Preliminary Results

RNS Number : 0035R

First Property Group PLC

25 June 2020

 

Date: 25 June 2020 

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 2020

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 2020.  

Highlights:

· Sale of Chałubińskiego 8 (CH8), the Group's largest directly owned property for €44 million;

· Significant cash reserves: £23.6 million as at 23 June 2020;

· Have not drawn on any government support for COVID-19;

· Final dividend maintained at 1.22 pence per share;

· Well positioned to weather the crisis and make judicial investments as the UK emerges from it;

· Retained No.1 investment performance ranking versus MSCI CEE Benchmark;

· Weighted average unexpired fund management contract term: 5 years, 0 months (2019: 5 years, 9 months).

Financial Summary:

	Unaudited year to 31 March 2020	Audited year to 31 March 2019	Percentage change
Income Statement:
Statutory profit before tax	£5.52m	£8.31m	-33.6%
		*PROFORMA: £7.25m	-23.9%
Diluted earnings per share	4.29p	4.85p	-11.5%
Total dividend per share	1.67p	1.66p	+0.6%
Average £/€ rate	0.873	0.881	-
*Recalculated to enable a like for like comparison with FY2020 by treating the deconsolidated entity Fprop Opportunities plc (FOP) as an associate rather than a subsidiary (See Note 4 Reconciliation and Note 3 Segmental Analysis).
Balance Sheet at year end:
Net debt	*£57.20m	£56.94m	+0.5%
Gearing ratio at market value**	50.94%	50.44%	-
Gearing ratio at book value***	57.32%	59.09%	-
Net assets per share	43.53p	41.46p	+5.0%
Adjusted net assets per share (EPRA basis)	55.00p	57.48p	-4.3%
Cash balances	****£7.34m	£9.74m	-24.6%
£/€ rate	0.885	0.862
*Prior to completion of sale of CH8 which completed in April 2020.
**Group debt divided by gross assets at market value.
***Group debt divided by gross assets at book value.
****Excludes cash following completion of sale of CH8.

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

"It is a difficult time to be reporting our results against the backdrop of a pandemic and the World in the throes of an economic crisis. Notwithstanding this, I am pleased to report that the Group is in as strong a position as it has ever been, with cash resources amounting to some £23.6 million.

We have had no need to draw on any of the support measures offered by the government in the wake of COVID-19 and are well positioned to take advantage of investment opportunities that will undoubtedly emerge. We shall aim to do so in conjunction with our clients so as to further our fund management business.

I am hopeful that we will emerge from the crisis in an even stronger position than we entered it."

A briefing for analysts will be held at 10:30hrs today via Investor Meet Company. To participate it is necessary to register at https://www.investormeetcompany.com/first-property-group-plc/register-investor and select to meet the Company. Those who have already registered and selected to meet the company will be automatically invited. A copy of the accompanying investor presentation and a recording of the call will be posted on the company website.

For further information please contact:

First Property Group plc	Tel: [phone]
Ben Habib (Chief Executive Officer) George Digby (Group Finance Director) Jeremy Barkes (Director, Business Development)	www.fprop.com [e-mail]
Arden Partners (NOMAD & Broker)	Tel: + 44 (20) 7614 5900
John Llewelyn-Lloyd (Director, Corporate Finance) Ben Cryer (Corporate Finance)
Newgate Communications (PR)	Tel: + 44 7540106366
Robin Tozer / Tom Carnegie / Isabelle Smurfit	[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. 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 eight directly held properties in Poland and Romania, and non-controlling interests in ten of the twelve 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

Financial Performance

Notwithstanding the major disruption to the economy and markets caused by various government responses to COVID-19, I am pleased to report that the Group is in as strong a position as it has ever been, with Group cash of some £23.6 million at 23 June.

The Group has not accessed any of the government support schemes to ease the effects of the lockdown, nor has it put any staff on furlough or made any redundancies. The group has honoured contracts with its counterparties, and expects to continue doing so.

Profit before tax decreased by 33.6% to £5.52 million (2019: £8.31 million) and by 23.9% on a proforma basis (2019: £7.25 million), mainly due to performance related fees reducing to £415,000 from £1.54 million in 2019.

Diluted earnings per share decreased by 11.5% to 4.29 pence (2019: 4.85 pence), a smaller decrease than profit before tax due to a lower tax charge.

Profit before tax was largely unaffected by foreign exchange rate movements.

The most significant financial and operational event of the year was the sale announced on 23 December 2019 of the Group's largest directly owned asset, a 50.3% share in Chałubińskiego 8 (CH8), an office building in Warsaw. The sale, which completed after the financial year-end, released some £17 million of cash and reduced debt to some £42 million (all of which is non-recourse to the Group). The cash generated both underpins the Group and provides it with significant resources with which to make new investments in what is likely to become an interesting investment market. It is intended to invest the cash in partnership with clients of the Group, in line with the Group's aim to grow its fund management business.

The Group ended the year with increased net assets, excluding non-controlling interests, of £48.05 million (2019: £46.17 million), equating to 43.53 pence per share (2019: 41.46 pence per share). The net assets of the Group when adjusted to their market value less any deferred tax liabilities decreased by 5.1% to £62.15 million (2019: £65.51 million), equating to 55.00 pence per share (2019: 57.48 pence per share).

The annualised growth in adjusted net assets together with dividends paid to shareholders over the last ten years equates to 22.7% (2019: 22.8%) per annum, a record of which we are immensely proud. 

During the year the Group purchased 1,000,000 of its own Ordinary Shares, which are now held in Treasury, for a total consideration of £417,000 (equating to an average price paid of 41.7 pence per share).

Dividend

The Directors have resolved to maintain the final dividend at 1.22 pence per share (2019: 1.22 pence per share), which together with the interim dividend of 0.45 pence per share (2019: 0.44 pence per share), equates to a dividend for the year of 1.67 pence per share (2019: 1.66 pence per share).

The proposed final dividend will be paid on 25 September 2020 to shareholders on the register at 21 August 2020, and is subject to shareholder approval at the forthcoming annual general meeting on 23 September 2020.

The full year's dividend is covered 2.60 times (2019: 2.98 times).

REVIEW OF OPERATIONS

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

As at 31 March 2020 third party assets under management amounted to £567 million (2019: £611 million), a reduction of some 7%. Around a third of the reduction from the prior year was due to property sales. The balance was due to downwards revaluations, in particular in the retail sector following the onset of COVID-19.

No new funds were established during the year. 

The split of funds managed across different asset classes, including funds in which the Group is a minority shareholder, is:

	UK	Poland	Romania	Total	% of Total
	£m.	£m.	£m.	£m.
Offices	215.67	105.36	7.82	328.85	58.0%
Retail warehousing	100.45	-	-	100.45	17.7%
Supermarkets/ Supermarket led schemes	51.58	19.68	0.98	72.24	12.8%
Shopping centres	-	57.45	-	57.45	10.1%
Industrial	8.03	-	-	8.03	1.4%
Total	375.73	182.49	8.80	567.02	100%
% of Total third party AUM	66.3%	32.2%	1.5%	100%

In Central Europe, FPAM retained its position as the best performing fund manager versus MSCI's Central and Eastern European (CEE) Benchmark, now for the fourteen years to 31 December 2019. Rental income was the main driver which contributed to the result. In the recent COVID-19 pandemic, our rent collection rate has thus far been higher than the industry average, according to a survey by Remit Consulting. In the UK, where the majority of rent is due quarterly in advance, we collected some 93% of rent for the March quarter. The collection rates in Poland and Romania were some 84% and 95% respectively of the combined April and May rental income.

On 1 November 2019 First Property Asset Management Ltd became a full scope Alternative Investment Fund Manager (AIFM) enabling it to manage above €500 million in aggregate of third-party funds.

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

	UK £m.			CEE £m.	Total £m.	No. of prop's
As at 31 March 2019	415.95			195.12	611.07	71
Purchases:
-Existing funds	-			-	-	-
-New funds	-			-	-	-
Property sales	(13.98)			-	(13.98)	(2)
Transfer to Group Properties	-			-	-	-
Capital expenditure	1.17			0.34	1.51	-
Property depreciation and write down	-			(0.48)	(0.48)	-
Property revaluation	(27.41)			(9.09)	(36.50)	-
FX revaluation	-			5.40	5.40	-
As at 31 March 2020		375.73	191.29		567.02	69

Fund management fees are levied monthly by FPAM generally 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 total profits in lieu of fund management fees and to receive annual payments on account equivalent to 10% of total cumulative income profits and realised capital gains. Under its accounting policy the Group does not recognise unrealised property revaluations above the properties' original cost. These payments are adjusted annually, if necessary, for any overpayments made in previous years up to a maximum of total past cumulative payments received. In the year just ended the Group recognised £415,000 (2019: £961,000), increasing the maximum that could be subject to clawback to £1.38 million. The reduction in the contribution from Fprop Offices LP was due to the value of its properties being marked down at 31 March 2020. Future entitlements to payment in respect of this fund are being earned at an annualised rate of £820,000 per annum, before property revaluations, and thus act as a buffer against possible refund liabilities in the future. 

Revenue excluding performance fees earned by this division increased to £3.48 million (2019: £3.42 million) but total revenue decreased by 21% to £3.90 million (2019: £4.96 million), resulting in a profit before unallocated central overheads and tax of £1.34 million (2019: £3.03 million). The decrease in total revenue and profit earned by this division results mainly from a lower contribution from performance fees, with Fprop Offices LP being the only fund from which performance fees were due.

At the year-end FPAM's fund management fee revenue, excluding any profit share from Fprop Offices LP, was being earned at an annualised rate of £3.13 million (2019: £3.34 million).

FPAM continues to manage twelve property investment funds. The weighted average unexpired fund management contract term at the year-end was 5 years, 0 months (2019: 5 years, 9 months).

Looking ahead, we expect that the disruption caused by the COVID-19 pandemic is likely to lead to a temporary reduction in asset prices. We expect to increase our investment activities as a result, including by investing Group cash alongside fund management clients.

A brief synopsis of the value of assets and maturity of each of the funds managed by FPAM is set out below:

Fund	Country of investment	Fund expiry	Assets under management at market value at 31 March 2020	No of properties	% of total assets under management	Assets under management at market value at 31 March 2019
Fund management division			£m.			£m.
SAM & DHOW	UK	Rolling	*	*	*	*
5PT	Poland	Dec 2022	8.0	3	1.29	7.90
UK PPP	UK	Feb 2022	70.3	20	11.28	87.22
OFFICES	UK	Jun 2024	143.4	5	23.01	146.60
SIPS	UK	Jan 2025	143.4	24	23.00	163.13
FOP	Poland	Oct 2025	71.3	5	11.44	71.84
FRS	Romania	Jan 2026	1.0	1	0.16	1.01
FGC	Poland	Mar 2026	22.4	1	3.59	21.59
SPEC OPPS	UK	Jan 2027	18.6	4	2.99	19.00
FKR	Poland	Mar 2027	23.0	1	3.69	23.00
FCL	Romania	Jun 2028	7.8	1	1.25	7.67
FPL	Poland	Jun 2028	57.8	4	9.27	62.11
Total Third Party AUM			567.0	69	90.97	611.07
Group Properties			56.3	8	9.03	94.61
Total AUM			623.3	77	100.00	705.68

* Not subject to recent revaluation;

GROUP PROPERTIES

At 31 March 2020 Group Properties comprised eight (2019: nine) directly owned properties in Poland and Romania and non-controlling interests in ten of the twelve funds managed by FPAM.

1.  Directly owned Group Properties

The Group's eight (2019: nine) directly owned commercial properties in Poland and Romania are accounted for under the cost model as set out in the table below:

Country	Sector	No. of properties	Book value	Market value	Contribution to Group profit before tax - year to 31 March 2020	Contribution to Group profit before tax - year to 31 March 2019
			£m.	£m.	£m.	£m.
Poland	Offices	2	37.68	43.70	5.1	*2.3
Poland	Supermarkets	4	5.31	6.00	0.2	(0.1)
Romania	Office and logistics	2	4.10	6.60	0.4	0.2
Total		8	47.09	56.30	5.7	2.4

* includes a €3.5 million impairment loss to an investment property.

The directly owned Group Propertiesgenerated a profit before unallocated central overheads and tax of £4.70 million (2019: £2.70 million). The increase was mainly a result of the profit of £1.53 million earned on the sale of CH8, Warsaw.

Of the Group's remaining eight directly owned properties, two account for 80% by value (£43.70 million). Both are office buildings in Poland of which one is in Warsaw (11,000 m²) and the other in Gdynia (15,500 m²).

The Group continues to depreciate the holding value of its office building in Gdynia at a rate of £1.74 million (€1.97 million) per annum because it is let to a single tenant and the lease expires in October 2020. We have commenced discussions with the tenant and other prospective tenants about leasing space in the building. The balance of 20% by value (£12.60 million) is invested in three mini-supermarkets in Poland, a development site in Warsaw, an office in Bucharest and a logistics warehouse in Romania.

The debt secured against the eight Group Properties reduced by some £22 million to £42 million following the sale of CH8, resulting in a loan to value ratio of some 75% and the ratio of debt to gross assets at market value of some 51%.

Analysis of borrowings secured against the eight directly held properties:
	31 March 2020	31 March 2019	% change
Book value	£47.09m	£82.14m	-42.7%*
Market value	£56.30m	£94.61m	-40.5%
Gross debt (all non-recourse to Group)	**£41.97m	£66.68m	-37.1%
LTV at book value %	**89.13%	81.18%
LTV at market value %	***74.55%	70.43%

*Reduction due to the sale of the Group's largest directly owned property, CH8.

**Gross debt excludes the bank loan (£22.56 million) in respect of CH8, the investment property sold at the year end. The bank loan was repaid following completion of the sale on 24 April 2020.

***Calculated by excluding the repaid bank loan relating to CH8.

Each loan secured against the eight Group Properties is held in a separate non-recourse special purpose vehicle. There are no loan to value covenant breaches.

The finance lease for the office building in Gdynia is technically in default of one of its loan covenants for failure to lease more than 50% of the leasable area one year prior to the expiry of the current sole tenant's lease in October 2020. Negotiations with the lender, the tenant and prospective tenants are in progress.

Interest expense in the year amounted to some £1.34 million (2019: £2.18 million). In order to mitigate potential interest rate increases we have fixed the interest rate on a proportion (47%) of these loans. The current weighted average borrowing cost is 1.83% (2019: 2.15%).

2.  Associates and Investments

The Group's non-controlling interests in ten of the twelve funds managed by FPAM are accounted for under the cost model as set out in the table below.

Fund		% owned by First Property Group	Book value of First Property's share in fund	Current market value of holdings	Group's share of post-tax profits/(losses) earned by fund 31 March 2020	Group's share of post-tax profits/(losses) earned by fund 31 March 2019
			£'000	£'000	£'000	£'000
Interest in associates
5PT		40.6%	1,128	1,209	149	54
RPT/ E and S		*	*	*	*	*(9)
FRS		24.1%	168	254	18	116
FGC		28.2%	2,346	2,977	288	302
FKR		18.1%	1,451	1,870	169	156
FCL		17.4%	519	519	79	17
FPL		23.4%	1,908	6,956	(141)	1,051
FOP		40.0%	10,178	10,178	658	(87)
Share of results in associates			17,698	23,963	1,220	1,600
Investments
UKPPP	0.9%	672	672	134	59
SPEC OPPS	4.0%	536	536	57	45
OFFICES	1.6%	1,966	1,966	133	169
Sub Total		3,174	3,174	324	273
Total			20,872	27,137	1,544	1,873

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

The contribution to Group profit before tax prior to the deduction of unallocated central overheads from our ten minority shareholdings in funds managed by FPAM was £1.22 million down from £1.60 million in 2019 (2019 proforma: £2.32 million). The reduction in profit compared to 2019 was mainly due to:

· a loss of £141,000 in Fprop Phoenix Ltd, which benefitted from a one-off gain in the prior year following the successful conclusion of a legacy dispute with a contractor (2019: £1.05 million);

· a reduction in the value of £659,000 in theGroup's 40% shareholding in FOP after the Polish government closed all shopping centres as part of its response to COVID-19 and the resultant reduction in the value of its two shopping centres.

Commercial Property Markets Outlook

Poland:

GDP in Poland is likely to be one of the least affected in the EU by the pandemic and one of just four in the bloc that is expected to return to 2019 levels of economic productivity by the end of 2021,according to the EU Commission and the World Bank. Prior to the crisis the ratio between Polish government debt and GDP was low at around 49%, making their COVID-19 stimulus package (which is worth some 10% of GDP) affordable. Interest rates, meanwhile, sit at 0.5% in Poland and can be cut if needed. Poland was one of the first European countries to exit lockdown.

Romania:

Similar to Poland, Romania was quick to respond to the COVID-19 pandemic. It entered lockdown relatively early, and was quick to implement measures to combat the ill effects of it, including a fiscal stimulus package. Romania's economy is similarly expected to recover faster than most EU countries.

United Kingdom:

According to Bank of England forecasts the economy will shrink by around 14% this year. The true extent of this has not yet been broadly felt due to the various government measures to combat the effects of lockdown. When the furlough scheme ends in October unemployment is likely to rise further and occupier demand for commercial property is likely to reduce. With government debt set to balloon to levels not seen since World War II, not just in the UK but globally, interest rates are likely to remain low for a long time. This is likely to buoy asset prices, even in the face of deteriorating economic fundamentals.

Current Trading and Prospects

It is a difficult time to be reporting our results against the backdrop of a pandemic and the World in the throes of an economic crisis. Notwithstanding this, I am pleased to report that the Group is in as strong a position as it has ever been, with cash resources amounting to some £23.6 million.

We have had no need to draw on any of the support measures offered by the government in the wake of COVID-19 and are well positioned to take advantage of investment opportunities that will undoubtedly emerge. We shall aim to do so in conjunction with our clients so as to further our aim to grow our fund management business.

I am hopeful that we will emerge from the crisis in an even stronger position to that in which we entered it.

Ben Habib

Chief Executive

25 June 2020

FINANCE DIRECTOR'S REVIEW

The financial results for the year ended 31 March 2020 bear testimony not only to the Group's business model through the current on-going upheavals but also to the Group's longstanding policy of holding its properties, whether directly held Group Properties or Associates and Investments, at the lower of cost and fair value. This results in smoother earnings because there is no effect on either the Income Statement or reported Net Assets as stated in the Balance Sheet, in the event of uplifts in value or reversals of such uplifts, providing the revised value is above original cost.

The one exception to the above policy is the Group's 40% interest in Fprop Opportunities plc (FOP) which had to be stated at fair (market) value in October 2018 when it achieved associate status, in accordance with IFRS. This fund holds two shopping centres in Poland, the valuations of which were adversely affected by the Polish government's decision to close shopping centres to combat the COVID-19 pandemic. This resulted in a reduction in fair value of £659,000 charged to the income statement.

The income returns were also affected by the closures. Despite this the Group achieved a creditable profit before tax of £5.52 million against £8.31 million in 2019 (proforma: £7.25 million).

The sale of CH8 resulted in the value of the directly held Group Properties reducing from £94.6 million to £56.3 million.

The reduction in third party assets under management (AUM) from £611 million to £567 million was the result of two further property disposals and reductions in valuations largely in the final quarter after the onset of the COVID-19 pandemic.

Total Group Net assets (excluding the non-controlling interest) increased by 4.07% to £48.05 million (2019: £46.17 million).

The annualised growth in adjusted net assets together with dividends paid to shareholders over the last ten years equates to 22.7% (2019: 22.8%) per annum. 

GOING CONCERN

As part of the preparation of our Financial Statements, there has been a particular focus on our going concern assessment. Further information on our approach and the result of our assessment is included in note 1 of the Financial Statements.

INCOME STATEMENT

Revenue and Gross Profit

A review of the operating and financial performance of the results of the two trading divisions for the year are included in the Chief Executive's Statement. The main adverse effect of the COVID-19 pandemic was to reduce the contribution from Associates due to their exposure to three shopping centres in Poland, which were subject to enforced closure with effect from 14 March 2020.

Operating Expenses

Operating expenses decreased by 7.62% to £8.61 million (2019: £9.32 million) mainly due to lower staff and executive incentives across the Group. 

Investment Property Depreciation

The Directors have reviewed the residual value of the Group's directly held property located in Gdynia and have continued to apply depreciation charged within operating expenses of £1.73 million (2019: £1.74 million).

Share of Results in Associates

The contribution for the year of £1.22 million (2019: £1.60 million) comprised the Group's share of post-tax profits from seven investments. This includes a reduction in the fair value of the Group's interest in FOP of £659,000 (2019: £764,000). All associates performed well but the apparent reduction from last year was mainly because of a one-off benefit in the prior year from a favourable litigation outcome in Fprop Phoenix Ltd.

Investment Income (from other financial assets and investments)

The increase from £273,000 to £324,000 from the Group's investment in three of the four UK funds it manages was due to the sale of a property in one fund which realised a gross profit of £6.4 million.

Financing Costs

Overall, the Group's finance costs reduced to £1.34 million from £2.18 million in 2019 (£1.39 million on a proforma basis, adjusting for the deconsolidation of FOP in October 2018). All bank loans and finance leases are denominated in Euro and all are used to finance properties valued in Euro.

Current Tax

The current tax charge of £974,000 decreased from £1.28 million in 2019 (£1.04 million on a proforma basis, adjusting for the deconsolidation of FOP in October 2018) but also included an under provision of UK corporation tax of £161,000 from 2019.

The charge includes Polish and Romanian corporation tax where the headline rates remain at 19% and 16% respectively. Unused trading tax losses in the UK of £6.35 million are available to be carried forward and will be utilised when / if possible.

Deferred Tax

A deferred tax credit of £360,000 (2019: charge of £659,000) has arisen mainly due to the strength of the Euro against the Polish Zloty which reduced the tax liability computed and payable in Polish Zloty.

Diluted earnings per Share

Diluted earnings per share decreased by 11.5% from 4.85p to 4.29p per share, a smaller decrease than the 33.6% decrease in the profit before tax for the year due to a lower total effective tax charge of 11.1% (2019: 23.4%).

BALANCE SHEET

Investment Properties and Property held as Inventory (all held at cost)

The book value of the Group's eight wholly owned properties ended the year at £47.09 million (2019: £82.14 million) compared to fair value of £56.30 million (2019: £94.61 million). The reason for the reduction was completion of the sale of CH8 in April 2020.

IFRS 16 - Lease liabilities and right of use assets

The Group has adopted IFRS 16 for the first time in this set of results. Under IFRS certain lease commitments have to be capitalised and treated as finance leases. One such lease qualifies for this treatment and its present value asset and liability amount to £584,000 with a corresponding liability shown within lease liabilities.

Capital Expenditure (investment and trade properties)

Capital expenditure of £1.26 million (2019: £1.54 million) mostly comprised office fit-outs for new tenants in CH8.

Borrowings

 All bank and finance lease borrowings were denominated in Euro and decreased from €77.38 million (£66.68 million) to €72.93 million (£64.53 million) due to scheduled bank loan repayments of €6.42 million.  There was one additional bank loan drawdown by Felix Developments SRL of €2.0 million in May 2019. The ratio of debt to gross assets at market value (the gearing ratio) was 50.94% (2019: 50.44%). After the year-end the bank loan secured against CH8 was repaid, following completion of its sale on 24 April 2020, thereby reducing Group debt to £41.97 million.

The finance lease for Gdynia was the subject of a notice of an event of default in October 2019 for failure to lease more than 50% of the leasable area 12 months prior to the end of the current sole tenant's lease in October 2020. As a result, the lender exercised control over the property's bank account from this date until such time as the requisite letting is secured. Access to these funds amounting to £875,000 at the year-end is restricted. Negotiations with the lender, the tenant and prospective tenants are in progress. 

Bank deposits of €1.86 million (2019: €1.83 million) are held in respect of four bank loans to redress potential Debt Service Cover Ratio (DSCR) covenant shortfalls, of which €1.20 million (2019: €1.20 million) are held in prepayments. The largest of these deposits was €1.1 million in relation to CH8 and was returned in April on completion of its sale.

Non-controlling Interests (NCI)

There are two non-controlling interests (NCI) represented by a 10% interest in the share capital of Corp Sp. z o. o., (the property management company to Blue Tower, Warsaw), and 23% of the share capital of E and S Estates Ltd. The value of these holdings increased to £157,000 (2019: £114,000) reflecting an improved performance from E and S Estates Ltd.

Foreign Exchange Translation Reserve

As a result of the Polish Zloty weakening against Sterling to PLN/GBP 5.1502 (2019: PLN/GBP 4.9957) there was a £0.53 million reduction in this reserve during the year to a deficit of £1.26 million.

Treasury Shares

First Property Group plc purchased 1,000,000 Ordinary Shares in itself during the year, at an average price of 41.7 pence per share including transaction costs, or £417,000. This purchase resulted in a reduction of equal quantum in the Group's net assets.

CASH and CASH FLOW

Cash levels decreased from £9.74 million to £7.34 million at the year-end. This reduction arose largely as a result of:

-  Scheduled bank loan repayments of £5.61 million;

-  Capital expenditure on the Group's properties of £1.26 million;

-  Payment of dividend £1.86 million;

-  The share buy-back, referred to above, at a cost of £417,000.

Cash was £23.6 million as at 23 June 2020 boosted by the completion of the sale of CH8 on 24 April 2020.

 

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2020

	Notes	Year ended 31 March 2020 (unaudited) Total results	Year ended 31 March 2019 PROFORMA* Total results	Year ended 31 March 2019  (audited) Total results
		£'000	£'000	£'000
Revenue	3	16,287	16,636	20,437
Cost of sales		(3,969)	(3,508)	(4,491)
Gross profit		12,318	13,128	15,946
Profit on the sale of FOP shares		-	64	64
Profit on sale of an investment property	6	1,527	-	-
Gain on loss of control of subsidiary		-	4,827	4,827
Impairment of goodwill on acquisition of subsidiary		-	(59)	(27)
Loss on disposal of subsidiary		-	(5)	(5)
Write down/ Impairment loss to investment property	11	-	(2,984)	(2,984)
Operating expenses		(8,612)	(9,014)	(9,320)
Operating profit		5,233	5,957	8,501
Share of results in associates	12	1,879	3,084	2,364
Fair value adjustment to associate	12	(659)	(764)	(764)
Investment income		324	273	273
Interest income	5	80	84	114
Interest expense	5	(1,338)	(1,388)	(2,180)
Profit before tax		5,519	7,246	8,308
Tax charge	7	(614)	(1,708)	(1,943)
Profit for the year		4,905	5,538	6,365
Attributable to:
Owners of the parent		4,859	5,514	5,514
Non-controlling interests		46	24	851
		4,905	5,538	6,365
Earnings per share:
Basic	9	4.38p		4.95p
Diluted	9	4.29p		4.85p

All operations are continuing.

*Recalculated on a Proforma basis in order to enable a like for like comparison with the current year, by treating the deconsolidated entity Fprop Opportunities plc (FOP) as an associate rather than a subsidiary. Proforma numbers are adjusted to exclude FOP's profit up to the date of deconsolidation on 12 October 2019, reinstating FOP asset management fees and including FPG's share of FOP's contribution as an associate. See note 4 for further analysis.

 

CONSOLIDATED SEPARATE STATEMENT

OF OTHER COMPREHENSIVE INCOME

for the year ended 31 March 2020

		Year ended 31 March 2020 (unaudited) Total results	Year ended 31 March 2019 PROFORMA	Year ended 31 March 2019 (audited) Total results
		£'000	£'000	£'000
Profit for the year		4,905	5,538	6,365
Other comprehensive income
Exchange differences on retranslation of foreign subsidiaries		(502)	(1,408)	(1,784)
Foreign exchange profit recycled to the income statement on disposal		-	(721)	(721)
Net gain/(loss) on financial assets at fair value through other comprehensive income		(195)	29	29
Taxation		-	-	-
Total comprehensive income for the year		4,208	3,438	3,889
Total comprehensive income for the year attributable to:
Owners of the parent		4,135	3,414	3,414
Non-controlling interests		73	24	475
		4,208	3,438	3,889

All operations are continuing.

 

CONSOLIDATED BALANCE SHEET

As at 31 March 2020

	Notes	As at 31 March 2020 (unaudited) £'000	As at 31 March 2019 (audited) £'000
Non-current assets
Goodwill	10	153	153
Investment properties	11	32,537	67,348
Property, plant and equipment		64	58
Investment in associates	12a)	17,698	17,054
Other financial assets	12b)	3,174	3,539
Other receivables	14	922	1,312
Right of use assets	8	584	-
Deferred tax assets	16	2,659	2,779
Total non-current assets		57,791	92,243
Current assets
Inventories - land and buildings	13	14,558	14,817
Current tax assets		122	28
Trade and other receivables	14	44,845	5,918
Cash and cash equivalents		7,337	9,738
Total current assets		66,862	30,501
Current liabilities
Trade and other payables	15	(9,158)	(7,078)
Financial liabilities	17	(49,073)	(6,329)
Current tax liabilities		(71)	(80)
Total current liabilities		(58,302)	(13,487)
Net current assets		8,560	17,014
Total assets less current liabilities		66,351	109,257
Non-current liabilities:
Financial liabilities	17	(15,461)	(60,348)
Lease liabilities	8	(584)	-
Deferred tax liabilities	16	(2,102)	(2,623)
Net assets		48,204	46,286
Equity
Called up share capital		1,166	1,166
Share premium		5,791	5,791
Share-based payment reserve		179	179
Foreign exchange translation reserve		(1,260)	(731)
Purchase of own shares reserve		(2,653)	(2,248)
Investment revaluation reserve		(236)	(41)
Retained earnings		45,060	42,056
Equity attributable to the owners of the parent		48,047	46,172
Non-controlling interests		157	114
Total equity		48,204	46,286
Net assets per share	9	43.53p	41.46p

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2020

Group	Share capital	Share premium	Share-based payment reserve	Foreign exchange translation reserve	Purchase of own shares	Investment revaluation reserve	Retained earnings	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2019	1,166	5,791	179	(731)	(2,248)	(41)	42,056	114	46,286
Profit for the year	-	-	-	-	-	-	4,905	-	4,905
Net gain/(loss) on financial assets at fair value through other comprehensive income	-	-	-	-	-	(195)	-	-	(195)
Exchange differences on retranslation of foreign subsidiaries	-	-	-	(529)	-	-	-	27	(502)
Sale of treasury shares	-	-	-	-	12	-	-	-	12
Purchase of treasury shares	-	-	-	-	(417)	-	-	-	(417)
Exercise of Share Options	-	-	-	-	-	-	-	-	-
Non-controlling interests	-	-	-	-	-	-	(46)	46	-
Dividends paid	-	-	-	-	-	-	(1,855)	(30)	(1,885)
At 31 March 2020	1,166	5,791	179	(1,260)	(2,653)	(236)	45,060	157	48,204

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2019

Group	Share capital	Share premium	Share-based payment reserve	Foreign exchange translation reserve	Purchase of own shares	Investment revaluation reserve	Retained earnings	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2018	1,166	5,789	203	1,398	(95)	(70)	38,344	6,187	52,922
Profit for the year	-	-	-	-	-	-	6,365	-	6,365
Net gain/(loss) on financial assets at fair value through other comprehensive income	-	-	-	-	-	29	-	-	29
Change in proportion held by NCI (FOP)	-	-	-	-	-	-	-	978	978
Change in proportion held by NCI (EAS)	-	-	-	-	-	-	-	95	95
Deconsolidation of FOP	-	-	-	-	-	-	-	(7,598)	(7,598)
Exchange differences on retranslation of foreign subsidiaries	-	-	-	(1,408)	-	-	-	(376)	(1,784)
Foreign exchange profit recycled to the income statement	-	-	-	(721)	-	-	-	-	(721)
Sale of treasury shares	-	2	-	-	10	-	-	-	12
Purchase of treasury shares	-	-	-	-	(2,201)	-	-	-	(2,201)
Exercise of share options	-	-	(24)	-	38	-	-	-	14
Non-controlling interests	-	-	-	-	-	-	(851)	851	-
Dividends paid	-	-	-	-	-	-	(1,802)	(23)	(1,825)
At 31 March 2019	1,166	5,791	179	(731)	(2,248)	(41)	42,056	114	46,286

 

CONSOLIDATED CASH FLOW STATEMENT 

for the year ended 31 March 2020

		2020	2019
		Group £'000	Group £'000
Cash flows from operating activities
Operating profit		5,233	8,501
Adjustments for:
Depreciation/write down of investment property and property, plant & equipment		2,178	5,167
Profit on the sale of investment property		(1,527)	-
Profit on the sale of FOP shares		-	(64)
Gain on loss of control of subsidiary		-	(4,827)
Impairment loss on an investment property		-	(32)
Impairment of goodwill on acquisition of subsidiary		-	27
Loss on disposal of subsidiary		-	5
(Increase)/decrease in inventories		(258)	96
Decrease/(increase) in trade and other receivables		1,040	(1,285)
(Decrease)/increase in trade and other payables		(483)	(187)
Other non-cash adjustments		121	599
Cash generated from operations		6,304	8,000
Taxes paid		(1,013)	(1,268)
Net cash flow from operating activities		5,291	6,732
Cash flow from/(used in) investing activities
Capital expenditure on investment properties		(1,258)	(1,531)
Proceeds from partial disposal of other financial assets held at fair value through other comprehensive income		576	549
Purchase of property, plant & equipment		(43)	(36)
Proceeds from the sale of FOP shares		-	2,630
Cash paid on acquisitions of new subsidiaries		-	(527)
Cash and cash equivalents received on acquisitions of new subsidiaries		-	421
Cash disposed following deconsolidation of subsidiaries		-	(2,046)
Investment in shares of new associates		-	(527)
Payment of Rights Issue in 5PT		-	(138)
Investment in funds		-	(468)
Proceeds from funds		218	569
Interest received		80	114
Dividends from associates		-	590
Distributions received		276	273
Net cash flow used in investing activities		(151)	(127)
Cash flow from/(used in) financing activities
Net repayment of shareholder loan in subsidiary		-	(121)
Proceeds from bank loan		1,769	-
Repayment of bank loans		(3,054)	(3,179)
Repayment from the sale of FOP shareholder loan		-	326
Repayment of finance lease		(2,562)	(3,065)
Sale of shares held in treasury		12	12
Purchase of new treasury shares		(417)	(2,201)
Exercise of share options		-	47
Interest paid		(1,338)	(2,180)
Dividends paid		(1,855)	(1,802)
Dividends paid to non-controlling interests		(30)	(23)
Net cash flow used in financing activities		(7,475)	(12,186)
Net increase/(decrease) in cash and cash equivalents		(2,335)	(5,581)
Cash and cash equivalents at the beginning of the year		9,738	15,315
Currency translation gains on cash and cash equivalents		(66)	4
Cash and cash equivalents at the year end		7,337	9,738

 

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 2020. The policies have been consistently applied to all years presented unless otherwise stated below. 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 2019 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.

Going Concern

In the shadow of the COVID-19 pandemic and the increased uncertainty that it brings, the Directors have carried out an analysis to support their view that the Group is a going concern and under which basis these financial statements have been prepared.

Underlying their conclusion was the sale of the Group's most valuable property, CH8, for a consideration of €44.0 million. The sale completed on 24 April 2020 and increased the Group's cash balances by €19.6 million after repaying the bank loan secured against the property. The Board therefore believes it is well placed to navigate a prolonged period of uncertainty if necessary.

The health and safety of all its employees and key service providers continues to remain a priority and the Group continues to monitor recommendations issued by the relevant authorities, and is complying with these where appropriate across the properties that it either owns or manages. The Group has put into action its Disaster Recovery (DR) plan which include travel restrictions and remote working policies. These have been in effect since 23 March 2020 and are operating well.

Analysis and scenario testing, which includes the impact from the COVID-19 pandemic, was carried out on the Group's main divisional income streams, being asset management fees from the asset management division, rental income from its eight directly owned group properties and cash returns from its associates and investments.

a)  Asset Management Fee Income

Asset management fee income is primarily derived from its UK funds (58%), three of which are limited partnerships whose limited partners are mostly UK pension funds.

With one exception, fees are invoiced monthly and are calculated based on a percentage of the latest valuation, which for the UK funds are performed quarterly. This income was tested for percentage falls in property values and the fund's ability to pay.

Income collected by the UK funds has to fall by over 85% before the fund's turn cash negative. In the one fund from which fees are not levied by reference to the property's valuation (Fprop Offices LP) no income was forecast for the purposes of this test, although a 9% decrease in property values in this fund would trigger a clawback of the fee recognised in the year to 31 March 2020. A 15% decrease would trigger the maximum clawback of fees recognised to date of £1.38m.

In the two UK funds with borrowing there is headroom of 20% on current property values within the LTV covenant agreed with the lenders. The Directors believe all funds have access to adequate resources to remedy the remote possibility of any loan covenant breaches.

Asset management fees on the group's Polish and Romanian managed funds are also levied as a percentage of funds under management, with reference to the most recent valuations, again with one exception where the fee is fixed (Fprop Phoenix Ltd). These funds are set up under the ownership of a UK limited company which in turn owns the company domiciled in the country that owns the property. Each of these local companies has borrowing secured on the property and is therefore ring fenced from the Group.

The collectability of all asset management fees is in little doubt. Their longevity is determined by the fund's life which is fixed by agreement when each fund is first established. The weighted average unexpired fund management contract term is 5 years, 0 months.

b)  Rental income from Group Properties

All eight Group Properties are located in Poland or Romania. These properties consist of 3 office blocks, a logistics warehouse and four mini-supermarkets. All were independently valued on 31 March 2020 after the COVID-19 outbreak at £56.30 million (2019: £94.61 million).

Whilst uncertainty in these valuations exist and short-term fluctuations can be expected there are reasons to be optimistic. Exposure to non-food retailers is very limited and with Poland exiting lockdown on 4 May 2020 the economic recovery there is forecast to be amongst the leaders in Europe.

The rental income has been reviewed and testedand no significant falls in collection rates are expected. The tenants are of good quality, as proven by excellent cash collection rates through and after the lockdown period. Any renegotiation of rental payment terms that have been agreed are reflected in the analysis.

The weighted average applicable LTV ratio for these Group Properties where applicable is 49.36% against a combined weighted average covenant of 67.38%. Of the Group Properties which are subject to an LTV bank covenant, current values are 26.74% higher. In the case of Gdynia whose borrowing is not subject to an LTV covenant the test assumes that the current finance lease will be renegotiated on competitive terms. 

The Directors have considered the consequences of failing to refinance the Gdynia property in this going concern assessment when the final finance lease repayment of €25.2 million falls due in February 2021. They are confident that, since the debt is non-recourse to the Group and that its equity in the property is valued in these financial statements at only €0.55 million, a failure to refinance would have no bearing on the going concern assessment.

c)  Income from Associates and Investments

Analysis was also carried out on the returns from the Group's investment in Associates. All funds invested in Poland and Romania have temporarily suspended distributions to shareholders and consequently no income for the Group was assumed from this source for the purposes of this test. All bank loan covenants were reviewed and tested against future decreases in valuation and net operating income.

Dividend income from the Group's UK investments was also stress tested and found not to have a significant impact. Average rent collection within the funds invested was 93% for the March quarter. For the purposes of this test a 50% fall was factored in for the full year. 

Going Concern statement

Based on the results of the analysis carried out as outlined above the Board believes that the Group has the ability to continue its business for at least 12 months from the date of approval of the financial statements and therefore has adopted the going concern basis in the preparation of this financial information.

New Standards and Interpretations

New standards impacting the Group which have been adopted in the preliminary financial statements for the year ended 31 March 2020, and which have given rise to changes in the Group's accounting policies are:

IFRS 16 Leases

The company has changed its accounting policy for leases.

Until 31 March 2019 the group held a small number of leases as lessee which were classified as operating leases, under which the significant portion of the risks and rewards of ownership were not transferred to the company. Payments made under operating leases were charged to profit or loss on a straight-line basis over the period of the lease.

From 1 April 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

· Fixed payments, less any lease incentives received

· Variable lease payments that are based on an index or a rate

· Amounts expected to be paid by the company under residual value guarantees

· Payments or penalties for terminating the lease, if the lease term reflects the company exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the lessee's incremental borrowing rate, being the rate that the company would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate the company where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

· the amount of the initial measurement of lease liability

· any lease payments made at or before the commencement date less any lease incentives received

· any initial direct costs; and

· restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

These preliminary financial statements were approved by the Board of Directors on 18 June 2020.

2.  Revenue

Revenue from continuing operations consists of revenue arising in the United Kingdom 12% (2019: 11%), Poland 81% (2019: 82%) and Romania 7% (2019: 7%). All revenue relates solely to the Group's principal activities.
 

3.  Segment Reporting 2020

	Fund Management Division	Group Properties Division
	Property fund management	Group properties and other co-investments	Associates and investments	Unallocated central overheads	Total
	£'000	£'000	£'000	£'000	£'000
Rental income	-	10,403	-	-	10,403
Service charge income	-	1,986	-	-	1,986
Asset management fees	3,483	-	-	-	3,483
Performance related fee income	415	-	-	-	415
Total revenue	3,898	12,389	-	-	16,287
Depreciation and amortisation	(35)	(2,443)	-	-	(2,478)
Operating profit	1,335	5,962	-	(2,064)	5,233
Share of results in associates	-	-	1,879	-	1,879
Fair value adjustment on associates	-	-	(659)	-	(659)
Investment income	-	-	324	-	324
Interest income	-	74	-	6	80
Interest payable	-	(1,338)	-	-	(1,338)
Profit/(loss) before tax	1,335	4,698	1,544	(2,058)	5,519
Analysed as:
Underlying profit/(loss) before tax before adjusting for the following items:	1,344	6,549	2,203	(1,023)	9,073
Profit on the sale of investment property	-	1,527	-	-	1,527
Fair value adjustment on associates	-	-	(659)	-	(659)
Depreciation	(35)	(2,443)	-	-	(2,478)
Performance related fee income	415	-	-	-	415
Staff incentives	(383)	(325)	-	(1,101)	(1,809)
Realised foreign currency (losses)/gains	(6)	(610)	-	66	(550)
Total	1,335	4,698	1,544	(2,058)	5,519
Assets - Group	1,078	98,591	3,174	4,032	106,875
Share of net assets of associates	-	-	18,006	(308)	17,698
Liabilities	(338)	(74,793)	-	(1,238)	(76,369)
Net assets	740	23,798	21,180	2,486	48,204
Additions to non-current assets
Property, plant and equipment	-	43	-	-	43
Investment properties	-	1,258	-	-	1,258
Trading stock	-	346	-	-	346
Investment in associates	-	-	-	-	-

 

Segment Reporting 2019

	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	-	9,658	3,272	-	12,930
Service charge income	-	1,748	798	-	2,546
Asset management fees	3,420	-	-	-	3,420
Performance related fee income	1,541	-	-	-	1,541
Total revenue	4,961	11,406	4,070	-	20,437
Depreciation and amortisation	(37)	(1,991)	(200)	-	(2,228)
Operating profit	3,031	2,048	6,136	(2,714)	8,501
Share of results in associates	-	1,687	(87)	-	1,600
Investment income	-	273	-	-	273
Interest income	-	78	31	5	114
Interest payable	-	(1,387)	(793)	-	(2,180)
Profit/(loss) before tax	3,031	2,699	5,287	(2,709)	8,308
Analysed as:
Underlying profit/(loss) before tax before adjusting for the following items:	1,981	7,467	2,058	(1,012)	10,494
Impairment losses	-	(3,043)	32	-	(3,011)
Group's share of revaluation losses on associates	-	-	(764)	-	(764)
Profit on the sale of 'FOP' shares	-	64	-	-	64
Gain on loss of control of subsidiary	-	606	4,221	-	4,827
Depreciation on investment property	-	(1,740)	-	-	(1,740)
Performance related fee income	1,541	-	-	-	1,541
Staff incentives	(476)	(190)	(212)	(1,669)	(2,547)
Realised foreign currency (losses)/gains	(15)	(465)	(48)	(28)	(556)
Total	3,031	2,699	5,287	(2,709)	8,308
Assets - Group	1,630	98,118	-	5,942	105,690
Share of net assets of associates	-	17,362	-	(308)	17,054
Liabilities	(398)	(74,254)	-	(1,806)	(76,458)
Net assets	1,232	41,226	-	3,828	46,286
Additions to non-current assets
Property, plant and equipment	-	35	-	-	35
Investment properties	-	1,116	415	-	1,531
Trading stock	-	11	-	-	11
Investment in associates	-	1,663	11,509	-	13,172

4.  Reconciliation of actual 2019 to Proforma Income Statement and Proforma Statement of Comprehensive Income

	Original	Less:	Add:	Adjustment:	PROFORMA
	Year to 31 March 2019	FOP (per published segment at 30 Sept 2018)	Reinstate FOP Asset Management fee elimination	FOP contribution as an Associate	Year to 31 March 2019
	£'000	£'000	£'000	£'000	£'000
Revenue	20,437	4,070	269	-	16,636
Cost of sales	(4,491)	(983)	-	-	(3,508)
Gross profit	15,946	3,087	269	-	13,128
Profit on sale of FOP shares	64	-	-	-	64
Impairment of goodwill on acquisition of subsidiary	(27)	32	-	-	(59)
Gain on loss of control of subsidiary	4,827		-	-	4,827
Impairment loss to investment property	(2,984)	-	-	-	(2,984)
Loss on disposal of subsidiary	(5)	-	-	-	(5)
Operating expenses	(9,320)	(575)	(269)	-	(9,014)
Operating profit	8,501	2,544	-	-	5,957
Share of results in associates	1,600	-	-	720	2,320
Investment income	273	-	-	-	273
Interest income	114	30	-	-	84
Interest expense	(2,180)	(792)	-	-	(1,388)
Profit before tax	8,308	1,782	-	720	7,246
Tax charge
Current tax	(1,284)	(240)	-	-	(1,044)
Deferred tax	(659)	5	-	-	(664)
	(1,943)	(235)	-	-	(1,708)
Profit after tax for the year	6,365	1,547	-	720	5,538
Attributable to:
Owners of the parent	5,514	720	-	720	5,514
Non-controlling interests	851	827	-	-	24
	6,365	1,547	-	720	5,538
Other comprehensive income
Exchange differences on retranslation of foreign subsidiaries	(1,784)	(376)	-	-	(1,408)
Foreign exchanges profit recycled to the income statement on disposal	(721)	-	-	-	(721)
Net gain/(loss) on financial assets at fair value through OCI	29	-	-	-	29
Taxation	-	-	-	-	-
Total comprehensive income for the year	3,889	1,171	-	720	3,438

Total comprehensive income for the year attributable to:
Owners of the parent	3,414	720	-	720	3,414
Non-controlling interests	475	451	-	-	24
	3,889	1,171	-	720	3,438

Reconciliation for adjustment to Share of results in associates:

				PROFORMA
				Year to 31 March 2019
			£'000	£'000
Share of results in associates				1,600
Adjustments for:
FOP profit before tax for 6 months to 30 September 2018			1,782
Tax expense attributable to FOP			(235)
Profit after tax			1,547
Less: FOP non-controlling interest 30 September 2018			(827)
				720
Share of result of associates on a proforma basis				2,320

5.  Interest Income

	2020	2019
	Group £'000	Group £'000
Interest income - bank deposits	26	18
Interest income - other	54	96
Total interest income	80	114

	2020	2019
	Group £'000	Group £'000
Interest expense - property loans	(1,009)	(1,571)
Interest expense - bank and other	(53)	(49)
Finance charges on finance leases	(276)	(560)
Total interest expense	(1,338)	(2,180)

6.  Profit on the Sale of an Investment Property

During the year, the Group's largest property, Chalubinskiego 8 (CH8) in Warsaw, Poland was sold for €44 million. The sale completed on 24 April 2020 with its financial liabilities being discharged.

€ '000

Sale Proceeds		44,000
Less: Cost to sell
Cost of property		(39,614)
Cost of sale guarantees		(2,612)
Other transactional costs		(314)
Release of property provision		266
Profit on the sale of an investment property		1,726

The profit on sale of the property recognised in the Consolidated Income Statement is £1,527,083 which represents the profit above of €1,725,757 converted at a rate of 1.1301 €/£.

As a condition of the sale the Group has guaranteed the rental and service charge income and fitout costs on the residual vacant space, up to some €1.2 million per annum for five years and €1.5 million respectively. A provision for the potential cost of this guarantee has been included within other payables and accruals.

7.  Tax Expense

	2020 £'000	2019 £'000
Analysis of tax charge for the year
Current tax	(974)	(1,284)
Deferred tax	360	(659)
Total tax charge for the year	(614)	(1,943)

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.

8.  Lease Liabilities and Right of Use Assets

The Group has reviewed the lease terms of its leases in force at the date of transition and has identified two leases.

The first lease which is the lease of the UK office at St James's Street, London terminates 1 July 2020 therefore within 12 months of the transition date. The Group has taken the exemption under IFRS 16 for short term leases and continued to recognise the cost of this lease as an expense in the income statement.  

The second lease within the Group is by First Property Poland sp. z. o. o. (FPP), a subsidiary entity leasing office space from 5^th Property Trading Poland sp. z. o. o. (a related party to the Group). This lease terminates on 31 March 2024. A discount rate of 2.75% has been applied representing its incremental borrowing rate.

As at 31 March 2020 the Group has recognised a lease liability under IFRS 16 of £584,000 with an equivalent right of use asset. The net charge to the income statement was £8,462.

9.  Earnings/NAV per Share

	2020	2019
Basic earnings per share	4.38p	4.95p
Diluted earnings per share	4.29p	4.85p
	£'000	£'000
Basic earnings	4,859	5,514
Diluted earnings assuming full dilution	4,867	5,522

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

	2020 Number	2019 Number
Weighted average number of Ordinary shares in issue (used for basic earnings per share calculation)	110,953,578	111,353,468
Number of share options	2,610,000	2,610,000
Total number of Ordinary shares used in the diluted earnings per share calculation	113,563,578	113,963,468

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

	2020 £'000	2019 £'000
Basic earnings per share
Basic earnings	4,859	5,514
Diluted earnings per share
Basic earnings	4,859	5,514
Notional interest on share options assumed to be exercised	8	8
Diluted earnings	4,867	5,522

	2020	2019
Net assets per share	43.53p	41.46p
Adjusted net assets per share	55.00p	57.48p

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	48,047	46,172
	£'000		£'000
For adjusted net assets per share
Net assets excluding non-controlling interests	48,047		46,172
Investment properties at fair value net of deferred tax	4,520		4,664
Inventories at fair value net of deferred tax	2,939		5,416
Other items	6,641		9,256
Total	62,147		65,508

	Number	Number
Number of shares in issue at year end	110,382,332	111,354,001
	Number	Number
Number of shares in issue at year end	110,382,332	111,354,001
Number of share options assumed to be exercised	2,610,000	2,610,000
Total	112,992,332	113,964,001

10.  Goodwill

	2020	2019
	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 was necessary because the estimated value in use was higher than the value stated.

11.  Investment Properties

	2020	2019
	Group £'000	Group £'000
Investment properties
At 1 April	67,348	132,180
Capital expenditure	1,258	1,531
Additions	-	5,406
Disposal	(32,190)	(63,907)
Depreciation	(2,055)	(2,111)
Write down/impairment loss to an investment property	-	(2,984)
Foreign exchange translation	(1,824)	(2,767)
At 31 March	32,537	67,348

Investment properties owned by the Group are stated at cost less depreciation and accumulated impairment losses. The properties were valued at the Group's financial year end at €43.08 million (2019: €84.84 million), the Sterling equivalent at closing foreign exchange rates being £38.12 million (2019: £73.18 million).

On acquisition of the Gdynia property the Directors took the decision to depreciate the property over the lease term which expires in 2020. 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.

The property disposals in the year to 31 March 2020 represent the sale of CH8 for €44.00 million. The disposal of £32.19 million represents the cost of the property up to the point of sale. See Note 6 for detail of the sale of the property.

 

12.  Investment in Associates and Other Financial Assets and Investments

The Group has the following investments:

	2020	2019
	Group £'000	Group £'000
a) Associates
At 1 April	17,054	4,725
Additions	-	13,172
Disposals	-	(1,304)
Shareholder loan repayments	(576)	(549)
Share of associates' profit after tax	1,879	2,364
Share of associates' revaluation losses	(659)	(764)
Dividends received	-	(590)
At 31 March	17,698	17,054

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:

	2020	2019
	Group £'000	Group £'000
Investment in associates
5th Property Trading Ltd	1,436	1,288
Fprop Romanian Supermarkets Ltd	168	150
Fprop Galeria Corso Ltd	2,346	2,089
Fprop Krakow Ltd	1,451	1,308
Fprop Cluj Ltd	519	458
Fprop Phoenix Ltd	1,908	2,049
Fprop Opportunities plc	10,178	10,020
	18,006	17,362
Less: Share of profit after tax withheld on sale of property to 5th Property Trading Ltd in 2007	(308)	(308)
	17,698	17,054

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 £23.96 million (2019: £25.97 million).

	2020	2019
	Group £'000	Group £'000
b) Other financial assets and investments
At 1 April	3,539	4,517
Additions	48	468
Disposals	-	(900)
Repayments	(218)	(569)
Increase /(Decrease) in fair value during the year	(195)	23
At 31 March	3,174	3,539

The Group holds three unlisted investments in funds managed by it. All are held at fair value. All of the assets have been designated at fair value through OCI upon the adoption of IFRS 9. 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.

 

13.  Inventories - Land and Buildings

	2020	2019
	Group £'000	Group £'000
Group properties for resale at cost
At 1 April	14,817	15,586
Capital expenditure	346	11
Disposal/write off	-	(30)
Depreciation	(88)	(77)
Foreign exchange translation	(517)	(673)
At 31 March	14,558	14,817

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 £18.19 million (€20.55 million) down from £21.50 million (€24.95 million) in 2019 but is stated at cost as above.

14.  Trade and Other Receivables

	2020	2019
	Group £'000	Group £'000
Current assets
Trade receivables	1,423	1,408
Less provision for impairment of receivables	(330)	(297)
Trade receivables net	1,093	1,111
Other receivables	42,343	2,836
Prepayments and accrued income	1,409	1,971
At 31 March	44,845	5,918

Other receivables, under current assets, includes £38.93 million relating to the sale proceeds following the sale of CH8, which were received in full on 24 April 2020.

Non-current assets
Other receivables	922	1,312

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. 

15.  Trade and Other Payables

	2020	2019
	Group £'000	Group £'000
Current liabilities
Trade payables	2,591	2,798
Other taxation and social security	1,030	855
Other payables and accruals	5,354	3,235
Deferred income	183	190
At 31 March	9,158	7,078

 

16.  Deferred Tax

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

	2020	2020	2020	2019	2019	2019
	Group net assets £'000	Group assets £'000	Group liabilities £'000	Group net assets £'000	Group assets £'000	Group liabilities £'000
Accrued interest payable	(1,026)	56	(1,082)	(919)	120	(1,039)
Accrued income	(7)	-	(7)	(5)	-	(5)
Foreign bank loan	1,281	1,295	(14)	1,108	1,108	-
Investment properties and inventories	(11)	983	(994)	(146)	1,425	(1,571)
Other temporary differences	320	325	(5)	118	126	(8)
At 31 March	557	2,659	(2,102)	156	2,779	(2,623)

17.  Financial Liabilities

	2020 Group £'000	2019 Group £'000
Current liabilities
Bank loan	23,829	3,780
Finance leases	25,244	2,549
At 31 March	49,073	6,329
Non-current liabilities
Bank loans	15,461	35,783
Finance leases	-	24,565
At 31 March	15,461	60,348

	2020 Group £'000	2019 Group £'000
Total obligations under bank loans and finance leases
Repayable within one year	49,073	6,329
Repayable within one and five years	8,770	54,073
Repayable after five years	6,691	6,275
At 31 March	64,534	66,677

Six bank loans and one finance lease all denominated in Euros totalling £64.53 million (2019: £66.68 million), included within financial liabilities, are secured against investment properties owned by the Group and one property owned by the Group shown under inventories. These bank loans and finance lease are otherwise non-recourse to the Group's assets.

There are no loan to value covenant breaches based on the current market values.

The finance lease for the office building in Gdynia is technically in default of one of its loan covenants for failure to lease more than 50% of the leasable area one year prior to the expiry of the current sole tenant's lease in October 2020. Negotiations with the lender, the tenant and prospective tenants are in progress.

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.

 

END

 

 

FR EANKLAFDEEFA