Final Results

RNS Number : 6509I
First Property Group PLC
03 June 2014
 

Date:                      3 June 2014

On Behalf of:         First Property Group plc ("First Property", "the Company" or "the Group")

Embargoed:         0700hrs

 

First Property Group plc

Preliminary Results for the twelve months to 31 March 2014

 

First Property Group plc (AIM: FPO), the commercial property fund management group, today announces its preliminary results for the 12 months ended 31 March 2014.

 

 

Financial highlights:


Unaudited

Year to

31 March 2014

Audited

Year to

31 March 2013

Percentage change





Profit before tax 

£6.60m

£3.54m

+86%

Diluted earnings per share

4.53p

2.18p

+108%

Total dividend

1.12p

1.08p

+4%





 

Profit before tax and unallocated central overheads by segment:

 

 

 



Property fund management (FPAM)

£2.63m

£2.84m

-7%

Group Properties (incl FOP)

£6.32m

£2.07m

+205%





Average €/£ rate used

1.188

1.226

+3%

Year-end €/£ rate used

1.210

1.183

-2%

Net assets

£23.46m

£18.54m

+27%

Cash Balances

£11.28m

£12.98m

-13%

Assets under management

£341m

£353m

-3%

          Poland

67%

71%


          UK

30%

26%


          Romania

3%

3%


 

 

Operational highlights:

 

 

·      Return to development activity in the UK generating a non-recurring contribution to earnings of some £3.8 million;

·      New fund, Fprop PDR, established October 2013 with total commitments of some £41 million, to undertake office to residential conversions. £22 million worth of offices acquired so far, which should earn development profits in due course;

·      Resumption of investment by FOP in income-producing commercial property in Poland (totalling some €35 million during the year);

·      Reduction in cash balances by £1.7 million from £12.98 million to £11.28 million principally as a result of £7.5 million of investments made by the Group in FOP, Blue Tower, and our new fund Fprop PDR;

·      Funds under management in Central and Eastern Europe once again rated by Investment Property Databank (IPD) as the best performing versus the IPD Central & Eastern European universe, now for the eight years to 31 December 2013.

 

 

Commenting on the results, Ben Habib, Chief Executive of First Property Group, said:

 

"The financial year just ended saw the Group return to development activity in the UK and resume investment in income-producing commercial property in Poland. The combined effect of these activities resulted in an 86% increase in profit before tax for the year.

 

"Whilst the large one-off profits we made on our investments in Woking and Bracknell are impressive achievements that would not be easy to repeat, I am confident that Fprop PDR's development activities should yield healthy profits in the current year. I also expect FOP to continue its investment activities in Poland, which should further enhance earnings.

 

"The very significant headwinds the property industry has experienced over the last few years seem to have abated, with economic growth becoming established in the UK and continuing in Poland. I therefore look to the future with continued optimism."

 

 

A briefing for analysts will be held at 09.30hrs today at the Group's headquarters, 35 Old Queen Street, London, SW1H 9JA. A conference call facility will also be available on +44 (20) 3139 4830 (PIN number 12852054#). A copy of the accompanying investor presentation can be accessed simultaneously at:

 

https://www.anywhereconference.com/?UserAudioMode=DATA&Name=&Conference=131646845&PIN=12852054.

 

A recorded copy of the call will subsequently be posted on the Company website, www.fprop.com.

 

 

For further information please contact:

 

First Property Group plc  

Tel: +44 (20) 7340 0270

Ben Habib (Chief Executive Officer)

George Digby (Group Finance Director)

Jeremy Barkes (Director, Business Development)

www.fprop.com

investor.relations@fprop.com



Arden Partners (NOMAD & Broker)

Tel: + 44 (20) 7614 5900

Chris Hardie (Director, Corporate Finance)




Redleaf Polhill (PR)

Tel:+ 44 (20) 382 4763

George Parrett/ Henry Columbine/ Hannah Pollack

firstproperty@redleafpr.com

 

 

Notes to investors and editors:

 

First Property Group plc is a co-investing direct property fund manager with operations in the United Kingdom and Central Europe. Its business model is to:

 

·     Raise third party funds to invest in income-producing commercial property;

 

·     Co-invest in these funds and thereby earn a return on its own capital invested;

 

·     Earn fees for the management of these funds. Fees earned are a function of the value of assets under management as well as the performance of the funds.

 

The investment performance of its funds under management in Poland and in Central Europe ranked No.1 versus the Investment Property Databank (IPD) universe for Central & Eastern Europe (CEE) over the eight years to 31 December 2013, having previously ranked No.1 versus the IPD CEE universe over the three, four, five, six and seven years to 31 December 2008, 2009, 2010, 2011 & 2012 respectively.



CHIEF EXECUTIVE'S STATEMENT

               

Financial results

 

I am pleased to report final results for the twelve months ended 31 March 2014.

 

Revenue earned by the Group increased to £18.05 million (2013: £10.64 million) yielding an 86% increase in profit before tax of £6.60 million (2013: £3.54 million). The increase in profit before tax is principally attributable to the Group's return to development in the United Kingdom, and in particular its investment in and subsequent sale of two office buildings in Woking and Bracknell, which contributed £3.80 million to earnings. Diluted earnings per share were 4.53 pence (2013: 2.18 pence), an increase of 108%.

 

The Group ended the period with net assets of £23.46 million (2013: £18.54 million).

 

Group cash balances stood at £11.28 million (2013: £12.98 million), of which £4.14 million (2013: £4.76 million) was held by Fprop Opportunities plc (FOP), which is 76.2% owned by the Group and £528,000 (2013: £642,000) was held by Corp SA (90% owned by the Group), the property management company for Blue Tower in Warsaw.

 

The reduction in cash balances by some £1.7 million from £12.98 million to £11.28 million was principally caused by some £7.5 million of investments made by the Group during the year in FOP, Blue Tower, and our new fund Fprop PDR LP.

 

Dividend

 

The Directors have resolved to recommend increasing the final dividend to 0.79 pence (2013: 0.75 pence), which together with the interim dividend of 0.33 pence (2013: 0.33 pence) equates to a dividend for the year of 1.12 pence (2013: 1.08 pence), an increase of 3.7% from the prior year. The final dividend, if approved, will be paid on 25 September 2014 to shareholders on the register at 22 August 2014.

 

Review of operations

 

Property Fund Management (First Property Asset Management Ltd or FPAM)

 

As of 31 March 2014 aggregate assets under management were £341 million (2013: £353 million). Of these, 30% were located in the UK and 67% in Poland.

 

Revenue earned by this division amounted to £4.27 million (2013: £4.02 million), resulting in a profit before tax of £2.63 million (2013: £2.84 million) and representing 29.4% (2013: 58%) of Group profit before tax and unallocated central overheads.

 

 



 

First Property Asset Management Ltd (FPAM) now manages seven closed-end funds, having established one new fund during the period under review, Fprop PDR LP. A brief synopsis of the value of assets and maturity of each of these funds is set out below:

 

Fund

Established

Fund Life

Assets under management

% of total assets

 under management

SAM Property Company Ltd (SAM)

August 2004

Rolling

*

*

Regional Property Trading Ltd (RPT)

August 2004

5 years to August 2009, extended to August 2012 then August 2015

£7.1m

2.1%

5th Property Trading Ltd (5PT)

December 2004

7 years to December 2011, extended to December 2014

£9.0m

2.6%

USS Fprop Managed Property Portfolio LP

August 2005

10 years to August 2015

£160.5m

47.1%

UK Pension Property Portfolio  LP (UK PPP)

February 2010

7 years to February 2017

£90.5m

26.5%

Fprop Opportunities plc (FOP)

October 2010

10 years to October 2020

£62.0m

18.2%

Fprop PDR LP

October 2013

5 years to

May 2018

£11.8m*

3.5%

Total

£340.9m

100%

 

*Not subject to recent revaluation

 

Our largest fund under management, USS Fprop Managed Portfolio, expires in August 2015 and is therefore in the process of disposing of its assets. We expect to more than make up for the reduced fee income which will result from these disposals by returns earned from new investments made by FOP and Fprop PDR (see below).

 

UK PPP is invested in a well-let portfolio of good secondary commercial property, a segment of the market which was out of favour during the fund's investment period but which is now experiencing an increase in investor interest. The fund's investors have benefitted from a dividend yield on their investment of some 6.5% per annum and, with renewed investor interest in the type of properties owned by the fund, we also expect capital gains to be earned in due course.  The fund is fully invested.

 

Fprop Opportunities plc (FOP) raised an additional £3.71 million in April 2013, including a subscription of £2 million by the Group. It made two new investments during the year with a value of some €35 million (£28 million), more than doubling its assets under management. At 31 March FOP held £4.14 million of un-invested cash. We expect FOP to make further investments in the current financial year.

 

Fprop PDR LP was established in October 2013 with some £41 million in commitments, including £2 million by the Group. Its investment strategy is to invest in vacant or short-lease office buildings in the UK with a view to converting these to residential use. To date the partnership has acquired seven properties at a total cost of some £22 million. It currently has one further property under offer at some £8 million. The Group receives no fee income from Fprop PDR but is entitled to 20% of all profits earned by it, subject to claw back in the event of subsequent losses.

 

Our funds under management in Central and Eastern Europe have once again been ranked by Investment Property Databank (IPD) as the best performing against the IPD Central & Eastern European universe, now for the eight years to 31 December 2013.

 

 

 

 

Group Properties

 

The Group's only direct property holding is a 48.2% interest in an office building, Blue Tower, located in Warsaw's central business district. During the year under review it did also comprise two office buildings in the UK (in Woking and Bracknell), both of which were acquired and sold during the period (as set out below).

 

Property

Acquired date

Group

share

Book value/

purchase price

Market

value

Sales

 price

Group profit before deducting central overheads

Blue Tower, Warsaw

2008 & 2013

48.2%

£12.8m

£16.2m

n/a

£1.26m

Westminster Court, Woking

2013

100%

£2.4m

-

£6.0m

£3.1m

Edenfield, Bracknell

2013

100%

£1.0m

-

£2.05m

£0.77m

Total

£8.05m

£5.13m

 

The Group's indirect property holdings comprise shares in five of the seven funds managed by FPAM (as set out in the table below). Our interests in these funds are accounted for, in the case of UK PPP LP and Fprop PDR LP as "dividend income", in the cases of 5th Property Trading Ltd and Regional Property Trading Ltd as "shares in associates", and in the case of Fprop Opportunities plc (FOP), on a consolidated basis because of the Group's majority shareholding.

 

It is the Group's policy to carry its investments at the lower of cost or market value for accounting purposes.

 

Co-investments in FPAM managed funds at the year-end:

 

Fund

% owned by

First Property

Group

Book value of First Property's share in

fund

Current market value of holdings

Group's share

of pre-tax profit

earned by fund

Investments





UK Pension Property Portfolio LP (UK PPP)

0.9%

£857,000

£847,000

£63,000 1

Fprop PDR LP

4.9%

£849,000

£849,000

nil






Interest in associates





5th Property Trading Ltd (5PT)

37.8%

£863,000

£1,273,000

£198,000

Regional Property Trading Ltd (RPT)

25.8%

£120,000

£177,000

(£8,000) 2

Share of results in associates


£983,000


£190,000






Consolidated undertaking





Fprop Opportunities plc (FOP)

76.2%

£7,937,000

£12,920,000

£940,000 3

Total

£10,626,000

£16,066,000

£1,193,000

 

1 represents dividend received;

2 loss caused by a foreign currency exchange loss arising on the refinancing of the fund;

3 after the deduction of non-controlling interest.



 

Revenue from Group Properties, including FOP, was £13.78 million (2013: £4.3 million), generating a profit before tax of £6.32 million (2013: £2.07 million), an increase of some 205% from last year and representing 70.6% of Group profit before central overhead costs. The increase in profit was principally attributable to the investment in and subsequent sale of two office blocks in Woking and Bracknell, from which we earned an aggregate contribution of some £3.8 million. 

 

Our initial 28.5% interest in Blue Tower was acquired by the Group in December 2008 for £8.3 million and in November 2013 we increased our shareholding to 48.2%, at an additional cost of £4.5 million. Our initial 28.5% interest was valued in February 2014 at £11.74 million. The combined investment contributed £1.26 million to pre-tax profit during the year to 31 March 2014 (2013: £0.96 million), including a partial contribution from the additional investment made in the second half of the year. Our investment in this property has proven to be an excellent one and it is our intention to acquire a greater interest in the building if the opportunity should arise.

 

Our investment in July 2013 in two office buildings in Woking and in Bracknell, and their subsequent sales in December 2013 and February 2014 contributed some £3.8 million to earnings. This contribution to earnings is non-recurring but we expect to continue to earn development profits from our co-investment in Fprop PDR LP.

 

The results of FOP, which is 76.2% owned by the Group, are consolidated in these accounts. FOP's revenue and profit before tax for the year to 31 March 2014 amounted to £3.29 million (2013: £2.14 million) and £1.23 million (2013: £1.00 million) respectively, whereas the Group's 76.2% share of these amounted to £2.50 million (2013: £1.77 million) and £0.94 million (2013: £0.84 million) respectively. FOP made two new investments during the year from which we expect to earn rates of return on equity exceeding 30% and 50% per annum respectively, but only benefitted from a partial contribution to its earnings from these two investments because they were made in the second half of the year.

 

Our shareholdings in our two other Polish funds, 5th Property Trading Ltd and Regional Property Trading Ltd, contributed £190,000 (2013: £145,000) to the Group's profit before tax. The Group's share of the loss in Regional Property Trading Ltd of £8,000 was caused by a foreign currency exchange loss arising on the refinancing of the fund. We do not have a controlling interest in these funds and they are accounted for as "shares in associates".

 

Our co-investment in UK PPP LP contributed £63,000 (2013: £58,000) of dividend income to the Group and is accounted for as a separate line item in our Income Statement.

 

Our co-investment in Fprop PDR LP did not yield a dividend as it is still in its investment phase.

 

Fund raising

 

In October 2013 we raised some £41 million in commitments, principally from clients of a leading global investment business, to establish a new investment partnership, Fprop PDR LP, referred to earlier in this report. The Group committed £2 million to the partnership.

 

In April 2013 FOP raised an additional £3.71 million, including a subscription of £2 million by the Group. We expect to complete investing the remaining equity in FOP during the current financial year.

 

Commercial property markets outlook

 

Economic growth has returned to almost all countries in the euro zone but government balance sheets remain weighed down by debt and the threat of deflation persists. We therefore expect continued low interest rates, albeit probably not as low as at present, for the foreseeable future.

 

Poland:

 

GDP growth in 2013 slowed to some 1.6%, but is forecast to grow by 3% in 2014 and 3.1% in 2015. The PLN reference interest rate remains at 2.5%, reduced from 4.75% in November 2012, but inflation is beginning to pick up, although is still some way off the central bank target of 2.5% per annum (forecast 1.4% in 2014 and 2% in 2015). Confidence is high as evidenced by consistent monthly PMI readings in excess of 50 and consumer spending is rebounding. Poland's inevitable path to convergence with developed Europe continues.

 

Turnover in the Polish commercial property investment market totalled some €3 billion in 2013, a 10% increase from 2012 and a substantial recovery from its low of €600 million in 2009, although still some way off its previous high in 2006 of €5.2 billion. Turnover remains dominated by international investors, who accounted for in excess of 90% of transactions in 2013, and who retain their preference for large prime lots. Prime yields narrowed over the year by some 25bp to c6% but yields for good secondary property, of the sort we favour, have largely yet to recover from their credit crunch lows. Banks are well capitalised and willing to lend, in particular against smaller lot sizes. This, coupled with Poland's faster rate of economic growth and the higher yields available in its investment property market, should result in Polish commercial property continuing to deliver attractive rates of return.

 

United Kingdom:

 

The UK's growth in GDP in 2013 recovered substantially to 1.9% and forecasts for 2014 and 2015 have been subject to several upgrades, currently to around 2.9% for 2014 and 2.5% for 2015.

 

Turnover in the UK commercial property investment market in 2013 rose to some £53.4 billion, a six- year high. Notably, investor demand has finally returned for good secondary commercial property of the sort we have acquired for UK PPP. Consequently the gap in values between Central London and the rest of the UK is now beginning to narrow.

 

Meanwhile residential property prices are rising strongly on the back of increased consumer confidence, boosted by government measures such as the Funding for Lending and Help to Buy schemes. Our investment strategy to convert redundant offices to residential use is well supported by these measures.

 

Current Trading and Prospects

The financial year just ended saw the Group return to development activity in the UK and resume investment in income-producing commercial property in Poland. The combined effect of these activities resulted in an 86% increase in profit before tax for the year.

 

Whilst the large one-off profits we made on our investments in Woking and Bracknell are impressive achievements that would not be easy to repeat, I am confident that Fprop PDR's development activities should yield healthy profits in the current year. I also expect FOP to continue its investment activities in Poland, which should further enhance earnings.

 

The very significant headwinds the property industry has experienced over the last few years seem to have abated, with economic growth becoming established in the UK and continuing in Poland. I therefore look to the future with continued optimism.

 

 

Ben Habib

Chief Executive

 

3 June 2014



 

 


Notes

Year ended

31 March 2014 (unaudited)

Total results

Year ended

31 March 2013  

(audited)

Total results



£'000

£'000

Continuing operations




Revenue  - existing operations

                 - business acquisitions                   


17,004

1,041

              10,636

-



18,045

10,636

Cost of sales


(5,800)

(3,244)

Gross profit


12,245

7,392

Operating expenses


(5,019)

(3,421)

Operating profit


7,226

3,971

Share of results in associates


190

145

Dividend income


63

64

Re-classification of profit


35

-

Loss on disposal of asset held for resale


(7)

-

Interest income


148

182

Interest expense


(1,057)

(819)

Profit on ordinary activities before taxation


6,598

3,543

Tax expense

5

(962)

(762)

Profit for the year from continuing operations


5,636

2,781

Continuing operations:

Profit for the year


 

5,636

 

2,781

 

Attributable to:

Owners of the parent

Non-controlling interest


 

 

5,281

355

 

 

2,568

213



5,636

2,781

 

Earnings per share:

Basic




-from continuing operations

Diluted

-from continuing operations

6

 

6

4.75p

 

4.53p

2.31p

 

2.18p

 



 



Year ended

31 March 2014

(unaudited)

Total results

Year ended

31 March 2013

(audited)

Total results



£'000

£'000





Profit for the year


5,636

2,781

Other comprehensive income




Exchange differences on retranslation of foreign subsidiaries


(128)

(291)

Re-classification of profit


(35)

-

Revaluation of available-for-sale financial assets


-

(51)

Taxation


-

-

Total comprehensive income for the year


5,473

2,439





Total comprehensive income for the year attributable to:




Owners of the parent

Non-controlling interests


5,327

146

2,237

202



5,473

2,439

 



 

Notes

As at

31 March 2014

(unaudited)

£'000

As at

31 March 2013

(audited)

£'000

Non-current assets



Goodwill

7

153

114

Investment properties

8

48,759

20,349

Property, plant and equipment


65

36

Interest in associates

9 (a)

675

615

Other financial assets

9 (b)

1,706

892

Other receivables

11

400

436

Deferred tax assets


839

173

Total non-current assets


52,597

22,615





Current assets




Inventories - land and buildings

10

12,304

8,591

Current tax assets


76

38

Trade and other receivables

11

4,135

1,212

Cash and cash equivalents


11,279

12,979

Total current assets


27,794

22,820





Current liabilities




Trade and other payables

12

(4,224)

(2,011)

Financial liabilities

13

(4,349)

(637)

Current tax liabilities


(247)

-

Total current liabilities


(8,820)

(2,648)

Net current assets


18,974

20,172

Total assets less current liabilities


71,571

42,787

Non-current liabilities:




Deferred tax liabilities

Financial liabilities

 

13

(897)

(47,212)

-

(24,244)

Net assets


23,462

18,543





Equity




Called up share capital


1,149

1,149

Share premium


5,498

5,492

Foreign exchange translation reserve


(914)

(995)

Revaluation reserve


(86)

(51)

Share-based payment reserve


203

203

Retained earnings


16,717

12,344

Equity attributable to the owners of the parent


22,567

18,142

Non-controlling interest


895

401

Total equity


23,462

18,543



 

Group

Share capital

 

 

 

£'000

Share premium

 

 

 

£'000

Share-based payment reserve

 

£'000

Foreign exchange translation reserve

 

£'000

Purchase of own shares

 

 

£'000

Investment revaluation

reserve

 

 

£'000

Retained earnings

 

 

 

£'000

Non-controlling interest

 

 

£'000

Total

 

 

 

 

£'000

At 1 April

2013

1,149

5,492

203

(995)

(603)

(51)

12,947

401

18,543

Profit for the period

-

-

-

-

-

-

5,636

-

5,636

Net change in available for sale financial assets

-

-

-

-

-

(35)

-

-

(35)

Movement on foreign exchange

-

-

-

81

-

-

-

(209)

(128)

Sale of treasury shares

-

6

-

-

293

-

-

-

299

Non-controlling interest

-

-

-

-

-

-

(355)

355

-

Decrease in non-controlling interest (acquisition of CORP)

-

-

-

-

-

-

-

(63)

(63)

Increase in non-controlling interest (FOP)

-

-

-

-

-

-

-

507

507

Dividends

paid

-

-

-

-

-

-

(1,201)

(96)

(1,297)

At 31 March 2014

1,149

5,498

203

(914)

(310)

(86)

17,027

895

23,462



At 1 April

2012

1,149

5,491

195

(715)

(612)

-

11,579

 

268

17,355

Profit for the period

-

-

-

-

-

-

2,781

-

2,781

Decrease in fair value of available for sale financial assets

-

-

-

-

-

(51)

-

-

(51)

Movement on foreign exchange

-

-

-

(280)

-

-

-

(11)

(291)

Sale of treasury shares

-

1

-

-

9

-

-

-

10

Issue of share options

-

-

8

-

-

-

-

-

8

Non-controlling interest

-

-

-

-

-

-

(213)

213

-

Dividends

paid

-

-

-

-

-

-

(1,200)

(69)

(1,269)

At 31 March 2013

1,149

5,492

203

(995)

(603)

(51)

12,947

401

18,543













 





2014

2013


Notes

Group

£'000

Group

£'000

Cash flows from operating activities




Operating profit


7,226

3,971

Adjustments for:




Depreciation of property, plant & equipment


31

41

(Profit)/loss on sale of associates


-

-

Share based payments


-

8

(Increase)/decrease in inventories


(4,474)

2,152

(Increase)/decrease in trade and other receivables


(2,604)

47

Increase/(decrease) in trade and other payables


1,547

(160)

Other non-cash adjustments


203

-

Cash generated from operations


1,929

6,059

Taxes paid


(552)

(619)

Net cash flow from operating activities


1,377

5,440





Cash flow from/(used in) investing activities




Purchase of investments


(849)

(40)

Proceeds from sale of property, plant & equipment


-

1

Proceeds from sale of financial assets


28

-

Capital expenditure  investment properties


(46)

6

Proceeds from sale of shares in associates


23

-

Cash paid on acquisitions of new subsidiaries

4

(4,415)

-

Cash and cash equivalents received on acquisitions

of new subsidiaries

4

786

-

Purchase of non-controlling interest


(126)

-

Purchase of investment property


(555)

-

Purchase of property, plant & equipment


(60)

(10)

Interest received


148

182

Dividends from associates


107

29

Dividends received


63

64

Net cash flow from investing activities


(4,896)

232





Cash flow (used in)/from financing activities




Proceeds from issue of shares to non-controlling interest


507

-

Proceeds from non-controlling interest shareholder loan in subsidiary


1,206


Repayment of shareholder loan in subsidiary


(107)

(66)

Proceeds from bank loan


3,136

-

Repayment of bank loan


(387)

(95)

Repayment of finance lease


(463)

(454)

Sale of shares held in Treasury


299

10

Interest paid


(1,029)

(819)

Dividends paid


(1,201)

(1,200)

Dividends paid to non-controlling interest


(96)

(69)

Net cash flow (used in)/from financing activities


1,865

(2,693)





Net increase in cash and cash equivalents


(1,654)

2,979

Cash and cash equivalents at the beginning of the year


12,979

9,975

Currency translation gains/(losses) on cash and cash equivalents


(46)

25

Cash and cash equivalents at the year-end


11,279

12,979



 

1.             Basis of preparation

 

 

·      These preliminary financial statements have not been audited and are derived from the statutory accounts within the meaning of section 434 of the Companies Act 2006. They have been prepared in accordance with the Group's accounting policies that will be applied in the Group's annual financial statements for the year ended 31 March 2014. These are consistent with the policies applied for the year ended 31 March 2013. These accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted by the European Union (EU). Whilst the financial information included in this preliminary statement has been prepared in accordance with IFRS, this announcement does not itself contain sufficient information to fully comply with IFRS. The comparative figures for the financial year ended 31 March 2013 are not the statutory accounts for the financial year but are derived from those accounts prepared under IFRS which have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified, did not include references to any matter to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

·      These preliminary financial statements were approved by the Board of Directors on 2 June 2014.

 

 

 

2.             Revenue

 

Revenue from continuing operations consists of revenue arising in the United Kingdom 53% (2013: 10%) and Poland 47% (2013: 90%), and all relates solely to the Group's principal activities.

3.             Segment reporting 2014

 


Property fund management

Group properties and other co-investments

Group fund properties "FOP"

Unallocated central overheads

Total


£'000

£'000

£'000

£'000

£'000

External revenue

- Existing operations

- Sale of  inventory

- Business acquisitions

 

4,268

-

-

 

2,440

8,050

-

 

2,246

-

1,041

 

-

-

-

 

8,954

8,050

1,041

Total

4,268

10,490

3,287

-

18,045







Depreciation and amortisation

(21)

(7)

(3)

-

(31)

Operating Profit

 - Existing operations

 - Business acquisitions

 

2,630

-

 

5,010

-

 

1,388

611

 

(2,413)

-

 

6,615

611

Total

2,630

5,010

1,999

(2,413)

7,226







Share of results in associates

-

190

-

-

190

Profit on disposal of asset held for resale

-

-

-

28

28

Dividend income

-

63

-

-

63

Interest income

-

76

40

32

148

Interest payable

-

(251)

(806)

-

(1,057)

Profit/(loss) before tax

2,630

5,088

1,233

(2,353)

6,598







Analysed as:






Before performance  fees and related items

2,592

5,157

1,288

(830)

8,207

Performance fees

451

-

-

-

451

Staff incentives

(413)

(69)

(55)

(1,523)

(2,060)

Realised foreign currency gain

-

-

-

-

-

Total

2,630

5,088

1,233

(2,353)

6,598







Assets - Group

1,241

16,983

54,890

6,602

79,716

Assets- associates

-

983

-

(308)

675

Liabilities

(884)

(10,935)

(43,587)

(1,523)

(56,929)

Net assets

357

7,031

11,303

4,771

23,462

Additions to

non-current assets






Property, plant and equipment

41

19

-

-

60

Investment properties

-

-

28,717

-

28,717

Investments

-

849

-

-

849

Interest in associates

-

-

-

-

-



 

Segment reporting 2013

 


Property fund management

Group properties and other co-investments

Group fund properties "FOP"

Unallocated central overheads

Total


£'000

£'000

£'000

£'000

£'000

External revenue

- Existing operations

- Sale of  inventory

- Business acquisitions

 

4022

-

-

 

2,167

2,309

-

 

2,138

-

-

 

-

-

-

 

8,327

2,309

-

Total

4,022

4,476

2,138

-

10,636







Depreciation and amortisation

(29)

(12)

-

-

(41)

Operating Profit

- Existing operations

- Business acquisitions

 

2,841

-

 

1,024

-

 

1,564

-

 

(1,458)

-

 

3,971

-

Share of results in associates

-

145

-

-

145

Dividend income

-

64

-

-

64

Interest income

-

27

60

95

182

Interest payable

-

(198)

(621)

-

(819)

Profit/(loss) before tax

2,841

1,062

1,003

(1,363)

3,543







Analysed as:






Before performance  fees and related items

2,987

1,104

1,022

(795)

4,318

Performance fees

-

-

-

-

-

Staff incentives

(146)

(42)

(19)

(568)

(775)

Realised foreign currency gain

-

-

-

-

-

Total

2,841

1,062

1,003

(1,363)

3,543







Assets - Group

576

10,634

25,969

7,641

44,820

Assets- associates

-

923

-

(308)

615

Liabilities

(387)

(7,669)

(18,177)

(659)

(26,892)

Net assets

189

3,888

7,792

6,674

18,543

Additions to

non-current assets






Property, plant and equipment

7

3

-

-

10

Investment properties

-

-

6

-

6

Investments

-

40

-

-

40

Interest in associates

-

145

-

-

145

 

Fprop Opportunities plc (FOP) a pan European fund was launched in October 2010. The Group owned 76.2% of this fund as at 31 March 2014. Management concluded that it does not suit the criteria for existing segments and that, for clarity, it should be reported as a separate segment.

 

Interest income from the cash that is 100% controlled is not allocated to a separate segment, because all cash is managed centrally, and is netted off against unallocated central overheads. Head office costs and overheads that are common to all segments are shown separately under unallocated central overheads. Assets, liabilities and costs which relate to Group central activities have not been allocated to business segments.

 

The geographic location of non-current assets is UK £2,424,000 (2013: £1,526,000) and Poland £48,934,000 (2013: £20,480,000).

4.             Business acquisitions

 

The Group's subsidiary Fprop Opportunities plc (FOP) made two acquisitions during the year. On 30 November 2013 it acquired all the share capital in USS Fprop Poland (2) Sp. z. o. o (USS 2), for €1.00 million (£832,000). USS 2's main asset is an office block in Lublin, South East Poland.

 

On 6 February 2014 FOP acquired all the share capital in USS Fprop Poland (4) Sp. z. o. o (USS 4) for €4.43 million (£3,583,000). USS4's main asset is a shopping centre in Ostrowiec, South East Poland. Both acquisitions were at fair value and generated no goodwill.

  


USS 2

 

£'000

USS 4

 

£'000

31 March 2014

£'000

Acquisitions of USS2 and USS4 net assets acquired at fair value




Cash

336

450

786

Trade and other receivables

139

194

333

Investment property

10,597

17,519

28,116

Trade payables

(221)

(344)

(565)

Tax liabilities

(37)

(9)

(46)

Financial liabilities

(9,884)

(14,218)

(24,102)

Tenant deposits

(99)

(50)

(149)

Fair value of goodwill

-

-

-

Foreign exchange reserve

1

(54)

(53)

Total purchase price paid in cash

832

3,583

4,415

Cash paid on acquisitions

Cash and cash equivalents acquired on purchases

832

(336)

3,583

(450)

4,415

(786)

Acquisitions net of cash and cash equivalents acquired

496

3,133

3,629

 

 

5.             Tax expense

 


2014

£'000

2013

£'000

Analysis of tax charge for the year



Current tax

761

634

Deferred tax

201

128

Total tax charge for the year

962

762

 

The tax charge includes actual current and deferred tax for continuing operations.

 

Brought forward tax losses, have been utilised and partially offset against profits arising in the UK. These tax losses were not previously recognised as a deferred tax asset due to insufficient foreseeable taxable income being earned in the UK.

 

As a result of the above the effective tax rate payable by the Group decreased to 15% (2013: 21%).

 

 

6.             Earnings per share

 


2014

2013

Basic earnings per share

4.75p

2.31p

Diluted earnings per share

4.53p

2.18p





£'000

£'000

Basic earnings

5,281

2,568

Diluted earnings assuming full dilution

5,298

2,592

 

 

The following numbers of shares have been used to calculate both the basic and diluted earnings per share:

 


2014

Number

2013

Number

Weighted average number of ordinary shares in issue

(used for basic earnings per share calculation)

111,265,093

111,119,031

Number of share options assumed to be exercised

5,750,000

7,500,000

Total number of ordinary shares used in the diluted earnings per share calculation

117,015,093

118,619,031

 

The following earnings have been used to calculate both the basic and diluted earnings per share:


2014

£'000

2013

£'000

Basic earnings per share



Basic earnings 

5,281

2,568





2014

£'000

2013

£'000

Diluted earnings per share



Basic earnings

5,281

2,568

Notional interest on share options assumed to be exercised

17

24

Diluted earnings

5,298

2,592

 

7.             Goodwill

 


2014

2013


Group

£'000

Group

£'000




At 1 April

114

114

Additions

39

-

At 31 March

153

114

 

The addition relates to the purchase of the additional 22.3% in CORP Sp. z. o. o. the management company of the Blue Tower; bringing the Group's interest to 90%, and reducing the non-controlling interest from 32.31% to 10%. The amount represents the excess paid above the percentage share relating to the fair value of net assets.

 

 

8.             Investment properties

 

Investment properties indirectly owned by the Group, via FOP are stated at cost. The properties were valued by CBRE at the Group's financial year-end at €63.96 million (2013: €26.10 million), the Sterling equivalent at closing foreign exchange rates being £52.88 million (2013: £22.10 million). The properties have not been depreciated as in the directors' opinion the properties' estimated residual value at the end of the period of ownership should be higher than the carrying value.

 


2014

2013


Group

£'000

Group

£'000

Investment properties



At 1 April

20,349

20,161

Business acquisitions

28,116

-

Purchase additions

555

-

Capital expenditure

46

7

Foreign exchange translation

(307)

181

At 31 March

48,759

20,349

 



 

9.             Investment in associates and other financial assets

 

The Group has the following investments:

 


2014

2013


Group

£'000

Group

£'000

a) Associates



At 1 April

615

499

Disposals

(23)

-

Share of associates profit after tax

190

145

Dividends received

(107)

(29)

At 31 March

675

615

 

The Group's investments in associated companies is held at cost plus its share of post-acquisition profits assuming the adoption of the cost model for accounting for investment properties under IAS40 and comprises the following:


2014

2013


Group

£'000

Group

£'000

Investments in associates



5th Property Trading Ltd

863

686

Regional Property Trading Ltd

120

237


983

923

Less: Share of profit after tax withheld on sale of property to associate in 2007

(308)

(308)


675

615

 

If the Group had adopted the alternative fair value model for accounting for investment properties, the carrying value of the investment in associates would have increased by £775,000 (2013: £861,000) to £1,450,000 (2013: £1,476,000).

 


2014

2013

 

 

Group

£'000

Group

£'000

b) Other financial assets and investments



At 1 April

892

903

Additions

849

40

Disposals

(35)

-

Decrease in fair value during the year

-

(51)

At 31 March

1,706

892

 

The Group holds two unlisted investments in funds managed by it. Both are held at fair value. All of the assets have been classified as available for sale. In the directors' view the fair value has been estimated to be not materially different from their carrying value. Fair value has been arrived at by applying the Group's percentage holding in the investments of the fair value of their net assets.

 

The addition in investments is in respect of the Group's 4.9% interest in Fprop PDR LP, a new fund established during the year.

 

 

10.          Inventories - land and buildings

 


2014

2013


Group

£'000

Group

£'000

Directly held Group properties for resale at cost



At 1 April

8,591

10,714

Purchases

Capital expenditure

Disposals

4,428

46

-

-

44

(2,426)

Foreign exchange translation

(761)

259

At 31 March

12,304

8,591

 

Additions refers to the purchase of a further 20% interest in Blue Tower, located in Warsaw, Poland bringing the Group's total interest in the property to 48.2% and has a fair value of £16.21 million (2013: £12.85 million).

 

The disposal in 2012/13 refers to the sale of Bacha, a property located in Warsaw, Poland.

11.          Trade and other receivables

 


2014

2013


Group

£'000

Group

£'000

Current assets



Trade receivables

3,305

917

Other receivables

502

66

Prepayments and accrued income

328

229


4,135

1,212




Non-current assets



Other receivables

400

436

 

 

12.          Trade and other payables

 


2014

2013


Group

£'000

Group

£'000

Current liabilities



Trade payables

1,139

568

Other taxation and social security

289

271

Other payables and accruals

2,780

1,155

Deferred income

16

17


4,224

2,011

 

13.          Financial liabilities

 


2014

£'000

2013

£'000

Current liabilities



Bank loan

3,840

151

Finance lease

509

486


4,349

637




Non-current liabilities



Loans repayable by subsidiary (FOP) to third party shareholders

2,229

1,130

Bank loans

32,322

9,659

Finance lease

12,661

13,455


47,212

24,244

 


2014

£'000

2013

£'000

Total obligations under bank loans and finance leases



Repayable within one year

4,349

637

Repayable within one and five years

35,106

23,114

Repayable after five years

12,106

1,130


51,561

24,881

 

Loans repayable by FOP to third party shareholders are repayable in October 2020.

 

Four bank loans and one finance lease (all denominated in foreign currencies) totalling £49,332,000 (2013: £23,751,000) included within financial liabilities are secured against investment properties owned by Fprop Opportunities plc (FOP) and the property owned by the Group shown under inventories.

 

The preliminary results are being circulated to all shareholders and can be downloaded from the Company's web-site (www.fprop.com). Further copies can be obtained from the registered office at 35 Old Queen Street, London, SW1H 9JA.


This information is provided by RNS
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