.

· Overall EPRA occupancy of 86.4% (2020: 87.3%), with majority of remaining vacancy having been recently refurbished or identified for strategic refurbishment or redevelopment.

· Increased prioritisation of ESG initiatives and incorporated energy efficiency measures into our capital expenditure projects.

· No employees were furloughed or made redundant, and the health and wellbeing of our people remained a priority during the year.

Neil Sinclair, Chief Executive of Palace Capital said: "In what has been one of the most challenging years in my career, we have weathered the storm and the signs are positive for the future of the Group. Despite our financial year coinciding entirely with the pandemic, we have seen good activity across the portfolio with strong rent collection, the completion of Hudson Quarter and positive lettings activity despite government restrictions. As a result, we are in fine shape and, with the positive progress being made in our disposals programme, are well positioned to recycle our capital into attractively priced, accretive investment opportunities, which we believe will emerge in the coming months. This has given us the required confidence to increase the quarterly dividend by 20% to 3.0p.

"The UK's regions are enjoying the benefit of increased investment from government and business, with many organisations choosing to take space outside of London, as we've seen in recent months. Alongside the predicted economic recovery, we therefore feel cautiously optimistic about the future and look forward to deploying our entrepreneurial spirit and refocusing again on growth."

Stanley Davis, Chairman of Palace Capital said: "Collectively, the Palace Capital team, who deserve great credit for navigating the Company through the challenges of the last year, has a long and established track record in the real estate sector, with deep-seated relationships and an unparalleled understanding of the dynamics of the UK commercial property market throughout multiple cycles. This puts us in a real position of strength as we move into the next phase of the current cycle and investment opportunities, which we are actively tracking, arise. We will continue to adopt our highly disciplined investment approach and will only acquire strategically located properties that have the potential to deliver attractive total returns in line with our objectives."

For further information please contact:

 PALACE CAPITAL PLC

Neil Sinclair, Chief Executive / Stephen Silvester, Chief Financial Officer
Tel. [phone]

 Broker

Numis Securities

Heraclis Economides / George Fry

Tel: [phone]

 Broker

Arden Partners plc

Corporate Finance: Paul Shackleton / Daniel Gee-Summons

Corporate Broking: James Reed-Daunter

Tel: [phone]

 Financial PR 

FTI Consulting

Claire Turvey / Methuselah Tanyanyiwa

Tel: [phone]

[e-mail]

About Palace Capital plc

Palace Capital plc (LSE: PCA) is a UK REIT that has a £282.8 million portfolio of UK regional commercial property with a focus on the office and industrial sectors. The Company maintains a disciplined investment strategy focused on towns and cities outside of London that are characterised by thriving local economies and strengthening fundamentals. Within those locations the highly experienced management team select assets that provide opportunities to drive both capital value and long-term rental income through tailored active asset management programmes ultimately delivering attractive shareholder returns.

www.palacecapitalplc.com

The Annual Reports and Accounts together with the Notice convening the 2021 Annual General Meeting will be posted to Shareholders on 23 June 2021.

Chief Executive's Review

Overview

Our financial year started just one week after the first lockdown in the UK. Therefore, over the last 12 months, we have been focused on the consolidation and active management of our current portfolio, with a view to ensuring that we are well positioned once we emerge from this extraordinary pandemic.

When the government directed us to work from home last March, our team responded extremely well and remote working enabled us to conduct our business seamlessly. I am pleased, however, that as I write we are now slowly returning to the office. Real estate investment companies like ours, as with many other industries, thrive on face-to-face collaboration and information sharing, and the office is a major facilitator of this.  There is absolutely a place for flexible working, which was already happening pre Covid-19, but the office continues to retain a critical role in the future of workspace.

highlights

Our immediate focus as we entered the first lockdown in March 2020 was direct and pro-active engagement with our tenants, which enabled us to work with them to maximise rent collection and agree payment plans as required. As a result, over the year, we collected an average of 95% of rents due.

Our second priority was to prudently maintain a healthy cash position, to which end we curtailed all non-essential capital expenditure, and to ensure a continuing close relationship with our lenders. Despite the pandemic, we have also managed to undertake five strategic disposals, all at a premium to book value, contributing to our cash reserves which stand at £9.4 million as at 31 March 2021.

While we took the prudent decision to cancel the dividend payment at the height of the disruption brought about by the pandemic in April 2020, this was reinstated in August 2020 with consistently high rent collection levels enabling the payment of successive quarterly dividends since then, including the recent quarterly dividend of 2.5p, paid in April 2021.

A major milestone was achieved for the Company just after the period end with the completion of Hudson Quarter, which we were able to progress despite the challenges of the government-imposed restrictions.  Having appointed a first-class Yorkshire contractor in Caddick Construction, we were able to complete the project on budget and only three months later than first envisaged. The original decision to move forward with the development was underpinned by a firm conviction in the positive fundamentals of the location and local economy, as well as our ambitious and entrepreneurial ethos. We are proud to have delivered an exemplary product that is already receiving accolades, not only for the standard of the construction, but also the quality of the finish, and which is now beginning to deliver strong returns for our investors. 

Elsewhere in the portfolio, our active asset management strategy is focused on maximising the full potential of all our properties and has resulted in positive letting activity at our leisure assets while work on our development and refurbishment pipeline has continued in anticipation of the recovery.

The pandemic has unsurprisingly had an effect on portfolio valuations, but our property team have worked tirelessly to deliver additional income and increase our NAV slightly compared to the results at our half year. I expect this to improve further as lockdown finally ends later this month, people return to the office, hospitality recovers plus the benefit from increasing sales at Hudson Quarter.

Our EPRA earnings for the year were £7.2m resulting in EPRA earnings per share of 15.7p (2020: 23.4p). However, our IFRS loss before tax was £5.5m, driven by a reduction in fair value of our investment properties, a reduction in surrender income (2020: £2.9m) in the year and a further £0.9m provision against rental income and service charge arrears under the expected credit loss model.

Our independent valuations show a decrease of 4.0% compared to the like-for-like values as at 31 March 2020.

Our EPRA Net Tangible Asset per share on 31 March 2021 was 350p which is 3.8% below that as at 31 March 2020, but 1% ahead of that as at 30 September 2020 (347p). This is partly due to the impact of Covid-19. However, with the completion of Hudson Quarter and the road map out of lockdown in full swing we are very confident that we have turned the tide.

STRATEGY

Palace Capital is focused on creating and maximising value from carefully selected assets in those regional towns and cities that display the right growth fundamentals that, in tandem with our tailored asset management strategies, can support value creation. We are highly disciplined in our investment approach and acquire strategically located properties that have the potential to become sustainable assets that deliver attractive total returns. With the regions increasingly enjoying the benefit of investment from government and business along with the predicted economic growth, we are now, more than ever, excited for the prospects and the potential to generate both income and capital returns for shareholders.

Collectively, our team has a long and established track record in the real estate sector, with deep-seated relationships and an unparalleled understanding of the dynamics of the UK commercial property market throughout multiple cycles. This puts us in a real position of strength as we move into the next phase of the current cycle and investment opportunities, which we are actively tracking, arise.  The majority of our portfolio to date has been assembled through the acquisition of corporate entities, which has resulted in SDLT savings and, prior to REIT conversion, secured capital losses as well. This continues to be our favoured approach and we envisage corporate opportunities emerging later this year and early next year when government support for companies is expected to be less marked.

According to Savills, the regions have lost a significant amount of Grade B & C office space since 2015. With limited speculative development, there will continue to be an underlying shortage of offices to meet the continuing demand that we are seeing, in particular for high quality space. This dynamic will be exacerbated by the government taking considerable space in Manchester, Leeds, Liverpool, Wolverhampton, Birmingham & Darlington as part of its levelling up agenda, which will also further stimulate demand in those local economies. We believe that this will underpin the value of our portfolio alongside the resumption of growth in the years ahead.

Through active asset management we create value, often through the refurbishment or redevelopment of well-located assets in areas of demographic and economic growth, with the Company ultimately benefiting from value crystallisation achieved through sales or sustainable income through leasing. I am very hopeful that Shareholders will see the tangible benefits of this strategy at Hudson Quarter.

At least 15 assets, valued in excess of £30 million, have been identified for sale this year as they are either non-core or their business plans have reached a conclusion. The net gains from these disposals will ultimately be reinvested in regional commercial investment property that conforms with our strict criteria. £9.4m of sales have already been exchanged or completed.

41.1% of our portfolio is in offices and in major city centres that are easily accessible with good transport links. We have avoided out of town business parks as most lack the amenities that today's more discerning workforce favours. As the blend between work and life increases, workers prefer the vibrancy and social benefits of city centres, where they can go out to lunch or the pub and meet friends at the end of the day. Moreover, as the spotlight on ESG becomes more pronounced, among our investors and critically our occupiers, city centre locations discourage car travel, unlike business parks which are reliant upon it.

As we move forward, our intention is to focus the majority of the portfolio towards the offices and logistics sectors. We currently own two leisure assets in Halifax and Northampton (12.5% of the portfolio), which have delivered a positive income performance and where three new lettings have been secured in the year. However, we do not intend to hold these long-term and we will exit them at the appropriate time.

Our portfolio

We are very pleased with the resilience our portfolio has shown over what has been an incredibly challenging 12 months across the globe. During this period, the momentum behind businesses choosing to locate operations outside of London, which we were seeing pre-pandemic, has grown. HM Government and the Bank of England are moving their departments to the regions, while the BBC has confirmed that 65% of its staff will relocate to Birmingham and Salford by 2027. Goldman Sachs also announced in April that it will move an engineering division to Birmingham. These trends, which have formed a part of our investment thesis, further validate our decision to invest in city centre office buildings in Manchester, Liverpool, Leeds and Newcastle. Here, rental commitments on a pounds per sq ft basis are considerably lower than in London, as are business rates, while organisations can access expanding talent pools, with graduate retention in these university towns at historically high levels.

Transport is a critical element and approval has been obtained for HS2 to be extended to Crewe as part of the next phase. We expect to see further support for the Northern Powerhouse Rail programme with a high-speed connection between Manchester and Leeds.

Against all of this, our portfolio is now valued at £282.2m with a contracted rental of £16.4m per annum. Our net rental income after the deduction of property operating expenses is £14.9m per annum for the year ended 31 March 2021.

During the year, despite the difficulties faced by the market, we concluded 14 new lettings at an average 16% premium to ERV.  One of the major challenges that we faced at the beginning of the financial year related to our two leisure assets, Sol, Northampton & Broad Street Plaza, Halifax. With hospitality venues ordered to close and the Government legislating for a moratorium in respect of collecting unpaid rent, we were faced with a very difficult situation. However, by pro-actively engaging with our tenants and advocating mutual support, our year finished far better than first envisaged. We achieved strong rent collection and where we granted rent free periods, we extended leases or removed breaks.  In addition, while we lost three tenants to CVAs at Halifax, we have already re-let two of the units. We have also let 5,952 sq ft of offices to the Secretary of State for Housing, Communities and Local Government, as well as a restaurant unit at Northampton. This activity, together with anecdotal evidence we have come across indicates that the leisure sector is now in recovery mode, which is encouraging for our future exit plans for these assets.

Tackling our vacant office space when government advice has been to work from home has not been easy. However, we have re-let the majority of the vacant space at Bank House, King Street, Leeds which is now 84.8% occupied. We have tactically opted for short leases pending a planned accretive refurbishment of the property in 2025.

The exposure we have to retail is limited, though we have two retail warehouses let to Booker, Wickes and Pets at Home, all with strong covenants which have been stand-out performers during the pandemic and from whom we have collected 100% of rent. The investment market for retail warehouses, given its alternative use potential as a proxy for urban logistics, has outperformed the rest of the sub-sector.

Throughout the year, within the parameters of government guidelines, we continued to progress plans for those of our strategic properties identified for refurbishment or redevelopment. The completion of Hudson Quarter just after the period end is an accomplishment we are particularly proud of. Judging by the level of sales and interest we have in the residential element; the pre-lease secured on 4,781sq ft of offices at a record rent; and discussions we are having on the remaining office space, we firmly believe that this scheme will produce above average returns for Shareholders.

We expect to complete the refurbishment of the vacant floors at St James Gate, Newcastle Upon Tyne in August 2021, as well as upgrading the exterior. Demand is strong and we are confident that this space will be let before the end of our financial year.

We have plans to redevelop or refurbish our assets in Leamington Spa and Leeds, which are both in prime locations, with commencement envisaged sometime in 2025, assuming satisfactory planning consent is granted.

Listed investment

We hold 1,592,500 ordinary shares representing a 5.6% stake in Circle Property plc, an AIM listed property investment company with a similar investment objective to our own. This investment remains under continuous review.

PositionED for sustainable long term performance

Having shown resilience over the past 12 months, supported by the hard work and expertise of our team, our portfolio and balance sheet are well positioned to continue to deliver sustainable returns for our Shareholders. 

Our future focus will be on offices and industrial property which already comprise 55.5% of the portfolio. This is expected to rise to over 70% of the portfolio once all the Hudson Quarter residential apartments have been sold and the HQ office is fully let.

As indicated, at least 15 properties have been identified for sale during the course of the financial year. Coupled with our expected sales at Hudson Quarter we are looking to further supplement our cash balance to take advantage of the opportunities, particularly corporate acquisitions, which we believe will become available later this year and early in 2022.

The outlook for the UK's regional economy is encouraging as businesses and people alike seek a more affordable and better quality of life outside the capital. While there has been considerable debate over the future of the office, it is becoming increasingly clear that high quality office space will win out among occupiers. Affordability will continue to be a critical factor among our target base and with the average rent across our office portfolio at £20.00 per sq ft, and with London rents at over £100.00 per sq ft, we provide a very attractive alternative option.

We have a first-class team at Palace Capital who are highly experienced and who have enabled us to weather the storm with strong rent collection figures. In addition, we have an unparalleled network, particularly in the areas we operate, and this will assist us in securing the relevant buying opportunities.

As you would expect, the Board constantly assesses the options for delivering maximum value for Shareholders, including the merits or otherwise of undertaking a share buyback programme to manage any persistent share price discount. The Board's view to date has been that any positive impact of a buyback programme would be marginal, and any benefits would be substantially countered by the resultant increase in net LTV, reduced liquidity, and constraints it would put on the Company's ability to take advantage of accretive investment opportunities. This remains under regular review but would likely only be contemplated where there is a surplus of capital.

We reinstated our dividend in July last year on the back of strong rent collection figures for the March 2020 quarter, at a minimum of 10.0p per annum ensuring it is fully covered. I am pleased to report that the continued strong rent collection figures, coupled with cautious optimism underpinned by the successful roll out of the vaccination programme, has resulted in the Board proposing a final dividend of 3.0p bringing total dividends for the year to 10.5p per share. We expect the final dividend to be the minimum level of dividend to be paid to shareholders each quarter for the year ending 31 March 2022.

outlook

In what has been one of the most challenging years in my career, we have weathered the storm and the signs are positive for the future of the Company. We are emerging in fine shape and with our dedicated Board, team and loyal Shareholders to whom we are grateful, we can look forward together to an exceptionally bright future for Palace Capital.

Neil Sinclair
Chief Executive

7 June 2021

Property Review

Last year we highlighted the challenge of Brexit and the impact of Covid-19, which was in its infancy. A year on and we can be very proud of how we balanced the demands of our tenants to keep them in business and collected enough rent to meet our financial obligations and provide returns to shareholders.

From the onset of the Covid-19 pandemic, every one of the asset managers in our tight-knit team worked tirelessly to engage personally with all the requests for support we received from our tenants. This active approach has been at the core of our strategy since our inception, with the pandemic making our tenant relationships even stronger.

Our focus during the year was on rent collection. Most of our 182 tenants met their contractual rent obligations, with agreements made with some to spread payments over longer periods of time. Where appropriate, we provided additional support with rent free periods. As a result of our active tenant outreach, over the financial year we collected 95% of rent due. We ensured our tenants were able to use our buildings throughout the pandemic by ensuring that the necessary alignment with government requirements was applied, including putting social distancing measures in place.

As a result of the pandemic, we took the prudent decision to review our capital expenditure projects and prioritised those which would have the most impact on value or tenant use.

During the financial year, we completed 31 lease events representing a floor area of 230,000 sq ft. This included 14 new lettings at 16% above the independent ERV, which generated an additional £0.9m of income per annum. New lettings represented 67,000 sq ft. and as a result, reduced our void costs by £0.12m per annum.

In a year where the leisure sector has really taken the brunt of the effects of the pandemic, we are pleased to have let two vacant units at Broad Street Plaza in Halifax, as well as securing an agreement to lease a vacant unit at Sol, Northampton. While these assets may not be long-term holds, this activity is testament to our ability to add value to our assets even in the most challenging of markets.

Portfolio Overview

We own 48 buildings (2020: 53) and have a long-term focus on the office and industrial sectors. We consider that both of these sectors will continue to outperform. These sectors make up 55.5% of our total holdings (increasing to over 70% once the Hudson Quarter residential apartments have been sold and the HQ office is fully let). The remainder of our holdings comprises 12.5% leisure and 10.9% retail and retail warehousing. The balance of our holdings at year end was in development, notably the signature mixed-use scheme, Hudson Quarter, which has since completed. 

Sector	Holding
Offices	41.1%
Industrial	14.4%
Leisure	12.5%
Development	21.1%
Retail	7.6%
Retail Warehouses	3.3%

Cushman and Wakefield independently valued the portfolio as at 31 March 2021 at £282.8m, which is 1.8% higher than at 31 March 2020 but a 4.0% decrease on a like-for-like basis.

	FY21	FY20
Portfolio value (£m)	£282.8m	£277.8m
Net initial yield (%)	5.6%	6.0%
Reversionary yield (%)	7.3%	6.6%
Contractual rental income (£m)	£16.4m	£17.6m
Estimated rental value (£m)	£20.6m	£20.6m
WAULT to break (years)	4.8 years	4.8 years
Void rate (%)	13.6%	12.7%

FUTURE INCOME UPSIDE

Sector	Passing rent per sq ft	Current ERV per sq ft
Offices	£14.89	£16.07
Industrial	£6.30	£7.02
Leisure	£12.44	£10.97
Retail	£15.94	£16.31
Retail Warehouses	£14.11	£11.06

Rents are at sustainable levels across the portfolio with reversionary potential in the office and industrial sectors, the majority of which can be captured through letting vacant space. This will be a priority over the course of the next year. Supply-demand dynamics support current regional rental levels, which we are well positioned to take advantage of, as evidenced by our track record.

Hudson Quarter, York

In April 2021, we reached practical completion of this mixed-use development. The decision to commence construction over two years ago for 127 high-end residential apartments as well as 39,000 sq ft of Grade A speculative offices was not taken lightly.  We were confident in the market and chose a high-quality design and specification. The contractor, Caddick Construction managed to continue throughout the lockdown/restrictions and implemented a full socially distanced programme to ensure workers were fully protected. Feedback from prospective buyers is very positive especially highlighting the quality of the build and the overall design and its compatibility to York's heritage. The buyers range from first time buyers, downsizers and investors who are both domestic and international.

Following the onset of the pandemic we adapted the development to ensure it met the demands for people to be able to work remotely, and as part of this we have now incorporated an external shelter with benches and a wi-fi hotspot in the manicured gardens.

In February 2020 we announced a pre-let to a subsidiary of Knights plc of the ground floor self-contained suite of 4,781 sq ft. This was for a 10-year unbroken term at a record rent for York of £25 per sq ft. The lease has now completed, and the tenant has commenced their fit out. Interest in the remainder of the office space has increased as restrictions have eased. We anticipate that occupiers will have a clearer idea of future working habits for their employees in the coming months and this will inevitably result in further lettings. 

The future of the office

Covid-19 has caused some to question the validity of the office and during the year there have been various studies and surveys reporting a wide spectrum of opinions. Our conclusion is that working from an office in the standard way (everyday, 9am - 5pm) is likely to evolve. The last year highlighted that "working from home" is an option but not a replacement for an office environment. Collaboration is key in any industry and the office will likely remain the common space necessary to produce peak performance. 

We continue to invest in our office holdings. During the year seven new lettings were secured at our assets in Manchester, Newcastle, Leeds, Liverpool and Brighton. These lettings were at 11.1% above the independent ERV and generated an additional £0.5m per annum. We believe that the amount of space that will be required in the future is unlikely to fall, but how the space will be used is under review. As businesses return to the office, evolved working practices will become the norm. We believe there will be three key considerations that new and existing tenants will prioritise: connectivity, adaptability and flexibility.

CONNECTIVITY, ADAPTABILITY AND FLEXIBILITY

Occupiers require flexible leasing, a trend that was underway prior to the pandemic but which is now much more relevant. Occupiers are currently wary of long-term commitments when further restrictions cannot be ruled out and while the balance between open plan collaborative space and cellular offices remains in flux. Reflecting this demand and also taking into consideration our medium-term refurbishment and redevelopment plans, over 50% of the office lettings agreed during the year, were granted on flexible lease terms.

With changing working habits as well as unknown long-term social distancing requirements, occupiers will lease high quality, well located space that they can adapt at the right cost. This relates to desk organisation, break out areas, quiet spaces and even areas where connectivity is limited to prevent interruption. In Newcastle, where we have completed the refurbishment of 20,000 sq ft, we have worked closely with our local advisors to show how spaces can be adapted to changing occupier requirements.

Connectivity has never been more in demand. Over four years ago, we started working with WiredScore to show potential occupiers our offices could be accessed quickly. In 2019, we engaged with Backbone Connect and began installing the infrastructure required as well as providing tenants with a cost-effective option for connectivity. We continue to improve the IT infrastructure across our portfolio and are always looking for new ways to separate our buildings from the competition. 

It is worth noting that regardless of the above, the fundamental aspect of any property investment is its location. Maintaining a focus on well-located offices in university towns and city centres with good transport links will remain the notable parameter in achieving benchmark beating returns.

INDUSTRIAL AS THE SECTOR OF CHOICE

The industrial sector continues to be the sector of choice having consistently performed better than any other sector over recent years. Over the longer term, the outlook remains promising, with demand continuing to outstrip supply and the pandemic having added further momentum to prevailing structural trends. 14.4% of our holdings are in this sector and where possible we will seek to increase our exposure as part of realigning the portfolio to a more core focus. During the year we have extended our income by 30.7% on previous rents through a combination of lease renewals and rent reviews. Overall, like-for-like valuations for this sector delivered 4.8% growth.

We have invested £0.15m at Saxon House in Kettering.  The refurbishment of this 15,000 sq ft unit following a tenant vacating has improved the offering and since the year end we have agreed terms with a new occupier.  In addition, following the refurbishment at Blackmoor Road Industrial Estate in Verwood, we have fully let the estate where the rental value for the units has increased, from £5.25 per sq ft at acquisition in October 2017 to £8.10 per sq ft.

Disposal programme

As our shareholders would expect, our portfolio is under constant review with assets that no longer meet our return requirement being identified for recycling. During the year we sold five assets for a total of £5.4m. These properties were sold at or above book value. 

At least a further 15 properties with an aggregate value of more than £30 million have been identified for potential disposal during this financial year. As a total return focused company, when the value of a property has been maximised through asset management, it is appropriate to consider its place in relation to the whole portfolio. 

Since the year end the sale of 249 Midsummer Boulevard, Milton Keynes has completed for the sum of £5.7m which is a premium to book value. Contracts have also been exchanged for the sale of 43-45, High Street, Weybridge for £3.7m, also ahead of book value, with completion due by 1 July 2021.

Both of these properties were predominately vacant and this is expected to provide savings of £0.35m per annum. Historically, we highlighted that Milton Keynes was a potential development opportunity. However, following extensive feasibility investigations we concluded the returns available were not in Shareholder's best interests. The sale of High Street, Weybridge concluded the process of obtaining planning permission for a new-build development.

Adapting our investment strategy

As we continue the disposal programme and the sales of the apartments in Hudson Quarter complete, we expect to recycle this equity into opportunities in the office and industrial sectors.  We have adapted our strategy to reposition the portfolio towards a core focus, which we believe will deliver improving returns. Increasing the core portfolio and average lot size will further improve our income and the resilience of our dividend. The balance of the portfolio will then be focused on generating sector leading returns through value-add strategies.

As part of our continued focus on the office and industrial sectors, we will be looking to exit from our holdings in the other sectors at an opportune time.

Since 2013, we have sold 31 commercial properties for £42.7m, of which 28 were completed at or in excess of book value, further improving the portfolio quality and income profile.

Acquisitions

Due to the pandemic and in the interest of prudence, the Board and management took the decision to prioritise our cash position and therefore no acquisitions have been made during the year.

We are currently tracking investment opportunities and as equity is released from our disposal programme and Hudson Quarter, we will redeploy this, by applying our highly disciplined investment strategy, into regional commercial property. 

Top 20 Occupiers

Maintaining a relationship with all our tenants is fundamental to our core values. This ensures that our strategies for each property are current and adapt to changing tenant demands. 

Our top 20 tenants contribute 44% of our total passing rent and over the period we collected 98% of their rent.

Tenant	Industry	Contracted Rent pa (£'000)
Vue	Leisure	913
Rockwell	Auto	544
Accor	Hotel	510
National Lottery	Charity	444
Brose	Auto	432
Somerset Bridge	Insurance	409
Wickes	Retail	401
Exela	Technology	355
Apcoa	Car Parking	345
D Young & Co	Legal	310
Bravissimo	Retail	294
Aldi	Retail	291
Sutton Council	Local Authority	283
Quadrant Systems	Aviation	280
NHS Calderdale and Huddersfield	Health	262
Booker	Retail	246
Serco	Public Services	246
Redland	Construction	240*
Bank of England	Central Bank	232
BHW Automotive	Auto repair	227
	TOTAL:	7,264

* Headline rent payable from September 2021

Sustainability

The increasing importance of identifying, monitoring and reporting relevant environmental, social and governance (ESG) information is critical to our ability to create future value and maintain a sustainable business. It is important that we are continuously reviewing our assets to see where positive changes can be made. It is also prevalent in any capital expenditure decision. Over the year we have collected data on how each building performs in relation to energy and water supply and use, waste collection and EPC rating. We have engaged with an external advisor and together with our managing agents this provides the basis on which we can improve our buildings performance over the longer term and future-proof the portfolio.

RECOGNITION

In a fast-changing environment our asset managers, together with our external advisors, have risen to the occasion to ensure the Group continues to operate as seamlessly as possible.

Richard Starr
Executive Property Director

7 June 2021

Financial Review

FINANCIAL HIGHLIGHTS

	2021	2020
Income growth
IFRS loss after tax	(£5.5m)	(£5.4m)
Adjusted profit before tax	£7.5m	£8.0m
EPRA earnings	£7.2m	£10.8m
Basic EPS	(12.0p)	(11.8p)
EPRA EPS	15.7p	23.4p
Adjusted EPS	16.4p	17.5p
Dividend per share	10.5p	12.0p
Dividend cover	1.6×	1.5×
Capital growth
Portfolio like-for-like value	(4.0%)	(5.7%)
Net Asset Value	£157.8m	£166.3m
Basic NAV per share	343p	361p
EPRA NTA per share	350p	364p
Total accounting return	(1.2%)	(7.5%)
Total property return	1.0%	1.1%
Total shareholder return	38.5%	(30.9%)
Debt finance
Debt drawn	£128.3m	£120.8m
Average cost of debt	3.0%	3.1%
Average debt maturity	2.6yrs	3.9yrs
Loan to Value Ratio	42%	38%
Net interest cover	2.7x	3.5x
NAV gearing (see note 18)	74%	63%

HEADLINE FY21 RESULTS

In the year ended 31 March 2021, the Group generated recurring earnings of £7.5m (2020: £8.0m). The Group made a loss before tax of £5.5m (2020: £5.4m loss) with the unrealised decline in portfolio fair value of £14.0m being the main contributing factor, which offset the recurring earnings and also impacted the IFRS net asset value of the Group which was reduced by 5.1% to £157.8m (2020: £166.3m). This equated to a decrease in net asset value per share from 361p to 343p and EPRA NTA per share of 350p (2020: 364p).

RENT COLLECTION AND CASH COVERED DIVIDEND

In the year to 31 March 2021, the Group was able to collect over 95% of rents due. This was despite the economic impact of Covid-19 on businesses across the country and the resultant Government moratorium limiting landlord's ability to enforce rent collection from tenants. In addition, there was significant support provided to tenants totalling £1.1m via rent concessions and rent deferrals, regearing leases to provide rent-free periods to tenants and payment plans to help tenants manage their cashflow.

	Quarter starting Mar-20 £m	Quarter starting Jun-20 £m	Quarter starting Sep-20 £m	Quarter starting Dec-20 £m	Year ended 31 March 2021 £m
Total Demanded	4.3	4.3	4.3	4.2	17.1
Total Collected	3.9	3.8	3.8	3.7	15.2
Concessions/Deferrals	0.3	0.3	0.2	0.3	1.1
Outstanding excl. payment plans	0.1	0.2	0.3	0.2	0.8
Current collection rates	96%	95%	95%	93%	95%

As a result of strong cash collection, we recommenced dividend payments from August 2020 and cash-covered quarterly dividends have continued to be paid throughout the year since. The final dividend of 3.0p has been proposed and once approved at the AGM on 29 July 2021, will mean total dividends paid for FY21 of 10.5p, cash-covered and at a sustainable level.

TOTAL RETURN OUTPERFORMANCE VS MSCI BENCHMARK

Notwithstanding the Covid-19 pandemic causing significant economic disruption in the past year, the Group has fallen only slightly behind the MSCI benchmark on a total property return basis by 0.2% for the year. This is largely a result of the benchmark's higher exposure to the industrial sector. The total return was 1.0% versus the benchmark performance of 1.2%, made up of an income return of 6.9% for the year and capital return of -5.7%. This is a key performance indicator for the Group and over a three-year period we continue to outperform the benchmark by 4%. As with any property cycle, property valuations can rise and fall, however, the Group's business model, focused on the regions outside London, continues to deliver relative outperformance over the longer term.

COVID IMPACT ON UNREALISED PROPERTY VALUATIONS

The movement in the values of investment properties can make a significant impact on profit before tax, even though they are not cash-based or realised. They are determined by independent valuers' assessment of what a willing purchaser would pay for the property based on an arm's length transaction. The investment portfolio valuation was not immune to the challenges posed by the Covid-19 pandemic, with the overall value of the portfolio reducing by £14.0m. The like-for-like valuations at year end were down 4.0% as a result.

DEBT FINANCING

It has been critical that in the current environment the Group continued to be in a strong financial position and well placed for the economic uncertainty to be encountered during the year. We have maintained a conservative capital structure with a loan to value (LTV) of 42% (2020: 38%). The increase in LTV was expected as progress at our flagship development Hudson Quarter, York entered the final year, and the Group increased the monthly drawdowns on the development facility. We expect to reduce our LTV over the next few months as we continue to complete further sales at Hudson Quarter and repay the development loan.

Our total cost of debt reduced to 3.0% (2020: 3.1%) in the year. There have been no new debt facilities in the year. There is the capacity to draw an additional £5m from the RCF and beyond that the facility to charge additional assets and access funds on a 50% LTV basis.

The Group's debt facilities at year-end total £128.3m (2020: £120.8m). The only loan to mature within one year is the development loan with Barclays, this was extended post year end to July 2022 and will be reduced to a maximum of £2.0m by 31 March 2022, if not repaid earlier. The average debt maturity on the investment facilities has decreased to 2.6 years (2020: 3.9 years) and there are no investment facilities due for refinancing in the next 12 months. We continue to monitor swap rates and as at year end held £62.6m of fixed or hedged debt which was approximately 49% of overall debt drawn.

Debt

	Fixed	Floating	Total drawn	Years to maturity
Barclays	34.3	3.7	38.0	3.2
NatWest	-	28.6	28.6	3.4
Santander	19.0	6.3	25.3	1.3
Lloyds	-	6.8	6.8	1.9
Scottish Widows	9.3	-	9.3	5.3
Barclays development	-	20.3	20.3	0.8
	62.6	65.7	128.3	2.6

DEBT COVENANT MANAGEMENT

Each debt facility is secured at a special purpose vehicle (SPV) level and we assess the gearing mainly through interest cover ratios (ICR) and loan to value ratios (LTV). In normal market conditions we gear our assets within a range of 40% to 60% LTV.

The Covid-19 pandemic has continued to have a major impact on business operations over the past 12 months, especially with rent collection challenges and debt covenants, particularly the interest cover ratio (ICR) and debt service ratio (DSC) coming under pressure on facilities charged to the two leisure schemes. As a result, we obtained covenant waivers from our lenders to manage through the periods where concessions or rent deferrals have been agreed with tenants.

Additionally, during the year the Group made a one-off repayment of £4.1m to reduce the Scottish Widows loan balance in order to cure the LTV covenant following an updated bank valuation in January 2021. The lender has continued to provide a covenant waiver with an expectation that as lockdown eases and tenants return to premises and recommence contractual rent payments, the facility will return to covenant compliance.

There was also an adjustment to the Barclays development facility after the year end to extend the termination of the loan until July 2022 and convert the sales milestones into a debt repayment schedule, given the slower progress made on sales at Hudson Quarter than originally forecast prior to Covid-19. This builds flexibility to repay the loan through both sales proceeds and equity into the facility.

SHARE PRICE RECOVERY

Since the significant reduction in the share price in March 2020 as a result of Covid-19, the stock market has rallied and specifically the Palace Capital share price has recovered from a low of 170.5p to a 31 March 2021 year end share price of 236p, an increase of 38%. This has contributed to a total shareholder return for the year of 38.5% (FY20: (30.9)%), however there remains a significant share price discount of 33% to EPRA NTA as at the year end and given the conservative capital structure and strong rent collection during the year, it remains a key focus for the Company to exercise those opportunities available to us which can support a narrowing of the discount.

EARNINGS

The gross income for the Group totalled £17.3m in the year ended 31 March 2021 (2020: £21.1m) and net rental income was £14.9m (2020: £18.8m). The reduction in income was a result of some vacancy within the portfolio, and we provided £0.9m in addition to last year's provision against rental income and service charge arrears under the expected credit loss model, as required by accounting standard IFRS 9. Due to Covid-19 we adopted a prudent approach based on a risk analysis of collecting outstanding rent due from tenants. This was carefully reviewed by our management team and the Audit & Risk Committee due to its judgemental nature. However, as the economy recovers, any subsequent collection of these arrears we would write back to the income statement and recognise as reversal of expected credit loss in the next financial period.

Void property costs were £1.3m in the year (2020: £2.2m), with the reduction due to business rates refunds of £0.4m being received, as well as letting of vacant space, disposal of assets with vacant space and general reduction in costs throughout the year. Administrative expenses (excluding share-based payments) decreased by 2.6% to £4.0m (2020: £4.2m). This was largely due to a reduction in costs as part of management's response to Covid-19. The employee numbers remained stable throughout the year and, including the Board, totalled 16 people (2020: 17) at the balance sheet date. Finance costs reduced 13% to £3.3m (2020: £3.8m) driven mainly by the LIBOR rate reducing in the year. There were £0.1m of debt termination costs resulting from writing off loan arrangement fees in the period. Average cost of debt reduced to 3.0% (2020: 3.1%).

DIVIDENDS

Despite the uncertain economic environment, the Board made the decision to reinstate continuous quarterly dividends in the year as a result of the strong rent collection and the strength of the Group's balance sheet. Subsequently, the Board is recommending a final quarterly dividend of 3.0p per share to be paid 5 August 2021 to shareholders registered at the close of business on 2 July 2021. The full year dividend, when taking account of the quarterly dividends paid in October 2020, December 2020 and April 2021, will total 10.5p, representing a 4.4% yield on the share price at 31 March 2021 and ensuring the dividend is covered by earnings by 1.6x. We expect the final dividend to be the minimum level of dividend to be paid to shareholders each quarter for the year ending 31 March 2022.

Income statement SUMMARY

	FY21 £m	FY20 £m
INCOME STATEMENT
Adjusted profit after tax	7.5	8.0
Surrender premium & share based payments	(0.3)	2.8
EPRA earnings	7.2	10.8
Revaluation losses	(14.0)	(17.9)
Equity investment revaluation profits/(losses)	0.7	(0.4)
Profits/(losses) on disposals	0.9	(0.2)
Hedging and derivative losses	(0.2)	(0.9)
Debt termination costs	(0.1)	(0.5)
Deferred tax REIT adjustment	-	3.7
IFRS loss for the year	(5.5)	(5.4)

The Group generated an overall IFRS loss after tax of £5.5m (2020: £5.4m loss) for the year ended 31 March 2021. EPRA earnings is the industry measure of underlying profit excluding revaluation gains, profits on disposals and exceptional items. EPRA earnings for the year totalled £7.2m (2020: £10.8m), a reduction of 8.6% when stripping out a one-off £2.9m surrender premium received last year. The Group also reports an adjusted profit before tax to track recurring earnings and to form a basis for calculating dividend cover. This totalled £7.5m for the year (2020: £8.0m), down 6.3% with adjusted earnings per share decreasing to 16.4p from 17.5p.

5 Year Dividend record

	FY17	FY18	FY19	FY20	FY21
DIVIDENDS
Adjusted EPS	22.2p	21.2p	17.3p	17.5p	16.4p
DPS	18.5p	19.0p	19.0p	12.0p	10.5p
Dividend cover	1.2×	1.1×	0.9×	1.5×	1.6x

HUDSON QUARTER YORK DEVELOPMENT

The flagship development at Hudson Quarter, York was completed on 20 April and on budget. Since then, 33 unit sales have been completed totalling £9.3m, the proceeds of which have been utilised to pay down part of the development loan which was standing at a balance of £20.3m at year end. We now have brand new Grade A office space totalling 34,000 sq ft available to let, which is expected to have a significant positive impact on income and capital returns for the business.

WORKING CAPITAL

The Group continues to execute a conservative approach to cashflow and managing debt covenants. Rent collection has been prioritised and dividends maintained at a cash covered level to ensure surplus capital is available to support capital expenditure projects such as property refurbishments to let vacant space, which will deliver future income and capital growth for the business. Gearing levels have risen to 42% (2020: 38%) as a result of Coronavirus-related property valuation declines and more specifically, debt drawn to fund the Hudson Quarter York development. LTV will reduce as residential apartments continue to be sold, having reached practical completion in April 2021.

There were sufficient cash reserves of £9.4m at year end, with a further £5m available to drawdown from the revolving credit facility. Our disposal programme currently in progress is also expected to release further funds into working capital as the new financial year progresses. Please see the going concern note for further details.

NON-CORE DISPOSALS

We continue to recycle capital out of non-core and vacant properties with limited growth potential which do not support our business strategy. Five properties were disposed of in the period for a total consideration of £5.4m, representing a profit on disposal of £0.9m (2020: £0.2m loss). Post year end we have agreed the sale and exchange of a further £9.4m of disposals.

ALTERNATIVE PERFORMANCE MEASURES

The Group's 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 the Directors to assess the Group's performance and included in the highlights for the year and throughout this document. These include a number of European Public Real Estate Association (EPRA) measures, prepared in accordance with the EPRA Best Practice Recommendations (BPR) framework, and Group adjusted measures. Further details are given in notes 6 and 7 to the financial statements. We report 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.

TAXATION & REIT STATUS

The Group entered the UK REIT regime on 1 August 2019 and all the Group's property rental operations became exempt from UK corporation tax from that date. The exemption is subject to the Group continuing to comply with the UK REIT rules, which was the case all year. During the period, the Group did not recognise any corporation tax, as all income fell within the tax-exempt business.

OUTLOOK

As we continue to progress with the Government roadmap out of lockdown, we expect most of our tenants to resume full trading and our rent collection to return to pre-pandemic levels. As sales of residential flats at our flagship Hudson Quarter development continue, this will further support our conservative capital base and release surplus funds for redeployment once the debt has been repaid. We have sufficient liquidity to support the growth of the business and deliver on its objective to drive income and capital growth, and to outperform the MSCI benchmark on a Total Property Return basis.

We have proposed a final dividend of 3.0p on a cash-covered basis and, all things being equal, we expect to maintain a minimum level of 3.0p per quarter going forward.

Stephen Silvester
Chief Financial Officer

7 June 2021

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 Executive team's day-to-day decision making, as they work hard to deliver the Company's strategy. The amount of risk taken is assessed in light of our strengths, the external environment, our financial position and where we are in the property cycle. Our risk appetite will vary over time but as a business with a small number of employees and a relatively flat management structure, we are able to assess and respond quickly to new and emerging risks. Our top down, bottom-up approach to risk identification means that asset managers and key individuals in the finance team are able to report directly and at an early stage, allowing management to take appropriate mitigating action.

The Executive team maintain a formal register of current and emerging risks and this is reviewed by the Audit and Risk Committee twice a year. The Audit and Risk Committee will support the Board in determining the principal risks facing the business and review, at least annually, the effectiveness of the Company's system of risk management and internal control.

COVID-19

A number of risks are heightened as a result of the Covid-19 pandemic. As the uncertainty surrounding the pandemic increased during the year, we paid particularly close attention to our tenant exposure and the macroeconomic environment. The Board held a conference call every two weeks during the initial stages of the pandemic where it discussed rent collection, compliance with banking covenants and its overall approach to tenant engagement.

All sectors of the commercial property market were impacted in one way or another, not only affecting our business, but those of our tenants and suppliers. In most cases Covid-19 has increased either the impact or the probability of risks already identified on the Risk Register, as well as being a risk in its own right. The Board has therefore added Covid-19 and Future Pandemics as a new principal risk. We continue to monitor the rate of infections and / or new variants as an emerging risk.

EMERGING RISKS

A prolonged fall-out from Covid-19, new variants or further pandemics may lead to further imposition of controls on the movement of people and interruption of large parts of the economy for a significant period. This could result in further economic disruption with continued uncertainty, reduced market confidence, volatile market valuations and pressure on our rental income. 

Cyber threats, technological advancements and the potential impact on operations are increasing for all businesses and were further heightened as working from home became vital in the fight against Covid-19. We have taken steps to increase our security measures during the year and continue to review ways in which we can further mitigate the risk to our network and data.

In addition, climate change is a global issue which presents both risks and opportunities to the commercial real estate market, with the potential to adversely impact the macroeconomic environment as well as our own operations and those of our supply chain. Demand for sustainable buildings is increasing across all stakeholder groups with evolving regulation in the built environment. The Board's ESG Committee is tasked with overseeing the Group's response to climate change.

GOING CONCERN STATEMENT

The Directors regularly assess the Group's ability to continue as a going concern. The strategic report in the Annual Report and Accounts sets out in detail the Group's financial position, cash flows, liquidity position, borrowing facilities and the factors which will affect future performance. Given the ongoing economic disruption caused by the Covid-19 pandemic, the assessment of the Group's ability to continue in operation has been undertaken, with due consideration given to the Group's cash resources, borrowing facilities, rental income, acquisitions and disposals of investment properties, committed capital expenditure and dividend distributions.

DOWNSIDE SCENARIO

The Directors have considered various downside scenarios in assessing the Groups' ability to continue as a going concern. Sensitivity analysis and reverse stress testing were undertaken on all these scenarios, to assess the impact on the business and in particular the loan covenants.

The downside scenario assumptions used in the assessment included:

· Further government intervention and a subsequent reduction in rent collection.

· Sales progression at our completed Hudson Quarter development in York is significantly reduced.

· We are unable to execute our disposal strategy.

· Cash reserves are used to repay debt/cure bank facilities covenants.

LIQUIDITY

At 31 March 2021 the Group had £9.4m of cash and cash equivalents with a further £5m available to drawdown from the NatWest RCF. The fair value of our property portfolio is £282.8m, with £128.3m debt drawn at 31 March 2021 with net assets of £157.8m. The Group restored quarterly dividends in the year, fully covered from rental income. The Group maintains a conservative level of gearing, albeit at year-end Group loan to value (LTV) totalled 42% due to being in the final stage of construction at our Hudson Quarter development and prior to receiving proceeds from residential apartment sales. There is a clear sales strategy at Hudson Quarter, York which is expected to deliver significant cash into the Group above and beyond repayment of the development loan with Barclays. Along with the portfolio-wide strategic disposal programme for assets which we have completed asset management initiatives on, we expect to significantly reduce Group LTV and enhance cash reserves.

RENT COLLECTION

We collected on average 95% of rent (excluding concessions and deferrals) for the period to 31 March 2021. This was extremely positive, and the Directors are confident this will improve as lockdown restrictions are eased and our tenants become fully operational and all resume paying rent when it falls due. We have offered £1.1m of rent concessions and deferrals in the year, showcasing how we have supported our tenants, and often in return we have extended leases, adding more certainty to future cash flows. Payment plans have been agreed with tenants largely focused in our two leisure schemes which were closed for much of the year in order to support tenants through a challenging time, but with timing agreed for the recovery of arrears.

DEBT COVENANTS / STRESS TESTING

Our lenders have remained supportive during the past year, remaining pragmatic and sympathetic of the current economic climate. We continually assess our rent receipts and outstanding arrears. We engage with our lenders ahead of potential breaches in covenants based on our continuous review of our covenant headroom.

All non-leisure assets remained covenant compliant in the year with significant headroom. However, Covid-19 and multiple government-enforced lockdowns had the most significant effect on our two leisure schemes in Halifax and Northampton. Tenants in these schemes have been unable to operate for much of the year which led to rental payments being withheld. The result was the Group required debt covenant waivers with both Scottish Widows and Santander during the year due to not satisfying the ICR and DSC covenants. In addition, the Company agreed to repay £4.1m of debt owed to Scottish Widows following an updated bank valuation in order to rectify the LTV. Looking forward, we expect to remain compliant on all our debt covenants over the next 12 months, based on our base case cash flow forecast.

As at 30 April 2021, the Group owed £20.m on the Barclays facility relating to our Hudson Quarter development. Lockdown and closures of the marketing suite slowed the rate of residential sales at Hudson Quarter, York in the year and subsequently the debt repayment plan has been amended with Barclays to allow for the delayed timetable.  It was agreed that the facility be reduced to £9.5m at 26 May 2021. The Group had £10.1m of agreed completions and exchanges on account, excluding deposits and reservation fees already received and paid to Barclays. The subsequent debt balance stood at £10.3m, the Group therefore funded £0.8m of the repayment from cash reserves to meet the £9.5m milestone. At 26 May we had £3.6m of residential units under offer, of which £0.3m have exchanged as at 7 June. When the remaining units have exchanged, we will meet the September 2021 milestone to reduce debt by a further £2.5m. Interest has picked up as lockdown eases, which will ensure we remain on track to repay the debt in line with the agreement which amounts to £2.5m at each quarter end date from September 2021 until it is fully repaid in June 2022. Under the downside scenario, we modelled a reduction in forecasted sales, and we should still meet our debt obligations.  However, we have sufficient capital within the Group to fund any shortfall if required.

The going concern assessment of debt covenants considered the prospect of the downside scenarios stated above. The Directors undertook reverse stress testing to confirm the resilience of the covenants, including a significant reduction in rental income and 75% of tenants vacating on break clauses and 85% vacating on lease expiry. Given the two leisure schemes have had covenant issues in the past 12 months, two scenarios were modelled to assess the impact on the covenants, especially ICR. We considered the credit rating and financial position of key tenants as part of the exercise and the potential impact they could have on the loan covenants. We stress tested a 25% reduction in rental income but assumed our largest tenants at each scheme would continue to pay under their payment plans. We also stress tested if the largest tenant did not pay rent for 12 months and other tenants paid their rent and what impact this would have. The resulting covenant forecast reduces the ICR headroom but the Directors' forecasts continue to show sufficient headroom to meet the loan covenants.

We have significant headroom on our LTV covenants tests, meaning if values fell 20% we would only need £3.5m to cure any breaches across the debt portfolio. The Lloyds facility has the lowest headroom of 7.6%, which means the value would need to fall by £0.9m. Under the downside scenario, we have modelled a disposal of the assets within the Santander and Lloyds facilities to repay the bank. The debt is due to be repaid within the viability period though outside the going concern period. The Directors' note that excess capital would be released into the Group working capital as the current asset values are 96% higher than the related debt of £32.0m. This was based on both facilities maturing within the viability period and a refinance from both banks not forthcoming.

Should we breach any of our loan covenants, our working capital model provides evidence that the Group has sufficient capital to cure any loan breach without lender support through covenant waivers. The Group can also access additional capital through liquidating various assets which are not secured to lenders though this remedy is not required in the stress test sensitivities undertaken.

The material uncertainty related to property values has been removed from valuers in this valuation period. This gives the Board reasonable comfort that there will not be a significant short-term outward yield shift which will adversely affect property valuations. However, if the economy does not respond positively as we come out of lockdown, adverse market sentiment could have an impact on market values.

GOING CONCERN STATEMENT

Based on the analysis undertaken of the reasonable downside scenarios and the subsequent sensitivity analysis and stress testing, the Group has sufficient liquidity to meet its ongoing liabilities that fall due over the assessment period. Great consideration has been given to the impact on our liquidity, loan covenants and the mitigating actions available to the Group to ensure that the Company has adequate resources to continue in operational existence for a period of at least 12 months. Given the market information available, the Directors are not aware of any material uncertainty that exists that may cast doubt upon the Group'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.

VIABILITY STATEMENT

In accordance with provision 31 of the UK Corporate Governance Code and taking into consideration the continued impact of Covid-19, the Directors have assessed the prospects of the Group and future viability over a three-year period from the year end, 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 on the Group of the Covid-19 pandemic and the mitigation strategies used to contain the pandemic including the use of restrictions, the success of the vaccination programme and resulting impact on the economies in which the Group operates and our tenants' ability to operate and meet their rental obligations.

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

· The Group's long-term strategy.

· 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.

ASSESSMENT OF 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:

· The Group's working capital model, detailed budgets and cash flows consist of a rolling three-year forecast.

· It reflects the short cycle nature of the Group's developments and asset management initiatives.

· This is the period in which the investment team assesses individual asset performance.

· Office refurbishments completed to date have taken less than 12 months.

· The Group's weighted average debt maturity at 31 March 2021 was 2.6 years.

· The Group's WAULT at 31 March 2021 was 4.8 years.

STRESS TESTS & DOWNSIDE

The Directors have undertaken a robust scenario assessment of the principal risks which could threaten the viability or the operational existence of the Group. As part of the downside modelling, we reverse stress-tested our working capital model and cash flows to understand the impact of our principal risks including the continuation of Covid-19 affecting the ability of our tenants to pay rent, meet our debt covenants, execute our sales strategy at our completed development and refinance our debt facilities.

The Group's downside forecasts and projections took into consideration a) reasonable potential reduction in rent collection from tenants with increased number of tenants vacating at lease break and expiry; b) a reduction in forecasted residential sales at our completed developments; c) reverse stress testing of the Group's debt facilities and liquidity headroom; and d) our ability to refinance our Santander and Lloyds facilities during the viability period.

The debt covenants were reverse stress-tested beyond the 12-month going concern period to allow for changes to banking covenants over the three-year viability period based on the scenarios above. If there was an economic downturn, ICR, DSC and LTV covenants could come under pressure. If covenant waivers were not obtained for a covenant breach, we would utilise cure rights and use additional liquidity if available. The Directors have considered further actions that could be taken to mitigate any negative cash flow impact and ensure additional liquidity. The Directors have assumed we would be unable to refinance the Santander and Lloyds facilities due to mature within the viability period. We would therefore dispose of the assets modelled at a 20% discount, repay the bank debt which would release substantial capital into the Group to help mitigate against other downside scenario impacts. As a result, the Company will continue to operate in accordance with its existing bank covenants with a smaller property portfolio.

Confirmation of Viability

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.

01(NEW RISK) Covid-19 / Future Pandemics

Risk description

The Covid-19 pandemic has created economic disruption and continued uncertainty, which could have a prolonged impact on collecting rental income and property valuations.

The acceleration of recent trends, changing occupier needs and the impact of Covid-19 on our tenants' businesses will affect our ability to retain tenants and let our vacant space, and may require further investment and capital expenditure into the portfolio.

Mitigation

· Ability to mobilise quickly and proactively to any new outbreak.

· Can reduce or pause all but essential capital expenditure.

· Undertake regular risk reviews of each one of our tenants.

· Dispose of or charge assets in order to increase the Group's cash reserves.

· Monitor market trends and the impact on the sectors where we have significant holdings.

Progress 2020/2021

· 95% rent collected over the 12 months ending 31 March 2021.

· Stress tested our budgets and cashflows and updated our scenario modelling to include the potential impact of the pandemic.

· Hudson Quarter development re-programmed to manage supply chain issues and labour delays.

· Capital expenditure projects recommencing in light of cashflows available and sufficient working capital.

· Identified a significant number of lower performing assets with reduced growth prospects which will inform our longer-term disposal strategy.

02 Development

Risk description

Overexposure to development could put pressure on cash flow and debt finance and must be managed in the context of the REIT regime.

Delays with construction, increased costs, adverse planning judgements and failure of a major contractor may all impact our underlying income.

Health, safety and environmental events that may cause injury to persons and damage or disruption to development operations.

Mitigation

· The Group's Capital Risk Management Policy limits development expenditure to <25% of Gross Asset Value.

· Core portfolio generates sustainable cash flows.

· All developments require Board approval and are modelled and financed appropriately to minimise risk and maximise return.

· A competitive tender process is undertaken, and contractors are assessed for financial stability. Design and build contracts are utilised where possible.

· Project managers are utilised to closely monitor the design, construction and delivery of the project in a safe and secure manner.

Progress 2020/2021

· Completed £33.6m construction contract in respect of Hudson Quarter.

· Principal contractor appointed with proven track record and strong safety credentials.

· Development pipeline continuously assessed to ensure exposure is limited at any one time.

· Working capital utilised where sales milestones were not achieved.

03 Tenant

Risk description

Exposure to tenant administration and poor tenant covenants could result in lower income, liability for voids and management time spent chasing arrears.

Changing tenant demand in relation to new technologies, energy efficiency and new trends and practices.

Mitigation

· Our strategy to invest across different sectors reduces our exposure to an individual sector or tenant.

· We maintain close relationships with our tenants, understanding their needs and supporting them throughout their business cycle.

· Management meet with managing agents to review rent collection and arrears on a regular basis.

· We actively manage our properties to improve security of income and limit exposure to voids.

Progress 2020/2021

· Total number of tenants across portfolio: 182 making up contractual rent roll of £16.4m.

· Loss of income from tenant administrations and CVAs totals £0.2m, which is 1.1% of portfolio contractual income.

· Portfolio weighted average lease length is 4.8 years providing reasonable longevity of income.

· Rent concessions have been agreed with those tenants who have needed the most support during the pandemic, usually in return for a lease extension.

04 Financing and Cash Flow

Risk description

Breach of debt covenants could trigger loan defaults and repayment of facilities putting pressure on surplus cash resources.

Bank of England monetary policy may result in interest rate rises and increased cost of borrowing. Financial regulatory changes under Basel III may increase the cost to borrowers.

Mitigation

· Close relationships with key lenders, ensuring transparency when it comes to monitoring the properties secured by debt.

· Assets are purchased that generate surplus cash and significant headroom on ICR and LTV loan covenants.

· Gearing is maintained at a conservative level and hedging utilised to reduce exposure to interest rate volatility.

· We maintain adequate cash balances and where necessary we will defer capital expenditure projects in order to reduce loan balances if LTV covenants come under pressure.

Progress 2020/2021

· Charged Bank House to the NatWest RCF, providing £5m additional capacity.

· The Group's weighted average debt maturity is currently 2.6 years.

· The Group's LTV has increased from 38% to 42% during the last 12 months but is expected to return to the Company's target range of 30-40% in the next financial year as the York development is sold down and debt repaid.

· Repaid £4.1m of Scottish Widows loan against the Broad Street Plaza, Halifax leisure scheme.

05 Economic and Political

Risk description

Uncertainty from Covid-19 and other world events (including Brexit) could impact economic growth, weakening demand of our tenants and the profitability of their businesses.

Decisions made by government and local councils can have a significant impact on our ability to extract value from our properties.

Mitigation

· Monitoring of economic and property industry research by Executive team and review at Board meetings, adjusting strategy accordingly.

· Our activities are focused solely on the UK regions with no foreign exchange exposure.

· We undertake sensitivity modelling against a downturn in economic outlook to test the robustness of our financial position.

· Use of consultants and experts when considering planning and development work.

· Review tenant profile and sector diversification.

Progress 2020/2021

· Our budgets reflect the current trading conditions, and the Board continues to closely monitor the ongoing pandemic situation.

· The trade agreement with the EU has alleviated some of the concerns associated with Brexit.

· Underlying government support for regional development initiatives bodes well for the markets in which we operate.

06 Accounting, tax, legal and regulatory

Risk description

Non-compliance as a result of changes to accounting standards, and the legal and regulatory requirements for a public real estate company.

Non-compliance with REIT regime leading to loss of REIT status or other changes to the Company's tax status and/or incorrect application of new tax rules.

Mitigation

· Key advisors including Auditors, Solicitors and Brokers are engaged on key regulatory, accounting and tax issues.

· REIT regime compliance is regularly monitored by the Board and the Executive team will consider the impact on the regime as part of their decision making.

Progress 2020/2021

· Greater level of scrutiny from the Board covering corporate governance and reporting requirements of a premium listed company.

· Business forecasts and strategy allow for changes to corporation tax rates and interest deductibility rules.

· Following conversion to a REIT on 1 August 2019 the Company has complied with the REIT regime.

07 Operational

Risk description

Business disruption as a result of physical damage to buildings, IT systems failure, cybercrime, extreme weather occurrences, or other environmental events, including those arising from climate change.

Without adequate systems and controls, our exposure to operational risk and business disruption is increased.

Mitigation

· Our buildings are covered by comprehensive buildings and loss of rent insurance.

· Antivirus software and firewalls protect IT systems and data is regularly backed up. Cyber insurance is in place.

· Tight-knit team with systems in place to ensure Executive team have shared responsibility across all major decisions.

· Segregation of duties applied to payments processing and bank authorisations.

· Climate related risks are considered as part of our ongoing environmental management.

Progress 2020/2021

· Business interruption processes well tested following the move to working from home.

· Continued to keep under review the internal control environment and ensure good governance practices are adopted throughout the business.

· Cyber security arrangements kept under review to ensure we are deploying the most up-to-date technologies.

· Increased our focus on environmental management, which forms a key part of the work of the ESG Committee.

08 People

Risk description

The Group's strategy and core business operations are led by a small number of individuals.

An inability to attract or retain staff and Directors, suppliers and/or managing agents with the right skills and experience may result in significant underperformance or impact the overall effectiveness of our operations.

Mitigation

· Key man insurance cover in place for Executive Directors.

· Succession planning is a regular agenda item for the Nominations Committee.

· We engage with staff regularly and encourage a positive working environment.

· We maintain an attractive reward and benefits package and undertake regular performance reviews.

· General policy of retaining incumbent managing agents on new property acquisitions to avoid awkward transitions and potential loss of income.

Progress 2020/2021

· Headcount stabilised with sufficient cover if any key personnel are unavailable.

· Workforce Advisory Panel continues to enhance employee engagement and ensure the Board understands the views of the whole workforce.

· The health, safety and wellbeing of our staff has been a priority in our response to the pandemic. We have supported employees as they worked away from the office and put in place processes for a safe and orderly return.

09 portfolio

Risk description

Decreases in portfolio valuation, volatile rental values and general underperformance of assets through inappropriate investment strategies, failure to implement asset business plans and failure to respond to climate change will adversely impact profitability, our ability to attract new tenants and may render assets obsolete.

Mitigation

· Diversification of portfolio minimising exposure to any one geography or sector with no exposure to London.

· All major investment decisions require Board approval.

· Experienced management team with vast experience, networks and use of advisors to support the assessment of investment opportunities.

· Sustainability and ESG considerations are embedded within asset management business plans.

· Independent valuations are undertaken for all assets at the year end and half-year end.

· Property returns are benchmarked against MSCI IPD index and performance against the benchmark is reviewed formally at the year end and half-year end.

Progress 2020/2021

· We have a balanced portfolio across a range of geographical areas outside of London.

· No single asset comprises more than 10% of the portfolio's value.

· Valuations are down on a like-for-like basis.

· New ESG strategy seeks to further embed ESG considerations within the Group's business with a clear set of process improvements.

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 adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union, 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 adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union, 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 adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and Article 4 of the IAS Regulation, 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

Nicola Grinham

Company Secretary

7 June 2021

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2021

	Note	2021 £'000	2020 £'000
Rental and other income	1	17,316	21,147
Property operating expenses	3b	(1,500)	(2,392)
Movement in expected credit loss	13	(949)	-
Net rental income		14,867	18,755
Dividend income from listed equity investments		72	105
Administrative expenses	3c	(4,347)	(4,284)
Operating profit before gains and losses on property assets, listed equity investments and cost of acquisitions		10,592	14,576
Profit on disposal of investment properties		905	138
Loss on revaluation of investment property portfolio	9	(14,750)	(17,154)
Reversal of impairment/(impairment)	10	763	(763)
Loss on disposal of assets held for sale		-	(269)
Gain/(loss) on revaluation of listed equity investments	11	709	(425)
Operating loss		(1,781)	(3,897)
Finance income		1	18
Finance expense	2	(3,347)	(3,845)
Debt termination costs		(140)	(501)
Changes in fair value of interest rate derivatives		(265)	(846)
Loss before taxation		(5,532)	(9,071)
Taxation	5	(1)	3,632
Loss after taxation for the year and total comprehensive income attributable to owners of the Parent		(5,533)	(5,439)
Earnings per ordinary share
Basic	6	(12.0p)	(11.8p)
Diluted	6	(12.0p)	(11.8p)

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 2021

	Note	2021 £'000	2020 £'000
Non-current assets
Investment properties	9	235,854	248,699
Listed equity investments at fair value	11	3,249	2,540
Right of use asset	12	165	313
Property, plant and equipment	12	71	101
		239,339	251,653
Current assets
Trading property	10	42,719	27,557
Trade and other receivables	13	9,764	9,323
Cash and cash equivalents	14	9,417	14,919
		61,900	51,799
Total assets		301,239	303,452
Current liabilities
Trade and other payables	15	(12,908)	(14,053)
Borrowings	17	(21,853)	(1,836)
Lease liabilities for right of use asset	20	(154)	(164)
Creditors: amounts falling due within one year		(34,915)	(16,053)
Net current assets		26, 985	35,746
Non-current liabilities
Borrowings	17	(105,432)	(117,520)
Deferred tax liability	5	(228)	(228)
Lease liabilities for investment properties	20	(1,804)	(1,806)
Lease liabilities for right of use asset	20	-	(154)
Derivative financial instruments	16	(1,029)	(1,343)
Net assets		157,831	166,348
Equity
Called up share capital	21	4,639	4,639
Share premium account		-	125,019
Treasury shares		(1,288)	(1,349)
Merger reserve		3,503	3,503
Capital redemption reserve		340	340
Capital reduction reserve		125,019	-
Retained earnings		25,618	34,196
Equity - attributable to the owners of the Parent		157,831	166,348
Basic NAV per ordinary share	7	343p	361p
Diluted NAV per ordinary share	7	342p	361p

These financial statements were approved by the Board of Directors and authorised for issue on 7 June 2021 and are signed on its behalf by:

Stephen Silvester  Neil Sinclair

Chief Financial Officer    Chief Executive

Consolidated Statement of Changes in Equity

for the year ended 31 March 2021

	Note	Share Capital £'000	Share Premium £'000	Treasury Share Reserve £'000	Other Reserves £'000	Capital Reduction Reserve £'000	Retained Earnings £'000	Total Equity £'000
At 31 March 2019		4,639	125,019	(1,771)	3,843	-	48,593	180,323
Total comprehensive income for the year		-	-	-	-	-	(5,439)	(5,439)
Share-based payments	22	-	-	-	-	-	130	130
Exercise of share options	22	-	-	422	-	-	(422)	-
Issue of deferred bonus share options		-	-	-	-	-	77	77
Dividends paid	8	-	-	-	-	-	(8,743)	(8,743)
At 31 March 2020		4,639	125,019	(1,349)	3,843	-	34,196	166,348
Total comprehensive income for the year		-	-	-	-	-	(5,533)	(5,533)
Share-based payments	22	-	-	-	-	-	300	300
Exercise of share options	22	-	-	61	-	-	(61)	-
Issue of deferred bonus share options		-	-	-	-	-	171	171
Dividends paid	8	-	-	-	-	-	(3,455)	(3,455)
Transfer to capital reduction reserve account		-	(125,019)	-	-	125,019	-	-
At 31 March 2021		4,639	-	(1,288)	3,843	125,019	25,618	157,831

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 shares represents the consideration paid for shares bought back from the market.

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.

During the year, the Group made an order to reduce the Group's share premium account and the crediting of the relevant sum to distributable profits. The Court order approving the Share Premium Reduction and a statement of capital were registered with the Registrar of Companies on 29 September 2020.  The Share Premium Reduction is now effective, and the amount that had been standing to the credit of the Company's share premium account (£125,018,886) has been credited to the Company's distributable profits and sits in the capital reduction reserve.

Consolidated Statement of Cash Flows

for the year ended 31 March 2021

	Note	2021 £'000	2020 £'000
Operating activities
Loss before taxation		(5,532)	(9,071)
Finance income		(1)	(18)
Finance expense	2	3,347	3,845
Changes in fair value of interest rate derivatives		265	846
Loss on revaluation of investment property portfolio	9	14,750	17,154
Profit on disposal of investment properties	9	(905)	(138)
Loss on disposal of assets held for sale		-	269
Reversal/(impairment) of trading properties	10	(763)	763
(Gain)/loss on revaluation of listed equity investments	11	(709)	425
Debt termination costs		140	501
Depreciation of tangible fixed assets	12	46	32
Amortisation of right of use asset	12	148	148
Share-based payments	22	300	130
Decrease/(increase) in receivables		491	(481)
(Decrease)/increase in payables		(291)	1,341
Net cash generated from operations		11,286	15,746
Interest received		1	18
Interest and other finance charges paid		(3,575)	(3,680)
Corporation tax paid in respect of operating activities		(1,174)	(2,173)
Net cash flows from operating activities		6,538	9,911
Investing activities
Capital expenditure on refurbishment of investment property	9	(2,425)	(5,667)
Capital expenditure on developments	9	(4,131)	(3,925)
Capital expenditure on trading property	9	(14,646)	(13,915)
Proceeds from disposal of investment property		5,290	2,708
Proceeds from assets held for sale		-	11,487
Amounts transferred from/(to) restricted cash deposits	14	1,020	(525)
Purchase of non-current asset - equity investment	11	-	(329)
Dividends from listed equity investments		72	105
Purchase of property, plant and equipment	12	(16)	(36)
Net cash flow used in investing activities		(14,836)	(10,097)
Financing activities
Bank loans repaid	19	(11,363)	(18,325)
Proceeds from new bank loans	19	18,916	19,736
Loan issue costs paid	19	(282)	(978)
Dividends paid	8	(3,455)	(8,743)
Net cash flow from financing activities		3,816	(8,310)
Net decrease in cash and cash equivalents		(4,482)	(8,496)
Cash and cash equivalents at beginning of the year		13,899	22,395
Cash and cash equivalents at the end of the year	14	9,417	13,899

Notes to the Consolidated Financial Statements

BASIS OF ACCOUNTING

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 4th Floor, 25 Bury Street, St James's, London, United Kingdom, SW1Y 6AL.

BASIS OF PREPARATION

The Group financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The financial information does not constitute the Group's financial statements for the years ended 31 March 2021 or 31 March 2020 but is derived from those financial statements.  Financial statements for the year ended 31 March 2020 have been delivered to the Registrar of Companies and those for the year ended 31 March 2021 will be delivered following the Company's Annual General Meeting.  The auditors' reports on both the 31 March 2021 and 31 March 2020 financial statements were unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006. The report for the year ended 31 March 2021 did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report. The report for the year ended 31 March 2020 did include an emphasis of matter paragraph, drawing attention to the material valuation uncertainty statement made by the valuers which was disclosed in the Properties Estimates note. The opinion was not modified in respect of this matter.

GOING CONCERN

The Directors have made an assessment of the Group's ability to continue as a going concern which included the current uncertainties created by Covid-19, coupled with the Group's cash resources, borrowing facilities, rental income, acquisitions and 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 development, performance and position are set out in the Strategic Report in the Annual Report and Accounts. 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 2021 the Group had £9.4m of cash and cash equivalents, of which £9.4m was unrestricted cash, a low gearing level of 42% and a fair value property portfolio of £282.8m. The Directors have reviewed the forecasts for the Group taking into account the impact of Covid-19 on trading over the twelve months from the date of signing this annual report. The forecasts have been assessed against a range of possible downside outcomes incorporating significantly lower levels of income in line with the possible ongoing effects of the pandemic. See Going Concern and Viability 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 2021 did not have a material impact on the financial statements and were not adopted.

New standards issued but not yet effective

IFRS Phase 2 amendments for interest rate benchmark (IBOR) reform provide a practical expedient to account for changes in the basis for determining contractual cash flows of financial assets and financial liabilities as a result of IBOR reform. Under the practical expedient, qualifying entities will account for these changes by updating the effective interest rate using the guidance in paragraph B5.4.5 of IFRS 9 without the recognition of an immediate gain or loss. This practical expedient applies only to such a change and only to the extent that it is necessary as a direct consequence of interest rate benchmark reform, and the new basis is economically equivalent to the previous basis. This is not expected to be material.

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.

SIGNIFICANT ACCOUNTING POLICIES

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 (including special purpose entities) over which the Company has control. The Company controls an entity when the following three elements are present: 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 the 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.

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 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 contracts. Such transactions are recognised when any conditions are 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.

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

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.

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.

Deferred income

Where invoices to customers have been raised which relate to a period after the Group year end, being 31 March 2021, the Group will recognise deferred income for the difference between revenue recognised and amounts billed for that contract.

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.

Borrowing costs directly attributable to development properties are capitalised and not recognised in profit or loss in the Consolidated Statement of Comprehensive Income. The capitalisation of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. Interest is also capitalised on the purchase cost of a site of property acquired specifically for redevelopment, but only where activities necessary to prepare the asset for redevelopment are in progress.

When the Group refinances a loan facility, the Group considers whether the new terms are substantially different from a quantitative and a qualitative perspective. From a quantitative perspective, the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. Modifications that would be considered substantial from a qualitative perspective are those that result in a significant value transfer and/or a new underwriting/pricing assessment of the financial instrument.

If it is deemed to be a substantial modification of terms, this is accounted for as an extinguishment, and any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.

Where the modification is not considered to be substantial, the loan continues to be measured at amortised cost using the original effective interest rate. Where the modification is substantial, the new effective interest rate is used,

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.

Listed equity investments

Listed equity investments are classified at fair value through profit and loss. Listed equity investments are subsequently measured using level 1 inputs, the quoted market price, and all fair value gains or losses in respect of those assets are recognised in profit or loss in the Consolidated Statement of Comprehensive Income.

Fair value hierarchy

• Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

• Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

• Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, 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 construction.

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.

Investment properties under construction are initially recognised at cost (including any associated costs), which reflects the Group's investment in the assets. The Group undertakes certain works including demolition, remediation and other site preparatory works to bring a site to the condition ready for construction of an asset. Subsequently, the assets are remeasured to fair value at each reporting date. The fair value of investment properties under construction is estimated as the fair value of the completed asset less any costs still payable in order to complete, and an appropriate developer's margin.

Assets held for sale

Assets are classified as held for sale when:

• They are available for immediate sale;

• Management are committed to a plan to sell;

• It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;

• An active programme to locate a buyer has been initiated;

• The asset is being marketed at a reasonable price in relation to its fair value; and

• A sale is expected to complete within 12 months from the date of classification.

Investment properties classified as held for sale are measured at fair value in accordance with the measurement criteria of IAS 40.

Assets held for sale are derecognised when significant risks and rewards attached to the asset have transferred from the Group which is on completion of contracts or when there are changes to a plan of sales.

Transfers between investment properties and trading properties

When the Group begins to redevelop an existing investment property for continued future use as an investment property, the property continues to be held as an investment property. When the Group begins to redevelop an existing investment property with a view to sell, the property is transferred to trading properties and held as a current asset. The property is remeasured to fair value as at the date of the transfer with any gain or loss being taken to the Consolidated Statement of Comprehensive Income. The remeasured amount becomes the deemed initial cost of the trading property.

Trading properties

Trading property is being developed for sale or being 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.

Right of use asset

Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

• lease payments made at or before commencement of the lease;

• initial direct costs incurred; and

• the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset.

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right of use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. Lease liabilities are remeasured when there is a change in future lease payments arising from a change in an index or rate or when there is a change in the assessment of the term of any lease.

The rate of amortisation generally applicable is:

Right of use asset 33% straight-line

Lease liabilities for investment properties

Lease obligations include lease obligations relating to investment properties and lease obligations relating to right of use assets.

Lease obligations relating to investment properties are capitalised at the lease's commencement and are measured at the present value of the remaining lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in liabilities. The finance charges are charged to the Consolidated Statement of Comprehensive Income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Investment properties classified as held under lease liabilities are subsequently carried at their fair value.

Lease liabilities for right of use assets

Lease obligations relating to right of use assets are measured at the present value of the contractual payments due to the lessor over the lease term, discounted at the Group's incremental borrowing rate. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

On initial recognition, the carrying value of the lease liability also includes:

• amounts expected to be payable under any residual value guarantee;

• the exercise price of any purchase option granted in favour of the Group if it is reasonable certain to assess that option;

• any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

Property, plant and equipment and depreciation

Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. Depreciation is calculated to write down the cost less estimated residual value of all tangible fixed assets by equal annual instalments over their expected useful economic lives. The rates generally applicable are:

Fixtures, fittings and equipment 25% - 33% straight-line

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.

The Government announced in the summer 2015 Budget the reduction in the corporation tax rate from 20% main rate in the tax year 2016 to 19% with effect from 1 April 2017.

The Government announced a proposal in March 2021 for an increase in the corporation tax rate from 19% main rate in the tax year 2021 to 25% with effect from 1 April 2023. This is subject to the Finance Bill 2021 being enacted.

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.

Commitments and contingencies

Commitments and contingent liabilities are disclosed in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is probable. A contingent asset is recognised when the realisation of the income is virtually certain.

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 from the 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 preference share capital redeemed.

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

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

Properties

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 and assets held for sale are 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.

Expected credit loss model

The Group applies the IFRS 9 simplified approach to the expected credit loss model, using 12 months of historic rental payment information for tenants, and adjusting risk profile rates based on forward looking information. Covid-19 and the resulting economic and social disruption has brought unforeseen challenges to the UK and the wider global economy; therefore in general our overall risk profile is elevated.

Due to the restrictions arising from the Covid-19 pandemic there is an increased risk of certain tenants defaulting on their rents, particularly in those in the leisure and retail sectors. The impact of Covid-19 has given rise to higher estimated probabilities of default for some of our tenants, so the ECL provisions calculated at 31 March 2021 are higher than in previous periods (refer to note 13).

In arriving at our estimates, we have considered the tenants at higher risk, particularly in the leisure and retail sectors, those in administration or CVA, and those tenants who have been impacted financially by the lockdown who are not necessarily in high-risk sectors.

Estimates and Judgements

Share-based payments

Equity-settled share awards are recognised as an expense based on their fair value at date of grant. The fair value of equity-settled share options is estimated through the use of option valuation models, which require inputs such as the risk-free interest rate, expected dividends, expected volatility and the expected option life, and is expensed over the vesting period. Some of the inputs used are not market observable and are based on estimates derived from available data. The models utilised are intended to value options traded in active markets. The share options issued by the Group, however, have a number of features that make them incomparable to such traded options (see note 22 for further details). The variables used to measure the fair value of share-based payments could have a significant impact on that valuation, and the determination of these variables requires a significant amount of professional judgement. A minor change in a variable which requires professional judgement, such as volatility or expected life of an instrument, could have a quantitatively material impact on the fair value of the share-based payments granted, and therefore will also result in the recognition of a higher or lower expense in the Consolidated Statement of Comprehensive Income.

Judgement is also exercised in assessing the number of options subject to non-market vesting conditions that will vest.

1. RENTAL AND OTHER INCOME

The chief operating decision maker ("CODM") takes the form of the three Executive Directors (the Group's Executive Committee). The Group's Executive Committee are 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 Group's property portfolio includes investment properties located throughout England, predominantly regional investments outside London and comprises a diverse portfolio of commercial buildings. The Directors consider that these properties have similar economic characteristics. Therefore, these individual properties have been aggregated into a single operating segment. In the view of the Directors, there is one reportable segment.

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	2021 £'000	2020 £'000
Rents received from investment properties	17,150	17,717
Dilapidations and other property related income	56	439
Priory House surrender premium	-	2,850
Insurance commission	110	141
Total Revenue	17,316	21,147

No single tenant accounts for more than 10% of the Group's total rents received from investment properties.

2. INTEREST PAYABLE AND SIMILAR CHARGES

	2021 £'000	2020 £'000
Interest on bank loans	2,898	3,351
Amortisation of loan arrangement fees	300	358
Interest on lease liabilities	105	123
Other finance charges	44	13
	3,347	3,845

3. PROFIT FOR THE YEAR

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

	2021 £'000	2020 £'000
Depreciation of tangible fixed assets and amortisation of right of use assets:	194	180
Auditor's remuneration:
Fees payable to the Auditor for the audit of the Group's annual accounts	143	124
Fees payable to the Auditor for the audit of the subsidiaries' annual accounts	27	26
Additional fees payable to the Auditor in respect of the 2020 audit	23	-
Fees payable to the Auditor and its related entities for other services:
Audit related assurance services	10	9
	203	159

b) The Group's property operating expenses comprise the following:

	2021 £'000	2020 £'000
Void, investment and development property costs	1,275	2,218
Legal, lettings and consultancy costs	225	174
	1,500	2,392

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

	2021 £'000	2020 £'000
Staff costs	2,642	2,593
Share-based payments	300	130
Accounting and audit fees	297	267
Other overheads	244	273
Stock Exchange costs	208	207
Amortisation of right of use asset	148	148
Rent, rates and other office costs	125	134
PR and marketing costs	118	193
Consultancy and recruitment fees	110	164
Legal and professional fees	109	143
Depreciation of tangible fixed assets	46	32
	4,347	4,284

d) EPRA cost ratios are calculated as follows:

	2021 £'000	2020 £'000
Gross property income	17,316	21,147
Administrative expenses	4,347	4,284
Property operating expenses	1,500	2,392
Movement in expected credit loss	949
EPRA costs (including property operating expenses)	6,796	6,676
EPRA Cost Ratio (including property operating expenses)	39.2%	31.6%
Less property operating expenses	(1,500)	(2,392)
EPRA costs (excluding property operating expenses)	5,296	4,284
EPRA Cost Ratio (excluding property operating expenses)	30.6%	20.3%

4. EMPLOYEES AND DIRECTORS' REMUNERATION

Staff costs during the period were as follows:

	2021 £'000	2020 £'000
Non-Executive Directors' fees	196	188
Wages and salaries	2,119	2,054
Pensions	102	91
Social security costs	225	260
	2,642	2,593
Share-based payments	300	130
	2,942	2,723

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

	2021 Number	2020 Number
Directors	7	8
Senior management and other employees	9	9
	16	17

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

	2021 £'000	2020 £'000
Emoluments for qualifying services	1,218	1,423
Social security costs	167	196
Pension	36	34
	1,421	1,653
Share-based payments	241	100
	1,662	1,753

5. TAXATION

	2021 £'000	2020 £'000
Current income tax charge	-	198
Capital gains charge in period	-	1,744
Tax under/(overprovided) in prior year	1	(222)
Deferred tax	-	(5,352)
Tax charge/(credit)	1	(3,632)

	2021 £'000	2020 £'000
Loss on ordinary activities before tax	(5,532)	(9,071)
Based on loss for the period: Theoretical Tax at 19% (2020: 19%)	(1,051)	(1,724)
Effect of:
Net expenses not deductible for tax purposes	(32)	28
Chargeable gain in excess of profit or loss on investment property	-	197
Tax under/(overprovided) in prior years	1	(222)
Movement on sale and revaluation not recognised through deferred tax	(145)	(371)
Deferred tax released to profit and loss on REIT conversion	-	(3,699)
REIT exempt income	(1,622)	(993)
Non-taxable items	2,850	3,152
Tax charge/(credit) for the period	1	(3,632)

As a result of the Company's conversion to a REIT on 1 August 2019, the Group is no longer required to pay UK corporation tax in respect of property rental income and capital gains relating to its property rental business.

Deferred taxes relate to the following:

	2021 £'000	2020 £'000
Deferred tax liability - brought forward	(228)	(5,580)
Deferred tax release to profit and loss on REIT conversion	-	3,699
Deferred tax on fair value of investment property	-	1,653
Deferred tax liability - carried forward	(228)	(228)

	2021 £'000	2020 £'000
Investment property unrealised valuation gains	(228)	(228)
Deferred tax liability - carried forward	(228)	(228)

A deferred tax liability on the revaluation of investment properties to fair value has been provided totalling £228,000 (2020: £228,000) as once the availability of capital losses, indexation allowances and the 1982 valuations for certain properties have been taken into account, it is anticipated that capital gains tax would be payable if the properties were disposed of at their fair value. The deferred tax liability relates to investment properties transferred into trading stock, prior to the Group becoming a REIT. As at 31 March 2021 the Group had approximately £9,694,000 (2020: £6,848,000) 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 2015 sets the main rate of UK corporation tax at 20% with effect on 1 April 2015. The enactment of Finance (No. 2) Act 2015 and Finance Act 2016 reduces the main rate of corporation tax to 19% from April 2017. The deferred tax liability has been calculated on the basis of 19% due to the expectation that all properties are retained through April 2022. The Government announced a proposal in March 2021 for an increase in the corporation tax rate 19% main rate in the tax year 2021 to 25% with effect from 1 April 2023. This is subject to the Finance Bill 2021 being enacted and as such the rate of 25% has not been used currently.

6. EARNINGS PER SHARE

Basic earnings per share

Basic earnings per share and diluted earnings per share have been calculated on profit 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).

	2021 £'000	2020 £'000
Loss after tax attributable to ordinary shareholders for the year	(5,533)	(5,439)

	2021 No. of shares	2020 No. of shares
Weighted average number of shares for basic earnings per share	46,061,417	45,988,353
Dilutive effect of share options	-	-
Weighted average number of shares for diluted earnings per share	46,061,417	45,988,353
Earnings per ordinary share
Basic	(12.0p)	(11.8p)
Diluted	(12.0p)	(11.8p)

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, associated close-out costs, one-off finance termination costs, share-based payments and other one-off exceptional items. EPRA earnings is calculated on the basis of the basic number of shares in line with IFRS earnings as the dividends to which they give rise accrue to current shareholders. The EPRA diluted earnings per share also takes into account the dilution of share options and warrants if exercised. There are 84,934 options that are exercisable but these are not included in the earnings as these would be anti-dilutive.

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 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. The corporation tax charge (excluding deferred tax movements, being a non-cash expense) is deducted in order to calculate the adjusted earnings per share.

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

	2021 £'000	2020 £'000
Loss for the year	(5,533)	(5,439)
Adjustments:
Loss on revaluation of investment property portfolio	14,750	17,154
(Reversal)/impairment of trading properties	(763)	763
Profit on disposal of investment properties	(905)	(138)
Loss on disposal of assets held for sale	-	269
(Gain)/loss on revaluation of listed equity investments	(709)	425
Debt termination costs	140	501
Fair value loss on derivatives	265	846
Deferred tax relating to EPRA adjustments and capital gain charged	-	(3,608)
EPRA earnings for the year	7,245	10,773
Share-based payments	300	130
Priory House surrender premium	-	(2,850)
Adjusted profit after tax for the year	7,545	8,053
Tax excluding deferred tax on EPRA adjustments and capital gain charged	1	(25)
Adjusted profit before tax for the year	7,546	8,028
EPRA and adjusted earnings per ordinary share
Weighted average number of shares for basic and diluted earnings per share	46,061,417	45,988,353
EPRA Basic	15.7p	23.4p
EPRA Diluted	15.7p	23.4p
Adjusted EPS	16.4p	17.5p

7. NET ASSET VALUE PER SHARE

The Group has adopted the new EPRA NAV measures which came into effect for accounting periods starting 1 January 2020. EPRA issued new best practice recommendations (BPR) for financial guidelines on its definitions of NAV measures. The new 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 has adopted these new guidelines and applies them in the 31 March 2021 Annual Report

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 2021

	EPRA NTA £'000	EPRA NRV £'000	ERPA NDV £'000
Net assets attributable to shareholders	157,831	157,831	157,831
Include:
Fair value adjustment of trading properties	2,247	2,247	2,247
Real estate transfer tax	-	18,365	-
Fair value of fixed interest rate debt	-	-	(59)
Exclude:
Fair value of derivatives	1,029	1,029	-
Deferred tax on latent capital gains and capital allowances	228	228	-
EPRA NAV	161,335	179,700	160,019
Number of ordinary shares issued for diluted and EPRA net assets per share	46,154,624	46,154,624	46,154,624
EPRA NAV per share	350p	389p	347p

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

• Fair value adjustment of trading properties: Difference between development property held on the balance sheet at cost and fair value of that development property

• 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.

• Fair value of derivatives: Exclude fair value financial instruments that are used for hedging purposes where the company has the intention of keeping the hedge position until the end of the contractual duration.

• 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 2020

	EPRA NTA £'000	EPRA NRV £'000	EPRA NDV £'000
Net assets attributable to shareholders	166,348	166,348	166,348
Include:
Fair value adjustment of trading properties	-	-	-
Real estate transfer tax	-	15,771	-
Fair value of fixed interest rate debt	-	-	(191)
Exclude:
Fair value of derivatives	1,343	1,343	-
Deferred tax on latent capital gains and capital allowances	228	228	-
EPRA NAV	167,919	183,690	166,157
Number of ordinary shares issued for diluted and EPRA net assets per share	46,068,616	46,068,616	46,068,616
EPRA NAV per share	364p	398p	360p

	2021 No of shares	2020 No of shares
Number of ordinary shares issued at the end of the year (excluding treasury shares)	46,069,690	46,036,508
Dilutive effect of share options	84,934	32,108
Number of ordinary shares issued for diluted and EPRA net assets per share	46,154,624	46,068,616
Net assets per ordinary share
Basic	343p	361p
Diluted	342p	361p
EPRA NTA	350p	364p

8. DIVIDENDS

	Payment date	Dividend per share	2021 £'000	2020 £'000
2021
Interim dividend	31 December 2020	2.50	1,152	-
Interim dividend	16 October 2020	2.50	1,152	-
		5.00	2,304	-
2020
Final dividend	14 August 2020	2.50	1,151	-
Interim dividend	27 December 2019	4.75	-	2,189
Interim dividend	18 October 2019	4.75	-	2,189
		12.00	1,151	4,378
2019
Final dividend	13 July 2019	4.75	-	2,183
Interim dividend	12 April 2019	4.75	-	2,182
		9.50	-	4,365
Dividends reported in the Group Statement of Changes in Equity			3,455	8,743

Proposed Dividends

	2021 £'000	2020 £'000
July 2021 final dividend in respect of year end 31 March 2021: 3.00p (2020 final dividend: 2.50p)	1,392	1,152
April 2021 interim dividend in respect of year end 31 March 2021: 2.50p (2020 interim dividend: 0.00p)	1,152	-
	2,544	1,152

Proposed dividends on ordinary shares are subject to approval at the Annual General Meeting and are not recognised as a liability as at 31 March 2021.

9. PROPERTY PORTFOLIO

	Freehold investment properties £'000	Leasehold investment properties £'000	Total investment properties £'000
At 1 April 2019	237,291	21,040	258,331
Additions - refurbishments	5,495	661	6,156
Capital expenditure on assets under construction	3,936	-	3,936
Loss on revaluation of investment properties	(13,756)	(3,398)	(17,154)
Disposals	(2,570)	-	(2,570)
At 1 April 2020	230,396	18,303	248,699
Additions - refurbishments	2,273	(44)	2,229
Capital expenditure on assets under construction	4,061	-	4,061
Loss on revaluation of investment properties	(13,614)	(1,136)	(14,750)
Disposals	(3,975)	(410)	(4,385)
At 31 March 2021	219,141	16,713	235,854

	Standing investment properties £'000	Investment properties under construction £'000	Total investment properties £'000	Trading properties £'000	Assets held for sale £'000	Total property portfolio £'000
At 1 April 2019	254,209	4,122	258,331	14,367	11,756	284,454
Additions - refurbishments	6,156	-	6,156	-	-	6,156
Capital expenditure on developments	-	3,936	3,936	-	-	3,936
Additions - trading property	-	-	-	13,953	-	13,953
Loss on revaluation of properties	(16,868)	(286)	(17,154)	(763)	-	(17,917)
Disposals	(2,570)	-	(2,570)	-	(11,756)	(14,326)
At 1 April 2020	240,927	7,772	248,699	27,557	-	276,256
Additions - refurbishments	2,229	-	2,229	-	-	2,229
Capital expenditure on developments	-	4,061	4,061	-	-	4,061
Additions - trading property	-	-	-	14,399	-	14,399
(Loss)/gain on revaluation of properties	(14,867)	117	(14,750)	763	-	(13,987)
Disposals	(4,385)	-	(4,385)	-	-	(4,385)
At 31 March 2021	223,904	11,950	235,854	42,719	-	278,573

The property portfolio (other than assets held for sale) 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.

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 £905,000 (2020: £138,000) relating to investment properties disposed of during the year were recognised in profit or loss.

The Group is developing a large mixed-use scheme at Hudson Quarter, York. Part of the approved scheme consists of commercial units which the Group holds for leasing. As a result, the commercial element of the scheme is classified as investment properties under construction.

For investment properties under construction and trading properties, £859,543 (2020: £474,558) of borrowing costs have been capitalised in the year including 100% of the interest due on the development loan.

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:

	2021 £'000	2020 £'000
Cushman & Wakefield LLP (property portfolio)	282,820	277,770
Adjustment in respect of minimum payment under head leases	1,804	1,806
Less trading properties at lower of cost and net realisable value	(42,719)	(27,557)
Less lease incentive balance included in accrued income	(3,804)	(3,320)
Less fair value uplift on trading properties	(2,247)	-
Carrying value of investment properties	235,854	248,699

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 - investment properties

The valuation reports produced by 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.

The Executive Director 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 Committee, which considers it as part of its overall responsibilities.

The key 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;

• An appropriate yield; and

• For investment properties under construction: gross development value, estimated cost to complete and an appropriate developer's margin.

Valuation technique - standing investment properties

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.

31 March 2021	Office	Industrial	Significant unobservable inputs
			Leisure	Other	Total
Fair value of property portfolio	£116,280,000	£40,740,000	£35,455,000	£90,345,000	£282,820,000
Area (sq ft)	669,711	409,593	306,970	217,520	1,603,794
Gross Estimated Rental Value	£10,813,496	£2,881,140	£3,226,035	£3,642,711	£20,563,382
Net Initial Yield
Minimum	(5.1%)	1.4%	7.4%	4.4%	(5.1%)
Maximum	10.0%	7.9%	8.3%	18.5%	18.5%
Weighted average	5.4%	5.4%	7.8%	7.0%	5.6%
Reversionary Yield
Minimum	6.5%	5.1%	7.4%	4.5%	4.5%
Maximum	10.8%	7.9%	8.6%	24.3%	24.3%
Weighted average	8.1%	4.7%	7.9%	6.5%	7.3%
Equivalent Yield
Minimum	6.1%	5.2%	8.3%	5.0%	5.0%
Maximum	8.1%	7.4%	9.5%	14.1%	14.1%
Weighted average	7.8%	6.3%	9.2%	6.5%	7.6%

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

Negative net initial yields arise where properties are vacant or partially vacant and void costs exceed rental income.

31 March 2020			Significant unobservable inputs
	Office	Industrial	Leisure	Other	Total
Fair value of property portfolio	£128,495,000	£38,805,000	£37,850,000	£72,620,000	£277,770,000
Area (sq ft)	778,218	409,593	306,970	196,309	1,691,090
Gross Estimated Rental Value	£11,480,070	£2,795,890	£3,295,049	£3,047,761	£20,618,770
Net Initial Yield
Minimum	(4.6%)	1.3%	6.8%	(0.5%)	(4.6%)
Maximum	9.4%	8.3%	8.7%	30.7%	30.7%
Weighted average	5.4%	5.8%	7.7%	6.6%	6.0%
Reversionary Yield
Minimum	4.7%	5.6%	7.2%	4.5%	4.5%
Maximum	13.8%	8.1%	7.9%	34.5%	34.5%
Weighted average	8.1%	5.0%	7.5%	5.5%	6.6%
Equivalent Yield
Minimum	4.1%	5.4%	7.8%	4.3%	4.1%
Maximum	11.4%	7.8%	8.7%	14.2%	14.2%
Weighted average	7.7%	6.5%	8.6%	3.3%	7.1%

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: £46,000-£2,006,763 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 significant 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 2021	(10.87)	10.87	(11.29)	12.35
(Decrease)/increase in the fair value of investment properties as at 31 March 2020	(13.36)	13.36	(12.21)	8.48

Valuation technique: properties under construction

Development assets are valued using the gross development value of the asset less any costs still payable in order to complete, and an appropriate developer's margin.

10. TRADING PROPERTY

	Total £'000
At 1 April 2019	14,367
Costs capitalised	13,953
Impairment of trading properties	(763)
At 1 April 2020	27,557
Costs capitalised	14,399
Reversal of impairment of trading properties	763
At 31 March 2021	42,719

The Group is developing a large mixed-use scheme at Hudson Quarter, York. Part of the approved scheme consists of residential units which the Group holds for sale. As a result, the residential element of the scheme is classified as trading property.

11. LISTED EQUITY INVESTMENTS

	Total £'000
At 1 April 2019	2,636
Additions	329
Loss on revaluation of equity investment shown in Consolidated Statement of Comprehensive Income	(425)
At 1 April 2020	2,540
Gain on revaluation of equity investment shown in Consolidated Statement of Comprehensive Income	709
At 31 March 2021	3,249

12. PROPERTY, PLANT AND EQUIPMENT

	IT,  fixtures and fittings £'000	Right of use asset £'000
At 1 April 2019	222	-
Additions	36	461
At 1 April 2020	258	461
Additions	16	-
At 31 March 2021	274	461
Depreciation
At 1 April 2019	125	-
Provided during the year	32	148
At 1 April 2020	157	148
Provided during the year	46	148
At 31 March 2021	203	296
Net book value at 31 March 2021	71	165
Net book value at 31 March 2020	101	313

13. TRADE AND OTHER RECEIVABLES

	2021 £'000	2020 £'000
Current
Gross amounts receivable from tenants	4,115	2,963
Less: expected credit loss provision	(1,340)	(391)
Net amount receivable from tenants	2,775	2,572
Other taxes	143	625
Other debtors	2,461	2,378
Accrued income	3,804	3,320
Prepayments	581	428
	9,764	9,323

Accrued income amounting to £3,804,000 (2020: £3,320,000) 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 carrying value of trade and other receivables classified at amortised cost approximates fair value.

As at 31 March 2021 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	12%	3%	7%	69%
Gross carrying amount	2,364	168	45	1,538	4,115
Loss provision	278	5	3	1,054	1,340

Changes to credit risk management

The impact of Covid-19 has given rise to higher estimated probabilities of default for some of the Group's tenants. As a result, 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 42 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. The Group predominantly operates in the Office and Industrial sectors, which has largely remained unaffected by Covid-19. 42% of the ECL provision relates to tenants in the leisure and retail sectors, and 21% of the ECL provision relates to tenants in administration or CVA.

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. The Group has been in close contact with each tenant throughout the pandemic therefore the Group has information to assess each tenant on its own merit. The Group also considered factors such as the Government's plans for easing of lockdowns and the pace of the vaccine rollout, which will positively impact the Groups 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 £355,737.

The Group does not hold any material collateral as security.

As at 31 March 2020 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%	1%	100%	61%
Gross carrying amount	2,651	43	2	267	2,963
Loss provision	226	1	2	162	391

Movement in the expected credit loss provision was as follows:

	2021 £'000	2020 £'000
Brought forward	391	71
Receivable written off during the year as uncollectable	-	(4)
Provisions increased	949	324
	1,340	391

14. CASH AND CASH EQUIVALENTS

All of the Group's cash and cash equivalents at 31 March 2021 and 31 March 2020 are in sterling and held at floating interest rates.

	2021 £'000	2020 £'000
Cash and cash equivalents - unrestricted	9,417	13,899
Restricted cash	-	1,020
	9,417	14,919

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

Restricted cash is cash where there is a legal restriction to specify its type of use. This is typically where the Group has agreed to deposit cash with a lender with regards to top-ups received from vendors on completion funds, to be realised over time consistent with the loss of income on vacant units, and where the Group has agreed to deposit cash with a lender to provide additional security over loan facilities.

15. TRADE AND OTHER PAYABLES

	2021 £'000	2020 £'000
Trade payables	1,143	2,911
Corporation tax	-	1,173
Other taxes	2,100	912
Other payables	2,607	2,344
Deferred rental income	3,347	3,567
Accruals	3,711	3,146
	12,908	14,053

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

Included within other payables are deposits on pre sales of apartments at Hudson Quarter, York totalling £924k (2020: £600k). These amounts will be recognised as revenue when the development is completed and title is transferred to the buyer, which took place post year end on 20 April 2021.

16. DERIVATIVES

The Group adopts a policy of entering into derivative financial instruments with banks to provide an economic hedge to its interest rate risks and ensure its exposure to interest rate fluctuations is mitigated.

The contract rate is the fixed rate the Group is paying for its interest rate swaps.

The valuation rate is the variable LIBOR and bank base rate the banks are paying for the interest rate swaps. Details of the interest rate swaps the Group has entered can be found in the table below.

The valuations of all derivatives held by the Group are classified as Level 2 in the IFRS 13 fair value hierarchy as they are based on observable inputs. There have been no transfers between levels of the fair value hierarchy during the year.

Both derivatives mature in more than one year and so have been presented as non-current liabilities but £675,000 of the fair value is expected to unwind over the next 12 months

Further details on interest rate risks are included in note 26.

Bank	Notional principal	Expiry date	Contract rate %	Valuation rate %	2021 Fair value £'000	2020 Fair value £'000
Barclays Bank plc	34,347,900	25/01/2023	1.3420	0.1862	(717)	(909)
Santander plc	18,967,136	03/08/2022	1.3730	0.1326	(312)	(434)
	53,315,036				(1,029)	(1,343)

17. BORROWINGS

	2021 £'000	2020 £'000
Current liabilities
Bank loans	22,075	1,836
Unamortised lending costs	(222)	-
	21,853	1,836
Non-current liabilities
Bank loans	105,432	117,520
Total borrowings	127,285	119,356

	2021 £'000	2020 £'000
Non-current liabilities
Secured bank loans drawn	106,238	118,925
Unamortised lending costs	(806)	(1,405)
	105,432	117,520

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

	2021 £'000	2020 £'000
Within one year	22,075	1,836
From one to two years	32,813	6,792
From two to five years	65,750	100,589
After five years	7,675	11,544
	128,313	120,761

Facility and arrangement fees

As at 31 March 2021

Secured Borrowings	All in cost	Maturity date	Loan Balance £'000	Unamortised facility fees £'000	Facility drawn £'000
Santander Bank plc	3.55%	August 2022	25,142	(108)	25,250
Lloyds Bank plc	2.04%	March 2023	6,782	(63)	6,845
National Westminster Bank plc	2.19%	August 2024	28,291	(329)	28,620
Barclays	3.17%	June 2024	37,785	(191)	37,976
Barclays	3.34%	January 2022	20,136	(222)	20,358
Scottish Widows	2.90%	July 2026	9,149	(115)	9,264
			127,285	(1,028)	128,313

As at 31 March 2020

Secured Borrowings	All in cost	Maturity date	Loan Balance £'000	Unamortised facility fees £'000	Facility drawn £'000
Santander Bank plc	3.68%	August 2022	25,563	(187)	25,750
Lloyds Bank plc	2.55%	March 2023	6,748	(97)	6,845
National Westminster Bank plc	2.70%	August 2024	28,225	(395)	28,620
Barclays	3.18%	June 2024	40,611	(255)	40,866
Barclays	3.48%	October 2021	4,649	(307)	4,956
Scottish Widows	2.90%	July 2026	13,560	(164)	13,724
			119,356	(1,405)	120,761

Investment properties with a carrying value of £234,613,000 (2020: £232,023,000) and trading properties with a carrying value of £42,719,000 (2020: £27,557,000) are subject to a first charge to secure the Group's bank loans amounting to £128,313,000 (2020: £120,761,000).

The Group has unused loan facilities amounting to £13,320,000 (2020: £32,924,000). A facility fee is changed on £11,380,000 of these facilities at a rate of 1.05% p.a. and is payable quarterly. This facility is 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 £1,940,000 balance of the unused facilities relates to the Barclays development loan. This facility is secured on the Hudson Quarter, York development held by Palace Capital (Developments) Limited.

The Group constantly monitors its approach to managing interest rate risk. The Group has fixed £62,580,000 (2020: £67,915,000) of its debt in order to provide surety of its interest cost and to mitigate interest rate risk. The remaining debt in place at year end is subject to floating rate in order to take advantage of the historically low interest rate environment.

The Group has a loan with Scottish Widows for £9,264,000 (2020: £13,724,000) which is fully fixed at a rate of 2.9%.

The Group has a loan with Barclays Bank plc for £37,976,000 (2020: £40,866,000), of which £34,348,000 (2020: £34,848,000) is fixed using an interest rate swap (see note 16). The floating rate portion of the loan is charged at three-month LIBOR plus 1.95%.

The Group has a loan with Santander plc for £25,250,000 (2020: £25,750,000), of which £18,967,000 (2020: £19,343,000) is fixed using an interest rate swap (see note 16). The floating rate portion of the loan is charged at three-month LIBOR plus 2.5%.

The Group has a loan with Lloyds Bank plc for £6,845,000 (2020: £6,845,000) which is fully charged at floating rate of three-month LIBOR plus 1.95%.

The Group has a loan with National Westminster Bank plc for £28,620,000 (2020: £28,620,000) which is fully charged at floating rate of three-month LIBOR plus 2.1%.

The fair value of borrowings held at amortised cost at 31 March 2021 was £127.342,000 (2020: £119,328,000).

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 did not meet all of its financial covenants due to non-payment of rent and reduction in the fair value of properties, particularly those in the leisure sector. The financial covenants that were not met during the year were the Historical Interest Cover, Historical Debt Service Cover and Projected Debt Service Cover covenants. Covenant waivers were issued for these breaches during the year, and therefore the Group was in full compliance with all banking covenants at 31 March 2021.

18. GEARING AND LOAN TO VALUE RATIO

The calculation of gearing is based on the following calculations of net assets and net debt:

	2021 £'000	2020 £'000
EPRA net asset value (note 7)	161,335	167,919
Borrowings (net of unamortised issue costs)	127,285	119,356
Lease liabilities for investment properties	1,804	1,806
Cash and cash equivalents	(9,417)	(14,919)
Net debt	119,672	106,243
NAV gearing	74%	63%

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

	2021 £'000	2020 £'000
Fair value of investment properties	240,101	250,213
Fair value of trading properties	42,719	27,557
Fair value of property portfolio	282,820	277,770
Borrowings	128,313	120,761
Cash at bank	(9,417)	(14,919)
Net bank borrowings	118,896	105,842
Loan to value ratio	42%	38%

19. RECONCILIATION OF LIABILITIES TO CASH FLOWS FROM FINANCING ACTIVITIES

	Bank borrowings £'000	Total £'000
Balance at 1 April 2019	118,016	118,016
Cash flows from financing activities:
Bank borrowings drawn	19,736	19,736
Bank borrowings repaid	(18,325)	(18,325)
Loan arrangement fees paid	(978)	(978)
Non-cash movements:
Amortisation of loan arrangement fees	358	358
Capitalised loan arrangement fees	48	48
Debt termination costs	501	501
Balance at 1 April 2020	119,356	119,356
Cash flows from financing activities:
Bank borrowings drawn	18,916	18,916
Bank borrowings repaid	(11,363)	(11,363)
Loan arrangement fees paid	(282)	(282)
Non-cash movements:
Amortisation of loan arrangement fees	300	300
Capitalised loan arrangement fees	218	218
Debt termination costs	140	140
Balance at 31 March 2021	127,285	127,285

20. LEASES

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

	2021 £'000	2020 £'000
Within one year	16,170	16,794
From one to two years	14,730	15,239
From two to three years	12,637	14,079
From three to four years	10,502	12,102
From four to five years	9,535	10,317
From five to 25 years	47,005	53,108
	110,579	121,639

Lease liabilities are classified as follows:

	2021 £'000	2020 £'000
Lease liabilities for investment properties	1,804	1,806
Lease liabilities for right of use asset	154	318
	1,958	2,124

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

	2021			2020 Present value of lease payments £'000
	Lease payments £'000	Interest £'000	Present value of  lease payments £'000
Within one year	107	(105)	2	2
From one to two years	108	(105)	3	3
From two to five years	323	(313)	10	9
From five to 25 years	1,593	(1,546)	47	50
After 25 years	9,206	(7,464)	1,742	1,742
	11,337	(9,533)	1,804	1,806

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

	2021			2020 Present value of lease payments £'000
	Lease payments £'000	Interest £'000	Present value of lease payments £'000
Within one year	156	(2)	154	164
From one to two years	-	-	-	154
	156	(2)	154	318

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

The Group has over 200 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 ten years.

A number of these leases contain rent free periods. Standard lease provisions include service charge payments and recovery of other direct costs. All investment properties in the Group's portfolio generated rental income during both the current and prior periods, with the exception of Hudson Quarter, York held in Palace Capital (Developments) Limited which commenced development in February 2018. Direct operating costs of £Nil (2020: £Nil) were incurred on the property.

21. SHARE CAPITAL

Authorised, issued and fully paid share capital is as follows:	2021 £'000	2020 £'000
46,388,515 ordinary shares of 10p each (2020: 46,388,515)	4,639	4,639
	4,639	4,639

Reconciliation of movement in ordinary share capital	2021 £'000	2020 £'000
At start of year	4,639	4,639
Issued in the year	-	-
At end of year	4,639	4,639

Movement in ordinary authorised share capital		Price per share pence	Number of ordinary shares issued	Total number of shares
As at 31 March 2019, 31 March 2020 and 31 March 2021		-	-	46,388,515

Movement in treasury shares		Number of ordinary shares issued	Total number of shares
As at 31 March 2019			505,266
Shares options exercised under deferred bonus share scheme	24 July 2019	(67,798)
Share options exercised under employee LTIP scheme	24 July 2019	(85,461)
As at 31 March 2020			352,007
Shares options exercised under deferred bonus share scheme	9 July 2020	(33,182)
As at 31 March 2021			318,825
Total number of shares excluding the number held in treasury at 31 March 2021			46,069,690

Year ended 31 March 2021

On 9 July 2020, 33,182 share options were exercised under the deferred bonus share scheme.

Year ended 31 March 2020

On 24 July 2019, 67,798 share options were exercised under the deferred bonus share scheme.

On 24 July 2019, 85,461 share options were exercised under the 2016 employee LTIP scheme.

Shares held in Employee Benefit Trust

Authorised, issued and fully paid share capital is as follows:	2021 No. of options	2020 No. of options
Brought forward	52,420	55,679
Transferred under scheme of arrangement	-	150,000
Shares exercised under deferred bonus share scheme	(33,182)	(67,798)
Shares exercised under employee LTIP scheme	-	(85,461)
At end of year	19,238	52,420

Share options:

Reconciliation of movement in outstanding share options	2021 No. of options	2020 No. of options
At start of year	770,223	651,730
Issued in the year	573,456	329,848
Exercised in the year	-	(85,461)
Lapsed in the year	(201,447)	(90,204)
Deferred bonus share options issued	84,934	32,108
Deferred bonus share options exercised	(33,182)	(67,798)
At end of year	1,193,984	770,223

As at 31 March 2021, the Company had the following outstanding unexpired options:

Description of unexpired share options	2021		2020
	No. of options	Weighted average option price	No. of options	Weighted average option price
Employee benefit plan (note 22)	1,114,232	0p	738,115	0p
Deferred bonus share scheme issued	84,934	0p	32,108	0p
Total	1,199,166	0p	770,223	0p
Exercisable	-	0p	-	0p
Not exercisable	1,199,166	0p	770,223	0p

The weighted average remaining contractual life of share options at 31 March 2021 is 1.7 years (2020: 1.5 years).

22. 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 2019	651,730	0p
Exercised during the year (LTIP 2016)	(85,461)	0p	276p
Issued during the year (LTIP 2019)	329,848	0p		25 June 2019	25 June 2022
Deferred bonus share options issued	32,108	0p		25 June 2019	25 June 2020
Deferred bonus share options exercised	(67,798)	0p	276p	13 July 2018	13 July 2019
Lapsed during year (LTIP 2016)	(85,820)	0p
Lapsed during year (LTIP 2019)	(4,384)	0p
Outstanding at 31 March 2020	770,223	0p
Exercised during the year (LTIP 2017)	-	0p
Issued during the year (LTIP 2020)	573,456	0p		14 October 2020	14 October 2023
Deferred bonus share options issued	84,934	0p		14 July 2020	14 July 2021
Deferred bonus share options exercised	(33,182)	0p	184p	25 June 2019	25 June 2020
Lapsed during year (LTIP 2017)	(187,956)	0p
Lapsed during year (LTIP 2019)	(13,491)	0p
Outstanding at 31 March 2021	1,193,984	0p

LTIP 2018

The options are awarded to employees on achievements against targets on two separate measures over the three-year period. The options are subject to a two-year holding period following vesting. An employee shall not transfer, assign, charge or otherwise dispose of their beneficial interest in the shares acquired on vesting of an award during the holding period except in order to raise sufficient funds to pay a tax liability. The holding period shall not apply (or shall cease to apply) after the employee has ceased to hold any office or employment with a member of the Group or if there has been a change in control of the Company. 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 based on the increase in the total property value of the Company compared with an increase in the MSCI IPD UK Quarterly Index (PV growth) as at 31 March 2018. This target will measure the growth in total property return over the three-year period ending 31 March 2021 (PV performance period), and comparing this with the total property value growth of the MSCI IPD UK Quarterly Index.

Total shareholder return (TSR) measures the total shareholder return (price rise plus dividends) over the period from 13 July 2018 to 12 July 2021. The base price is £3.54 per share which was the market price at the grant date.

Annualised TSR over the TSR performance period	Vesting %	PV growth over the PV performance period	Vesting %
<8%	0	<1%	0
Equal to 8%	33.33	Equal to 1%	33.33
Between 8% and 13%	33.33-100	Equal to 2%	66.67
Equal to 13%	100	Equal to 3%	100

LTIP 2019

The options are awarded to employees on achievements against targets on two separate measures over the three-year period. 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 based on the increase in the total property return of the Company compared with an increase in the MSCI IPD UK Quarterly Index (PV growth) as at 31 March 2019. This target will measure the annualised growth in total property return over the three-year period ending 31 March 2022 (PV performance period), and comparing this with the annualised total property return growth of the MSCI IPD UK Quarterly Index.

Total shareholder return (TSR) measures the total shareholder return (price rise plus dividends) over the period from 25 June 2019 to
24 June 2022. The base price is £2.85 per share which was the market price at the grant date.

Annualised TSR over the TSR performance period	Vesting %	PV growth over the PV 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

LTIP 2020

The options are awarded to employees on achievements against targets on two separate measures over the three-year period. 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 based on the increase in the total property return of the Company compared with an increase in the MSCI IPD UK Quarterly Index (PV growth) as at 31 March 2020. This target will measure the annualised growth in total property return over the three-year period ending 31 March 2023 (PV performance period), and comparing this with the annualised total property return growth of the MSCI IPD UK Quarterly Index.

Total shareholder return (TSR) measures the total shareholder return (price rise plus dividends) over the period from 14 October 2020 to 13 October 2023. The base price is £1.88 per share which was the market price at the grant date.

Annualised TSR over the TSR performance period	Vesting %	PV growth over the PV 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 Portfolio Value (PV) 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	14 October 2020	14 October 2020
Share price	£1.88	£1.88
Exercise price	0p	0p
Term	5 years	5 years
Expected volatility	33.92%	33.92%
Expected dividend yield	0.00%	0.00%
Risk free rate	0.01%	0.01%
Time to vest (years)	3.0	3.0
Expected forfeiture p.a.	0%	0%
Fair value per option	£0.91	£1.88

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

	2021 £'000	2020 £'000
LTIP 2016	-	25
LTIP 2017	13	(48)
LTIP 2018	86	67
LTIP 2019	135	86
LTIP 2020	66	-
Total expense arising from share-based payment transactions	300	130

23. RELATED PARTY TRANSACTIONS

Accounting services amounting to £3,062 (2020: £2,783) have been provided to the Group by Stanley Davis Group Limited, a company where Stanley Davis is a Director and shareholder.

Charitable donations amounting to £4,000 (2020: £19,335) have been made by the Group to Variety, the Children's Charity, a charity where Neil Sinclair is a Trustee.

Dividend payments made to Directors amounted to £163,511 (2020: £416,056) during the year. See note 4 for further details of key management remuneration.

24. CAPITAL COMMITMENTS

The obligation for capital expenditure relating to the construction, development or enhancement of investment properties entered into by the Group amounted to £5,575,818 (2020: £19,234,661).

25. POST BALANCE SHEET EVENTS

On 20 April 2021, the Group completed the construction of the Hudson Quarter development.

On 20 April 2021, the Group signed a six month loan extension with Barclays in respect of the Development facility to extend the loan termination date to 6 July 2022.

On 20 April 2021, the Group completed the disposal of 249 Midsummer Boulevard, for a total consideration of £5.74 million. The property was charged against the loan facility with NatWest plc and as a result, £4.5m of the total consideration was used to repay the NatWest loan facility on 23 April 2021.

Post year end, one of the Groups facilities breached ICR and Debt Service Cover covenants as part of the quarterly April 2021 test due to the non-payment of rent. A covenant waiver was issued and the Group expects to return to compliance once tenants recommence rental payments.

On 10 May 2021, the Group exchanged on the disposal of Bridge House, Weybridge, for a total consideration of £3.7 million. The property was uncharged against the loan facility with NatWest plc. Completion of the sale is due to take place by 1 July 2021.

Post year end, the Group have completed on 33 residential unit sales at Hudson Quarter for a total consideration of £9.3m.

Post year end, the Group have repaid £8.9m of the Barclays development facility.

26. FINANCIAL RISK MANAGEMENT

The Group's principal financial liabilities are loans and borrowings. The main purpose of the Group's loans and borrowings is to finance the acquisition and development of the Group's property portfolio. 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 interest rate risk and 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:

Capital risk management

The Group considers its capital to comprise its share capital, share premium, other reserves and retained earnings which amounted to £157,831,000 at 31 March 2021 (2020: £166,348,000). 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.

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.

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.

The Group is exposed to market risk in terms of the listed equity investment held because changes in the market prices will affect the value of the listed equity investment held. Revaluation of the listed equity investment in the income statement would be affected by £32,500 (2020: £25,400) by a one percentage point change in market prices on a full year basis.

Interest rate risk

The interest rate exposure profile of the Group's financial assets and liabilities as at 31 March 2021 and 31 March 2020 were:

	Nil rate assets and liabilities £'000	Floating rate assets £'000	Fixed rate liability £'000	Floating rate liability £'000	Total £'000
As at 31 March 2021
Trade and other receivables	5,236	-	-	-	5,236
Cash and cash equivalents	-	9,417	-	-	9,417
Trade and other payables	(7,461)	-	-	-	(7,461)
Equity investments	3,249	-	-	-	3,249
Interest rate swaps	-	-	(1,029)	-	(1,029)
Bank borrowings	-	-	(62,579)	(64,706)	(127,285)
Lease liabilities	-	-	(1,958)	-	(1,958)
	1,024	9,417	(65,566)	(64,706)	(119,831)

	Nil rate assets and liabilities £'000	Floating rate assets £'000	Fixed rate liability £'000	Floating rate liability £'000	Total £'000
As at 31 March 2020
Trade and other receivables	4,950	-	-	-	4,950
Cash and cash equivalents	-	14,919	-	-	14,919
Trade and other payables	(8,400)	-	-	-	(8,400)
Equity investments	2,540	-	-	-	2,540
Interest rate swaps	-	-	(1,343)	-	(1,343)
Bank borrowings	-	-	(67,915)	(51,441)	(119,356)
Lease liabilities	-	-	(2,124)	-	(2,124)
	(910)	14,919	(71,382)	(51,441)	(108,814)

The Group's interest rate risk arises from borrowings issued at floating interest rates. The Group's interest rate risk is reviewed throughout the year by the Directors. The Group manages its exposure to interest rate risk on borrowings through the use of interest rate derivatives (see note 16). Interest rate swaps are used to mitigate the risk of an increase in interest rates but also to allow the Group to benefit from a fall in interest rates. 49% of the Group's interest rate exposure is fixed and the remainder held on a floating rate. The Group has employed an external adviser when contracting hedging to advise on the structure of the hedging.

The Group is exposed to changes in interest rates as a result of the cash balances that it holds. The cash balances of the Group at the year end were £9,417,000 (2020: £14,919,000). Interest receivable in the income statement would be affected by £94,000 (2020: £149,000) by a one percentage point change in floating interest rates on a full year basis.

The Group has loans amounting to £64,706,000 (2020: £51,441,000) which have interest payable at rates linked to the three-month LIBOR interest rates or bank base rates. A 1% increase in the LIBOR or base rate will have the effect of increasing interest payable by £647,000 (2020: £514,000).

The Group has interest rate swaps with a nominal value of £53,315,036 (2020: £54,190,623). If the LIBOR or base rate was to increase above the fixed contract rate then the Group will benefit from a fair value increase of the interest rate swap. If, however, the LIBOR or base rate was to decrease, then the Group would incur a decrease in the fair value of the interest rate swap.

Change in interest rate	-1% £'000	+1% £'000
(Decrease)/increase in fair value of interest rates swaps as at 31 March 2021	(859)	840
(Decrease)/increase in fair value of interest rates swaps as at 31 March 2020	(1,418)	1,359

Upward movements in medium and long-term interest rates, associated with higher interest rate expectations, increase the value of the Group's interest rate swaps that provide protection against such moves. The converse is true for downward movements in the yield curve.

The Group is therefore relatively sensitive to changes in interest rates. 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 four large banks in the United Kingdom. At 31 March 2021 the cash balances of the Group were £9,417,000 (2020: £14,919,000). The concentration of credit risk held with Barclays Bank plc, the largest of these banks, was £6,773,000 (2020: £10,552,000). Credit risk on liquid funds is limited because the counterparty is a UK bank with a high credit rating assigned by international credit rating agencies.

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 5.6% (2020: 5.2%) 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 2021 was £5,236,000 (2020: £4,950,000). The details of the provision for expected credit loss are shown in note 13.

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, including organic growth and acquisition activities, and to meet certain unforeseen obligations and opportunities. 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 cash management process. 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 Group's objective is to maintain a balance between continuity of funding and flexibility through the use of multiple sources of funding including bank loans, term loans, loan notes, overdrafts and lease liabilities.

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	> 5 years £'000	Total £'000
As at 31 March 2021
Interest bearing loans	-	25,678	35,268	68,244	7,735	136,925
Lease liabilities	-	107	108	323	10,799	11,337
Derivative financial instruments	-	-	312	717	-	1,029
Trade and other payables	7,461	-	-	-	-	7,461
	7,461	25,785	35,688	69,284	18,534	156,752

	On demand £'000	0-1 years £'000	1-2 years £'000	2-5 years £,000	> 5 years £'000	Total £'000
As at 31 March 2020
Interest bearing loans	-	6,062	10,264	107,093	12,973	136,392
Lease liabilities	-	107	108	323	10,907	11,445
Derivative financial instruments	-	-	-	1,343	-	1,343
Trade and other payables	8,400	-	-	-	-	8,400
	8,400	6,169	10,372	108,759	23,880	157,580

Company Statement of Financial Position

as at 31 March 2021

	Note	2021 £'000	2020 £'000
Fixed assets
Investments in subsidiaries	2	125,567	127,417
Loans to subsidiary undertakings	2	-	40
Listed equity investments	3	3,249	2,540
Property, plant and equipment	4	68	96
		128,884	130,093
Current assets
Trade and other receivables	5	33,899	23,643
Cash at bank and in hand		266	4,887
		34,165	28,530
Total assets		163,049	158,623
Current liabilities
Creditors: amounts falling due within one year	6	(19,159)	(8,923)
Net current assets		15,006	19,607
Net assets		143,890	149,700
Equity
Called up share capital	7	4,639	4,639
Share premium account		-	125,019
Treasury shares		(1,288)	(1,349)
Merger reserve		3,503	3,503
Capital redemption reserve		340	340
Capital reduction reserve		125,019	-
Retained earnings		11,677	17,548
Equity - attributable to the owners of the Parent		143,890	149,700

The Company's loss after tax for the year was £2,826,000 (2020: £4,342,000 loss).

The Company has applied the S408 exemption for company accounts.

The financial statements were approved by the Board of Directors and authorised for issue on 7 June 2021 and are signed on its behalf by:

Stephen Silvester  Neil Sinclair

Finance Director  Chief Executive

Company Statement of Changes in Equity

as at 31 March 2021

	Share Capital £'000	Share Premium £'000	Treasury Share Reserve £'000	Other Reserves £'000	Capital Reduction Reserve £'000	Retained Earnings £'000	Total Equity £'000
At 31 March 2019	4,639	125,019	(1,771)	3,843	-	30,848	162,578
Total comprehensive income for the year	-	-	-	-	-	(4,342)	(4,342)
Transactions with Equity Holders
Costs of issue of new shares	-	-	-	-	-	-	-
Share-based payments	-	-	-	-	-	130	130
Exercise of share options	-	-	422	-	-	(422)	-
Issue of deferred bonus share options	-	-	-	-	-	77	77
Dividends	-	-	-	-	-	(8,743)	(8,743)
At 31 March 2020	4,639	125,019	(1,349)	3,843	-	17,548	149,700
Total comprehensive income for the year	-	-	-	-	-	(2,826)	(2,826)
Transactions with Equity Holders
Share-based payments	-	-	-	-	-	300	300
Exercise of share options	-	-	61	-	-	(61)	-
Issue of deferred bonus share options	-	-	-	-	-	171	171
Dividends	-	-	-	-	-	(3,455)	(3,455)
Transfer to capital reduction reserve account	-	(125,019)	-	-	125,019	-	-
At 31 March 2021	4,639	-	(1,288)	3,843	125,019	11,677	143,890

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 shares represents the consideration paid for shares bought back from the market.

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.

During the year, the Group made an order to reduce the Group's share premium account and the crediting of the relevant sum to distributable profits. The Court order approving the Share Premium Reduction and a statement of capital were registered with the Registrar of Companies on 29 September 2020.  The Share Premium Reduction is now effective, and the amount that had been standing to the credit of the Company's share premium account (£125,018,886) has been credited to the Company's distributable profits and sits within the capital reduction reserve.

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 below and the nature of the Group's operations and its principal activities are set out in the Strategic Report in the Annual Report and Accounts. 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 has been amended to "Fixed assets" from "Non-current assets" to be consistent with the Company's presentation of its statement of financial position 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.

Listed equity investments

Listed equity investments been classified as being at fair value through profit and loss. Listed equity investments are subsequently measured using level 1 inputs, the quoted market price, and all fair value gains or losses in respect of those assets are recognised in the profit and loss.

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.

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.

The Government announced in the summer 2015 Budget the reduction in the corporation tax rate from 20% main rate in the tax year 2016 to 19% with effect from 1 April 2017.

The Government announced a proposal in March 2021 for an increase in the corporation tax rate 19% main rate in the tax year 2021 to 25% with effect from 1 April 2023. This is subject to the Finance Bill 2021 being enacted.

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 3)

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 due to the reduction in property values for the year ended 31 March 2021.

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	Loans to subsidiaries £'000	Total £'000
At 1 April 2019	122,244	53,823	176,067
Additions − capitalisation of loans to subsidiaries	61,370	(53,717)	7,653
Additions − capitalisation of loan interest	-	(66)	(66)
At 1 April 2020	183,614	40	183,654
Settlement of loans	-	(40)	(40)
At 31 March 2021	183,614	-	183,614
Provision for impairment:
At 1 April 2019	44,573	-	44,573
Provided during the year	11,624	-	11,624
At 1 April 2020	56,197	-	56,197
Provided during the year	1,850	-	1,850
At 31 March 2021	58,047	-	58,047
Net book value at 31 March 2021	125,567	-	125,567
Net book value at 31 March 2020	127,417	40	127,457

Loans to Subsidiaries

A loan amounting to £Nil remains outstanding at 31 March 2021 (2020: £25,000) from Palace Capital (Northampton) Limited. Interest on this loan is charged at a fixed rate of 5% per year.

A loan amounting to £Nil remains outstanding at 31 March 2021 (2020: £15,000) from Palace Capital (Manchester) Limited. Interest on this loan is charged at a fixed rate of 5% per year.

Investment in Subsidiaries

Year ended 31 March 2020

On 25 March 2020 the Company purchased an additional 7,652,636 ordinary £1 shares at par in Palace Capital (Leeds) Limited in order to refinance the subsidiary.

On 26 March 2020 the Company purchased an additional 4,308,517 ordinary £1 shares at par in Palace Capital (Liverpool) Limited in order to refinance the subsidiary.

On 26 March 2020 the Company purchased an additional 1,609,633 ordinary £1 shares at par in Palace Capital (Halifax) Limited in order to refinance the subsidiary.

On 31 March 2020 the Company purchased an additional 4,511,348 ordinary £1 shares at par in Palace Capital (Northampton) Limited in order to refinance the subsidiary.

On 31 March 2020 the Company purchased an additional 3,427,624 ordinary £1 shares at par in Palace Capital (Manchester) Limited in order to refinance the subsidiary.

On 31 March 2020 the Company purchased an additional 15,842,510 ordinary £1 shares at par in Palace Capital (Properties) Limited in order to refinance the subsidiary.

On 31 March 2020 the Company purchased an additional 24,017,272 ordinary £1 shares at par in Palace Capital (Signal) Limited in order to refinance the subsidiary.

These investments were settled via the capitalisation of the loans due from the subsidiaries including amounts owed by subsidiary undertakings in note 5.

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 (Liverpool) 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
R.T. Warren (Investments) Limited	Ordinary	100	Property Investments
Palace Capital (York) Limited	Ordinary	100	Property Management
Associate Company:
HBP Services Limited*	Ordinary	21.4	Property Management
Clubcourt Limited*	Ordinary	40	Property Management

* Held indirectly

The results of the associates 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:

• UK entities: 4th Floor, 25 Bury Street, St James's, London, SW1Y 6AL.

On 3 July 2020 the holding in Meadowcourt Management (Meadowhall) Limited was disposed of.

On 22 September 2020 Signal Property Investments LLP was dissolved.

On 22 December 2020 Quintain (Signal) Member B Limited and Signal Investments LLP were dissolved.

3. LISTED EQUITY INVESTMENTS

	Total £'000
At 1 April 2019	2,636
Additions	329
Loss on revaluation of listed equity investment shown in statement of comprehensive income	(425)
At 31 March 2020	2,540
Gain on revaluation of listed equity investment shown in statement of comprehensive income	709
At 31 March 2021	3,249

4. PROPERTY, PLANT AND EQUIPMENT

	IT, fixtures and fittings £'000
At 1 April 2019	217
Additions	36
At 31 March 2020	253
Additions	16
At 31 March 2021	269
Depreciation
At 1 April 2019	125
Provided during the period	32
At 31 March 2020	157
Provided during the period	44
At 31 March 2021	201
Net book value at 31 March 2021	68
Net book value at 31 March 2020	96

5. TRADE AND OTHER RECEIVABLES

	2021 £'000	2020 £'000
Amounts owed by subsidiary undertakings	30,063	22,965
Trade debtors	2,454	414
Other debtors	1,096	30
Other taxes and social security	-	25
Accrued interest on amounts owed by subsidiary undertakings	65	-
Prepayments	221	209
	33,899	23,643

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 £26,375,362 remains outstanding at 31 March 2021 (2020: £22,965,362) from Palace Capital (Developments) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £396,034 remains outstanding at 31 March 2021 (2020: £Nil) from Palace Capital (Leeds) Limited. Interest on this loan is charged at a fixed rate of 5% per year. This loan is repayable on demand.

 A loan amounting to £3,291,417 remains outstanding at 31 March 2021 (2020: £Nil) from Palace Capital (Halifax) Limited. Interest on this loan is charged at a fixed rate of 5% per year. This loan is repayable on demand.

6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

	2021 £'000	2020 £'000
Trade creditors	206	223
Amount owed to subsidiary undertaking	17,776	7,697
Corporation tax payable	-	57
Other taxes	269	75
Other creditors	66	5
Accruals and deferred income	842	866
	19,159	8,923

A loan amounting to £9,373,143 remains outstanding at 31 March 2021 (2020: £Nil) to Palace Capital (Signal) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £Nil remains outstanding at 31 March 2021 (2020: £43,012) to Palace Capital (Newcastle) Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £2,662,519 remains outstanding at 31 March 2021 (2020: £3,317,480) to R.T. Warren Investments Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £4,996,489 remains outstanding at 31 March 2021 (2020: £4,336,489) to Property Investment Holdings Limited. No interest is charged on this loan. This loan is repayable on demand.

A loan amounting to £743,583 remains outstanding at 31 March 2021 (2020: £Nil) to Palace Capital (Properties) Limited. No interest is charged on this loan. This loan is repayable on demand.

7. SHARE CAPITAL

The details of the Company's share capital are provided in note 21 of the notes to the Consolidated Financial Statements.

8. LEASES

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

	2021 £'000	2020 £'000
Within one year	178	178
From one to two years	19	178
From two to five years	-	19
	197	375

9. POST BALANCE SHEET EVENT

There are no post balance sheet events.

Officers and Professional Advisors

Directors

Stanley Davis  Chairman

Neil Sinclair  Chief Executive Officer

Stephen Silvester  Chief Financial Officer

Richard Starr  Executive Property Director

Anthony Dove  Non-Executive Director

Kim Taylor-Smith  Non-Executive Director

Mickola Wilson  Non-Executive Director

Paula Dillon  Non-Executive Director

Secretary

Nicola Grinham  ACG

Registered office

25 Bury Street
London
SW1Y 6AL

Registered number

05332938 (England and Wales)

Auditor

BDO LLP

55 Baker Street
London
W1U 7EU

Registrar

Link Group

10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL

Joint broker

Arden Partners plc

125 Old Broad Street
London
EC2N 1AR

Joint broker

Numis Securities Limited

The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT

Solicitors

Hamlins LLP

Roxburghe House
273-287 Regent Street
London
W1B 2AD

CMS Cameron McKenna
Nabarro Olswang LLP

1 South Quay
Victoria Quays
Sheffield
S2 5SY

Walker Morris LLP

33 Wellington Street
Leeds
LS1 4DL

EDWIN COE LLP

Lincoln's Inn
2, Stone Buildings
London WC2A 3TH

Investor & public relations

FTI Consulting

200 Aldersgate
Aldersgate Street
London
EC1A 4HD

Bankers

Barclays Bank plc

69 Albion Street
Leeds
LS1 5AA

Lloyds Bank plc

25 Gresham Street
London
EC2V 7HN

National Westminster Bank plc

16 The Boulevard
Crawley
West Sussex
RH10 1XU

Santander UK plc

Bridle Road
Merseyside
L30 4GB

 

END

 

 

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