FIRST PROPERTY GROUP PLC — Earnings Release 2018

Jun 8, 2018

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RNS Number : 7212Q

First Property Group PLC

08 June 2018

Date:                     8 June 2018                                     

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 2018

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 2018.

Financial Highlights:

·      Group profit before tax of £9.23 million (2017: £9.14 million);

·      Total assets under management up 31% to £626 million (2017: £477 million);

·      Third party assets under management up 45% to £454 million (2017: £313 million);

·      Adjusted NAV per share increased by 11% to 53.07 pence (2017: 47.64 pence);

·      Final dividend increased by 2.6% to 1.18 pence per share (2017: 1.15 pence per share).

Operational Highlight:

·      Investment performance ranked No.1 versus MSCI's Central & Eastern Europe (CEE) Benchmark over the twelve years to 31 December 2017.

Financial Summary:

	Unaudited year to 31 March 2018		Audited year to 31 March 2017	Percentage change
Income Statement:
Statutory profit before tax	£9.23m		£9.14m	+1.0%
Diluted earnings per share	5.70p		6.61p	-13.8%
Total dividend per share	1.60p		1.55p	+3.2%
Average £/€ rate	0.881		0.841	+4.8%
Balance Sheet at year end:
Net assets per share	40.29p		34.84p	+15.6%
Adjusted net assets per share (EPRA basis)	53.07p		47.64p	+11.4%
Cash balances	£15.32m		£15.95m	-3.9%
Year end £/€ rate	0.877		0.855	+2.6%
Group Direct Property Portfolio at year end:
(excludes the Group's non-controlling interests in nine other FPAM managed funds)
Group Properties at Book value	£147.80m		£143.52m	+3.0%
Group Properties at Market value	£171.34m		£164.48m	+4.2%
Gross debt (all non-recourse to Group)	£117.62m		£117.54m	-%
LTV %	68.65%		71.46%	-3.9%
Total Assets Under Management:		£626m	£477m	+31.2%
United Kingdom		62.3%	51.4%
Poland		35.8%	45.4%
Romania		1.9%	3.2%

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

"The year just ended was another one of substantial operational and financial progress.

The growth of our fund management division continued apace with third party assets under management increasing by some 45%.

Both divisions are trading well and although we have had a significant vacancy in a Group property, Chalubinskiego 8 (previously known as Oxford Tower) in February 2018, we have already re-leased some 26% of this space and are experiencing healthy interest in the remaining space which we expect to re-let in due course.

We have a number of exciting opportunities both in the UK and Central Europe and we hope to report positively on these as the year unfolds."

A briefing for analysts will be held at 10:30hrs today at the headquarters of First Property Group plc, 32 St James's Street, London, SW1A 1HD. Participants can also attend by telephone on +44 (0)330 336 9104, passcode 084930. A copy of the accompanying investor presentation can be accessed simultaneously at http://www.fprop.com/media-news/presentations/. An audio recording of the call will subsequently be posted on the company website, www.fprop.com/audio/.

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) 3757 6880
Elisabeth Cowell/ Fiona Norman	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 twelve funds which are invested across the United Kingdom, Poland and Romania.

·      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 nine other funds managed by FPAM.

Listed on AIM the Company has offices in London, Warsaw and Bucharest. 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 final results for the twelve months ended 31 March 2018.

Revenue earned by the Group increased to £25.46 million (2017: £23.66 million) contributing to a 1.0% increase in profit before tax of £9.23 million (2017: £9.14 million), a new record for the Group. The results benefitted from a stronger Euro which was, on average, 4.8% higher against Sterling at £0.881/ €1 (2017: £0.841/ €1) increasing profit before tax by some £435,000 million than if on a constant currency basis.

Diluted earnings per share decreased by 13.77% to 5.70 pence (2017: 6.61 pence). The decline is mainly due to the impact of a deferred tax credit in 2017 (of £608,000) compared to a deferred tax charge in the current year of £90,000.

The Group ended the year with reported net assets up 21.86% to £52.92 million (2017: £43.43 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, increased by 11.41% to £63.00 million (2017: £56.55 million).

Dividend

The Directors have resolved to increase the final dividend to 1.18 pence per share (2017: 1.15 pence per share), an increase of 2.60%, which together with the interim dividend of 0.42 pence per share (2017: 0.40 pence per share), equates to a dividend for the year of 1.60 pence per share (2017: 1.55 pence per share), an increase of 3.23%.

The proposed final dividend will be paid on 28 September 2018 to shareholders on the register at 24 August 2018, 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 2018 aggregate assets under management stood at £626 million (2017: £477 million), an increase of 31% from the prior year. Of this, £454 million (2017: £313 million) was managed on behalf of third party clients, an increase of 45% from the prior year. A further £67 million of equity commitments is still available for investment in funds managed on behalf of third parties. 

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 31 March 2017		245.3		67.7	313.0	63	164.5	10	477.5	73
Purchases:
-Existing funds		34.0		-	34.0	5	-	-	34.0	5
-New funds		114.4		-	114.4	4	-	-	114.4	4
Property sales		(11.4)		(3.7)	(15.1)	(4)	-	-	(15.1)	(4)
Capital expenditure		0.2		-	0.2	-	2.6	-	2.8	-
Property depreciation		-		-	-	-	(2.3)	-	(2.3)	-
Property revaluation		7.4		(1.3)	6.1	-	4.5	-	10.6	-
FX  revaluation		-		1.8	1.8	-	2.0	-	3.8	-
As at 31 March 2018	389.9		64.5		454.4	68	171.3	10	625.7	78

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 realised in full until the financial year following investment (or sale), because of the timing of draw down (or sale) during the year. In the case of Fprop Offices LP, the Group is entitled to a share of profits in lieu of fund management fees. Fprop Offices LP is still in its investment phase and with property purchase costs in the UK at 6.8% of the purchase price, insufficient profits were earned in the year to completely absorb these acquisition costs.

Revenue earned by this division amounted to £2.92 million (2017: £2.05 million), resulting in a profit before unallocated central overheads and tax of £1.00 million (2017: £404,000). The increase in revenue and profit earned by this division results from the growth in funds under management and the payment of a performance fee of £189,000 (2017: £Nil).

At the year end FPAM's fund management fee revenue, excluding performance fees, was being earned at an annualised rate of £2.60 million (2017: £2.45 million), an increase of some 6% from the prior year, a level that would have been higher if Fprop Offices LP had earned a performance fee. The corresponding weighted average unexpired fund management contract term at the year end was 6 years, 5 months (2017: 6 years, 5 months). We expect the contribution to Group profit from fund management to increase as we continue to invest fund management mandates.

First Property Asset Management Ltd (FPAM) now manages twelve (2017: eleven) property investment funds, following the establishment of one new fund during the year, Fprop Offices LP. 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 2018	% of total assets under management	Assets under management at market value at 31 March 2017
			£m.		£m.
SAM & DHOW	UK	Rolling	*	*	*
RPT & EAS	Poland	Aug  2020	5.31	0.85%	6.88
5PT	Poland	Dec  2022	7.63	1.22%	8.46
UK PPP	UK	Feb  2022	93.53	14.95%	93.13
PDR	UK	May 2018	-	-	-
SIPS	UK	Jan 2025	165.74	26.49%	152.15
FRS	Romania	Jan 2026	6.69	1.07%	10.08
FGC	Poland	Mar 2026	21.84	3.49%	20.66
SPEC OPPS	UK	Jan 2027	16.28	2.60%	-
FKR	Poland	Mar 2027	22.99	3.67%	21.64
OFFICES	UK	Jun 2024	114.35	18.28%	-
Sub Total			454.36	72.62%	313.00
FOP**	Poland	Oct  2020	74.46	11.90%	68.52
GRP PROPS	Poland & Romania	n/a	96.88	15.48%	95.96
Sub Total			171.34	27.38%	164.48
Total			625.70	100.00%	477.48

* Not subject to recent revaluation

** Fprop Opportunities plc, a fund which is invested in five commercial properties in Poland in which the Group is a 51.46% shareholder.

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 twelve years from the commencement of our operations in Poland in 2005 to 31 December 2017.

GROUP PROPERTIES

Group Properties comprised ten (2017: ten) commercial properties held directly by the Group (including five held by FOP, in which the Group is a 51.46% shareholder), and non-controlling interests in nine of the twelve funds and joint ventures managed by FPAM, as set out in the tables below. It is the Group's accounting policy to carry its direct properties at the lower of cost or market value and its investments in associates at cost plus its share of post-acquisition profits/ (losses) less dividends paid.

1.     Directly held Properties (including five held by FOP) at 31 March 2018:

Property / Country		No. of properties	Book value	Market value			Contribution to Group profit before tax - year to 31 March 2018	Contribution to Group profit before tax - year to 31 March 2017
			£m.	£m.			£m.	£m.
Poland	3		79.9		91.7	6.9			6.0
Romania	2		4.2		5.1	0.6			0.9
FOP (Poland)	5		63.7		74.5	3.4			3.4
Total	10		147.8		171.3	10.9			10.3

2.     Non-controlling interests in funds and joint ventures managed by FPAM at 31 March 2018:

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/(losses) earned by fund 31 March 2018	Group's share of pre-tax profits earned by fund 31 March 2017
		£'000	£'000	£'000	£'000
Interest in associates
5PT	37.8%	721	824	113	129
RPT	28.6%	105	105	(87)	45
EAS	27.0%	116	116	(6)	-
FRS	24.1%	624	782	539	125
FGC	28.2%	1,920	2,214	270	220
FKR	18.1%	1,239	1,695	121	-
Share of results in associates		4,725	5,736	950	519

Investments
UKPPP	0.9%	887	887	63	60
PDR	4.9%	2	2	-	-
SPEC OPPS	4.0%	768	768	-	-
OFFICES	1.6%	1,960	1,960	-	-
KBP	-	900	900	-	-
Sub Total		4,517	4,517	63	60

Total		9,242	10,253	1,013	579

Revenue from Group Properties, including FOP, amounted to £22.54 million (2017: £21.62 million), generating a profit before unallocated central overheads and tax of £11.18 million (2017: £11.53 million). This represents 91.76% (2017: 96.61%) of Group profit before unallocated central overheads and tax.

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 2018	Year to 31 March 2017
	€m.	€m.
Net operating income (NOI)	18.77	19.47
Interest expense on bank loans / finance leases	(3.15)	(3.42)
NOI after interest expense	15.62	16.05
Current tax	(1.40)	(1.40)
Debt amortisation	(7.84)	(7.20)
Capital expenditure	(2.83)	(2.47)
Free cash	3.55	4.98
Market value of properties	€195.43	€192.29
Average yield on market value	9.60%	10.13%
Bank loans/ finance leases outstanding	€134.16	€137.41
Loan to value (LTV)	68.65%	71.46%
Weighted average unexpired  lease term (WAULT)	3yrs, 9mths	3yrs, 7mths
Vacancy rate	13.77%	2.18%

The year on year reduction in net operating income by €700,000 (or 3.6%) was caused mainly by the sale of a warehouse in Ploesti, Romania, in March 2017, and the subsequent lease expiry of another warehouse in Tureni, Romania, in December 2017. Around 40% of the vacant space at Tureni has been re-let (for some €135,000 per annum) to a UK manufacturer of automotive control systems and we are currently marketing the remainder of the space.

The loans secured against our Group 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 (49%) of these loans. A one percentage point increase from current market interest rates would increase the annual interest bill by £610,000 per annum (2017: £825,000).  The current weighted average borrowing cost is 2.34% (2017: 2.35%).

In February 2018 we obtained vacant possession of 10,000 m2 of space in Chalubinskiego 8, Warsaw (previously known as Oxford Tower) following the expiry of a lease which previously generated some €3.00 million of income per annum. Encouragingly, we have already re-let some 26% of this newly vacant space which will generate some €1.21 million per annum, though this will not be payable until we have re-fitted out the space. As a result of this vacancy we expect the Group's earnings from this property to reduce for the year to 31 March 2019. There is also other tenant demand for the remaining vacant space and we hope to report positively on this in due course. 

Fprop Opportunities plc ("FOP"):

The contribution by FOP to Group profit before tax amounted to £2.16 million (2017: £2.26 million). FOP is earning a pre-tax rate of return on equity invested (at current market values) of some 16% per annum. We expect this rate to increase this year as new tenants at Galeria Ostrowiec begin to pay rent.

We have continued to sell shares held by the Group in FOP. Such sales during the year amounted to £4.27 million (2017: £1.70 million), representing 17.77% of FOP's issued share capital and resulting in a capital profit for the Group of £1.11 million (2017: £552,000).

The Group's shareholding in FOP at the year-end represented 51.46% (2017: 69.23%) of FOP's issued share capital.

Associates and Investments:

The contribution to Group profit before tax, prior to the deduction of unallocated central overheads, from our nine minority shareholdings in funds managed by FPAM increased by 75% to £1.01 million (2017: £579,000). The increased contribution largely arose from the Group's share of profits in Fprop Romanian Supermarkets Ltd, which sold three of its nine properties at a profit. The contribution from associates and investments represented 9.06% of the total contribution by Group properties.

Krakow Business Park ("KBP")

On 20 September 2017 the Group acquired a number of Polish companies which own properties located in Krakow Business Park in Krakow for a total consideration of £900,000. These properties mainly comprised four office buildings with a gross leasable area of some 50,000 m2, half of which was vacant. At the time of purchase the value of these properties was compromised by the debt secured on them, which was in default. As a result of this default, the results of these companies have not been consolidated into the results of the Group as at 31 March 2018. Instead they have been accounted for as a trade investment.

On 25 May 2018, after the year end, the bank loan was restructured and is no longer in default. The value of the debt secured on these properties is €47 million.

With effect from later in June/ July 2018 the park is to be renamed Eximius Park.

Commercial Property Markets Outlook

Poland:

GDP growth in Poland, which is forecast at 3.8% in 2018 and 3.1% in 2019, continues to exceed that of most other EU member states, as it has done since its entry into the EU.

Investor demand for commercial property remains robust. Investment volumes in 2017 exceeded €5 billion, the highest since 2006. The yield for prime offices and retail properties is sub 6% per annum but the yields available on good secondary property, of the sort we favour, remain attractive at around 7.5% plus per annum.

Romania:

GDP growth in Romania surged in 2017 to 6.7% and is forecast at 4.5% in 2018 and 4.0% in 2019.

Investor demand for commercial property is increasing but remains low. Transaction volumes in 2017 amounted to some €1 billion (2016:  €0.9 billion), of which c40% was invested in Bucharest.

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.

United Kingdom:

GDP growth in the UK slowed in the first quarter of 2018 to 0.1% per annum but the forecast rate for the year is still around 1.2%.

Commercial property transactions in 2017 exceeded £65 billion, up 25% from £52 billion in 2016. The office sector accounted for 37% (£24 billion) of all investment whilst retail volumes declined to £11.5 billion and are forecast to remain under pressure this year. Retail warehouse volumes were virtually unchanged in 2017 at £2.8 billion, reflecting ongoing appetite for relatively stable long income, coupled with vacancy rates falling to their lowest level since 2007.

Current Trading and Prospects

The year just ended was another one of substantial operational and financial progress.

The growth of our fund management division continued apace with third party assets under management increasing by some 45%.

Both divisions are trading well and although we have had a significant vacancy in a Group property, Chalubinskiego 8 (previously known as Oxford Tower) in February 2018, we have already re-leased some 26% of this space and are experiencing healthy interest in the remaining space which we expect to re-let in due course.

We have a number of exciting opportunities both in the UK and Central Europe and we hope to report positively on these as the year unfolds.

Ben Habib

Chief Executive

8 June 2018

FINANCE DIRECTOR'S REVIEW

The financial year ended 31 March 2018, was a second successive record one for the Group with profit before tax advancing to £9.23 million from £9.14 million and a more significant increase in net assets (with properties held at cost) of 21.86% to £52.92 million (2017: £43.43 million) The results were aided by an improved performance from the Fund Management division and again by a stronger Euro.

The annualised growth in adjusted net assets together with dividends paid to shareholders over the last five years equates to 25.26% per annum (2017: 24.68% per annum).

Revenue and Gross profit

An operating and financial review of the two trading divisions' results for the year is included in the Chief Executive's Statement above.

Operating expenses

An overall increase in expenses of 11.59% to £9.16 million was incurred as the Group continued to invest in its employees. This included the costs of an increased headcount in the UK and Poland. Wage inflation in Poland and Romania is increasing more rapidly than the UK. In relation to last year the overall cost of all staff incentives increased by 4.00%. The overseas overhead costs also suffered from a stronger Polish and Romanian local currency when these costs are translated into GBP sterling (our reporting currency) to the extent of £473,000 compared to last year.   

Profit on sale of shares in 'FOP'

As part of the Group's aim to simplify its structure and achieve a more balanced contribution from each of its two trading divisions the Group continued to sell shares in FOP reducing the Group's holding from 69.23% to 51.46%. These sales resulted in a profit of £1.11 million (2017: £552,000).

Impairment loss to investment property

The charge of £183,000 (2017: £219,000), relates to the reduction in fair value below original cost of one property located in Poland owned by the FOP fund.

Share of results of associates

The Group's share of profits after tax of its associates of £950,000 (2017: £519,000) included the Group's share of profit from the sale of 3 of the 9 supermarkets, owned by Fprop Romanian Supermarkets Ltd, of £397,000, the first year of contribution from Fprop Krakow Ltd, a fund launched in April 2017 and a £193,000 impairment loss (2017: Nil) associated with the Group's investments in Regional Property Trading Ltd and E & S Estates Ltd.   

Financing costs

The Group's finance costs are in line with previous years. All bank loans and finance leases are denominated in Euros and all are used to finance properties which are all valued in Euros.

Current tax

The current tax charge of £1.38 million (2017: £1.16 million) is in line with previous years and is incurred entirely in Poland and Romania where the mainstream tax rates are 19% and 16% respectively. No UK corporation tax was incurred as brought forward losses of £6.4 million (2017: £4.60 million) were available to be utilised.

Deferred tax

A deferred tax charge of £90,000 (2017: credit of £608,000) is the main cause of the increase in the total tax charge. This was due to a reduction in the deferred tax asset in respect of foreign bank loans and investment properties (both denominated in Euros).

Non-controlling interests

The sale of shares in FOP has increased the non-controlling interest in FOP from 30.77% to 48.54%. The effect has been to increase the profit for the year attributable to the non-controlling interest to £1.00 million (2017: £757,000).

The other non-controlling interest in CORP of 10% has remained the same as last year.

Earnings per share

Basic earnings per share have decreased by 13.78% to 5.82 pence per share (2017: 6.75 pence per share), a larger decrease than the 9.66% decrease in the profit (after tax) for the year. This is due to the increase in the non-controlling interest mentioned above.

BALANCE SHEET and CASHFLOW

Investment Properties and Property held under inventory (all held at cost)

All properties have been revalued at the year end, the result of which was a net increase in value of €3.14 million compared to 2017. This increase was primarily due to an increase in the values of the shopping centre at Ostrowiec and Blue Tower, the office block in Warsaw, both independently valued by professional valuers.

Capital expenditure (investment and trade properties)

Capital expenditure of £2.48 million (2017: £2.12 million) comprised development expenditure of £2.00 million (2017: £1.64 million) on the expansion of the shopping centre located in Ostrowiec, Poland. This development was completed during the year and has been open for trade since the autumn of 2017. The development has been reflected in an upward revaluation of the shopping centre from €31.25 million to €36.20 million but is carried at cost in these accounts.

Cash, cash flow and liquidity

Cash levels decreased by £630,000 from £15.95 million to £15.32 million despite total capital expenditure of £2.48 million, bank loan repayments of £6.90 million, new investments in new UK and Polish funds of £3.75 million and dividends paid of £1.80 million, thus retaining the Group's ability to exploit investment opportunities as they arise.

Borrowings

All bank and finance lease borrowings are denominated in Euros. The overall level of debt decreased from €137.41 million to €134.16 million after scheduled bank loan repayments of €7.84 million and taking into account a new top up loan of €4.50 million in FOP and accrued interest. All loan-to-value covenants to which these loans are subject have been respected. On an adjusted NAV basis, the Group's total gearing ratio was 65.12%.

POST BALANCE SHEET EVENT

After the year end, on 6 April 2018, the Group purchased into treasury 4,775,000 Ordinary shares of 0.01p each which reduced the number of shares in issue to 111,241,546 Ordinary shares, a reduction of 4.1%. This should serve to enhance our earnings per share and adjusted net asset value per share results for the year to 31 March 2019.

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2018

	Notes	Year ended 31 March 2018 (unaudited) Total results	Year ended 31 March 2017   (audited) Total results
		£'000	£'000
Revenue	3	25,460	23,663
Cost of sales		(6,030)	(5,065)
Gross profit		19,430	18,598
Profit on sale of an investment property		-	890
Profit on the sale of 'FOP' shares		1,112	552
Impairment loss to an investment property		(183)	(219)
Operating expenses		(9,158)	(8,207)
Operating profit		11,201	11,614
Share of results in associates	9	950	519
Distribution income		63	60
Interest income	4	82	135
Interest expense	4	(3,063)	(3,191)
Profit before tax		9,233	9,137
Tax charge	5	(1,473)	(547)
Profit for the year		7,760	8,590
Attributable to:
Owners of the parent		6,755	7,833
Non-controlling interests		1,005	757
		7,760	8,590
Earnings per share:
Basic	6	5.82p	6.75p
Diluted	6	5.70p	6.61p

All operations are continuing.

CONSOLIDATED SEPARATE STATEMENT

OF OTHER COMPREHENSIVE INCOME

for the year ended 31 March 2018

		Year ended 31 March 2018 (unaudited) Total results	Year ended 31 March 2017 (audited) Total results
		£'000	£'000
Profit for the year		7,760	8,590
Other comprehensive income
Exchange differences on retranslation of foreign subsidiaries		1,590	2,008
Revaluation of available-for-sale financial assets		(3)	(29)
Taxation		-	-
Total comprehensive income for the year		9,347	10,569
Total comprehensive income for the year attributable to:
Owners of the parent		8,131	9,974
Non-controlling interests		1,216	595
		9,347	10,569

CONSOLIDATED BALANCE SHEET

As at 31 March 2018

	Notes	As at 31 March 2018 (unaudited) £'000	As at 31 March 2017 (audited) £'000
Non-current assets
Goodwill	7	153	153
Investment properties	8	132,180	128,428
Property, plant and equipment		66	97
Interest in associates	9a)	4,725	4,347
Other financial assets	9b)	4,517	897
Other receivables	11	1,766	2,108
Deferred tax assets	13	4,518	4,341
Total non-current assets		147,925	140,371
Current assets
Inventories - land and buildings	10	15,586	15,115
Current tax assets		100	160
Trade and other receivables	11	5,154	4,890
Cash and cash equivalents		15,315	15,946
Total current assets		36,155	36,111
Current liabilities
Trade and other payables	12	(8,298)	(9,848)
Financial liabilities	14	(8,319)	(19,641)
Current tax liabilities		(230)	(314)
Total current liabilities		(16,847)	(29,803)
Net current assets		19,308	6,308
Total assets less current liabilities		167,233	146,679
Non-current liabilities:
Financial liabilities	14	(110,768)	(100,043)
Deferred tax liabilities	13	(3,543)	(3,208)
Net assets		52,922	43,428
Equity
Called up share capital		1,166	1,166
Share premium		5,789	5,781
Share-based payment reserve		203	203
Foreign exchange translation reserve		1,398	19
Investment revaluation reserve		(70)	(67)
Retained earnings		38,249	33,311
Equity attributable to the owners of the parent		46,735	40,413
Non-controlling interests		6,187	3,015
Total equity		52,922	43,428
Net assets per share	6	40.29p	34.84p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2018

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 2017	1,166	5,781	203	19	(99)	(67)	33,410	3,015	43,428
Profit for the year	-	-	-	-	-	-	7,760	-	7,760
Fair value (or revaluation) gains/ (losses) on available-for-sale financial assets to profit or loss	-	-	-	-	-	(3)	-	-	(3)
Change in proportion held by NCI	-	-	-	-	-	-	-	2,000	2,000
Movement on foreign exchange	-	-	-	1,379	-	-	-	211	1,590
Sale of treasury shares	-	8	-	-	4	-	-	-	12
New shares issued	-	-	-	-	-	-	-	-	-
Non-controlling interests	-	-	-	-	-	-	(1,005)	1,005	-
Dividends paid	-	-	-	-	-	-	(1,821)	(44)	(1,865)
At 31 March 2018	1,166	5,789	203	1,398	(95)	(70)	38,344	6,187	52,922
At 1 April 2016	1,166	5,773	203	(2,151)	(103)	(38)	27,334	1,906	34,090
Profit for the year	-	-	-	-	-	-	8,590	-	8,590
Fair value (or revaluation) gains/ (losses) 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

CONSOLIDATED CASH FLOW STATEMENT 

for the year ended 31 March 2018

		2018	2017
		Group £'000	Group £'000
Cash flows from operating activities
Operating profit		11,201	11,614
Adjustments for:
Depreciation of investment property and property, plant & equipment		2,272	1,960
Profit on the sale of  an investment property		-	(890)
Profit on the sale of FOP shares		(1,112)	(552)
Impairment loss on an investment property		183	219
(Increase)/ decrease in inventories		(107)	(130)
Decrease/ (increase) in trade and other receivables		240	305
(Decrease)/ increase in trade and other payables		(1,746)	1,637
Other non-cash adjustments		263	615
Cash generated from operations		11,194	14,778
Taxes paid		(1,407)	(1,156)
Net cash flow from operating activities		9,787	13,622
Cash flow from/ (used in) investing activities
Capital expenditure on investment properties		(2,375)	(1,990)
Proceeds from partial disposal of available-for-sale assets		633	239
Purchase of property, plant & equipment		(19)	(26)
Proceeds from the sale of 'FOP' shares		3,112	1,108
Investment in shares of new associates		(122)	(1,119)
Investment in funds		(3,623)	-
Interest received		82	135
Dividends from associates		61	96
Distributions received		68	64
Net cash flow used in investing activities		(2,183)	(1,493)
Cash flow from/ (used in) financing activities
Net repayment of shareholder loan in subsidiary		(1,841)	(227)
Proceeds from bank loan		3,994	-
Repayment of bank loans		(3,498)	(3,125)
Repayment from the sale of FOP shareholder loan		1,157	534
Repayment of a short term loan to an associate		-	5,083
Repayment of finance lease		(3,403)	(2,950)
Sale of shares held in treasury		12	12
Proceeds from the issue of share capital		-	-
Interest paid		(2,915)	(3,100)
Dividends paid		(1,821)	(1,757)
Dividends paid to non-controlling interests		(44)	(42)
Net cash flow used in financing activities		(8,359)	(5,572)
Net increase/ (decrease) in cash and cash equivalents		(755)	6,557
Cash and cash equivalents at the beginning of the year		15,946	8,975
Currency translation gains on cash and cash equivalents		124	414
Cash and cash equivalents at the year end		15,315	15,946

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 2018. These are consistent with the policies applied for the year ended 31 March 2017. 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 2017 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 2018.

2.             Revenue

Revenue from continuing operations consists of revenue arising in the United Kingdom 8% (2017: 7%), Poland 87% (2017: 85%) and Romania 5% (2017: 8%). All revenue relates solely to the Group's principal activities.

3.             Segment reporting 2018

	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
Rental income	-	12,132	6,177	-	18,309
Service charge income	-	2,498	1,733	-	4,231
Asset management fees	2,731	-	-	-	2,731
Performance fees	189	-	-	-	189
Total revenue	2,920	14,630	7,910	-	25,460
Depreciation and amortisation	(40)	(1,983)	(249)	-	(2,272)
Operating profit	1,004	9,404	3,749	(2,956)	11,201
Share of results in associates	-	950	-	-	950
Distribution income	-	63	-	-	63
Interest income	-	53	20	9	82
Interest payable	-	(1,455)	(1,608)	-	(3,063)
Profit/ (loss) before tax	1,004	9,015	2,161	(2,947)	9,233
Analysed as:
Underlying profit/(loss) before tax before adjusting for the following items:	1,329	9,975	2,843	(941)	13,206
Impairment losses	-	(193)	(183)	-	(376)
Profit on the sale of 'FOP' shares	-	1,112	-	-	1,112
FPG's share in associate's profit from the sale of investment properties	-	397	-	-	397
Depreciation	-	(1,739)	-	-	(1,739)
Performance and related fees	189	-	-	-	189
Staff incentives	(538)	(214)	(213)	(1,915)	(2,880)
Realised foreign currency (loss)/gains	24	(323)	(286)	(91)	(676)
Total	1,004	9,015	2,161	(2,947)	9,233
Assets - Group	1,362	100,072	68,147	9,774	179,355
Share of net assets of associates	-	5,033	-	(308)	4,725
Liabilities	(204)	(75,337)	(53,562)	(2,055)	(131,158)
Net assets	1,158	29,768	14,585	7,411	52,922
Additions to non-current assets
Property, plant and equipment	19	-	-	-	19
Investment properties	-	371	2,004	-	2,375
Trading stock	-	107	-	-	107
Interest in associates	-	122	-	-	122

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
Rental income	-	12,165	5,229	-	17,394
Service charge income	-	2,464	1,759	-	4,223
Asset management fees	2,046	-	-	-	2,046
Performance fees	-	-	-	-	-
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
Impairment loss to an investment property	-	-	(219)	-	(219)
Profit on the sale of 'FOP' shares	-	552	-	-	552
Profit on the sale of an investment 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)/ gains	-	(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
Trading stock	-	130	-	-	130
Interest in associates	-	1,119	-	-	1,119

4.             Interest income

	2018	2017
	Group £'000	Group £'000
Interest income - bank deposits	28	35
Interest income - other	54	100
Total interest income	82	135

	2018	2017
	Group £'000	Group £'000
Interest expense - property loans	(2,078)	(2,192)
Interest expense - bank and other	(142)	(160)
Finance charges on finance leases	(843)	(839)
Total interest expense	(3,063)	(3,191)

5.             Tax expense

	2018 £'000	2017 £'000
Analysis of tax charge for the year
Current tax	(1,383)	(1,155)
Deferred tax	(90)	608
Total tax charge for the year	(1,473)	(547)

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.

6.             Earnings/ NAV per share

	2018	2017
Basic earnings per share	5.82p	6.75p
Diluted earnings per share	5.70p	6.61p
	£'000	£'000
Basic earnings	6,755	7,833
Diluted earnings assuming full dilution	6,763	7,841

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

	2018 Number	2017 Number
Weighted average number of Ordinary shares in issue (used for basic earnings per share calculation)	116,004,730	115,975,959
Number of share options	2,700,000	2,700,000
Total number of Ordinary shares used in the diluted earnings per share calculation	118,704,730	118,675,959

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

	2018 £'000	2017 £'000
Basic earnings per share
Basic earnings	6,755	7,833
Diluted earnings per share
Basic earnings	6,755	7,833
Notional interest on share options assumed to be exercised	8	8
Diluted earnings	6,763	7,841

	2018	2017
Net assets per share	40.29p	34.84p
Adjusted net assets per share	53.07p	47.64p

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	46,735	40,413
	£'000		£'000
For adjusted net assets per share
Net assets excluding non-controlling interests	46,735		40,413
Investment properties at fair value net of deferred tax	10,272		10,740
Inventories at fair value net of deferred tax	4,582		4,128
Other items	1,409		1,267
Total	62,998		56,548

	Number	Number
Number of shares in issue at year end	116,016,546	115,992,699
	Number	Number
Number of shares in issue at year end	116,016,546	115,992,699
Number of share options assumed to be exercised	2,700,000	2,700,000
Total	118,716,546	118,692,699

7.             Goodwill

	2018	2017
	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

	2018	2017
	Group £'000	Group £'000
Investment properties
At 1 April	128,428	120,718
Capital expenditure	2,375	1,990
Disposal	-	(1,711)
Depreciation	(2,204)	(1,891)
Fair value adjustment	(183)	(219)
Foreign exchange translation	3,764	9,541
At 31 March	132,180	128,428

Investment properties owned by the Group, and indirectly via FOP are stated at cost less depreciation and accumulated impairment losses. The properties were valued at the Group's financial year end at €171.20 million (2017: €168.66 million), the Sterling equivalent at closing foreign exchange rates being £150.10 million (2017: £144.26 million).

On acquisition of the Gdynia Podolska property the Directors took the decision to depreciate the property over the lease term. In the Directors' 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:

	2018	2017
	Group £'000	Group £'000
a) Associates
At 1 April	4,347	3,044
Additions	122	1,119
Shareholder loan repayments	(633)	(239)
Share of associates profit after tax	1,143	519
Impairment	(193)	-
Dividends received	(61)	(96)
At 31 March	4,725	4,347

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:

	2018	2017
	Group £'000	Group £'000
Investments in associates
5th Property Trading Ltd	1,029	916
Regional Property Trading Ltd	105	192
E and S Estates Ltd	116	-
Fprop Romanian Supermarkets Ltd	624	750
Fprop Galeria Corso Ltd	1,920	1,678
Fprop Krakow Ltd	1,239	1,119
	5,033	4,655
Less: Share of profit after tax withheld on sale of property to 5th Property Trading Ltd in 2007	(308)	(308)
	4,725	4,347

If the Group had adopted the alternative fair value model for accounting for investment properties, the carrying value of the investments in associates would have increased to £5.74 million (2017: £5.27 million).

	2018	2017
	Group £'000	Group £'000
b) Other financial assets and investments
At 1 April	897	914
Additions	3,623	12
Disposals	-	-
Decrease in fair value during the year	(3)	(29)
At 31 March	4,517	897

The Group holds four unlisted investments in funds managed by it. All 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 to the fair value of their net assets.

10.          Inventories - land and buildings

	2018	2017
	Group £'000	Group £'000
Group properties for resale at cost
At 1 April	15,115	13,894
Capital expenditure	107	130
Foreign exchange translation	364	1,091
At 31 March	15,586	15,115

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 £21.24 million (€24.23 million) up from £20.21 million (€23.63 million) in 2017 but is stated at cost as above.

11.          Trade and other receivables

	2018	2017
	Group £'000	Group £'000
Current assets
Trade receivables	2,070	2,003
Less provision for impairment of receivables	(640)	(626)
Trade receivables net	1,430	1,377
Other receivables	2,462	2,435
Prepayments and accrued income	1,262	1,078
	5,154	4,890
Non-current assets
Other receivables	1,766	2,108
Other receivables, under non-current assets, relates to the deferred consideration from the sale of an investment property located in Romania. This has been discounted to reflect its current value.

12.          Trade and other payables

	2018	2017
	Group £'000	Group £'000
Current liabilities
Trade payables	3,405	2,941
Other taxation and social security	946	799
Other payables and accruals	3,425	5,275
Deferred income	522	833
	8,298	9,848

13.          Deferred tax

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

	2018	2018	2018	2017	2017	2017
	Group net assets £'000	Group assets £'000	Group liabilities £'000	Group net assets £'000	Group assets £'000	Group liabilities £'000
Accrued interest payable	(1,082)	551	(1,633)	(1,114)	457	(1,571)
Accrued income	(4)	-	(4)	(4)	-	(4)
Foreign bank loan	1,678	2,121	(443)	1,945	2,086	(141)
Investment properties and inventories	99	1,534	(1,435)	203	1,473	(1,270)
Other temporary differences	284	312	(28)	103	325	(222)
	975	4,518	(3,543)	1,133	4,341	(3,208)

14.          Financial liabilities

	2018 Group £'000	2017 Group £'000
Current liabilities
Loans repayable by subsidiary (FOP) to third party shareholders	1,464	2,148
Bank loan	3,411	3,180
Finance leases	3,444	14,313
	8,319	19,641
Non-current liabilities
Bank loans	65,719	63,850
Finance leases	45,049	36,193
	110,768	100,043

	2018 Group £'000	2017 Group £'000
Total obligations under bank loans and finance leases
Repayable within one year	8,319	19,641
Repayable within one and five years	96,087	65,726
Repayable after five years	14,681	34,317
	119,087	119,684

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 £117.62 million (2017: £117.54 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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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