Final Results

First Property Group PLC 06 June 2007 FIRST PROPERTY GROUP PLC ('First Property', 'Fprop' or the 'Company') PRELIMINARY RESULTS SHOW CONTINUED GROWTH AND A TREBLING OF ASSETS UNDER MANAGEMENT First Property (AIM: FPO), the property asset manager, announces preliminary results for the year ended 31 March 2007. Financial Highlights â€¢ As predicted, turnover reduced to Â£7,854,000 (2006: Â£8,312,000) as a result of a shift in the Group's activities away from its property transaction and underwriting businesses to focus on its asset management activities. â€¢ Profit on ordinary activities before taxation and goodwill amortisation increased to Â£1,199,000 (restated 2006: Â£1,154,000). â€¢ Recommended dividend for the year increased by 16.67% to 0.175p per share (2006: 0.15p) â€¢ Significant shift in income away from property trading profits to asset management fee income thus materially improving visibility of revenues for 2008. Corporate Highlights â€¢ Assets under management trebled to over Â£150 million (2006: Â£51 million). â€¢ 85% of assets under management are located in Central and Eastern Europe. â€¢ This portfolio earned a pre tax return on equity of between 7% and 8% from rent alone. â€¢ This rate of return increases to over 20% per annum when combined with the increases in value of the properties over the last year. â€¢ Over Eur 100 million (Â£68 million) of property currently under offer on behalf of the funds managed by First Property. â€¢ Strategic emphasis on growing the asset management division and thus reducing dependence on transaction underwriting and trading, continues to be successfully progressed. Post Year End Highlights â€¢ Universities Superannuation Scheme doubled its investment mandate with First Property from Â£50 million to Â£100 million, which once fully invested will result in assets under management increasing to over Â£400 million. â€¢ Part IV FSA registration awarded, allowing First Property to raise and manage funds directly from the public as well as institutional shareholders. â€¢ Acquisition of three office blocks in Poland, Romania and the UK, with an aggregate value of some â‚¬90 million (Â£61 million) on behalf of funds managed. â€¢ Forward commitment in the region of â‚¬70 million (Â£47 million) agreed to acquire a retail centre, which is to be built in Bytom, southern Poland on behalf of funds managed. Commenting on the results, Ben Habib, chief executive, said, 'The Group has again experienced a hugely positive year, with assets under management trebling to over Â£150 million. The strategic emphasis on growing our asset management division has been successfully progressed. This, coupled with our recently awarded FSA part IV registration, which enables us to raise funds independently, means that we should be able to continue scaling up our business over the next few years. I remain very confident about the Group's prospects.' For further information: Ben Habib Richard Sunderland/Rachel Drysdale First Property Group plc Tavistock Communications Tel 020 7731 2844 Tel: 020 7920 3150 www.fprop.com rsunderland@tavistock.co.uk CHIEF EXECUTIVE'S STATEMENT Results and dividend I am pleased to report the results for the year to 31 March 2007, which has been both a successful and transformational year for the Group. As predicted when we reported last year, turnover has reduced to Â£7,854,000 (2006: Â£8,312,000), but the gross profit earned has increased to Â£2,638,000 (2006: Â£2,318,000), yielding a profit on ordinary activities before taxation and goodwill amortisation of Â£1,199,000 (restated 2006: Â£1,154,000). Diluted earnings per ordinary share before goodwill amortisation were slightly lower than the previous year at 0.80 pence (restated 2006: 0.82 pence), reflecting the minority shareholder interest taken in First Property Services Ltd. Pursuant to the requirements of FRS 20, we have provided in the profit and loss account, as an expense, the value of management share options which vested in the period under review. The effect of this new accounting standard on the year to 31 March 2007 was to reduce profit by Â£31,000 (2006: Â£13,000). As a result of the implementation of the new accounting standard the accounts for the year to 31 March 2006 have been restated. I reported last year that the Group was experiencing major changes in its business as income derived from property underwriting and trading reduced and fee income derived from asset management increased. What was uncertain was the rate at which this transformation would take place. As it happens, we have done so at a fast rate. Assets under management trebled to over Â£150 million (2006: Â£51 million) and the significant increase in fee income demonstrates the extent of this transformation. Dividend On the basis of these results, and our confidence in the Company's future, the Directors have resolved to recommend an increased dividend for the year of 0.175 pence per share (restated 2006: 0.15 pence per share), which, if approved, will be paid on 28 September 2007 to shareholders on the register at 24 August 2007. Review of operations Property asset management Revenue earned by this division amounted to Â£1,362,000 (2006: Â£503,000). Of the fees earned, Â£310,000 (2006: Â£217,000) was in respect of super performance fees. We now have over Â£150 million of property assets under management (2006: Â£51 million). Of these, over 85% by number and value are located in Central and Eastern Europe. Our experience of the Central and Eastern European property markets continues to bear out our expectations of the region. We are finding many more attractive properties to acquire than in the UK, as evidenced by the rapid growth of our activities there. In addition, at the time of writing the funds we manage have over Eur 100 million (Â£68 million) of property under offer, which is going through the due diligence process. The pre-tax rates of return on equity earned from rent alone by our various funds remains healthy, notwithstanding the recent increases in interest rates, earning a rate of between 7% and 8% per annum. When combined with the increases in value of the properties over the last year, this rate of return increases to over 20% per annum. We were pleased to announce last week that the Universities Superannuation Scheme (USS) has doubled its investment mandate with us, from an initial Â£50 million to a Â£100 million commitment. Together with gearing and once fully invested this mandate should result in assets under management exceeding Â£400 million. USS first provided us with a mandate of Â£50 million in 2005, giving the Company a remit to invest up to Â£200 million in commercial property in Central and Eastern Europe and the United Kingdom. The initial mandate is now over 70% complete. As mentioned above we are working on acquiring a further Eur 100 million (Â£68 million) of property, which if acquired will more than fully utilise the initial Â£50 million. The Group's growth remains focussed on asset management activities. As such, we recently applied for, and received, Part IV registration with the Financial Services Authority. The Part IV FSA registration allows us to raise, and subsequently manage, funds directly from the public, rather than solely from institutional and professional investors. We will now be able to access funds from a broad range of investors and structure a wide variety of investment vehicles, including publicly quoted investment companies, unit trusts as well as regulated and unregulated investment schemes. Property transaction underwriting and trading Turnover from this activity was Â£3,252,000 (2006: Â£7,375,000), producing a gross profit contribution of Â£515,000 (2006: Â£1,547,000). This lower result was in line with our expectations for this division for the reasons set out above. We are now coming across interesting trading opportunities in Central and Eastern Europe. We will therefore be exploring opportunities for this division in the region, looking to replace some of the reduction in profit that it has recently experienced. We expect to see evidence of this improvement in the 2008 financial year. First Property Services Ltd (FPS) FPS, in which we acquired a 60% interest in February 2006, is engaged in the provision of facilities maintenance and building services to clients in the commercial property sector. For the year to 31 March 2007, its first full year in the Group, FPS earned revenues of Â£2,870,000 and a profit before tax of Â£122,000. In view of the fact that this was effectively the company's first full year of trading within the Group the result was good. FPS operates independently of our other divisions and we are therefore able to report on it as a stand alone entity, with its own independent profit and loss account. The other divisions have a degree of overlap in personnel, which is why we only report their revenues and, in the case of the property trading division, gross profit (as opposed to profit before tax). The margins available in this business are lower than those we earn from asset management and property trading. It nevertheless has a healthy book of clients and an experienced work force and is I believe capable of achieving good returns. Given the nature of the business it is difficult to assess its likely performance for the current year, but it has made a good start. Online activities Online activities contributed revenues of Â£302,000 (2006: Â£258,000). We expect the division to contribute a result of the same order of magnitude for the year to 31 March 2008. Strategy Our strategy, which is now well established, remains to grow our sustainable lines of revenue, most notably through our asset management division. We will also aim to create further value through the trading of suitable properties. Current trading and prospects I am delighted by the rapid transformation of the Group over the last year. As a result of this we enter the current year with greater visibility of earnings derived primarily from our asset management division. The asset management division should continue to grow at a rapid rate, further adding to our revenue streams and improving the visibility and security of our income. We now have a good track record as property asset managers and understand how to apply these skills to international property markets. If our current chosen geographic areas become less attractive than they are at present (which we do not anticipate), we believe that we will not find it difficult to reposition ourselves in other growth areas. This expertise, coupled with our ability to raise funds independently now that we are FSA registered, means that we should be able to continue scaling up our business in the years ahead. Given the above I remain very confident about the Group's prospects. Ben Habib Chief Executive 6 June 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 March 2007 2007 2006 2006 2006 Restated Restated Restated (Unaudited) Audited Audited Audited ---------------------------------------------------------------------------- Notes Total Before Goodwill Total results goodwill amortisation result amortisation Â£'000 Â£'000 Â£'000 Â£'000 ---------------------------------------------------------------------------- Turnover - continuing operations 2 7,854 8,312 - 8,312 ---------------------------------------------------------------------------- Total turnover 7,854 8,312 - 8,312 Cost of sales (5,216) (5,994) - (5,994) ---------------------------------------------------------------------------- Gross profit 2,638 2,318 - 2,318 Net operating expenses (1,611) (1,139) (391) (1,530) ---------------------------------------------------------------------------- Operating profit - continuing operations 1,027 1,179 (391) 788 ---------------------------------------------------------------------------- Total operating profit 1,027 1,179 (391) 788 Income - fixed asset investment 116 2 - 2 Share of associated company's profit before tax 89 23 - 23 Net interest payable (33) (50) - (50) ---------------------------------------------------------------------------- Profit on ordinary activities before taxation 2 1,199 1,154 (391) 763 Taxation on ordinary activities (240) (236) - (236) ---------------------------------------------------------------------------- Profit for the year before minority interest 959 918 (391) 527 Equity minority interest (44) 20 - 20 ---------------------------------------------------------------------------- Profit for the year 915 938 (391) 547 Earnings per Ordinary 1p share - basic 3 0.82p 0.84p 0.49p - diluted 3 0.80p 0.82p 0.48p CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES for the year ended 31 March 2007 Notes 2007 2006 Restated (Unaudited) Audited Exchange differences on translation of foreign operations 6 10 70 Net Gain recognised directly in Reserves 6 10 70 Profit for year after tax 6 748 407 Total recognised gains for year 758 477 CONSOLIDATED BALANCE SHEET at 31 March 2007 2007 2006 Restated (Unaudited) Audited ----------------------------------------------------------------------------- Notes Group Group Â£'000 Â£'000 Fixed assets Intangible assets 25 16 Tangible assets 139 220 Investments 274 230 ----------------------------------------------------------------------------- 438 466 ----------------------------------------------------------------------------- Current assets Stocks 2,314 2,698 Debtors 4,267 5,706 Cash at bank and in hand 2,522 1,189 ----------------------------------------------------------------------------- 9,103 9,593 ----------------------------------------------------------------------------- Creditors: amounts falling due within one year (1,836) (2,975) ----------------------------------------------------------------------------- Net current assets 7,267 6,618 ----------------------------------------------------------------------------- Total assets less current liabilities 7,705 7,084 ----------------------------------------------------------------------------- Creditors: amounts falling due after one year (41) (92) ----------------------------------------------------------------------------- Net assets 7,664 6,992 ----------------------------------------------------------------------------- Capital and reserves Called up share capital 5 1,116 1,116 Share premium 6 5,298 5,298 Merger reserve 6 5,823 5,823 Foreign Exchange Translation Reserve 6 80 70 Profit and loss account 6 (4,653) (5,315) ------------------------------------------------------------------------------- Equity shareholders' funds 7 7,664 6,992 ------------------------------------------------------------------------------- CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 March 2007 Notes 2007 2006 Â£'000 Â£'000 (Unaudited) (Audited) Net cash inflow/(outflow) from operating activities 8 2,538 (850) ------------------------------------------------------------------------------- Returns on investments and servicing of finance - Dividends paid (167) (140) - Dividends received 116 2 - Interest paid (132) (151) - Interest received 99 101 ------------------------------------------------------------------------------- Net cash (outflow) from returns on investments and servicing of finance before taxation (84) (188) Taxation (367) (1) Capital expenditure and financial investment - Purchase of tangible fixed assets (45) (222) - Purchase of intangible fixed assets (9) (16) - Purchase of fixed asset investments (54) (111) - Sale of tangible fixed assets 54 7 - Sale of fixed asset investments 132 - - Purchase of minority interest - (336) ------------------------------------------------------------------------------- Net cash (outflow)/ from capital expenditure and financial investment (289) (679) ------------------------------------------------------------------------------- Cash inflow/(outflow) before management of liquid resources and financing 2,165 (1,717) ------------------------------------------------------------------------------- Management of liquid resources - Decrease/(increase) in short term deposits 9 (1,311) 508 Financing - Purchase of own shares (86) - - Bank overdraft (3) 3 - Finance Lease (84) 145 - Loans advanced - 1,304 - Loan repayments (659) (134) ------------------------------------------------------------------------------- Net cash (outflow)/inflow from management of liquid resources and financing (2,143) 1,826 ------------------------------------------------------------------------------- Increase in cash in the year 9 22 109 ------------------------------------------------------------------------------- Reconciliation of net cash flow to movement in net funds Notes 2007 2006 Â£'000 Â£'000 Increase in cash in the year 22 109 Movement in short term deposits 1,311 (508) Movement in loans and bank overdraft 746 (1,318) ------------------------------------------------------------------------------- Movement in net funds in the year 2,079 (1,717) Net funds at 1 April (263) 1,454 ------------------------------------------------------------------------------- Net funds at 31 March 9 1,816 (263) ------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS 1. Basis of preparation The figures for the year ended 31 March 2007 are unaudited and are not full financial statements. The figures for the years ended 31 March 2007 and 31 March 2006 are non-statutory. The figures for the year ended 31 March 2006 are extracts from the full financial statements delivered to the Registrar of Companies, as restated to comply with FRS 20. The report of the auditors on those financial statements was unqualified and contained no statements under either Section 237(2) or 237(3) of the Companies Act 1985. 2. Segmental analysis Turnover Profit/(loss) before tax ------------------------------------------------------------------------------- 2007 2006 2007 2006 Â£'000 Â£'000 Â£'000 Â£'000 ------------------------------------------------------------------------------- Business analysis - continuing operations Property underwriting and related services 3,252 7,375 494 1,407 Property asset management 1,362 503 1,166 502 Property contracting and maintenance 2,870 136 122 (51) Property online sales 163 59 163 59 Database provision and web services 139 199 61 75 Other fees 68 40 2 - Unallocated central costs - - (809) (838) ------------------------------------------------------------------------------- 7,854 8,312 1,199 1,154 ------------------------------------------------------------------------------- The profit/(loss) before tax attributable for each activity is stated after allocating direct net operating expenses. 3. Earnings per share The calculation of basic earnings per share is based on the profit on ordinary activities after taxation and minority interest, namely Â£915,000 (restated 2006: Â£938,000) and on 111,601,115 (2006: 111,601,115) ordinary shares being the weighted average number of ordinary shares in issue and ranking for dividend during the year. The calculation of diluted earnings per share is based on an adjusted profit on ordinary activities after taxation and minority interest of Â£956,000 (restated 2006: Â£944,000) and on 120,038,615 (2006: 114,901,115) ordinary shares being the adjusted weighted average number of ordinary shares at the year-end including shares under option which are exercisable at less than the market price at the year-end. 4. Dividend on ordinary shares 2007 2006 Â£'000 Â£'000 ------------------------------------------------------------------------------- Final Dividend paid for previous year 167 140 ------------------------------------------------------------------------------- 167 140 ------------------------------------------------------------------------------- 5. Called-up share capital 2007 2006 Â£'000 Â£'000 ------------------------------------------------------------------------------- Authorised 240,000,000 (2006: 240,000,000) Ordinary shares of 1p each 2,400 2,400 Allotted, called up and fully paid 111,601,115 (2006: 111,601,115) Ordinary shares of 1p each 1,116 1,116 ------------------------------------------------------------------------------- 6. Share premium account and reserves Group Share Foreign Merger Purchase of Profit Premium Exchange Reserve own shares and Loss Translation Account Reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 1 April 2006 5,298 70 5,823 - (5,315) Profit for the financial period - - - - - Increase in foreign exchange translation reserve - 10 - - - Purchase of Treasury Shares - - - (86) - Profit for the year after tax and dividends - - - - 748 ------------------------------------------------------------------------------- At 31 March 2007 5,298 80 5,823 (86) (4,567) ------------------------------------------------------------------------------- During the year the Company purchased 450,000 of its own ordinary shares which are held in treasury, at a price of 19 pence per share. 7. Reconciliation of movements in equity shareholders' funds Group 2007 2006 Â£'000 Â£'000 ------------------------------------------------------------------------------- Opening shareholders' funds 6,992 6,515 Profit for the year 915 547 New share capital issued - - Purchase of Treasury Shares (86) - Dividends paid (Note 3) (167) (140) Increase in foreign exchange translation reserve 10 70 ------------------------------------------------------------------------------- Closing shareholders' funds 7,664 6,992 ------------------------------------------------------------------------------- 8. Reconciliation of operating profit to net cash inflow/(outflow) from operating activities 2007 2006 Â£'000 Â£'000 ------------------------------------------------------------------------------- Operating profit 1,027 788 Depreciation and profit/(loss) on disposal of fixed assets 51 18 (Profit) on disposal of fixed asset investments (48) - Amortisation of goodwill - 391 Movement in foreign exchange translation reserve 10 70 Decrease/(increase) in stocks 384 1,303 Decrease/(increase) in trade debtors 1,150 (3,892) Decrease/(Increase) in prepayments and other debtors 269 (261) Increase/(decrease) in trade creditors 77 149 Increase/(decrease) in taxation and social security 47 (54) (Decrease)/increase in other creditors, accruals and deferred income (431) 638 ------------------------------------------------------------------------------- Net cash inflow/(outflow) from operating activities 2,536 (850) ------------------------------------------------------------------------------- 9. Reconciliation of movement in net funds 1 April 2006 Cash flow 31 March 2007 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 1,189 1,333 2,522 Short term deposits (501) (1,311) (1,812) ------------------------------------------------------------------------------- Cash (excluding short term deposits) 688 22 710 Short term deposits 501 1,311 1,812 Debt due within one year Overdraft (3) 3 - Finance Lease (53) 33 (20) Property loan (1,304) 659 (645) Debt due after one year Finance Lease (92) 51 (41) ------------------------------------------------------------------------------- (263) (2,079) 1,816 ------------------------------------------------------------------------------- 10. International Financial Reporting Standards The Company is adopting IFRS accounting standards for the year ending 31 March 2008. It is the Directors' intention that an impact analysis, showing the effect of the material changes on the March 2007 financial statements, will be produced at or before the reporting of the Group's interim accounts for the six months ending September 2007. 11. Report circulation Copies of this preliminary results announcement are available from the Company's registered office at 17 Quayside, William Morris Way, London SW6 2UZ and on its website at www.fprop.com. Copies of the Annual Report and Accounts will be sent to shareholders by 10 August 2007 for approval at the Annual General Meeting to be held on 7 September 2007 and will also be available at the Company's registered office and its website at www.fprop.com. This information is provided by RNS The company news service from the London Stock Exchange

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