Interim Results

RNS Number : 1410I

First Property Group PLC

22 November 2018

 

Date:	22 November 2018
On behalf of:	First Property Group plc ("First Property" or "the Group")
Embargoed:	0700hrs

First Property Group plc

Interim Results for the six months to 30 September 2018                                                                                

First Property Group plc (AIM: FPO), the award winning property fund manager and investor with operations in the United Kingdom and Central Europe, today announces its interim results for the six months to 30 September 2018.

Financial Highlights:

·      Profit before tax of £3.82 million (2017: £4.98 million);

·      Cash unchanged at £10.01 million (2017: £10.00 million) after cash outflows from investments (over the past year) of £5.17 million;

·      Adjusted NAV per share of 62.21 pence per share (2017: 51.25 pence per share);

·      Interim dividend of 0.44 pence per share (2017: 0.42 pence per share).

Operational Highlights:

·      Assets under management £730 million (2017: £554 million);

·      Third party assets under management £551 million (2017: £382 million);

·      Weighted average unexpired fund management contract term: 6.30 years (2017: 6.08 years);

·      Two new funds established (one invested in Poland, the other in Romania, together amounting to some €80 million) with investors including a client of Willis Towers Watson and Oxbridge colleges.

Post period-end Highlight:

·      Deconsolidation of subsidiary, Fprop Opportunities plc (FOP), from 12 October 2018 following the sale of a 6.74% interest.

Financial Summary:

	Unaudited Six months to 30 Sept 2018	Unaudited Six months to 30 Sept 2017	Percentage change	Audited Year to 31 March 2018
Income Statement:
Revenue	£11.16m	£12.09m	-7.69%	£25.46m
Statutory profit before tax	£3.82m	£4.98m	-23.29%	£9.23m
Diluted earnings per share	1.69p	2.84p	-40.49%	5.70p
Dividend per share	0.44p	0.42p	+4.76%	1.60p
Average £/€ rate	0.886	0.881	+0.57%	0.881
Balance Sheet at period end:
Net assets per share	39.39p	35.68p	+10.40%	40.29p
Adjusted net assets per share (EPRA basis)	62.21p	51.25p	+21.39%	53.07p
Cash Balances	10.01m	£10.00m	+0.10%	£15.32m
Period end £/€ rate	0.891	0.881	+1.14%	0.877
Group Property portfolio at period end:
Properties at book value	£152.4m	£146.3m	+4.17%	£147.8m
Properties at market value	£178.3m	£171.9m	+3.72%	£171.3m
Gross Debt (non-recourse to the Group)	£120.8m	£117.8m	+2.55%	£117.6m
LTV%	67.76%	68.53%		68.65%
Associates and Investments at market value	£20.1m	£9.1m	+120.88%	£10.3m
Total assets under management:	£730m	£554m		£626m
United Kingdom	58.0%	57.0%		62.3%
Poland	39.9%	40.8%		35.8%
Romania	2.1%	2.2%		1.9%

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

"This has been a good six months for First Property.

"The reduction in profit before tax should only be temporary and is due virtually entirely to the expiry of Citi Group's lease at one of our two towers in Warsaw, CH8 (previously known as Oxford Tower), as previously flagged. We expect this vacant space to be leased in the near future.

"Third party funds under management increased by 44% from the prior year and the Group's adjusted net assets per share increased by 21% over the same period.

"We are particularly excited by the investments we are acquiring on behalf of Fprop Offices in the UK and the prospects of Eximius Park in Krakow, both of which should result in material contributions to group profits in due course.

"We look forward to delivering continued growth and increasing levels of profitability for our clients and shareholders."

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 [phone], passcode 613421. 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: [phone]
Ben Habib (Chief Executive & Chief Investment Officer) George Digby (Group Finance Director) Jeremy Barkes (Director, Business Development)	www.fprop.com
Arden Partners	Tel: [phone]
John Llewellyn-Lloyd/ Ben Cryer
Newgate Communications	Tel: [phone]
Robin Tozer/ Elisabeth Cowell	[e-mail]

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. It has grown its adjusted net assets, together with dividends paid, by some 28% per annum since 2006.

The Group's 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 thirteen 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 comprise nine commercial properties in Poland and Romania and non-controlling interests in nine of the thirteen funds managed by FPAM.

Listed on AIM the Company has offices in London, Warsaw and Bucharest. Around one third of the shares in the Company are owned by management and their families. 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 interim results for the six months ended 30 September 2018.

Revenue earned by the Group amounted to £11.16 million (2017: £12.09 million) yielding a profit before tax of £3.82 million (2017: £4.98 million). Diluted earnings per share were 1.69 pence (2017: 2.84 pence). The reduction in revenue and profit before tax was virtually entirely due to the expiry of Citi Group's lease at one of our two towers in Warsaw, CH8 (previously known as Oxford Tower). We expect this vacant space to be leased in the near future.

The Group ended the period with reported net assets of £50.76 million (2017: £44.91 million), an increase of 13.0%. It is the accounting policy of the Group to carry its 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 £70.89 million (2017: £60.84 million), an increase of 16.5%.

Group cash balances at the period end were unchanged versus the prior year at £10.01 million (2017: £10.00 million) and reduced by £5.31 million from the financial year end (31 March 2018: £15.32 million). Of the cash held, £2.03 million (2017: £2.83 million) was held by FOP (51.02% owned by the Group until 12 October 2018) and £684,000 was held by Corp Sp. z o.o. (90% owned by the Group), the property management company for Blue Tower in Warsaw. During the period the Group purchased 4,775,000 of its own Ordinary Shares for a total consideration of £2.2 million and made additional investments in its funds of £1.6 million.  

Dividend:

The Directors have resolved to increase the interim dividend by 4.8% to 0.44 pence per share (2017: 0.42 pence per share) which will be paid on 28 December 2018 to shareholders on the register at 30 November 2018, with an ex-dividend date of 29 November 2018.

Review of Operations:

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

As at 30 September 2018 aggregate assets under management amounted to £730 million (2017: £554 million), an increase of 32% from the prior year. Of this £551 million was managed on behalf of third parties (2017: £382 million), an increase of 44% from the prior year and an increase of £97 million or 21% from the 2018 financial year-end. The increase since the 2018 financial year-end was attributable to two additional investments in the UK and the establishment of two new funds, Fprop Phoenix Ltd and Fprop Cluj Ltd, which are invested in Poland and Romania respectively.

58.0% of aggregate assets under management were located in the UK, 39.9% in Poland, and 2.1% in Romania.

Fund management fees are generally levied monthly by FPAM by reference to the value of properties under management. In the case of Fprop Offices LP the Group does not receive any fees but instead shares in the profits earned by the fund. Revenue growth inevitably lags the growth in assets under management because investments made during a given period do not benefit from full period fee or profit contributions, and in the case of Fprop Offices LP also needs to overcome standard property purchase costs in the UK of 6.8% of a given property's value before a profit share can be earned. 

Revenue earned from fund management increased by 4% to £1.55 million (2017: £1.49 million), resulting in a profit before unallocated central overheads and tax of £798,000 (2017: £804,000). This represents 15.8% (2017: 11.7%) of Group profit before unallocated central overheads and tax. The Group has not yet recognised any profits from Fprop Offices LP pursuant to the profit share agreement but expects to do so in the second half of the current financial year.

At the period end FPAM's fund management fee income, excluding performance fees, was being earned at an annualised rate of £2.90 million (2017: £2.64 million).

FPAM's weighted average unexpired fund management contract term at the period end was 6.30 years (2017: 6.08 years).

FPAM now has over 100 clients of which pension funds represent 76% by value, endowments funds represent 10% by value and private clients represent 9% by value. The balance is represented by the Group's investments in its funds (which are accounted for as investments and associates).  

The reconciliation of movement in funds under management during the period 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 2018	389.9	64.5	454.4	68		171.3	10		625.7	78
Purchases	31.8	-	31.8	2		-	-		31.8	2
New fund mandates	-	72.1	72.1	5		-	-		72.1	5
Property sales	-	(4.3)	(4.3)	(4)		-	-		(4.3)	(4)
Transfer to Group Properties	-	(5.4)	(5.4)	(4)		5.4	4		-	-
Capital expenditure	-	-	-	-		0.6	-		0.6	-
Property depreciation	-	-	-	-		(1.2)	-		(1.2)	-
Property revaluation	1.4	0.4	1.8	-		(0.3)	-		1.5	-
FX  revaluation	-	1.0	1.0	-		2.5	-		3.5	-
As at 30 Sept 2018	423.1	128.3	551.4	67		178.3	14		729.7	81

At the period end FPAM managed thirteen (2017: twelve) closed-end funds. A brief synopsis of the value of assets and maturity of each of these vehicles is set out below:

Fund	Country of investment	Fund expiry	Assets under management at market value at 30 Sept 2018	% of total assets  under management	Assets under management at market value at 30 Sept 2017
			£m.	%age	£m.
SAM & DHOW	UK	Rolling	*	*	*
RPT/E&S	Poland	Aug 2020	**	**	7.1
5PT	Poland	Dec  2022	8.2	1.1%	8.7
UK PPP	UK	Feb 2022	92.0	12.6%	93.3
SIPS	UK	Jan 2025	166.3	22.8%	156.1
FRS	Romania	Sept 2025	2.5	0.3%	6.7
FGC	Poland	Aug 2024	22.2	3.1%	21.2
FKR	Poland	Apr 2024	23.4	3.2%	22.3
SPEC OPPS	UK	Jan 2027	19.1	2.6%	15.4
OFFICES	UK	Jun 2024	145.8	20.0%	51.1
FPL	Poland	June 2028	64.0	8.8%	-
FCL	Romania	June 2028	7.9	1.1%	-
Sub Total			551.4	75.6%	381.9
FOP	Poland	Oct 2025	75.3	10.3%	73.9
RPT/E&S	Poland	Aug 2020	5.4	0.7%	**
Wholly owned by the Group	Poland & Romania	n/a	97.6	13.4%	98.0
Sub Total			178.3	24.4%	171.9
Total			729.7	100.0%	553.8

* Not subject to recent revaluation

**With effect from 1 August 2018 RPT/E&S were consolidated into Group Properties

GROUP PROPERTIES

At the period end Group Properties comprised:

·      Fourteen commercial properties in Poland and Romania, five of which were held by FOP (in which the Group was the majority shareholder until 12 October 2018), and four of which (with effect 1 August 2018) were jointly held by Regional Property Trading Ltd (RPT) and E&S Estates Ltd (E&S). These fourteen properties are accounted for under the cost model at £152 million. Their fair value is £178 million. See table 1 below.

·      Non-controlling interests in nine of the thirteen funds managed by FPAM as set out in table 2 below. Of these:

o  Six are accounted for as Associates under the cost model, resulting in a carried value of £5.99 million. If the Group were to adopt the fair value model, the carrying value of its investments in Associates would increase to £16.53 million;

o  Three are accounted for as Investments in funds and are carried at fair value of £3.54 million (2017: £3.26 million).

1.     Fourteen properties (including five held by FOP and four held by RPT/E&S) as at 30 September 2018:

Country	No. of properties	Book value	Market value	Contribution to Group profit before tax period to 30 Sept 2018*		Contribution to Group profit before tax period to 30 Sept 2017*
		£m.	£m.		£m.	£m.
Poland	3	78.93	92.30		1.96	3.46
Romania	2	4.21	5.25		0.08	0.46
FOP (all in Poland)	5	63.91	75.33		2.19	1.90
RPT/E&S (all in Poland)	4	5.39	5.39		0.01	-
Total	14	152.44	178.27		4.24	5.82

*Prior to the deduction of unallocated central overheads.

2.     Non-controlling interests in nine funds managed by FPAM as at 30 September 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 earned by fund 30 Sept 2018	Group's share of pre-tax profits earned by fund 30 Sept 2017
			£'000.	£'000.	£'000.	£'000.
a) Associates
5PT		37.8%	884	988	25	56
RPT/E&S		-	-	-	(9)*	27
FRS		24.1%	393	393	275	482
FGC		28.2%	2,040	2,365	168	134
FKR		18.1%	1,279	1,765	85	41
FPL		23.4%	939	10,556	(59)	-
FCL		17.4%	458	462	(2)	-
Sub Total			5,993	16,529	483	740

b) Investments
UK PPP	0.9%	887	887	29	33
SPEC OPPS	4.8%	773	773	20	-
OFFICES	1.6%	1,883	1,883	108	-
Sub Total		3,543	3,543	157	33

Total

9,536

20,072

640

773

* Representing the Group's share of the loss from its associate share in RPT/E&S prior to its consolidation into the Group's accounts on 1 August 2018.

Revenue from Group Properties amounted to £9.61 million (2017: £10.60 million), generating a profit before unallocated central overheads and tax of £4.26 million (2017: £6.08 million) and representing 84.2% (2017: 88.3%) of Group profit before unallocated central overheads and tax.

The reduction in revenue and profit compared to the same period last year was virtually entirely due to the expiry of Citi Group's lease at Chałubińskiego 8, Warsaw (CH8, previously known as Oxford Tower), as explained in fuller detail below.

The contribution to earnings by the Group's fourteen properties, including the five held by FOP (in which the Group held 51.02% as at 30 September 2018) and the four held jointly by RPT and E&S, is detailed below. The table below excludes the Group's non-controlling interests in nine of the thirteen funds managed by FPAM.  

	Six months to 30 Sept 2018	Six months to 30 Sept 2017
	€m.	€m.
Net operating income (NOI)	7.91	9.41
Interest expense on bank loans/ finance leases	(1.58)	(1.59)
NOI after interest expense	6.33	7.82
Current tax	(0.36)	(0.71)
Debt amortisation	(3.95)	(3.66)
Capital expenditure	(0.66)	(2.10)
Free cash	1.36	1.35
Market value of properties	€200.15	€195.08
Average yield on market value	7.9%	9.6%
Bank loans/ finance leases outstanding	€135.62	€133.74
Loan to value (LTV)	67.8%	68.6%
Weighted average unexpired lease term (WAULT)	2.73 yrs	3.13 yrs
Vacancy rate	15.8%	1.5%

The loans secured against these fourteen properties are held in separate non-recourse special purpose vehicles. 

In order to mitigate the effects of potential interest rate rises we have fixed the interest rate on some 40% of the loans by value. A one percentage point increase from current interest rates would increase the Group's interest bill by £650,000 per annum (2017: £563,000). The current weighted average borrowing cost is 2.83% (2017: 2.46%) per annum.

Chałubińskiego 8 (CH8, previously known as Oxford Tower)

Until February 2018 Citi Group leased some 10,000 m² of office space in CH8, equating to just over half the space we own in this tower.

Since the expiry of Citi's lease we have signed new leases over 3,049 m² (around a third of the vacated space) and are in advanced negotiations over a further 4,936 m². We expect the remaining vacant space to be fully leased in the near future.

Fprop Opportunities plc (FOP)

The contribution by FOP to Group profit before unallocated central overheads and tax amounted to £1.78 million (2017: £1.51 million).

The Group has continued to sell shares held by it in FOP. Sales during the period resulted in a capital profit for the Group of £32,000 (2017: £101,000). At the period end the Group held 51.02% (31 March 2018: 51.46%) of the issued share capital. The Group intends to continue to sell its shares until its interest has reduced to some 25%-30%.

After the period end, following further share sales, the Group's share in FOP reduced to 44.3% which permits its deconsolidation from the accounts of the Group. With effect from 12 October 2018 the Group will account for its remaining share of the profits of FOP as an associate undertaking.

Regional Property Trading Ltd (RPT) and E&S Estates Ltd (E&S)

With effect from 1 August 2018 the results of RPT and E&S, which jointly own four properties in Poland, were consolidated into the accounts of the Group, following the Group acquiring full ownership of RPT and 77% of E&S.

Associates and Investments:

The Group's non-controlling interests in funds managed by FPAM contributed £483,000 (2017: £740,000) to Group profit before tax. The reduction compared to the prior year was mainly due to the sale of three supermarkets by Fprop Romanian Supermarkets Ltd (FRS) in the previous financial year, which resulted in a reduced contribution by FRS in  the period just ended of £275,000 (2017: £482,000).

The Group made two new associate investments totalling some £1.46 million during the period in the two new funds established by FPAM, Fprop Phoenix Ltd and Fprop Cluj Ltd.

Fprop Phoenix Ltd is the holding company for Eximius Park (previously known as Krakow Business Park). In late May/ early June 2018 the Group refinanced the loan secured against the properties, which was previously in default, and obtained new equity commitments totalling some €33 million. The Group is not participating in the new equity commitments made resulting in its share in Phoenix reducing to 23.4%.  

Commercial Property Markets Outlook

Poland:

GDP growth in Poland is expected at 5% in 2018 and to exceed 4% in 2019, again putting it at the forefront of EU member states. Inflation has picked up but at just over 2% per annum should be manageable. Government debt remains low by international standards at some 54% of GDP.

Investor demand for commercial property remains high. Volumes are expected to climb to €6 billion in 2018, a new record. Rental growth has been more elusive in recent years due to the volume of new development, but there are signs that this may be changing in some sub sectors, such as offices in Warsaw, due to high take up levels. Capital values for good secondary property remain attractive, yielding around one third more than equivalent property in Western Europe at around 7-9% per annum.

Romania:

In 2017 Romania was the fastest growing country in the European Union, recording GDP growth of over 7%. GDP growth is expected to slow in 2018 to 3.5%, a level which it is forecast to sustain into 2019 and 2020.

Investor demand for commercial property continues to improve but volumes remain slim. Around €1 billion of commercial property is expected to transact in 2018, as it did in 2017, but volume is expected to be more concentrated in the second half of this year. The occupier market is picking up too, as the economy continues to expand but, as in Poland, rental growth remains elusive given the scale of new development.

Bank lending margins are beginning to reduce, which should boost investment demand for commercial property.

United Kingdom:

The Bank of England's decision to raise the base rate by 0.25% to 0.75% in August has had limited impact on the commercial property market so far and nor do we expect it to given the Bank's continued loose monetary policy.

We remain bullish about the prospects of the UK commercial property market and particularly Fprop Offices LP which is currently in the process of investing its capital commitments.

Current Trading and Prospects

This has been a good six months for First Property.

The reduction in profit before tax should only be temporary and is due virtually entirely to the expiry of Citi Group's lease at one of our two tower's in Warsaw, CH8 (previously known as Oxford Tower), as previously flagged. We expect this vacant space to be leased in the near future.

Third party funds under management increased by 44% from the prior year, and the Group's adjusted net assets per share increased by 21% over the same period.

We are particularly excited by the investments we are acquiring on behalf of Fprop Offices in the UK and the prospects of Eximius Park in Krakow, both of which should result in material contributions to group profits in due course.

We look forward to delivering continued growth and increasing levels of profitability for our clients and shareholders.

Ben Habib

Chief Executive

22 November 2018

CONSOLIDATED INCOME STATEMENT

for the six months to 30 September 2018

		Six months to 30 Sept 2018 (unaudited)	Six months to 30 Sept 2017 (unaudited)	Year to 31 Mar 2018 (audited)
		Total results	Total results	Total results
		£'000	£'000	£'000
Revenue		11,157	12,089	25,460
Cost of sales		(2,452)	(2,179)	(6,030)
Gross profit		8,705	9,910	19,430
Profit on sale of FOP shares		32	101	1,112
Reversal of impairment loss /(impairment loss) to investment properties	8	32	167	(183)
Goodwill on acquisition	5	(27)	-	-
Disposal of subsidiary	6	(5)	-	-
Operating expenses		(4,110)	(4,415)	(9,158)
Operating profit		4,627	5,763	11,201
Share of results in associates	9	483	740	950
Investment income		157	33	63
Interest income	3	47	75	82
Interest expense	3	(1,495)	(1,631)	(3,063)
Profit before tax		3,819	4,980	9,233
Tax charge	4	(1,052)	(1,122)	(1,473)
Profit for the period		2,767	3,858	7,760
Attributable to:
Owners of the parent		1,924	3,364	6,755
Non-controlling interest		843	494	1,005
		2,767	3,858	7,760
Earnings per share
Basic	7	1.73p	2.90p	5.82p
Diluted	7	1.69p	2.84p	5.70p

CONDENSED CONSOLIDATED STATEMENT OF

COMPREHENSIVE INCOME

for the six months to 30 September 2018

		Six months to 30 Sept 2018	Six months to 30 Sept 2017	Year to 31 Mar 2018
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
Profit for the period		2,767	3,858	7,760
Other comprehensive income
Exchange difference on retranslation of foreign subsidiaries		(1,453)	(1,245)	1,590
Revaluation of available-for-sale financial assets		-	-	(3)
Taxation		-	-	-
Total comprehensive income for the period		1,314	2,613	9,347
Total comprehensive income for the period:
Owners of the parent		595	2,306	8,131
Non-controlling interest		719	307	1,216
		1,314	2,613	9,347

All operations are continuing.
 

CONDENSED CONSOLIDATED BALANCE SHEET

as at 30 September 2018

	Notes	As at 30 Sept 2018 (unaudited)	As at 30 Sept 2017 (unaudited)	As at 31 Mar 2018 (audited)
		£'000	£'000	£'000
Non-current assets
Goodwill		153	153	153
Investment properties	8	137,062	130,892	132,180
Property, plant and equipment		50	78	66
Interest in associates	9a	5,993	4,475	4,725
Other financial assets	9b	3,543	3,258	4,517
Other receivables	10	1,574	1,905	1,766
Deferred tax assets		4,417	4,213	4,518
Total non-current assets		152,792	144,974	147,925
Current assets
Inventories - land and buildings		15,505	15,391	15,586
Current tax assets		59	78	100
Trade and other receivables	10	4,714	5,308	5,154
Cash and cash equivalents		10,009	9,998	15,315
Total current assets		30,287	30,775	36,155
Current liabilities
Trade and other payables	11	(5,627)	(7,283)	(8,298)
Financial liabilities	12a	(10,057)	(8,861)	(8,319)
Current tax liabilities		(326)	(165)	(230)
Total current liabilities		(16,010)	(16,309)	(16,847)
Net current assets		14,277	14,466	19,308
Total assets less current liabilities		167,069	159,440	167,233
Non-current liabilities
Financial liabilities	12b	(112,095)	(111,104)	(110,768)
Deferred tax liabilities		(4,210)	(3,423)	(3,543)
Net assets		50,764	44,913	52,922
Equity
Called up share capital		1,166	1,166	1,166
Share premium		5,790	5,785	5,789
Share-based payment reserve		203	203	203
Foreign exchange translation reserve		69	(1,039)	1,398
Investment revaluation reserve		(70)	(67)	(70)
Retained earnings		36,664	35,343	38,249
Equity attributable to the owners of the parent		43,822	41,391	46,735
Non-controlling interest		6,942	3,522	6,187
Total equity		50,764	44,913	52,922
Net assets per share	7	39.39p	35.68p	40.29p

CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

for the six months to 30 September 2018

 

	Share Capital	Share Premium	Share Based Payment Reserve	Foreign Exchange Translation Reserve	Purchase of own Shares	Investment Revaluation Reserve	Retained Earnings	Non-controlling Interest	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2017	1,166	5,781	203	19	(99)	(67)	33,410	3,015	43,428
Profit for the period	-	-	-	-	-	-	3,858	-	3,858
Fair value (or revaluation) gains on available-for-sale financial assets to profit or loss	-	-	-	-	-	-	-	-	-
Movement on foreign exchange	-	-	-	(1,058)	-	-	-	(187)	(1,245)
Total comprehensive income	-	-	-	(1,058)	-	-	3,858	(187)	2,613
Change in proportion held by non-controlling interests	-	-	-	-	-	-	-	224	224
Sale of treasury shares	-	4	-	-	2	-	-	-	6
Non-controlling interest	-	-	-	-	-	-	(494)	494	-
Dividends paid	-	-	-	-	-	-	(1,334)	(24)	(1,358)
At 30 Sept 2017	1,166	5,785	203	(1,039)	(97)	(67)	35,440	3,522	44,913
Profit for the period	-	-	-	-	-	-	3,902	-	3,902
Fair value (or revaluation) gains on available-for-sale financial assets to profit or loss	-	-	-	-	-	(3)	-	-	(3)
Movement on foreign exchange	-	-	-	2,437	-	-	-	398	2,835
Total comprehensive income	-	-	-	2,437	-	(3)	3,902	398	6,734
Change in proportion held by non-controlling interests	-	-	-	-	-	-	-	1,776	1,776
Sale of treasury shares	-	4	-	-	2	-	-	-	6
Non-controlling interest	-	-	-	-	-	-	(511)	511	-
Dividends paid	-	-	-	-	-	-	(487)	(20)	(507)
At 1 April 2018	1,166	5,789	203	1,398	(95)	(70)	38,344	6,187	52,922
Profit for the period	-	-	-	-	-	-	2,767	-	2,767
Fair value (or revaluation) gains on available-for-sale financial assets to profit or loss	-	-	-	-	-	-	-	-	-
Movement on foreign exchange	-	-	-	(1,329)	-	-	-	(124)	(1,453)
Total comprehensive income	-	-	-	(1,329)	-	-	2,767	(124)	1,314
Change in proportion held by non-controlling interests	-	-	-	-	-	-	-	58	58
Sale of treasury shares	-	1	-	-	5	-	-	-	6
Purchase of treasury shares	-	-	-	-	(2,201)	-	-	-	(2,201)
Non-controlling interest	-	-	-	-	-	-	(843)	843	-
Dividends paid	-	-	-	-	-	-	(1,313)	(22)	(1,335)
At 30 Sept 2018	1,166	5,790	203	69	(2,291)	(70)	38,955	6,942	50,764

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the six months to 30 September 2018

		Six months to  30 Sept 2018 (unaudited)	Six months to 30 30 Sept 2017 (unaudited)	Year to 31 Mar 2018  (audited)
	Notes	£'000	£'000	£'000
Cash flows from operating activities
Operating profit		4,627	5,763	11,201
Adjustments for:
Depreciation of investment property, and property, plant & equipment		1,177	1,138	2,272
Profit on the sale of FOP shares		(32)	(101)	(1,112)
(Reversal of impairment loss)/ impairment loss to investment properties	8	(32)	(167)	183
Goodwill on business acquisition		27	-	-
Loss on disposal of subsidiary		5	-	-
(Increase)/ decrease in inventories		35	(149)	(107)
(Increase)/ decrease in trade and other receivables		728	(122)	240
(Decrease)/ increase in trade and other payables		(2,441)	(2,649)	(1,746)
Other non-cash adjustments		3	86	263
Cash generated from operations		4,097	3,799	11,194
Income taxes paid		(614)	(727)	(1,407)
Net cash flow from operating activities		3,483	3,072	9,787
Cash flow from investing activities
Capital expenditure on investment properties Proceeds from partial disposal of available-for-sale assets		(586) 93	(1,663) 612	(2,375) 633
Purchase of property, plant and equipment		(4)	(13)	(19)
Cash paid on business acquisition	5	(527)	-	-
Cash and cash equivalents acquired on business acquisition	5	421	-	-
Consideration from the sale of FOP shares		149	326	3,112
Investment in funds		(464)	(2,361)	(3,623)
Repayment from funds		537	-	-
Investment in shares of new associates		(460)	-	(122)
Payment for rights issue 5PT		(138)	-	-
Interest received	3	47	75	82
Dividends from associates	9a	506	-	61
Investment income received		157	33	68
Net cash flow (used in)/ from investing activities		(269)	(2,991)	(2,183)
Cash flow from financing activities
Net repayment of shareholder loans in subsidiaries		(121)	(158)	(1,841)
Proceeds from bank loan		-	-	3,994
Repayment of bank loans		(1,656)	(1,798)	(3,498)
Repayment of finance leases		(1,819)	(1,445)	(3,403)
Repayment from the sale of FOP shareholder loan		21	131	1,157
Purchase of shares held in Treasury		(2,201)	-	-
Sale of shares held in Treasury		6	6	12
Interest paid		(1,419)	(1,486)	(2,915)
Dividends paid		(1,313)	(1,334)	(1,821)
Dividends paid to non-controlling interest		(22)	(24)	(44)
Net cash flow (used in)/ from financing activities of continuing operations		(8,524)	(6,108)	(8,359)
Net (decrease)/ increase in cash and cash equivalents		(5,310)	(6,027)	(755)
Cash and cash equivalents at the beginning of period		15,315	15,946	15,946
Currency translation gains/ (losses) on cash and cash equivalents		4	79	124
Cash and cash equivalents at the end of the period		10,009	9,998	15,315

 

NOTES TO THE ACCOUNTS

for the six months ended 30 September 2018

1.     Basis of Preparation

·     These interim consolidated financial statements for the six months ended 30 September 2018 have not been audited or reviewed and do not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. They have been prepared in accordance with the Group's accounting policies as set out in the Group's latest annual financial statements for the year ended 31 March 2018 and are in compliance with IAS 34 "Interim Financial Reporting". 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).

·     The comparative figures for the financial year ended 31 March 2018 are not the full statutory accounts for the financial year but are abridged 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 interim financial statements were approved by a committee of the Board on 21 November 2018.

 

2.               Segmental Analysis 

Segment reporting six months to 30 September 2018

Direct costs incurred by First Property Group plc relating to the cost of the Board and the related share listing costs are shown separately under unallocated central costs. The staff incentive accrual is included under unallocated central costs but will be reallocated across all segments at the year end.

	Fund Management Division	Group Properties Division
	Property fund management	Group properties	Group fund properties ("FOP")	Unallocated central overheads	TOTAL
	£000	£000	£000	£'000	£'000
Rental income	-	5,020	3,272	-	8,292
Service charge income	-	515	798	-	1,313
Asset management fees	1,474	-	-	-	1,474
Performance fees	78	-	-	-	78
Total Revenue	1,552	5,535	4,070	-	11,157
Depreciation and amortisation	(19)	(964)	(194)	-	(1,177)
Operating profit	798	2,522	2,544	(1,237)	4,627
Share of results in associates	-	483	-	-	483
Investment income	-	157	-	-	157
Interest income	-	15	31	1	47
Interest expense	-	(702)	(793)	-	(1,495)
Profit/ (loss) before tax	798	2,475	1,782	(1,236)	3,819
Analysed as:
Underlying profit/ (loss) before tax before adjusting for the following items:	720	3,363	1,798	(498)	5,383
Profit on the sale of FOP shares	-	32	-	-	32
Goodwill on acquisition of associates	-	(27)	-	-	(27)
FPG's share in an associate's profit from the sale of investment properties	-	216	-	-	216
Loss on disposal of subsidiary	-	(5)	-	-	(5)
Reversal of impairment loss to investment properties	-	-	32	-	32
Performance and related fees	78	-	-	-	78
Depreciation on investment property	-	(874)	-	-	(874)
Staff incentive accrual	-	-	-	(735)	(735)
Realised foreign currency (losses)/ gains	-	(230)	(48)	(3)	(281)
Profit/ (loss) before tax	798	2,475	1,782	(1,236)	3,819

Revenue for the six months to 30 September 2018 from continuing operations consists of revenue arising in the United Kingdom 10% (2017: 8%) and Central and Eastern Europe 90% (2017: 92%) and all relates solely to the Group's principal activities.

 

Segment reporting six months to 30 September 2017

	Fund Management Division	Group Properties Division
	Property fund management	Group properties	Group fund properties ("FOP")	Unallocated central overheads	TOTAL
	£000	£000	£000	£'000	£'000
Rental income	-	6,262	3,000	-	9,262
Service charge income	-	626	708	-	1,334
Asset management fees	1,304	-	-	-	1,304
Performance fees	189	-	-	-	189
Total Revenue	1,493	6,888	3,708	-	12,089
Depreciation and amortisation	(19)	(997)	(122)	-	(1,138)
Operating profit	804	4,526	2,334	(1,901)	5,763
Share of results in associates	-	740	-	-	740
Investment income	-	33	-	-	33
Interest income	-	21	54	-	75
Interest expense	-	(749)	(882)	-	(1,631)
Profit/ (loss) before tax	804	4,571	1,506	(1,901)	4,980
Analysed as:
Underlying profit/ (loss) before tax before adjusting for the following items:	615	5,111	1,465	(486)	6,705
Profit on the sale of FOP shares	-	101	-	-	101
FPG's share in an associate's profit from the sale of investment properties	-	397	-	-	397
Reversal of impairment loss to investment properties	-	-	167	-	167
Performance and related fees	189	-	-	-	189
Depreciation on investment property	-	(870)	-	-	(870)
Staff incentive accrual	-	-	-	(1,256)	(1,256)
Realised foreign currency (losses)/ gains	-	(168)	(126)	(159)	(453)
Profit/ (loss) before tax	804	4,571	1,506	(1,901)	4,980

Segment reporting year to 31 March 2018

	Fund Management Division	Group Properties Division
	Property fund management	Group properties	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 expense	-	(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 loss to investment properties	-	(193)	(183)	-	(376)
Profit on the sale of FOP shares	-	1,112	-	-	1,112
FPG's share in associate's profit on the sale of investment property	-	397	-	-	397
Performance and related fees	189	-	-	-	189
Depreciation on investment property	-	(1,739)	-	-	(1,739)
Staff incentive accrual	(538)	(214)	(213)	(1,915)	(2,880)
Realised foreign currency gain/ (loss)	24	(323)	(286)	(91)	(676)
Profit/ (loss) before tax	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

 

3.       Interest Income/ (Expense)

	Six months ended 30 Sept 2018	Six months ended 30 Sept 2017	Year ended 31 Mar 2018
	£'000	£'000	£'000
Interest income - bank deposits	10	14	28
Interest income - other	37	61	54
Total interest income	47	75	82

	Six months ended 30 Sept 2018	Six months ended 30 Sept 2017	Year ended 31 Mar 2018
	£'000	£'000	£'000
Interest expense - property loans	(1,057)	(1,049)	(2,078)
Interest expense - bank and other	(32)	(87)	(142)
Finance charges on finance leases	(406)	(495)	(843)
Total interest expense	(1,495)	(1,631)	(3,063)

4.       Tax Expense

The tax charge is based on a combination of actual current and deferred tax charged at an effective rate that is expected to apply to the profits for the full year. 

	Six months ended 30 Sept 2018	Six months ended 30 Sept 2017	Year ended 31 Mar 2018
	£'000	£'000	£'000
Current tax	(752)	(687)	(1,383)
Deferred tax	(300)	(435)	(90)
Total	(1,052)	(1,122)	(1,473)

The period's charge for current tax includes an under accrual from last year of £131,000.

5.       Business Acquisitions

	E and S Estates Ltd	Regional Property Trading Ltd	E and S Sp. z o.o.	Total
Acquisitions of net assets acquired at Fair Value	£'000	£'000	£'000	£'000
Cash	67	54	300	421
Trade Receivables	-	-	31	31
Bad Debt Provision	-	-	(17)	(17)
Other Debtors	-	-	95	95
Deferred Tax Asset	-	-	59	59
Share in Subsidiary	4	4	-	8
Investment Property	-	-	5,406	5,406
Intercompany Loans	142	134	(276)	-
Dividend Payable/Receivable	684	684	(1,368)	-
Trade and Other Payables	(3)	(4)	(195)	(202)
Tax Liabilities	(1)	-	(499)	(500)
Financial Liabilities	-	(2)	(4,485)	(4,487)
Goodwill on acquisition	18	9	-	27
Total net assets acquired before NCI	911	879	(949)	841
Non-controlling interest share of net assets	(95)	-	-	(95)
Total net assets acquired	816	879	(949)	746
Note(i)
Cash paid on buy out investors (current year)	(226)	(301)	-	(527)
Less: cash acquired	67	54	300	421
Net cash acquired	(159)	(247)	300	(106)
Note(ii)
Cash paid on original purchase (prior years)	122	48	7	177
Share of Post Acquisition Profits to 31 March 2018 (since original purchase)	29	206	-	235
Less impairment to 31 March 2018	(40)	(153)	-	(193)
	111	101	7	219
Cash paid on buy out of investors (current year)	226	301	-	527
Total consideration	337	402	7	746

6.       Disposal of a Subsidiary

Disposal of net assets		Net Assets £'000
Financial Assets - Shares in KBP entities		900
Cash		16
Trade Receivables		9
VAT		31
Prepayments		214
Other Debtors		39,496
Deferred Tax Asset		39
Intercompany Loans		(986)
Trade Payables		(243)
Other Payables		(39,445)
Other Tax Liabilities		(7)
Total net assets disposed		24
Sale proceeds		19
Loss on disposal of subsidiary		(5)

On 5 June 2018 the First Property Group plc sold its investment in Scaup sp. Z o.o. to Fprop Phoenix Limited.

7.       Earnings/ NAV Per Share

The basic earnings per ordinary share is calculated on the profit on ordinary activities after taxation and after non-controlling interests on the weighted average number of ordinary shares in issue, during the period.

Figures in the table below have been used in the calculations.

	Six months ended 30 Sept 2018	Six months ended 30 Sept 2017	Year  ended 31 Mar 2018
Basic -  pence per share	1.73p	2.90p	5.82p
Diluted - pence per share	1.69p	2.84p	5.70p
	Number	Number	Number
Weighted average number of ordinary shares in issue for basic	111,398,291	115,992,763	116,004,730
Share options	2,700,000	2,700,000	2,700,000
Total for diluted	114,098,291	118,692,763	118,704,730
	£'000	£'000	£'000
Basic earnings	1,924	3,364	6,755
Notional interest on share options assumed to be exercised	4	4	8
Diluted earnings	1,928	3,368	6,763

	Six months ended 30 Sept 2018		Six months ended 30 Sept 2017		Year  ended 31 Mar 2018
Net assets per share	39.39p	35.68p		40.29p
Adjusted net assets per share	62.21p	51.25p		53.07p

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

	Number	Number	Number
Number of shares in issue at period end	111,253,003	116,004,464	116,016,546
	£'000	£'000	£'000
Net assets excluding non-controlling interest	43,822	41,391	46,735
Adjusted net assets per share	Number	Number	Number
Number of shares in issue at period end	111,253,003	116,004,464	116,016,546
Number of share options assumed to be exercised	2,700,000	2,700,000	2,700,000
Total	113,953,003	118,704,464	118,716,546
Adjusted net assets per share	£'000	£'000	£'000
Net assets excluding non-controlling interest	43,822	41,391	46,735
Investment properties at fair value net of deferred taxes	11,211	13,315	10,272
Inventories at fair value net of deferred taxes	4,922	4,409	4,582
Other adjustments	10,932	1,726	1,409
Total	70,887	60,841	62,998

8.   Investment Properties

	Six months ended 30 Sept 2018	Six months  ended 30 Sept 2017	Year  ended 31 Mar 2018
	£'000	£'000	£'000
1 April	132,180	128,428	128,428
Capital expenditure	586	1,663	2,375
Business Acquisition	5,406	-	-
Depreciation	(1,146)	(1,105)	(2,204)
Fair value adjustment	32	167	(183)
Foreign exchange translation	4	1,739	3,764
30 Sept	137,062	130,892	132,180

Investment properties owned by the Group, and indirectly via FOP are stated at cost less depreciation and accumulated impairment losses.

9.      Interest in Associates and Other Financial Assets

	Six months ended 30 Sept 2018	Six months ended 30 Sept 2017	Year ended 31 Mar 2018
a) Associated undertakings	£'000	£'000	£'000
Cost of investment  at beginning of period	4,725	4,347	4,347
Additions	1,595	-	122
Repayment of shareholder loan	(92)	(612)	(633)
Transfer from associate to subsidiary status	(212)	-	-
Share of associates profit after tax	483	740	1,143
Impairment	-	-	(193)
Dividends received	(506)	-	(61)
Cost of investment at end of period	5,993	4,475	4,725
Investments in associated undertakings
5th Property Trading Ltd	1,192	972	1,029
Regional Property Trading Ltd	-	218	105
E and S Estates Ltd	-	-	116
Fprop Romanian Supermarkets Ltd	393	649	624
Fprop Galeria Corso Ltd	2,040	1,784	1,920
Fprop Krakow Ltd	1,279	1,160	1,239
Fprop Cluj Ltd	458	-	-
Fprop Phoenix Ltd	939	-	-
	6,301	4,783	5,033
Less: Group share of profit after tax withheld on sale of property to an associate in 2007	(308)	(308)	(308)
Cost of investment at end of period	5,993	4,475	4,725
The withheld profit figure of £308,000 represents the removal of the percentage of intercompany profit resulting from the sale of the property in 2007 to 5th Property Trading Ltd (an associate). The figure will reduce when there is a reduction in First Property Group's stake in 5th Property Trading Ltd.
b) Other financial assets and investments
Cost of investment at beginning of period	4,517	897	897
Additions Repayments Disposal	463  (537) (900)	2,361 - -	3,623 - -
(Decrease)/increase in fair value during the period	-	-	(3)
Cost of investment at end of period	3,543	3,258	4,517

10.    Trade and Other Receivables

	Six months ended 30 Sept 2018	Six months ended 30 Sept 2017	Year  ended 31 Mar 2018
	£'000	£'000	£'000
Current assets
Trade receivables	2,124	2,514	2,070
Less provision for impairment of receivables	(912)	(490)	(640)
Trade receivables net	1,212	2,024	1,430
Other receivables	2,459	2,426	2,462
Prepayments and accrued income	1,043	858	1,262
	4,714	5,308	5,154
Non-current assets	1,574	1,905	1,766

Other receivables include a balance of £1.57 million relating to the deferred consideration from the sale of an investment property located in Romania, which is receivable after one year. This has been discounted to reflect its current value.

11.        Trade and Other Payables

	Six months ended 30 Sept 2018	Six months ended 30 Sept 2017	Year  ended 31 Mar 2018
	£'000	£'000	£'000
Trade payables	2,841	3,457	3,405
Other taxation and social security	827	891	946
Other payables and accruals	1,426	2,272	3,425
Deferred income	533	663	522
	5,627	7,283	8,298

12.        Financial Liabilities

	Six months ended  30 Sept 2018	Six months ended 30 Sept 2017	Year  ended 31 Mar 2018
	£'000	£'000	£'000
a) Current liabilities
Loans repayable by subsidiary (FOP) to third party shareholders	1,356	2,121	1,464
Bank loans	4,951	3,470	3,411
Finance leases	3,750	3,270	3,444
	10,057	8,861	8,319
b) Non-current liabilities
Bank loans	68,181	63,757	65,719
Finance leases	43,914	47,347	45,049
	112,095	111,104	110,768
c) Total obligations under financial liabilities
Repayable within one year	10,057	8,861	8,319
Repayable within one and five years	97,876	78,099	96,087
Repayable after five years	14,219	33,005	14,681
	122,152	119,965	119,087

Loans repayable by Fprop Opportunities plc (FOP) to third party shareholders are unsecured and repayable on demand.

Nine bank loans and three finance leases (all denominated in Euros) totalling £120.80 million (30 Sept 2017: £117.84 million) included within financial liabilities are secured against investment properties owned by the Group and Fprop Opportunities plc (FOP), and one property owned by the Group shown under inventories. These bank loans and finance leases are otherwise non-recourse to the Group's assets.

The interim 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.

 

END

 

 

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