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RNS
First Property Group PLC  -  FPO   

Preliminary Results

Released 07:00 08-Jun-2017

RNS Number : 4821H
First Property Group PLC
08 June 2017
 

Date:                      8 June 2017                                     

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 2017

 

First Property Group plc (AIM: FPO), the property fund manager and investor with operations in the United Kingdom and Central Europe, today announces its preliminary results for the twelve months ended 31 March 2017.

 

Financial Highlights:

 

·      Profit before tax up 24% to a record £9.14 million;

·    Total assets under management up 35% to £477 million (2016: £353 million), third party assets under management up 60% to £313 million;

·    Annualised fund management fee income at year end up 46% to £2.45 million and rising (2016: £1.68 million);

·      Group cash balances increased to £15.95 million (2016: £8.98 million);

·      Final dividend increased by 3.1% to 1.15 pence per share (2016: 1.115 pence per share).

 

Operational Highlights:

 

·    Ranked No.1 versus MSCI's Central & Eastern Europe (CEE) Benchmark over the eleven years to 31 December 2016;

·    UK Pension Property Portfolio LP ranked "Best Small Specialist Fund" at the MSCI/IPF Awards over the three years to 31 December 2016;

·   Two new funds established (with aggregate equity commitments of £21 million) and the Shipbuilding Industries Pension Scheme (SIPS) fund enlarged from £125 million to £170 million.

 

Financial Summary:

 

 

Unaudited year to 31 March 2017

Audited year to

31 March 2016

Percentage

change

Income Statement:

Revenue

£23.66m

£21.96m

+7.7%

Statutory profit before tax

£9.14m

£7.35m

+24.4%

Diluted earnings per share

6.61p

4.28p

+54.4%

Total dividend per share

1.55p

1.50p

+3.3%

Average £/€ rate

0.841

0.733

+14.7%

 

 

 

 

Balance Sheet at year end:

Net assets*

£43.43m

£34.09m

+27.4%

Net assets per share

34.84p

27.75p

+25.5%

Adjusted net assets per share (EPRA basis)

47.64p

43.01p

+10.8%

Cash balances

£15.95m

£8.98m

+77.6%

Year end £/€ rate

0.855

0.793

+7.8%

 

 

 

 

Group Direct Property Portfolio at year end:

(excludes the Group's non-controlling interests in eight other FPAM managed funds)

Book value

£143.52m

£134.53m

+6.7%

Market value

£164.48m

£156.92m

+4.8%

Gross debt (non-recourse to Group)

£117.54m

£114.82m

+2.4%

LTV

71.46%

73.17%

-1.7%

 

 

 

 

Total Assets Under Management:

 

£477m

£353m

 

Poland

45.4%

51.5%

 

Romania

3.2%

4.7%

 

United Kingdom

51.4%

43.8%

 

         

 

 *

Including non-controlling interests in the net asset values of Fprop Opportunities plc and Corp Sp z o.o.

 

 

 

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

 

"This has been a record year for First Property with profits up by a quarter. Furthermore, third party funds under management increased by 60% in value and we have additional mandates yet to be invested.

 

The markets in which we operate are generally buoyant. In the UK in particular I believe the decision to leave the EU will create opportunities on which we, as a niche fund manager, will be well placed to capitalise. The establishment of our new UK Special Opportunities Fund in January is an example of this, and a reflection of our confidence in the UK market and the returns available to be earned."

 

A video recording and investor presentation to accompany these results can be accessed on the Company's 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)

Ben Cryer (Corporate Finance)

 

 

 

Redleaf Communications (PR)

Tel:+ 44 (20) 7382 4734

Rebecca Sanders-Hewett / Robin Tozer /

Susie Hudson

firstproperty@redleafpr.com

 

Notes to Investors and Editors:

 

First Property Group plc is an award winning property fund manager and investor with operations in the United Kingdom and Central Europe. Around one third of the shares in the Company are owned by management and their families.

 

Its focus is on higher yielding commercial property with sustainable cash flows. The company is flexible and takes an active approach to asset management. Its earnings are derived from:

 

·   Fund management - via its FCA regulated and AIFMD approved subsidiary, First Property Asset Management Ltd (FPAM), which earns fees from investing for third parties in property. FPAM currently manages eleven funds which are invested across the United Kingdom, Poland and Romania. FPAM funds rank No.1 versus MSCI's Central & Eastern Europe (CEE) universe for the eleven years from the commencement of its operations in Poland in 2005 to 31 December 2016, and for the annualised periods from 2005 to the end of each of the years between 31 December 2008 and 31 December 2016. In addition, FPAM's UK Pension Property Portfolio (UK PPP) was awarded best "Small Specialist Fund" by MSCI at its UK Property Investment Awards 2017. FPAM was also one of ten fund managers, out of a pool of 95, to be awarded a Data Quality Award by MSCI.

 

·    Group Properties - principal investments by the Group, to earn a return on its own capital, usually in partnership with third parties. Investments include ten directly held properties in Poland and Romania (including five held by Fprop Opportunities plc [FOP], in which the Group is currently the majority shareholder), and interests in eight other funds managed by FPAM.

 

Listed on AIM the Company has offices in London and Warsaw. Further information about the Company and its products can be found at: www.fprop.com.

 

 

 

 

 

 

 

CHIEF EXECUTIVE'S STATEMENT

               

Performance

 

I am pleased to report the final results for the twelve months ended 31 March 2017.

 

Revenue earned by the Group increased to £23.66 million (2016: £21.96 million) contributing to a 24% increase in profit before tax of £9.14 million (2016: £7.35 million), a new record for the Group. The results benefitted from a stronger Euro which was, on average, 14.7% higher against Sterling at £0.841/ €1 (2016: £0.733/ €1) increasing profit before tax by some £1.39 million than if on a constant currency basis.

 

Diluted earnings per share increased by 54.4% to 6.61 pence (2016: 4.28 pence).

 

The Group ended the period with reported net assets up by 27.4% to £43.43 million (2016: £34.09 million). It is the accounting policy of the Group to carry its directly held properties and interests in associates at the lower of cost or market value. The net assets of the Group, when adjusted to their market value less any deferred tax liabilities, stood at £56.55 million (2016: £51.03 million).

 

Dividend

 

The Directors have resolved to increase the final dividend to 1.15 pence per share (2016: 1.115 pence per share), an increase of 3.1%, which together with the interim dividend of 0.40 pence per share (2016: 0.385 pence per share) equates to a dividend for the year of 1.55 pence per share (2016: 1.50 pence per share).

 

The proposed final dividend will be paid on 29 September 2017 to shareholders on the register at 1 September 2017, and is subject to shareholder approval at the forthcoming annual general meeting.

 

REVIEW OF OPERATIONS

 

PROPERTY FUND MANAGEMENT (First Property Asset Management Ltd or FPAM)

 

As at 31 March 2017 aggregate assets under management, calculated by reference to independent third party valuations, stood at £477 million (2016: £353 million). Of this, £313 million (2016: £196 million) was managed on behalf of third party clients, an increase of 60% from the prior year. Since the year end a further £5 million has been invested in funds managed on behalf of third parties, with £22 million of equity commitments still available for investment. 

 

The reconciliation of movement in funds under management during the year is shown below:

 

 

Funds managed for third parties (including funds in which the Group is a minority shareholder)

 

Group Properties (including FOP)

 

Totals

 

UK

£m.

CEE

£m.

Total

£m.

No. of prop's

All CEE

£m.

No. of prop's

AUM

£m.

No. of prop's

 

 

 

 

 

 

 

 

 

As at 1 April 2016

154.7

41.5

196.2

50

156.9

11

353.1

61

Purchases

96.2

-

96.2

12

-

-

96.2

12

Sales

-

-

-

-

(3.4)

(1)

(3.4)

(1)

New fund mandates

-

21.6

21.6

1

-

-

21.6

1

Property Depreciation

-

-

-

-

(1.9)

-

(1.9)

-

Property Revaluation

(5.6)

1.4

(4.2)

-

1.1

-

(3.1)

-

FX  Revaluation

-

3.2

3.2

-

11.8

-

15.0

-

 

 

 

As at 31 March 2017

245.3

67.7

313.0

63

164.5

10

477.5

73

 

Fund management fees are levied monthly by FPAM by reference to the value of funds under management excluding cash and cash commitments. The effect of any increase (or decrease) in fund management fee income associated with increased (or decreased) funds under management is not felt in full until the financial year following draw down (or sale), because of the timing of draw down (or sale) during the year.

 

Revenue earned by this division amounted to £2.05 million (2016: £2.90 million), resulting in a profit before unallocated central overheads and tax of £404,000 (2016: £1.38 million). The decline in revenue and profit earned by this division is explained by an absence of performance fees (2016: £1.13 million).

 

At the year end FPAM's fund management fee revenue, excluding performance fees was being earned at an annualised rate of £2.45 million (2016: £1.68 million), an increase of some 46% from the prior year. The corresponding weighted average unexpired fund management contract term at the year end was 6 years, 5 months (2016: 6 years, 6 months). We expect fund management fee revenue to increase as we continue to invest fund management mandates.

 

First Property Asset Management Ltd (FPAM) now manages eleven (2016: nine) property investment funds, following the establishment of two new funds during the year, and the enlargement of one existing fund. A brief synopsis of the value of assets and maturity of each of these funds is set out below:

 

Fund

Country of investment

Fund expiry

Assets under management at market value at 31 March 2017

% of total assets under management

Assets under management at market value at 31 March 2016

 

 

 

£m.

 

£m.

SAM & DHOW

UK

Rolling

*

 

*

RPT

Poland

Aug  2020

6.88

1.44%

6.83

5PT

Poland

Dec  2022

8.46

1.77%

7.77

UKPPP

UK

Feb  2022

93.13

19.50%

94.93

PDR

UK

May 2018

-

-

-

 

 

 

  (commitment of £42m)

SIPS

UK

Jan 2025

152.15

31.87%

59.80

 

 

 

(commitment of £170m)

FRS

Romania

Jan  2026

10.08

2.11%

8.17

FGC

Poland

Mar  2026

20.66

4.33%

18.68

SPEC OPPS

UK

Jan 2027

-

-

-

 

 

 

(commitment of £15m)

FKR

Poland

Mar 2027

21.64

4.53%

-

Sub Total

 

 

313.00

65.55%

196.18

 

 

 

 

 

 

FOP

Poland

Oct  2020

68.52

14.35%

61.46

GRP PROPS

 

Poland & Romania

n/a

95.96

20.10%

95.47

Sub Total

 

 

164.48

34.45%

156.93

 

 

 

 

 

 

Total

 

 

477.48

100.00%

353.11

 

* Not subject to recent revaluation

 

Independent Fund Performance Analysis:

 

Our investments in Poland and Romania once again ranked No.1 versus MSCI's Central & Eastern Europe (CEE) Benchmark, now for the eleven years from the commencement of our operations in Poland in 2005 to 31 December 2016. In the United Kingdom, our UK Pension Property Portfolio LP was ranked Best Small Specialist Fund over the three years to 31 December 2016 at the MSCI/ IPF Awards. FPAM was also one of ten fund managers, out of a pool of 95, to be awarded a Data Quality Award by MSCI.

 

Other accolades include being awarded "Best fund manager" by Alternative Investment Awards, and being shortlisted for awards by Pensions Age, European Pensions, Property Week and Property Investor Europe. In addition, I was nominated for the second year running as "Best CEO Capital Allocator (UK)" at The Value Investor Awards. Also for the second time, the Group was listed as one of "1000 Companies to inspire Britain" in 2017.

 

GROUP PROPERTIES

 

Group Properties comprised ten (2016: eleven) commercial properties held directly by the Group (including five held by FOP, in which the Group is a 69.2% shareholder), and non-controlling interests in eight of the eleven funds and joint ventures managed by FPAM, as set out in the tables below. It is the Group's policy to carry its direct properties and interest in associates at the lower of cost or market value for accounting purposes and to recognise dividends when received.

 

1.     Directly held Properties (including five held by FOP) at 31 March 2017:

 

Property / Country

No. of properties

Book value

Market value

Contribution to Group profit before tax - year to
31 March 2017

Contribution to Group profit before tax - year to
31 March 2016

 

 

£m.

£m.

£m.

£m.

 

 

 

 

 

 

Poland

3

79.2

90.7            

6.0       

5.7

Romania

2

4.2

5.3            

0.9       

0.9

FOP

5

60.1

68.5            

3.4       

3.3

Total

10

143.5

164.5            

10.3       

9.9

                   

 

 

2.     Non-controlling interests in funds and joint ventures managed by FPAM at 31 March 2017:

 

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 profits earned by fund

31 March 2017

Group's share

of pre-tax profits earned by fund

31 March 2016

 

 

£'000

£'000

£'000

£'000

Interest in associates

5PT

37.8%

608

1,058

129

121

RPT

28.6%

192

233

45

20

FRS

24.1%

750

1,030

125

12

FGC

28.2%

1,678

1,827

220

17

FKR*

18.1%

1,119

1,119

-

-

Share of results in

associates

4,347

5,267

519

170

*shares allotted but issued post year end.

 

Investments

 

 

 

 

 

UKPPP

0.9%

884

884

60

60

PDR

4.9%

13

13

-

163

SPEC OPPS

4.8%

-

-

-

-

Sub Total

 

897

897

60

223

 

Total

5,244

6,164

579

393

 

Revenue from Group Properties, including FOP, amounted to £21.62 million (2016: £19.06 million), generating a profit before unallocated central overheads and tax of £11.53 million (2016: £8.85 million) and representing 96.6% (2016: 86.5%) of Group profit before unallocated central overheads and tax. The increase in underlying revenue and profit before tax prior to the deduction of unallocated central overhead costs was primarily attributable to the strengthening of the Euro versus Sterling, but also to the full year contribution from the two investments made in the second half of the previous financial year in Fprop Romanian Supermarkets Ltd ("FRS") and Fprop Galeria Corso Ltd ("FGC").

 

The contribution to Group profit before tax prior to the deduction of unallocated central overheads by the ten directly held properties is detailed below:

 

 

Year to

31 March 2017

Year to

31 March 2016

 

€m.

€m.

Net operating income (NOI)

19.47

19.74

Interest expense on bank loans / finance leases 

(3.42)

(3.59)

NOI after interest expense

16.05

16.15

Current tax

(1.40)

(1.25)

Debt amortisation

(7.20)

(7.11)

Capital expenditure

(2.47)

(1.94)

Free cash

4.98

5.85

 

 

 

Market value of properties

€192.29

€197.92

Average yield on market value

9.45%

9.97%

Bank loans/ finance leases outstanding

€137.41

€144.82

Loan to value (LTV)

71.46%

73.17%

Weighted average unexpired  lease term (WAULT)

3yrs, 7mths

4 yrs, 1 mth

Vacancy rate

2.2%

2.4%

 

The loans secured against these properties are each held in separate non-recourse special purpose vehicles. In order to mitigate potential interest rate rises we have fixed the interest rate on a proportion of these loans. A one percentage point increase from current market interest rates would increase the annual interest bill by £825,000 per annum (2016: £663,000).  The current weighted average borrowing cost is 2.35% (2016: 2.47%).

 

During the year we sold one Group Property, a warehouse in Ploiesti, Romania, resulting in a profit of £890,000, thereby reducing the number of properties held directly by the Group to ten.

 

Fprop Opportunities plc ("FOP"):

 

The contribution by FOP to Group profit before tax amounted to £2.26 million (2016: £2.46 million), a level impacted by some £219,000 of fair value impairment (2016: credit of £462,000), a non cash item. FOP is earning a pre-tax return on equity invested from rent alone in the region of 15.5% per annum; a level which we expect will increase following completion of the extension at Galeria Ostrowiec, and the subsequent sale or refinancing of this asset. The gallery's extension, which is 95% pre-let, is scheduled for completion on 30 September 2017, and is forecast, once fully let, to increase the net operating income of this investment from €2.17 million per annum to €2.75 million per annum.

 

As reported at our interim results, we have begun to sell the shares held by the Group in FOP because it is not the Group's business model to be a controlling shareholder in funds managed by it, and to simplify the Group's structure. Sales of shares in FOP during the year amounted to £1.64 million, representing 7.9% of FOP's issued share capital and resulting in a capital profit for the Group of £552,000.

 

The Group's shareholding in FOP at the year end represented 69.2% (2016: 76.2%) of the issued share capital in FOP. It is our intention to continue to sell the Group's shares in FOP until its shareholding reaches some 25-30%.

 

Associates and Investments:

 

The contribution to Group profit before tax prior to the deduction of unallocated central overheads from our eight minority shareholdings in funds managed by FPAM increased by 47% to £579,000 (2016: £393,000). This contribution represents 5% of the contribution by Group Properties and should increase as we benefit from a full period contribution from our co-investment in the two new funds, Fprop UK Special Opportunities LP ("SPEC OPPS") and Fprop Krakow Ltd ("FKR"), which were established in the second half of the year.

 

 

Commercial Property Markets Outlook

 

Poland:

 

GDP growth in Poland, which is forecast at 3.2% in 2017 and 3.4% in 2018, continues to exceed that of most other EU member states, as it has done since its entry into the EU. Inflation turned positive in November 2016 and is now running in excess of 2% on an annualised basis.

 

This continued economic growth has resulted in a property development boom over the last few years and in turn rents coming under pressure, especially in the office sector.

 

Investor demand for commercial property has been steadily increasing since the credit crunch (turnover in 2016 is estimated at some €4.5 billion) with the yields available on good secondary property, of the sort we favour, remaining attractive at around 7.5% plus per annum.

 

We have appointed Del Chandler as senior adviser to our Warsaw office. Del has a longstanding broad experience of property deal making and financing in Central Europe, with a career in the region spanning over twenty five years. He was most recently managing director of the Central European real estate financing business of ING and then head of capital markets at BNP Paribas in Warsaw.

 

Romania:

 

GDP growth in Romania has rebounded over the past couple of years and is once again expected to exceed 4% in 2017. Inflation turned positive in January 2017 and is now running at in excess of 1% on an annualised basis.

 

As a result of the improved economic outlook, new development is beginning to pick up, but the take-up rate is, at least at the moment, matching this increased supply.

 

In the secondary market a mismatch persists in pricing expectations between buyers and sellers, mainly due to the higher debt finance costs and amortisation rates prevalent in Romania. This has made making new investment a challenging task. Nevertheless, we remain keen on investing in Romania and recently appointed Catalin Ana to head up our operations in the country.

 

United Kingdom:

 

GDP growth in the UK remained robust in the aftermath of the vote for Brexit in June 2016. It has slowed in the first quarter of 2017 but the forecast rate for the year is still a respectable 1.5%. Commercial property values fell in the second half of 2016, in particular for properties with shorter leases, or requiring asset management, or those located in Scotland, due to heightened political fears. The Group took immediate advantage of this nervousness by increasing the size of the mandate awarded to it by the Shipbuilding Industries Pension Scheme  from £125 million to £170 million, most of which was invested in supermarkets and retail warehousing. 

 

Values have now stabilised and there are some signs that they may increase in due course as a result of the healthy occupier market and loose monetary policy.

 

We therefore remain bullish about the prospects of the UK commercial property market.

 

Current Trading and Prospects

 

This has been a record year for First Property with profits up by a quarter. Furthermore, third party funds under management increased by 60% in value and we have additional mandates yet to be invested.

 

The markets in which we operate are generally buoyant. In the UK in particular I believe the decision to leave the EU will create opportunities on which we, as a niche fund manager, will be well placed to capitalise. The establishment of our new UK Special Opportunities Fund in January is an example of this, and a reflection of our confidence in the UK market and the returns available to be earned.

 

 

Ben Habib

Chief Executive

8 June 2017

 

 

 

 

 

 

 

FINANCE DIRECTOR'S REVIEW

 

The financial year ending 31 March 2017, was a record one for the Group which saw profit before tax advancing 24.4% to £9.14m and net assets (with assets held at the lower of cost or value) increasing by 27.4% to £43.43m. The results were aided by a strong Euro and improved underlying performances from both trading divisions. The quality of earnings has continued to improve with 100.0% (2016: 94.8%) of top line revenue being of a recurring nature.

 

It is also noteworthy that, the annualised growth in adjusted net assets together with dividends paid to shareholders over the last five years equates to some 24.9% per annum.

 

INCOME STATEMENT

 

Revenue and gross profit

 

A review of the revenue and profits earned by our two trading divisions is included within the Chief Executive's Statement.

 

Operating expenses

 

Operating expenses decreased by 2.3% to £8.2m (2016: £8.4m) despite increases in staff related costs and an unfavourable exchange rate for costs, but benefited from the reversal of certain previously charged bad debts and a reduced charge for other provisions.

 

Capital profit on sale of shares in FOP and sale of an investment property

 

A capital profit of £552,000 (2016: nil) was made from the sale of some of the Group's shares in FOP, reducing the Group's holding from 76.2% to 69.2%.

 

In addition, a capital profit of £890,000 (2016: nil) was made on the sale of an investment property, a warehouse located in Ploiesti, Romania. Consideration for this sale is payable by quarterly instalments over the next six years, and the debtor as stated, has been discounted to reflect its current value.  

 

Fair value adjustment on properties

 

The charge of £219,000 (2016: credit £462,000), relates to the reduction in fair value below the original cost of one property located in Poland and owned by FOP.

 

Financing costs

 

The current weighted average of the Group's borrowing costs is 2.35% per annum, a level in line with previous years as the Group continues to benefit from the low interest rate environment in the Euro zone. All bank loans and finance leases are denominated in Euro. Of these Euro borrowings, 39% at year end were subject to a fixed interest rate.

 

Current tax

 

The current tax charge of £1.15m is in line with previous years and was incurred entirely in Poland and Romania where the mainstream tax rates are 19% and 16% respectively. No UK corporation tax was incurred in the UK where brought forward tax losses of £4.5m remain available for utilisation.

 

Deferred tax

 

A deferred tax credit of £608,000 (2016: charge of £484,000) has arisen primarily due to a reduction in the value of two Group properties, which has created a higher deferred tax asset.

 

Earnings per share

 

Basic earnings per share increased by 54.5% to 6.75p per share (2016: 4.37p per share), a much larger increase than the 24.4% increase in profit before tax. This was due to the deferred tax credit of £608,000 mentioned above, which resulted in a much lower overall tax charge.

 

Dividends

 

The total proposed dividend for the year of 1.55p (2016: 1.50p), or £1.8 million in aggregate will be the fourth consecutive year of dividend growth.

 

 

 

 

BALANCE SHEET AND CASHFLOW

 

Investment properties

 

Investment properties owned by the Group, and indirectly via FOP are stated at cost less depreciation and accumulated impairment losses. The properties were valued by CBRE, Polish Properties and BNP Paribas at the Group's financial year end at €168.66 million (2016: €177.73 million).

 

The reduction in fair value in Euro terms noted above includes a reduction of €5.1 million in the value of Oxford Tower, Warsaw due to an expected lease expiry in February 2018, a depreciation charge of €1.97m in respect of the property located in Gdynia and the disposal of the warehouse in Ploiesti, Romania.

 

 

Capital expenditure

 

Capital expenditure of £1.99m on investment properties comprised development expenditure of £1.6m on the enlargement of the shopping centre in Ostrowiec owned by FOP. Property held within stock incurred £0.13m of capital expenditure relating to ongoing refurbishment and modernisation.

 

Cash, cash flow and liquidity

 

Group cash balances stood at £15.95 million (2016: £8.98 million) at the year end, after the deduction for capital expenditure of £2.12 million, bank loan repayments of £6.08 million and dividend payments of £1.8 million. Of the Group's cash, £4.37 million (2016: £4.76 million) was held by Fprop Opportunities plc (FOP, 69.2% owned by the Group) and £595,000 (2016: £635,000) was held by Corp Sp. z o.o. (the property management company for Blue Tower in Warsaw, 90% owned by the Group).  

 

The prior year's figure for cash balances of £8.98 million was reduced as a result of a bridging loan of €6.5 million (£5.15m) made by the Group to Fprop Romanian Supermarkets Limited, an associated company. This loan was repaid in May 2016.

 

Borrowings

 

There have been no new bank loans drawn, or refinancings during the year, resulting in overall bank borrowings being reduced by £6.08 million through scheduled loan repayments. All Loan-To-Value covenants have been respected.

 

Key performance indicators (KPI's)

 

The Group monitors its performance through the following key indicators:

 

 

2017

2016

Group:   

   Cash levels

£15.95m

£8.98m

   Adjusted net asset value per share

47.64p

43.01p

   Recurring revenue

100%

94.8%

 

Fund Management Division:            

   Asset under management

£477m

£353m

   Weighted average fund length

6yrs 5mths

6yrs 6mths

 

Group Properties:              

   Weighted average lease length

3yrs 7mths

4yrs 1mth

 

Non-controlling interests

 

As previously mentioned in this review the sale of the Group's shares in FOP has increased the non-controlling interest in FOP from 23.8% to 30.8%. The other non-controlling interest in CORP of 10% has remained at this level throughout the year.

 

George Digby

Group Finance Director

8 June 2017

 

 

 

 

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2017

 

 

Notes

Year ended

31 March 2017 (unaudited)

Total results

Year ended

31 March 2016

(audited)

Total results

 

£'000

£'000

 

 

 

Revenue

3

23,663

21,955

 

(5,065)

(4,255)

Gross profit

 

 

18,598

17,700

Profit on sale of a property

 

890

-

Profit on the sale of 'FOP' shares

 

552

-

Fair value adjustment to investment properties

 

(219)

462

 

(8,207)

(8,404)

 

11,614

9,758

Share of results in associates

9

519

170

Distribution income

 

60

223

Interest income

4

135

126

4

(3,191)

(2,931)

Profit before tax

 

9,137

7,346

5

(547)

(1,687)

 

8,590

5,659

 

 

 

 

Attributable to:

 

 

 

Owners of the parent

 

7,833

5,008

 

757

651

 

8,590

5,659

 

Earnings per share:

 

 

 

 

Basic

6

6.75p

4.37p

6

6.61p

4.28p

 

 

 

 

All operations are continuing.

  

 

 

CONSOLIDATED SEPARATE STATEMENT

OF OTHER COMPREHENSIVE INCOME

for the year ended 31 March 2017

 

 

 

Year ended

31 March 2017

(unaudited)

Total results

Year ended

31 March 2016

(audited)

Total results

 

 

£'000

£'000

 

 

 

 

Profit for the year

 

8,590

5,659

Other comprehensive income

 

 

 

Exchange differences on retranslation of foreign subsidiaries

 

2,008

(1,346)

Revaluation of available-for-sale financial assets

 

(29)

11

Taxation

 

-

-

Total comprehensive income for the year

 

10,569

4,324

 

 

 

 

Total comprehensive income for the year attributable to:

 

 

 

 

Owners of the parent

 

9,974

3,486

Non-controlling interests

 

595

838

 

 

10,569

4,324

 

 

 

 

CONSOLIDATED BALANCE SHEET

As at 31 March 2017

 

 

Notes

As at

31 March 2017

(unaudited)

£'000

As at

31 March 2016

(audited)

£'000

 

 

 

 

Non-current assets

 

 

 

Goodwill

7

153

153

Investment properties

8

128,428

120,718

Property, plant and equipment

 

97

186

Interest in associates

9a)

4,347

3,044

Other financial assets

9b)

897

914

Other receivables

11

2,108

186

Deferred tax assets

13

4,341

3,016

Total non-current assets

 

140,371

128,217

 

 

 

 

Current assets

 

 

 

Inventories - land and buildings

10

15,115

13,894

Current tax assets

 

160

56

Trade and other receivables

11

4,890

10,128

Cash and cash equivalents

 

15,946

8,975

Total current assets

 

36,111

33,053

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

12

(9,848)

(7,938)

Financial liabilities

14

(19,641)

(7,668)

Current tax liabilities

 

(314)

(200)

Total current liabilities

 

(29,803)

(15,806)

Net current assets

 

6,308

17,247

Total assets less current liabilities

 

146,679

145,464

 

 

 

 

Non-current liabilities:

 

 

 

Financial liabilities

14

(100,043)

(108,992)

Deferred tax liabilities

        13

(3,208)

(2,382)

Net assets

 

43,428

34,090

 

 

 

 

Equity

 

 

 

Called up share capital

 

1,166

1,166

Share premium

 

5,781

5,773

Foreign exchange translation reserve

 

19

(2,151)

Investment revaluation reserve

 

(67)

(38)

Share-based payment reserve

 

203

203

Retained earnings

 

33,311

27,231

Equity attributable to the owners of the parent

 

40,413

32,184

Non-controlling interests

 

3,015

1,906

Total equity

 

43,428

34,090

 

 

 

 

Net assets per share

6

34.84p

27.75p

         
 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2017

 

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 interests

 

 

£'000

Total

 

 

 

 

£'000

At 1 April

2016

1,166

5,773

203

(2,151)

(103)

(38)

27,334

1,906

34,090

Profit for the period

-

-

-

-

-

-

8,590

-

8,590

Fair value (or revaluation) gains on available-for-sale financial assets to profit or loss

-

-

-

-

-

(29)

-

-

(29)

Change in proportion held by NCI

-

-

-

-

-

-

-

556

556

Movement on foreign exchange

-

-

-

2,170

-

-

-

(162)

2,008

Sale of treasury shares

-

8

-

-

4

-

-

-

12

New shares issued

-

-

-

-

-

-

-

-

-

Non-controlling interests

-

-

-

-

-

-

(757)

757

-

Dividends

paid

-

-

-

-

-

-

(1,757)

(42)

(1,799)

At 31 March 2017

1,166

5,781

203

19

(99)

(67)

33,410

3,015

43,428

 

 

 

 

 

 

 

 

 

 

At 1 April

2015

1,149

5,505

203

(618)

(173)

(49)

23,908

1,094

31,019

Profit for the period

-

-

-

-

-

-

5,659

-

5,659

Fair value (or revaluation) gains on available-for-sale financial assets to profit or loss

-

-

-

-

-

11

-

-

11

Movement on foreign exchange

-

-

-

(1,533)

-

-

-

187

(1,346)

Sale of treasury shares

-

10

-

-

70

-

-

-

80

New shares issued

17

258

-

-

-

-

-

-

275

Non-controlling interests

-

-

-

-

-

-

(651)

651

-

Dividends

paid

-

-

-

-

-

-

(1,582)

(26)

(1,608)

At 31 March 2016

1,166

5,773

203

(2,151)

(103)

(38)

27,334

1,906

34,090

 

CONSOLIDATED CASH FLOW STATEMENT 

for the year ended 31 March 2017

 

 

2017

2016

 

Group

£'000

Group

£'000

 

 

 

Operating profit

 

11,614

9,758

Adjustments for:

 

 

 

Depreciation of investment property and property, plant & equipment

 

1,960

1,704

Profit on the sale of  an investment property

 

(890)

-

Profit on the sale of FOP shares

 

(552)

-

Fair value adjustment on investment properties

 

219

(462)

(Increase)/ decrease in inventories

 

(130)

(291)

Decrease/ (increase) in trade and other receivables

 

305

903

Increase/ (decrease) in trade and other payables

 

1,637

(356)

Other non-cash adjustments

 

615

460

Cash generated from operations

 

14,778

11,716

 

(1,156)

(922)

 

13,622

10,794

 

 

 

 

 

 

 

Capital expenditure on investment properties

 

(1,990)

(1,216)

Proceeds from partial disposal of available-for-sale assets

 

239

628

Purchase of property, plant & equipment

 

(26)

(197)

Consideration from the sale of 'FOP' shares

 

1,108

-

Investment in shares of new associates

 

(1,119)

(2,293)

Interest received

 

135

126

Dividends from associates

 

96

90

Distributions received

 

64

223

Net cash flow used in investing activities

 

(1,493)

(2,639)

 

 

 

 

Cash flow from/ (used in) financing activities

 

 

 

Net repayment of shareholder loan in subsidiary

 

(227)

(95)

Proceeds from bank loan

 

-

8,993

Repayment of bank loans

 

(3,125)

(9,341)

Repayment from the sale of FOP shareholder loan

 

534

-

Repayment of a short term loan to an associate

 

5,083

(4,729)

Repayment of finance lease

 

(2,950)

(2,446)

Sale of shares held in treasury

 

12

80

Proceeds from the issue of share capital

 

-

275

Interest paid

 

(3,100)

(2,825)

Dividends paid

 

(1,757)

(1,582)

 

(42)

(26)

 

(5,572)

(11,696)

 

 

 

 

6,557

(3,541)

 

8,975

12,240

 

414

276

 

15,946

8,975

 

 

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 2017. These are consistent with the policies applied for the year ended 31 March 2016. 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 2016 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 7 June 2017.

 

 

2.             Revenue

 

Revenue from continuing operations consists of revenue arising in the United Kingdom 7% (2016: 10%), Poland 85% (2016: 82%) and Romania 8% (2016: 8%). All revenue relates solely to the Group's principal activities.
 

3.             Segment reporting 2017

 

 

Fund Management Division

Group Properties Division

 

 

Property fund management

Group properties and other co-investments

Group fund properties "FOP"

Unallocated central overheads

Total

 

£'000

£'000

£'000

£'000

£'000

Total revenue

2,046

14,629

6,988

-

23,663

 

 

 

 

 

 

Depreciation and amortisation

(41)

(1,786)

(133)

-

(1,960)

 

 

 

 

 

 

Operating profit

404

10,192

3,866

(2,848)

11,614

Share of results in associates

-

519

-

-

519

Distribution income

-

60

-

-

60

Interest income

-

37

48

50

135

Interest payable

-

(1,535)

(1,656)

-

(3,191)

Profit/ (loss) before tax

404

9,273

2,258

(2,798)

9,137

 

Analysed as:

 

 

 

 

 

Underlying profit/(loss) before tax before adjusting for the following items:

907

9,993

2,791

(857)

12,834

Fair value adjustment to investment properties

-

-

(219)

-

(219)

Sale of 'FOP' shares

-

552

-

-

552

Sale of property

-

890

-

-

890

Depreciation

-

(1,662)

-

-

(1,662)

Provision

-

-

-

(44)

(44)

Performance and related fees

-

-

-

-

-

Staff incentives

(503)

(172)

(173)

(1,922)

(2,770)

Realised foreign currency loss

-

(328)

(141)

25

(444)

Total

404

9,273

2,258

(2,798)

9,137

 

Assets - Group

792

95,923

67,026

8,394

172,135

Share of net assets of associates

-

4,655

-

(308)

4,347

Liabilities

(189)

(79,817)

(50,652)

(2,396)

(133,054)

Net assets

603

20,761

16,374

5,690

43,428

 

Additions to non-current assets

Property, plant and equipment

26

-

-

-

26

Investment properties

-

325

1,665

-

1,990

Interest in associates

-

1,119

-

-

1,119

 

 

Segment reporting 2016

 

 

 

Fund Management Division

Group Properties Division

 

 

 

Property fund management

Group properties and other co-investments

Group fund properties "FOP"

Unallocated central overheads

Total

 

£'000

£'000

£'000

£'000

£'000

Total revenue

2,895

12,894

6,166

-

21,955

 

 

 

 

 

 

Depreciation and amortisation

(31)

(1,535)

(138)

-

(1,704)

 

 

 

 

 

 

Operating profit

1,384

7,316

3,962

(2,904)

9,758

Share of results in associates

-

170

-

-

170

Distribution income

-

223

-

-

223

Interest income

-

101

5

20

126

Interest payable

-

(1,424)

(1,507)

-

(2,931)

Profit/ (loss) before tax

1,384

6,386

2,460

(2,884)

7,346

 

Analysed as:

 

 

 

 

 

Underlying profit/(loss) before tax before adjusting for the following items:

783

8,268

2,321

(899)

10,473

Fair value adjustment to investment properties

-

-

462

-

462

Depreciation

-

(1,450)

-

-

(1,450)

Provision

(49)

(17)

(17)

(663)

(746)

Performance and related fees

1,131

-

-

-

1,131

Staff incentives

(481)

(169)

(164)

(1,610)

(2,424)

Realised foreign currency loss

-

(246)

(142)

288

(100)

Total

1,384

6,386

2,460

(2,884)

7,346

 

Assets - Group

497

88,670

62,283

6,776

158,226

Share of net assets of associates

-

3,352

-

(308)

3,044

Liabilities

(249)

(76,454)

(48,132)

(2,345)

(127,180)

Net assets

248

15,568

14,151

4,123

34,090

 

 

 

 

 

Additions to non-current assets

 

 

 

 

Property, plant and equipment

197

-

-

-

197

Investment properties

-

968

248

-

1,216

Interest in associates

-

2,293

-

-

2,293

 

 

 

 

 

 

 

 

 

 

 

 

4.             Interest income

 

 

2017

2016

 

Group

£'000

Group

£'000

Interest income - bank deposits

35

36

Interest income - other

100

90

Total interest income

135

126

 

 

 

2017

2016

 

Group

£'000

Group

£'000

Interest expense - property loans

(2,192)

(2,254)

Interest expense - bank and other

(160)

(106)

Finance charges on finance leases

(839)

(571)

Total interest expense

(3,191)

(2,931)

 

 

5.             Tax expense

 

 

2017

£'000

2016

£'000

Analysis of tax charge for the year

 

 

Current tax

(1,155)

(1,203)

Deferred tax

608

(484)

Total tax charge for the year

(547)

(1,687)

 

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

As in prior years, brought forward and current UK tax losses have not been recognised as a deferred tax asset due to insufficient foreseeable taxable income being earned in the UK.

 

A deferred tax credit of £608,000 (2016: charge of £484,000) has arisen primarily due to a reduction in the value of two Group Properties, which has created a higher deferred tax asset.

 

6.             Earnings/ NAV per share

 

 

2017

2016

Basic earnings per share

6.75p

4.37p

Diluted earnings per share

6.61p

4.28p

 

 

 

 

£'000

£'000

Basic earnings

7,833

5,008

Diluted earnings assuming full dilution

7,841

5,016

 

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

 

 

2017

Number

2016

Number

Weighted average number of Ordinary shares in issue

(used for basic earnings per share calculation)

115,975,959

114,543,523

Number of share options

2,700,000

2,700,000

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

118,675,959

117,243,523

 

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

 

 

2017

£'000

2016

£'000

Basic earnings per share

 

 

Basic earnings 

7,833

5,008

 

 

Diluted earnings per share

 

 

Basic earnings

7,833

5,008

Notional interest on share options assumed to be exercised

8

8

Diluted earnings

7,841

5,016

 

 

 

2017

2016

Net assets per share

34.84p

27.75p

Adjusted net assets per share

47.64p

43.01p

 

The following numbers have been used to calculate both the net assets and adjusted net assets per share:

 

For net assets per share

£'000

£'000

Net assets excluding non-controlling interests

40,413

32,184

 

 

£'000

£'000

For adjusted net assets per share

 

 

Net assets excluding non-controlling interests

40,413

32,184

Investment properties at fair value net of deferred tax

10,740

16,338

Inventories at fair value net of deferred tax

4,128

1,795

Other items

1,267

716

Total

56,548

51,033

       

 

 

Number

Number

Number of shares in issue at year end

115,992,699

115,967,111

 

 

 

 

Number

Number

Number of shares in issue at year end

115,992,699

115,967,111

Number of share options assumed to be exercised

2,700,000

2,700,000

Total

118,692,699

118,667,111

 

 

7.             Goodwill

 

 

2017

2016

 

Group

£'000

Group

£'000

At 1 April

153

153

At 31 March

153

153

 

The Directors have carried out an annual impairment test and concluded that no impairment write down is necessary because the estimated recoverable amount was higher than the value stated.

 

8.             Investment properties

 

 

2017

2016

 

Group

£'000

Group

£'000

Investment properties

 

 

At 1 April

120,718

114,262

Capital expenditure

1,990

1,216

Disposal

(1,711)

-

Depreciation

(1,891)

(1,654)

Fair value adjustment

(219)

462

Foreign exchange translation

9,541

6,432

At 31 March

128,428

120,718

 

 

 

 

Investment properties owned by the Group, and indirectly via FOP are stated at cost less depreciation and accumulated impairment losses. The properties were valued by CBRE, Polish Properties and BNP Paribas at the Group's financial year end at €168.66 million (2016: €177.73 million), the Sterling equivalent at closing foreign exchange rates being £144.26 million (2016: £140.91 million).

 

The decrease in fair value in Euro terms noted above includes a reduction of €5.1 million in the value of Oxford Tower, Warsaw due to an expected lease expiry in February 2018, a depreciation charge of €1.97 million in respect of the property located in Gdynia, and the disposal of the warehouse in Ploiesti, Romania.

 

The reduction in value of Oxford Tower is expected to reverse once the pending lease expiry has been resolved.

 

On acquisition of the Gdynia Podolska property the Directors took the decision to depreciate the property over the lease term. In the Director's opinion the property's estimated residual value at the end of the period of ownership will be lower than the carrying value. No other property has been depreciated as the estimated residual value is expected to be higher than the carrying value.

 

9.             Investment in associates and other financial assets and investments

 

The Group has the following investments:

 

 

2017

2016

 

Group

£'000

Group

£'000

a) Associates

 

 

At 1 April

3,044

671

Additions

1,119

2,293

Disposals

(239)

-

Share of associates profit after tax

519

170

Dividends received

(96)

(90)

At 31 March

4,347

3,044

 

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:

 

2017

2016

 

Group

£'000

Group

£'000

Investments in associates

 

 

5th Property Trading Ltd

916

871

Regional Property Trading Ltd

192

159

Fprop Romanian Supermarkets Ltd

750

737

Fprop Galeria Corso Ltd

1,678

1,585

Fprop Krakow Ltd

1,119

-

 

4,655

3,352

Less: Share of profit after tax withheld on sale of property to 5th Property Trading Ltd in 2007

(308)

(308)

 

4,347

3,044

 

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 to £5.27 million (2016: £3.55 million).

 

 

2017

2016

 

 

Group

£'000

Group

£'000

b) Other financial assets and investments

 

 

At 1 April

914

1,531

Additions

12

-

Disposals

-

(628)

(Decrease)/ increase in fair value during the year

(29)

11

At 31 March

897

914

 

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.

 

10.          Inventories - land and buildings

 

 

 

 

2017

2016

 

 

Group

£'000

Group

£'000

Group properties for resale at cost

 

 

At 1 April

13,894

12,639

Capital expenditure

130

291

Foreign exchange translation

1,091

964

At 31 March

15,115

13,894

 

The Group's total interest in Blue Tower (an office block in Warsaw) is 48.2% of the building. The fair value of this interest is £20.21 million (€23.63 million) up from £16.01 million (€20.19 million) in 2016 but is stated at cost as above.   

 

 

11.          Trade and other receivables

 

 

2017

2016

 

Group

£'000

Group

£'000

Current assets

 

 

Trade receivables

2,003

2,589

Less provision for impairment of receivables

(626)

(905)

Trade receivables net

1,377

1,684

Other receivables

2,435

7,554

Prepayments and accrued income

1,078

890

 

4,890

10,128

 

 

 

 

Non-current assets

 

 

Other receivables

2,108

186

 

 

12.          Trade and other payables

 

 

2017

2016

 

Group

£'000

Group

£'000

Current liabilities

 

 

Trade payables

2,941

2,189

Other taxation and social security

799

575

Other payables and accruals

5,275

5,163

Deferred income

833

11

 

9,848

7,938

 

 

 

 

 

 

13.          Deferred tax

 

Deferred tax assets and liabilities are attributable to the following items:

 

2017

2017

2017

2016

2016

2016

 

Group net assets £'000

Group assets £'000

Group liabilities £'000

Group net assets £'000

Group assets £'000

Group liabilities £'000

Accrued interest payable

(1,114)

457

(1,571)

(1,456)

151

(1,607)

Accrued income

(4)

-

(4)

(108)

9

(117)

Foreign bank loan

1,945

2,086

(141)

2,199

2,255

(56)

Investment properties and inventories

203

1,473

(1,270)

(393)

209

(602)

Other temporary differences

103

325

(222)

392

392

-

 

1,133

4,341

(3,208)

634

3,016

(2,382)

 

14.          Financial liabilities

 

 

2017

Group

£'000

2016

Group

£'000

Current liabilities

 

 

Loans repayable by subsidiary (FOP) to third party shareholders

2,148

1,841

Bank loan

3,180

3,014

Finance leases

14,313

2,813

 

19,641

7,668

 

 

 

 

 

Non-current liabilities

 

 

Bank loans

63,850

62,038

Finance leases

36,193

46,954

 

100,043

108,992

 

 

2017

Group

£'000

2016

Group

£'000

Total obligations under bank loans and finance leases

 

 

Repayable within one year

19,642

7,668

Repayable within one and five years

65,725

93,150

Repayable after five years

34,317

15,842

 

119,684

116,660

 

Loans repayable by FOP to third party shareholders are unsecured and repayable on demand.

 

Eight bank loans and three finance leases all denominated in Euros totalling £117.54 million (2016: £114.82 million) included within financial liabilities are secured against investment properties owned by the Group and Fprop Opportunities plc (FOP) and the property owned by the Group shown under inventories. These bank loans and finance leases are otherwise non-recourse to the Group's assets.

 

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 32 St James's Street, London, SW1A 1HD.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Preliminary Results - RNS