The directors present their strategic report for the year ended 31 March 2025.

Ethical Property’s strategy to improve financial performance and reduce debt is making steady progress, building on last year’s efforts. We have achieved a 36% growth in operating profit compared to a 12-month average of the last reporting period (which covered 18 months). This is due to growth in turnover, tight cost control and a reduction in interest payable due to a lower loan balance and reducing interest rates.

During the year we sold two buildings, Brick Yard in London and Green Fish in Manchester. We leased both these buildings back from the new owners and continue to operate the space. The proceeds of the sales were used to reduce the loan by £5,041k. We are working to reduce the loan further through additional disposals.

We have a good relationship with Lloyds Bank, our lenders. Interest payments have been met as they fall due and the bank loan has been extended to 31 August 2025. We continue to work with Lloyds Bank on a lending agreement beyond this date.

Variable interest rates have reduced over the year, from 5.24% to 4.49%. This has reduced the cost of debt financing and supported modest improvements in the value of commercial property. However, other macroeconomic factors are impacting us and our tenants. Inflation is increasing more slowly but the Consumer Price Index (CPI) in April 2025 was 3.5%, which make it challenging for tenants with fixed incomes and grant funding. It also makes it challenging for us to manage costs, especially as building and maintenance costs have been inflated at a higher rate than CPI. Some tenants have been impacted by the dismantling of USAID, which has resulted in them downsizing or moving out of our buildings. Additionally, the changes to employers’ National Insurance contributions has increased costs for tenants. This has negatively impacted occupancy in our buildings.

The Board, management and staff team remain strongly focused on improving profitability and reducing the loan balance to ensure that the company is financially sustainable. This has resulted in a profit of £1,039k for the reporting year and a 5% growth in the balance sheet.

The KPIs most relevant to our business are net lettable area in square feet, occupancy (% of maximum income), gross profit (profit generated by the core business) and return on book cost (profit generated by the buildings as a percentage of their cost).

Our net lettable area has reduced slightly due to the sale of Stowe Centre in Bristol in December 2022. Although we sold two buildings during the most recent financial year, we now lease both buildings and continue to let this space.

Average occupancy has reduced by 5% due to the reduction in demand for larger units. The cities with the largest reduction in demand are London, Bristol and Cardiff. We are reviewing the best ways to increase demand and improve marketing to generate more enquiries, viewings and occupancy.

The gross profit for the year was £2,802k, a reduction of £18k (1%) from the 12-month equivalent last year. Lower occupancy over the year has reduced income. We aim to reduce cost of sales in line with occupancy, but some of these costs are fixed and not impacted by lower occupancy.

The return on book cost has reduced from 4.3% to 4.1% due to the lower gross profit. The calculation excludes properties that we lease; these properties made a material contribution to this KPI, so their removal also has a negative impact. The prior year calculation is based on a 12-month average so it is comparable.

The profit for the year was £1,039k (2023/24 18 months: £15,994k loss). The operating profit for the year was £1,164k (2023/24 18 months: £1,281k). When comparing with prior year performance, the 12-month average has been used for 2023/24.

Turnover increased by £420k (7%) when compared to the 12-month average for the last reporting period. This is due to better recovery of costs and additional income streams. Cost of sales increased by 13% due to the higher cost of cleaning and security in the buildings, while some buildings also required higher spend on maintenance for health and safety reasons. These costs were passed on to tenants as appropriate.

Administrative expenses decreased by £205k (10%) compared to the 12-month average for 2023/24. This is due to savings from improved IT systems, reduced spend on marketing and tight cost control throughout the business.

Other operating income includes dividends received from the Social Justice and Human Rights Centre, income from consultancy, and a successful claim to recover lost income from our operations impacted by the fire in Bath. Green Park Station is now fully open and making a good recovery.

The Social Justice and Human Rights Centre balance sheet has grown through improved profits and an increase in the value of the building. As a result, the value of our investments increased by £504k.

Interest payable for the year was £1,752k (2023/24 18 months: £2,888k). The 12-month equivalent for last year is £1,925k; this reduction in interest payable is due to a reduced loan balance and lower interest rates. The interest payable on the lending is based on the three-month SONIA rate plus 2.4%.

The value of the properties increased by £1,145k due to lower interest rates and improved cost recovery in the buildings. The cities with the highest growth are Bristol and Oxford. The valuations were assessed by Allsop LLP and produced for the balance sheet dated 31 March 2025. Where property has been marketed, the valuations have been adjusted to reflect offers received.

No dividends were paid during the reporting period (2024: nil).

Movements relating to revaluation of investment properties and investments do not impact cash flows.

Balance sheet

Net assets increased by £1,038k, owing to improved profitability and the revaluation of the property portfolio. Net asset value per share is £1.48, which is £0.07 higher than the prior year.

Investment properties decreased by £3,815k due to the sale of two properties, offset by the increase in value of the remaining portfolio. Investments increased by £452k due to the growth in the value of the Social Justice and Human Rights Centre.

Debtors have increased by £352k due to prepaid costs received earlier than usual. This is reflected in higher trade creditors in creditors falling due within one year (note 16). Cash at bank and in hand has reduced by £229k due to interest payments and reduction in bank loan.

The loan with Lloyds Bank has been extended to 31 August 2025 while we work on reducing the loan balance further. Therefore, the bank loan balance of £21.2m is shown in creditors due within one year.

Cash generated by operating activities was £1,644k, resulting in a net cash outflow of £134k after interest of £1,752k was paid.

The sale of Green Fish in Manchester and Brick Yard in London was completed, which resulted in £5,010k cash inflow. Bank loans were repaid by £5,041k using these funds.

The cash balance as of 31 March 2025 was £719k. Cashflow modelling and testing have been applied to review the resilience of this balance in relation to the longer-term effects of higher interest rates.

We have a portfolio of good-quality properties that we see as having a successful, long-term future. We seek to manage risks appropriately and respond to the risks that materialise. We have updated our financial forecasts and capital expenditure plans to take account of any changes in risks, opportunities and market conditions.

The cost of funding our bank debt remains challenging. The key mitigation measures available would be to further reduce the company’s cost base and capital expenditure. Other options include issuing new share capital for cash, asset sales and leasebacks, and obtaining further covenant waivers and working with the bank to agree mechanisms to ease pressures on cash flow.

Note 1.3 Going concern (page 19) to the financial statements sets out the material uncertainties that the company faces. Having reviewed these uncertainties, the Board concluded that it remains appropriate to adopt the going concern basis of accounting in preparing the financial statements because the Board has a reasonable expectation that the company will continue to operate as a going concern for at least 18 months from the date of approval of the financial statements.

Principal risks and uncertainties

Assessing and managing risk is a fundamental part of the company’s business strategy and a core competency for its staff and Directors. With the oversight of the Audit and Risk Committee, we regularly monitor and manage our risks to ensure we are aware of any key concerns. The Directors are responsible for overall risk management and determine the level of risk the business can take to meet its strategic objectives.

The Ethical Property Company is committed to operating as a responsible and sustainable business, recognising our obligations to various stakeholders: tenants and building users, shareholders, suppliers, the environment and the local community. We understand that our success is intrinsically linked to the wellbeing and interests of these groups, and as such, we aim to fulfil our statutory duties in accordance with Section 172 of the Companies Act 2006.

Our obligations to stakeholders

Tenants and building users:

• Providing a safe, comfortable and healthy work environment which encourages collaborative working and networking to increase impact in the sector.

• Ensuring fair and transparent leasing agreements, with flexible lease terms.

• Addressing any concerns or issues promptly through the centre management team on site and the centre management group.

• Promoting community and tenant engagement with activities suitable for both groups.

Shareholders:

• Delivering sustainable financial performance.

• Regular reporting and updates, and timely responses to queries.

• Transparent communication of company objectives and performance.

• Maintaining a strong corporate governance framework.

Suppliers:

• Encouraging ethical and responsible supply chain practices, including paying staff at least the Living Wage.

• Paying suppliers fairly and on time.

The environment:

• Reducing the environmental impact of our operations.

• Implementing sustainable practices to minimise energy and resource consumption.

• Sourcing renewable energy and biogas to reduce carbon emissions.

• Maximising recycling of waste for tenants and building users.

Local community:

• Engaging with the local community through outreach programmes and events.

• Contributing to the local economy and job creation.

• Minimising any negative impacts of our business on the community.

Our approach

We uphold the following key principles and actions to demonstrate our commitment to Section 172:    

• Informed decision making: We consider the interests of all stakeholders when making strategic decisions, taking into account their unique needs and priorities.

• Sustainability and responsibility: We are committed to environmental sustainability, ethical business practices and positive social impact. This includes reducing our carbon footprint, improving energy efficiency and promoting social impact activities.

• Communication and engagement: We actively engage with our stakeholders through open and transparent communication. We listen to their feedback and concerns, and we seek to address these appropriately.

• Financial performance: We aim to provide long-term value to our shareholders by maintaining a strong financial performance, while balancing this with the interests of other stakeholders.

• Compliance: We adhere to all relevant legal and regulatory requirements, ensuring that our actions are in compliance with the law.

The Board meets quarterly to assess the progress of the business and holds additional meetings when necessary to deal with urgent matters. Members of the Senior Management Team regularly attend Board meetings to provide information and insight that contribute to and support the quality of the Board’s decision making. This year, the main focus of the Board has been oversight of the property disposal process. In addition, the Board has spent more time on the development of a new partnership approach to business growth, and is working on a new set of metrics with which to assess the overall performance of the company.

The Board has three committees that meet during the year, and whose Terms of Reference have been reviewed to ensure that they cover all the important aspects of the company’s activities. Each committee has at least two Board Directors as members, and each also draws on expert advice from Independent Committee members. The three committees are:

• Audit and Risk Committee, chaired by Jenny Ekelund.

• Governance and Human Resources Committee, chaired by Anne-Marie O’Hara.

• Portfolio Investment Committee, chaired by Mark Hannam.

Following the departure of Monica Middleton as Board Director in December 2024, the Board appointed Arti Bareja as a new Director in March 2025 and Cate Teideman, Finance Director in May 2025. The Board would like to extend its thanks to Monica Middleton for many years of service to the company.

The Ethical Property Company will continue to work towards its key goals over the next 12 months:

1. Reducing debt and securing new lending.

• Complete planned asset sales and reduce debt.

• Refinance debt with significantly decreased leverage.
  

2. Improving our investor performance.

• Begin a series of regular share buybacks to improve share trading prices and liquidity.

• Return to regular dividend payments.
  

3. Maintain appropriate levels of profitability.

• Improve income generated by the portfolio with higher occupancy and improved cost recovery.

• Dispose of buildings which are not able to generate required levels of profit.

• Secure better returns from investments and/or redeploy capital into better performing investments or projects.

• Investigate new income streams using our existing skill set.
  

4. Start to roll-out our place-based strategy.

• Build networks with new partners that have similar goals.

• Develop a consultancy service around using buildings for impact.

On behalf of the board

The Directors present their annual report and financial statements for the year ended 31 March 2025.

The principal activity of the company aims to be that of supporting charities, co-operatives, community and campaign groups and ethical businesses by developing and running centres that are focal points for social change. At these centres the tenant organisations benefit from reasonable rents, flexible tenancy terms and office space facilities designed to meet their needs. They also become part of a working community where they can exchange skills and ideas under one roof. The Ethical Property Company offers investors the opportunity to make an ethical investment in property that supports groups working for social change.

The results for the year are set out on page 15.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The directors’ who served during the period and their beneficial interests in the company are stated below:

The company has made qualifying third party indemnity provisions for the benefit of its directors during the year. These provisions remain in force at the reporting date.

In accordance with the company's articles, a resolution proposing that Moore Kingston Smith LLP be reappointed as auditor of the company will be put at a General Meeting.

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the 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 company and of the profit or loss of the company for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

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 Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

So far as each person who was a Director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the Directors individually have taken all the necessary steps that they ought to have taken as Directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

We have audited the financial statements of The Ethical Property Company PLC (the 'company') for the year ended 31 March 2025 which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

• give a true and fair view of the state of the company's affairs as at 31 March 2025 and of its profit for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty relating to going concern

We draw attention to note 1.3 in the financial statements which explains that the company has entered into a standstill agreement with the Lloyds Bank as it has breached the terms of its facility agreement. The terms of the standstill agreement require the company to sell properties in order to repay bank loans totalling £21,208,781. Whilst the sale of properties is progressing, the timing of the completion of the transactions are uncertain and as a result the company is reliant on an extension of the existing standstill agreement with the bank, which currently expires on 31 August 2025.

As stated in note 1.3 these events and conditions, along with the other matters as detailed in note 1.3 indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.

Our approach was as follows:

• We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, and UK taxation legislation.

• We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.

• We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.

• We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.

• Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

The Profit and Loss Account has been prepared on the basis that all operations are continuing operations.

The Ethical Property Company PLC is a public company limited by shares incorporated in England and Wales. The registered office is The Old Music Hall, Oxford, United Kingdom, OX4 1JE.

The comparative amounts presented in the financial statements are for an extended period of 18 months to 31 March 2024 and therefore not entirely comparable.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in pounds sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest thousand pounds.

The financial statements have been prepared under the historical cost convention, modified to include investment properties at fair value. The principal accounting policies adopted are set out below.

The directors have reviewed forecasts and budgets for the period to 31 October 2026, which have been drawn up with appropriate regard for the current economic environment and the particular circumstances in which the company operates. These were prepared with reference to historical and current industry knowledge, taking into account the future strategy of the company.

During the prior financial period the company breached the financial covenants of its bank facility agreement with Lloyds Bank, although all interest has been paid when falling due. As a result the bank loan outstanding of £26,250k became repayable.

As the company was unable to repay the outstanding loans on 31 January 2024, under the terms of the facility agreement it entered into a standstill agreement with the bank. This agreement was originally for the period ended 31 May 2024, but was subsequently extended until 31 August 2025. This agreement allows the company time to progress sales of properties, to repay debt, and remedy the breach of the financial covenants.

During the year end 31 March 2025 two properties were sold and the bank loan balance has been reduced to £21,209k as at the balance sheet date. Post year end a further property has been sold and the bank loan account will be reduced by a further £450k.

As at the date of approval of the financial statements the sale of other properties are in progress and planned. The directors are confident that the bank will extend the period of the standstill agreement and the sale of properties will proceed within the anticipated time period, which will allow the company to repay agreed levels of debt to the bank. So far the bank has extended the standstill agreement from 31 May 2024 to 31 July 2024, 30 September 2024, 15 July 2025 and then to 31 August 2025.

As a result of these considerations, at the time of approving the financial statements, the directors consider that the company has sufficient resources to continue in operational existence for the foreseeable future. However, given that a degree of uncertainty exists in the timing of future sales, there exists a material uncertainty in relation to the going concern basis adopted in the preparation of the financial statements.

Turnover comprises rents, service charges, management fees and consultancy fees receivable by the company, exclusive of value added tax.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.

Capitalisation of finance costs

Interest is capitalised on investment properties where refurbishment/redevelopment expenditure is required before the asset can be brought into use. Borrowing costs capitalised are calculated by reference to the actual interest rate payable on property-specific borrowings, or if financed out of general borrowings by reference to the average rate payable on funding the assets employed by the Company and applied to the expenditure on the property undergoing redevelopment.

Interest is capitalised from the date of acquisition of the property under refurbishment or redevelopment until the date when substantially all the activities necessary to prepare the asset for its intended use are complete. For a phased completion, capitalisation of interest costs is reduced by the proportion of Net Lettable Area of the whole building made available at each stage.

If the total amounts calculated to be capitalised exceed total interest costs then only an amount equal to actual interest costs incurred is capitalised, and general borrowing costs are allocated to multiple projects pro-rata to their use of general borrowings.

Investment properties are stated at market value, with independent valuations taking place at least every three years. The properties were last independently valued in March 2025. The Directors reviewed the valuation calculations and updated the assumptions as 31 March 2025, as described in notes 2 and 11.

Any surplus or deficit on revaluation is reported in the statement of comprehensive income and is transferred to the revaluation reserve unless a deficit below original cost, or its reversal.

Although the Companies Act would normally require the systematic depreciation of fixed assets, the Directors believe that the policy of not providing for depreciation is necessary in order for the financial statements to give a true and fair view, since current value of investment properties, and changes to the current value, are of prime importance rather than a calculation of annual depreciation.

Properties undergoing refurbishment or redevelopment are valued by deducting the costs to complete the works from the open market value of the completed building.

Associated companies are those in which the company holds between 20% and 50% of the share capital, over which it has significant influence but not control. Investments in associated companies are stated at the Directors' estimate of fair value where this is materially different from cost. This is based on the results reported in the latest available financial statements and further information available from the local Boards. Any surplus or deficit is transferred to the revaluation reserve.

At each reporting period end date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks and other short-term liquid investments with original maturities of three months or less.

The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Share capital issued by the company is recorded at the proceeds received, net of direct issue costs. Dividends payable on share capital are recognised as liabilities once they are no longer at the discretion of the company.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of investment properties in the course of construction.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

The company operates two defined contribution retirement benefit schemes and the pension charge represents the amounts payable by the company to the funds in respect of the year.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Revenue grants are recognised in the profit and loss account on a systematic basis over the period in which the company recognises expenses for the related costs for which the grants are intended to compensate.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the statement of comprehensive income for the period.

In the application of the company's accounting policies, the Directors are required to make judgments, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The measurement of fair value and carrying investments at fair value through profit and loss constitutes the principal areas of estimates and judgement exercised by the Directors in the preparation of these financial statements.

The valuations of properties are carried out by the Directors with reference to external advisers who the Directors consider to be suitably qualified to carry out such valuations. The primary source of evidence for the property valuations is recent, comparable market transactions on arm's length terms. However, the valuation of properties is inherently subjective, and may not prove to be accurate, particularly where there are few comparable transactions. Key assumptions, which are also the major sources of uncertainty used in the valuation, include the value of future rental income, rental yields, the outcome of rent reviews and the rate and length of voids.

Investments in joint ventures and associates are valued at the company's share of net assets, translated to sterling for foreign currency amounts. The carrying values are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Interest rate swaps are determined by reference to the market-to-market valuations provided by the derivative provider.

The average monthly number of persons (including Directors) employed by the company during the year was:

Their aggregate remuneration comprised:

During the period, retirement benefits in respect of a money purchase scheme were accruing to one (2024: one) Director.

Fees of £40k (2024: £59k) were paid to Non-Executive Directors. Key management compensation during the period totalled £324k (2024: £522k). Key management includes the Executive Director and the senior managers.

The actual charge for the year can be reconciled to the expected charge/(credit) for the year based on the profit or loss and the standard rate of tax as follows:

As at 31 March 2025 the company had estimated property tax losses of £3,434k (2024: £3,434k) and non-trade loan relationship deficit of £5,069k (2024: £5,499k) available to carry forward against income arising in future years.

Deferred tax timing differences mainly arise from temporary differences between the carrying amount and tax base of investment properties, investments, computer equipment and fixtures.

Ethical Property tax policy

Ethical Property is committed to paying all the taxes owed in accordance with the spirit of all tax laws that apply to our operations. Paying our taxes in this way is the clearest indication the company can give of being responsible participants in society. The company will fulfil the commitment to paying the appropriate taxes owed by seeking to pay the right amount of tax, in the right place, and at the right time. Doing this by ensuring that our tax affairs are reported in ways that reflect the economic reality of the transactions that are undertaken during the course of our business.

The company is committed to not seek out options made available in tax law, or the allowances and reliefs that it provides, in ways that are contrary to the spirit of the law. Nor undertake specific transactions with the sole or main aim of securing tax advantages that would otherwise not be available to us based on the reality of the trade that is undertaken. Transactions will never be undertaken that would require notification to HM Revenue & Customs under the Disclosure of Tax Avoidance Schemes Regulations or participate in any arrangement to which it might be reasonably anticipated that the UK’s General Anti-Abuse Rule might apply.

The company believes tax havens undermine the UK’s tax system. We aim not to trade with customers and suppliers located in places considered to be tax havens, but if some customers and suppliers are genuinely located in places considered to be tax havens, no attempt will be made to use of those places to secure a tax advantage, and nor take advantage of the secrecy that many such jurisdictions provide for transactions recorded within them. The company's accounts will be prepared in compliance with this policy and will seek to provide all the information that users, including HM Revenue & Customs, might need to properly appraise our tax position.

The company's freehold properties and long leasehold properties comprising of office spaces were valued on 31 March 2025 by Allsop LLP, an independent valuer with experience in the location and class of the investment properties being valued. Where property has been marketed during the period, valuations have been based on offers received less cost of sale.

The valuation of the properties was on the basis of Market Value and that any investment properties would be sold subject to any existing leases and tenancies.

The Market Value of the properties as at 31 March 2025 was £36,085k (2024: £39,900k). In the directors opinion, the fair value of the investment properties undertaken by the independent valuer does not materially differ from the carrying value as at the balance sheet date.

The original cost of the investment properties was £54,727k (2024: £58,265k). The value of long leasehold properties included within investment properties was £5,505k (2024: £5,890k).

During the year nil (2024: £Nil) of interest costs directly attributable to the financing of freehold property developments were capitalised at the weighted average cost of the related borrowings. The total capitalised interest at 31 March 2025 was £1,380k (2024: £1,380k).

Details of the company's joint ventures and associates at 31 March 2025 are as follows:

Debt instruments comprise trade debtors, derivative financial instruments and other debtors (note 15).

In the prior year the company had an interest rate swap as at the year end in relation to the bank loan. The company agreed to swap the variable interest payments on the loan, being the 3 month SONIA, and fix its interest payments on the loan at 1.499%.

Financial liabilities measured at amortised cost comprise trade creditors, other creditors, accruals, deferred and bank loans income (note 16).

During 2024, the existing loans were refinanced into a new loan facility and the loan became repayable on demand by 30 September 2024. This is covered by a existing standstill agreement which ends on the 31 August 2025.

The rate of interest applicable on the loans as at the year- end is as follows:

Loan facility     2.4% above 3-month SONIA

The bank loan is sustainability linked with a reduction on the margin linked with the achievement of environmental KPIs. The loan is secured under a fixed charge over the properties.

The company operates two defined contribution pension schemes for all qualifying employees. The assets of the schemes are held separately from those of the company in independently administered funds.

The calculations of basic and diluted earnings per share are based on earnings as set out below and on 14,901,708 (2024: 14,910,708) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

The calculations of basic and diluted earnings per share after accounting for exceptional items, taxation, fair value interest swap and investment movements is based on profit of £1,039k (2024: (£15,994k)) and on 14,910,708 (2024: 14,910,708) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

In the opinion of the Directors the earnings per share excluding exceptional items, taxation, fair value interest swap and investment movements is a more suitable measure of the underlying performance of the Company.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Standard leases to third parties have a break clause of less than one year. Three leases with break clauses over one year have been identified. All three leases have an end date of 31 July 2026. All of the leases include a provision for upward rent reviews according to prevailing market conditions. There are no options in place for either party to extend the lease terms.

At the reporting end date the company had contracted with tenants for the following minimum lease payments:

During the year the company made the following related party transactions:

Social Justice and Human Rights Centre Limited

(joint venture with Trust for London, Joseph Rowntree Charitable Trust, The Barrow Cadbury Trust and Lankelly Chase Foundation).

The Ethical Property Company manages the company and all of its transactions, including payment of management fees. At the period end the value of the company's investment in the share capital of Social Justice and Human Rights Centre Limited was £5,354k (2024: £4,822k). The company raised invoices to Social Justice and Human Rights Centre Limited during the period amounting to £506k (2024: £730k) for management fees. At the balance sheet date included within debtors, the amount due from Social Justice and Humans Rights Centre Limited was £nil (2024: £nil). At the balance sheet date included within creditors, the amount due to Social Justice and Human Rights Centre Limited was £nil (2024: £nil). Also during the period, The Ethical Property Company purchased services totalling £2k (2024: £2k). All transactions were carried out in the normal course of business. The company paid a dividend of £22k (2024: £22k) to The Ethical Property Company in the period.

On 10 July 2025, a property was sold at auction for £910k.

There was no overall controlling shareholder.