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First Property Group - 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: +44 (20) 7340 0270

Ben Habib (Chief Executive Officer)

George Digby (Group Finance Director)

Jeremy Barkes (Director, Business Development)

www.fprop.com

[email protected]

 

 

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

[email protected]

 

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 Properties generated 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 the Group'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

                     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 tested and 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 5th 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.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
FR EANKLAFDEEFA

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