Interim Results
First Property Group PLC
16 November 2005
FIRST PROPERTY GROUP PLC
Interim results show solid progress and 59% increase in assets under management
First Property Group plc ('Fprop' or 'the Company'), the online commercial
property transaction platform and property asset manager, announces interim
results for the six months ended 30 September 2005. The results show that the
Group continues to make good progress and highlights are as follows:
• Turnover increased 7.9% to £2,537,000 (2004: £2,352,000)
• Profit on ordinary activities before goodwill amortisation and
taxation grew 18% to £505,000 (2004: £428,000)
• Earnings per share reduced by 7.3% to 0.38 pence (2004: 0.41 pence) as
a result of a £78,000 (2004:nil) provision made for the resumption of
corporation tax payments
• Assets under management grew by 59% to £24.2 million (2004: £15.2
million)
• Assets under management expected to increase to over £200 million
• Focus shifted to investment opportunities in Poland with first
acquisition made
• Conditional contracts signed for the purchase of three further
properties in Poland worth £4.6 million with eight more worth over £25 million
in the pipeline
Commenting on the results, Ben Habib, chief executive, said: 'The period under
review has been one of solid progress for First Property. Our assets under
management and sustainable lines of revenue are growing at a substantial rate. I
am particularly encouraged by the investment environment in Poland which gives
me confidence that this rate will continue.
'I expect income from our underwriting activities to be strong for the remainder
of this year but to reduce thereafter, being replaced by income from our asset
management activities.
'Given the continued growth of our asset management division, I am more
confident about our prospects than I have ever been.'
For further information:
Ben Habib, chief executive, First Property Group plc: 020 7731 2844
Richard Sunderland, Tavistock Communications: 020 7920 3150
CHIEF EXECUTIVE'S STATEMENT
Results and dividend
I am pleased to report that our interim results for the six month period to 30
September 2005 show that the Group continues to make good progress.
Turnover for the period was £2,537,000 (2004: £2,352,000), producing an increase
of 18% in profit on ordinary activities before goodwill amortisation and
taxation of £505,000 (2004: £428,000).
The Group has now virtually fully utilised tax losses brought forward. We will
be paying corporation tax for the first time this year and have made a provision
of £78,000 (2004: nil) for the taxation of profit on ordinary activities arising
in the six months to 30 September 2005.
As a consequence of the provision for tax, earnings per share reduced by 7.3%
from the same period last year and amounted to 0.38 pence (2004: 0.41 pence).
Assets under management grew by 59% to £24.2 million (2004: £15.2 million).
The Directors have resolved to maintain the dividend policy established in
previous years of only declaring a final dividend. Accordingly, there is no
interim dividend. The amount of the final dividend will be determined later in
the year.
Review of operations
Property transaction underwriting
The property underwriting division made a good start to the year. Turnover from
this activity amounted to £2.2 million (2004: £2.12 million) producing a gross
profit of £605,000 (2004: £586,000).
We also expect that it will make a continued improved contribution for the year
to 31 March 2006, largely earned by selling properties to which we made
commitments earlier this and last year.
As I mentioned when we reported our annual results in June 2005, the property
market in the UK has risen sharply over the last few years, even though the
occupational market has remained weak. We have therefore found it increasingly
difficult to identify properties which we would be comfortable underwriting and
buying. As a result, we expect that the contribution earned by this division in
the UK, is going to reduce from its current levels in the future.
On the other hand, we have acquired two supermarkets in Poland and our new
office in Warsaw has identified further interesting property trading situations.
I anticipate that we will replace some of this revenue decline in the UK with
revenue earned in Poland. The speed with which we achieve this transition is
difficult to predict but early signs are positive.
Property asset management
The rate of growth of our asset management activities has been fast with
revenues earned by this division increasing by 100% to £134,000 (2004: £67,000).
We now have £24.2 million (2004: £15.2 million) under management, an increase of
59%. However, shareholders will recall that in August we secured a significant
asset management mandate on behalf of the Universities Superannuation Scheme, to
invest £50 million in the UK, Central and Eastern Europe. It is intended that we
borrow in the region of 75 per cent of the value of any properties acquired on
behalf of this fund and thus, once fully invested, we expect assets under
management to rise to in excess of £200 million.
As with our underwriting activities we have found it difficult to identify
properties in the UK which meet our target rates of return and investment
criteria. We do, from time to time, come across such properties but the
occurrence is much less frequent than has hitherto been the case.
The greater part of our efforts has recently been and is likely to continue to
be on buying properties in Poland rather than the UK. We bought our first Polish
property, with a value of some £1.4 million, on behalf of a fund last month. In
addition to this purchase, we have signed conditional contracts for the purchase
of three further properties worth £4.6 million and have agreed terms to acquire
eight properties worth over £25 million. It is not possible to know with
certainty how many of these properties will come to be acquired but the pipeline
is large and growing.
The better investment environment in Poland gives me confidence that we will
continue to grow our assets under management at a substantial rate.
Commercial Property Database ('CPD')
CPD is trading satisfactorily and earned revenues of £103,000 (2004: £100,000).
We expect the division to contribute a healthy result for the year to 31 March
2006.
Online marketing of commercial property
Revenue earned from the online sale of commercial properties was £39,000 (2004:
£40,000).
Given the buoyancy of the property market in the UK it has proved difficult
recruiting the right team to take this product forward and grow it to its full
potential. However, we continue to receive sales instructions and I am confident
that this product will come into its own.
Strategy
Our strategy remains to grow our sustainable lines of revenue. Particular
emphasis has been placed on our asset management activities since we commenced
these operations in 2002.
We will also continue to look for earnings enhancing acquisitions. We have
considered a number of acquisition opportunities but none of them has thus far
been of sufficiently high quality to pursue.
Current trading and prospects
We are experiencing three major changes in our business, which once completed
will create a much stronger Group.
First, the income we earn from our underwriting activities is likely to reduce.
Second, the income we earn from our asset management activities is likely to
materially increase. Third, a significant amount of our income is likely to be
earned in Poland rather than the UK.
Given that turnover from our underwriting activities is determined by the value
of properties sold, as these activities reduce, the turnover of the Group will
also reduce. This will be replaced, to some extent, by higher margin income
earned by the asset management division.
Once our existing asset management mandates have been fully invested, we expect
the Group's profit to materially exceed the level of profit we are currently
earning. All that remains to be determined is the rate at which this
transformation takes place.
Given the above, I am more confident about our prospects than I have ever been
since the Group was established.
Ben Habib
Chief Executive
16 November 2005
CONSOLIDATED PROFIT & LOSS ACCOUNT
for the six months to 30 September 2005
Six months to 30 September 2005 Six Year to 31
(unaudited) months to 30 March 2005
September (audited)
2004
(unaudited)
------------------------------------------------------------------------------------------------------------------------
Notes Before Goodwill Total Total Total
Goodwill Amortisation Results Results Results
Amortisation
£'000 £'000 £'000 £'000 £'000
------------------------------------------------------------------------------------------------------------------------
Turnover
- continuing operations 2,537 - 2,537 2,352 5,650
------------------------------------------------------------------------------------------------------------------------
Total turnover 2 2,537 - 2,537 2,352 5,650
Cost of sales
- continuing operations (1,611) - (1,611) (1,504) (3,769)
------------------------------------------------------------------------------------------------------------------------
Gross profit 926 926 848 1,881
Net operating expenses 3 (430) (391) (821) (401) (931)
------------------------------------------------------------------------------------------------------------------------
Operating profit
- continuing operations 496 (391) 105 447 950
------------------------------------------------------------------------------------------------------------------------
Total operating profit 496 (391) 105 447 950
Income - fixed asset investment - - - - 1
Share of associated companies'
profits before tax 24 - 24 - 11
Net interest payable (15) - (15) (19) (7)
------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities
before taxation 505 (391) 114 428 955
------------------------------------------------------------------------------------------------------------------------
Taxation on profit on
ordinary activities 4 (78) - (78) - (2)
------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities
before minority interest 427 (391) 36 428 953
Equity minority interest - - - (17) 17
------------------------------------------------------------------------------------------------------------------------
Profit for the period 427 (391) 36 411 970
Dividend on ordinary shares - - - (18) (158)
------------------------------------------------------------------------------------------------------------------------
Profit transferred to reserves 427 (391) 36 393 812
------------------------------------------------------------------------------------------------------------------------
Earnings per Ordinary 1p share
- basic before goodwill
amortisation 5 0.38p - 0.41p 0.92p
Earning per Ordinary 1p share
- basic after goodwill
amortisation 5 - 0.04p 0.41p 0.92p
Earnings per Ordinary 1p share
- diluted before goodwill
amortisation 5 0.37p - 0.40p 0.90p
Earnings per Ordinary 1p share
- diluted after goodwill
amortisation 5 - 0.04p 0.40p 0.90p
------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
as at 30 September 2005
------------------------------------------------------------------------------------------------------------------------
Notes As at 30 Sept As at 30 Sept As at 31 March
2005 2005 2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------------------------------------------------
Fixed assets
Intangible assets - - -
Tangible assets 22 6 21
Investments 124 25 100
------------------------------------------------------------------------------------------------------------------------
146 31 121
------------------------------------------------------------------------------------------------------------------------
Current assets
Stocks - land and buildings 5,423 3,533 4,001
Debtors 1,604 381 1,355
Cash at bank and in hand 789 2,222 1,588
------------------------------------------------------------------------------------------------------------------------
7,816 6,136 6,944
------------------------------------------------------------------------------------------------------------------------
Creditors: amounts falling due within
one year (1,473) (221) (690)
------------------------------------------------------------------------------------------------------------------------
Net current assets 6,343 5,915 6,254
------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 6,489 5,946 6,375
------------------------------------------------------------------------------------------------------------------------
Creditors: amounts falling due after
more than one year (78) - -
------------------------------------------------------------------------------------------------------------------------
Net assets 6,411 5,946 6,375
------------------------------------------------------------------------------------------------------------------------
Capital and reserves
Called up share capital 7 1,116 1,112 1,116
Share premium 7 5,298 5,292 5,298
Merger reserve 7 5,823 5,823 5,823
Profit and loss account 7 (5,826) (6,281) (5,862)
------------------------------------------------------------------------------------------------------------------------
Equity shareholders' funds 6,411 5,946 6,375
------------------------------------------------------------------------------------------------------------------------
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
for the six months to 30 September 2005
------------------------------------------------------------------------------------------------------------------------
Notes As at 30 Sept As at 30 Sept As at 31 March
2005 2005 2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------------------------------------------------
Net cash inflow/(outflow) from operating
activities 8 (1,169) 1,247 565
------------------------------------------------------------------------------------------------------------------------
Returns on investment and servicing of
finance
Equity dividends paid (139) (111) (111)
Interest received 32 26 53
Interest paid (47) (45) (60)
------------------------------------------------------------------------------------------------------------------------
Net cash (outflow) from returns on
investment and servicing of finance
before taxation (154) (130) (118)
------------------------------------------------------------------------------------------------------------------------
Taxation - - (2)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (8) - (19)
Sale of tangible fixed assets - - -
Purchase of fixed asset investments (337) (20) (85)
Sale of fixed asset investments - - -
------------------------------------------------------------------------------------------------------------------------
Net cash (outflow) from capital
expenditure and financial investment (345) (20) (106)
------------------------------------------------------------------------------------------------------------------------
Cash inflow/(outflow) before
management of liquid resources and
financing (1,668) 1,097 341
------------------------------------------------------------------------------------------------------------------------
Management of liquid resources
(Increase)/decrease in short term deposits 596 (2,174) (995)
Financing
Issue of Ordinary share capital - 2,797 2,807
Bank overdraft - - -
Loans advanced 1,003 - 134
Loans repaid (134) (2,141) (2,163)
------------------------------------------------------------------------------------------------------------------------
Net cash inflow/(outflow) from
management of liquid resources and
financing 1,465 (1,518) (217)
------------------------------------------------------------------------------------------------------------------------
(Decrease)/increase in cash in period (203) (421) 124
------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/ FUNDS
------------------------------------------------------------------------------------------------------------------------
Notes As at 30 Sept As at 30 Sept As at 31 March
2005 2005 2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------------------------------------------------
(Decrease)/increase in cash in period (203) (421) 124
Movement in short term deposits (596) 2,174 995
Movement in loans (869) 2,141 2,029
------------------------------------------------------------------------------------------------------------------------
Movement in net funds (1,668) 3,894 3,148
In period
Net funds at beginning of period 1,454 (1,694) (1,694)
------------------------------------------------------------------------------------------------------------------------
Net funds/(debt) at end of period (214) 2,200 1,454
------------------------------------------------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED RESULTS
for the six months ended 30 September 2005
1. The interim accounts have been prepared on a basis which is consistent
with the accounting policies adopted for the year ended 31 March 2005.
2. Turnover consists of revenue arising in the United Kingdom 99% (2004:
100%) and Poland 1% (2004: 0%) and all relates solely to the Group's
principal activities.
3. Goodwill arising on consolidation has been fully written off in the period
in which it arose and relates to the purchase of all the outstanding 26%
minority interest in First Property Asset Management Ltd in September 2005,
now a wholly owned subsidiary of First Property Group plc. There was no
goodwill amortisation in the comparative year ending 31 March 2005.
4. The tax charge is based on the effective rate that is expected to apply to
the profits for the full year.
5. The basic earnings per Ordinary Share is calculated on the profit on
ordinary activities after taxation on the weighted average number of
Ordinary Shares in issue, during the period, of 111,601,115 (30 September
2004: 99,960,582 and 31 March 2005: 105,642,729). The diluted earnings per
Ordinary Share is calculated on an adjusted profit on ordinary activities
after taxation of £438,000 and an adjusted number of Ordinary shares in
issue of 117,138,615.
6. The company has no recognised gains or losses other than those disclosed in
the profit and loss account.
7. Capital and Reserves
Share Share Merger Profit
capital premium reserve and loss
account
£'000 £'000 £'000 £'000
------------------------------------------------------------------------------------------------------------------------
At 1 April 2005 1,116 5,298 5,823 (5,862)
Profit for the period - - - 36
------------------------------------------------------------------------------------------------------------------------
At 30 Sept 2005 1,116 5,298 5,823 (5,826)
------------------------------------------------------------------------------------------------------------------------
8. Reconciliation of operating profit to net cash inflow/(outflow) from operating activities
------------------------------------------------------------------------------------------------------------------------
Notes As at 30 Sept As at 30 Sept As at 31 March
2005 2005 2004
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
------------------------------------------------------------------------------------------------------------------------
Operating profit 496 447 950
Depreciation and profit on
disposal of fixed assets 7 2 6
Decrease/(increase) in stocks (1,422) 196 (273)
Decrease/(increase) in debtors (303) 809 (131)
(Decrease)/increase in creditors 53 (207) 13
------------------------------------------------------------------------------------------------------------------------
Net cash inflow/(outflow) from operating
activities (1,169) 1,247 565
------------------------------------------------------------------------------------------------------------------------
9. The financial information contained in this interim report does not
constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985. This information has been neither audited nor reviewed
within the meaning of APB Bulletin 1999/4 by the Company's auditors. The
financial statements for the year ended 31 March 2005, incorporating an
unqualified report of the auditors, have been filed with the Registrar of
Companies.
10. The interim results are being circulated to all shareholders. Further copies
can be obtained from the registered office at 17 Quayside Lodge, William
Morris Way, London SW6 2UZ.
This information is provided by RNS
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