REG - First Property Group - Preliminary results
22/06/2023 07:00
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RNS Number : 5731D First Property Group PLC 22 June 2023
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 2023
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 2023.
Highlights since interim results:
· Sold two directly owned supermarkets in Poland for £5.50 million
generating a profit of £0.68 million.
· 5th Property Trading Ltd (5PT), a fund in which the Group gained
a controlling interest following the purchase of an additional 6.57% in
shares, has been consolidated into the Group's accounts.
· Post the year end, launched a senior debt product for secured
lending against commercial property.
· Second interim dividend, in lieu of a final dividend, of 0.25
pence per share paid on 5 April 2023, to make a total dividend of £0.50 pence
for the year (2022: £0.50 pence).
Financial summary:
Restated Percentage
Unaudited Audited change
year to year to
31 March 2023 31 March 2022
Income Statement:
Statutory profit before tax £2.49m £7.08m -64.83%
Diluted earnings per share 1.70p 6.01p -71.71%
Total dividend per share 0.50p 0.50p -%
Average €/£ exchange rate 1.1567 1.1754 -
Financial Position at the year-end:
Investment properties at book value* £47.01m £36.20m +29.86%
Investment properties at market value* £53.97m £42.24m +27.77%
Associates and investments at book value £22.13m £26.58m -16.74%
Associates and investments at market value £25.27m £30.60m -17.42%
Cash balances £7.65m £6.42m +19.16%
Cash per share 6.82p 5.81p +17.38%
Gross debt** £29.66m £23.66m +25.36%
Net debt** £22.00m £17.24m +27.61%
Gearing ratio at book value*** 40.57% 35.62%^ -
Gearing ratio at market value*** 36.08% 31.25%^ -
Net assets at book value**** £43.44m £42.77m^ +1.57%
Net assets at market value £52.54m £52.05m^ +0.94%
Adjusted net assets per share (EPRA basis) 46.50p 46.07p^ +0.93%
Year-end €/£ rate 1.1381 1.1834 -
*Investment properties includes properties of 5PT, previously classed as an
associate
**Debt comprises financial liabilities, including those of 5PT
***Gearing ratio = Gross debt divided by gross assets
****Attributable to the owners of the parent, excludes non-controlling
interests
^Restated, further details within the basis of preparation section of the
notes to the accounts.
Commenting on the results, Ben Habib, Chief Executive of First Property Group
plc, said:
"These are a creditable set of results in extremely challenging times.
"The end of lockdowns should have ushered in a more normal trading
environment. Instead, we are experiencing the severe impact of broken supply
chains and labour markets. Together with the war in Ukraine, the result has
been rocketing inflation and a concomitant increase in interest rates.
"Consequently, investment markets have been hit hard, with a sharp reduction
in debt availability and the volumes of property being traded.
"Occupational demand is generally holding up better than investment markets
and we are making some inroads in letting the space available at our office
blocks in Warsaw and Gdynia.
"Given the general withdrawal of financing from the market, we have
established a platform for the provision of debt to finance commercial
property investments. It is too early to determine the likely success of this
venture but we believe it to be the right product, launched at the right
time."
A briefing for analysts and shareholders will be held at 11.00hrs today via
Investor Meet Company. To participate it is necessary to register at
https://www.investormeetcompany.com/first-property-group-plc/register-investor
(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's website.
For further information please contact:
First Property Group plc Tel: +44 (20) 7340 0270
Ben Habib (Chief Executive Officer) www.fprop.com (http://www.fprop.com)
Laura James (Group Finance Director) investor.relations@fprop.com (mailto:investor.relations@fprop.com)
Jeremy Barkes (Director, Business Development)
Jill Aubrey (Company Secretary)
Allenby Capital (NOMAD & Broker) Tel: + 44 (0) 20 3328 5656
Nick Naylor / Daniel Dearden-Williams (Corporate Finance)
Amrit Nahal (Equity Sales)
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 six directly held properties in Poland, one in Romania,
and non-controlling interests in nine of the twelve funds.
Quoted on AIM, the Company has offices in London and Warsaw. Around one third
of the shares in the Company are owned by management, directors and their
families. Further information about the Company and its properties can be
found at: www.fprop.com (http://www.fprop.com) .
CHIEF EXECUTIVE'S STATEMENT
Financial performance
I am pleased to report the Company's preliminary results for the year ended 31
March 2023.
Revenue earned by the Group during the year amounted to £7.25 million (31
March 2022: £8.65 million) yielding a profit before tax of £2.49 million (31
March 2022: £7.08 million). The profit for the prior year, as explained in
the accounts for that year, was bolstered by the restructuring of the loan
secured on the Group's property in Gdynia.
The Group's profit was lower than in previous years due to the sale of income
producing properties and the re-investing of some of these proceeds in the
office block in Gdynia and in a further 32% of Blue Tower in Warsaw. Both
investments were largely vacant at the time the investments were made and are
now being leased up. Further details on these investments are set out below.
The Group ended the year with net assets calculated under the cost basis of
accounting, excluding non-controlling interests, of £43.44 million (2022:
restated £42.77 million), equating to 39.18 pence per share (2022: restated
38.74 pence per share). It is the accounting policy of the Group to carry its
properties and interests in associates at the lower of cost or market value.
The net assets of the Group when adjusted to their market value less any
deferred tax liabilities (EPRA basis), amounted to £52.54 million or 46.50
pence per share (31 March 2022: restated £52.05 million or 46.07 pence per
share).
Gross debt amounted to £29.66 million at the year-end (31 March 2022: £23.66
million), £17.02 million of which was non-interest bearing and represents
deferred consideration payable for the purchase of two properties in Poland
(in Gdynia and Warsaw, as referenced above). Net debt stood at £22.00 million
(31 March 2022: £17.24 million). The debt was secured against six properties
in Poland and one in Romania.
The Group's gearing ratio with its properties at their book value was 40.57%
(31 March 2022: restated 35.62%) and with its properties at their market value
was 36.08% (31 March 2022: restated 31.25%).
Group cash balances at the year-end stood at £7.65 million (31 March 2022:
£6.42 million), equivalent to 6.82 pence per share (31 March 2022: 5.81 pence
per share).
Diluted earnings per share was 1.70 pence (2022: 6.01 pence).
As set out in previous accounts, the profit share earned by Fprop Offices LP
is subject to clawback. As a result of reductions in the value of commercial
property, an adjustment has been made to the net assets of the Group as at 31
March 2022 to reflect the likelihood of this clawback. No cash repayment has
yet been made but the Directors consider it prudent to make this adjustment.
In addition, the results for the year to 31 March 2023 include a provision of
£0.59 million which represents the balance of any potential clawback.
Dividend
Instead of a final dividend (usually paid in September), a second interim
dividend of 0.25 pence per share was paid on 5 April 2023 (2022: Final
dividend 0.25 pence per share), which together with the first interim dividend
of 0.25 pence per share equates to a dividend for the year of 0.50 pence per
share (2022: 0.50 pence per share).
REVIEW OF OPERATIONS
PROPERTY FUND MANAGEMENT
Third party assets under management ended the year at £400.4 million (31
March 2022: £516.5 million).
The decrease was attributable to:
1. The sale by three funds of seven properties in the United Kingdom
valued at £69.0 million offset by the purchase by another fund of one
property, also in the United Kingdom, for £6.2 million;
2. A decrease in the value of the remainder of the portfolio of some
£52.4 million offset by foreign exchange gains of £4.8 million; and
3. The consolidation of 5PT into the Group's accounts, a fund invested
in three commercial properties in Poland with a value at the date of
acquisition of £7.62 million.
Fund management fees are generally levied monthly by reference to the value of
properties. 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
capital gains. These payments are adjusted annually.
Revenue earned by this division decreased by 38% to £2.52 million (2022:
£4.04 million), resulting in profit before unallocated central overheads and
tax decreasing by £1.32 million to £0.12 million (2022: £1.44 million). The
decrease was due to the sale of properties held by three funds invested in the
United Kingdom, a reduction in value of properties generally, and a provision
for the possible clawback by Fprop Offices LP of £0.59 million in profit
share.
At the year end fund management fee income, excluding performance fees, was
being earned at an annualised rate of £2.55 million (31 March 2022: £2.66
million).
The weighted average unexpired fund management contract term at the year-end
was 2 years, 9 months (31 March 2022: 3 years, 7 months).
The reconciliation of movement in third party funds managed by FPAM during the
year is shown below:
Funds managed for third parties (including funds in which the Group is a
minority shareholder)
UK CEE Total No. of properties
£m £m £m
As at 1 April 2022 345.5 171.0 516.5 62
Purchases 6.2 - 6.2 1
Property sales (69.0) - (69.0) (7)
Reclassified as Group properties - (7.6) (7.6) (3)
Capital expenditure 0.3 1.6 1.9 -
Property revaluation (41.6) (10.8) (52.4) -
FX revaluation - 4.8 4.8 -
As at 31 March 2023 241.4 159.0 400.4 53
An overview 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 No. of properties % of total third-party assets under management Assets under management at market value at
31 March 2023 31 March 2022
£m. £m.
SAM & DHOW UK Rolling * * * *
5PT** Poland Dec 2025 - - - 7.7
OFFICES UK Jun 2024 84.9 4 21.2 136.4
SIPS UK Jan 2025 104.7 21 26.1 140.6
FOP Poland Oct 2025 64.5 5 16.1 64.5
FGC Poland Mar 2026 22.0 1 5.5 21.3
UK PPP UK Jan 2027 28.1 10 7.0 41.5
SPEC OPPS UK Jan 2027 14.9 4 3.7 17.0
FKR Poland Mar 2027 16.8 1 4.2 19.4
FCL Romania Jun 2028 8.7 1 2.2 8.5
FPL Poland Jun 2028 47.0 4 11.8 49.6
FULCRUM UK Indefinite 8.8 2 2.2 10.0
Total Third-Party AUM 400.4 53 100.0 516.5
* Not subject to recent revaluation.
** The Group gained control of this fund in May 2022, consolidating its Net
Assets into the Group.
The sub sector weightings of investments in FPAM funds is set out in the table
below:
UK Poland Romania Total % of Total
£m. £m. £m. £m.
Offices 150.5 85.9 8.7 245.1 61.2%
Retail warehousing 62.3 - - 62.3 15.6%
Supermarkets 28.6 12.6 - 41.2 10.3%
Shopping centres - 51.8 - 51.8 12.9%
Total 241.4 150.3 8.7 400.4 100.0%
% of Total Third-Party AUM 60.3% 37.5% 2.2% 100%
GROUP PROPERTIES
At 31 March 2023, Group Properties comprised seven directly owned commercial
properties in Poland and Romania valued at £53.97 million (31 March 2022:
seven valued at £42.24 million) and interests in nine of the twelve funds
managed by FPAM (classified as Associates and Investments) in which the
Group's share is valued at £25.27 million (31 March 2022: £30.60 million).
The contribution to Group profit before tax and unallocated central overheads
from the Group Properties division was £3.43 million (31 March 2022: £8.60
million), representing 97% of Group profit before unallocated central
overheads and tax. The profit in the prior year included the benefit of a
£7.81 million debt restructuring. In addition, the Group's investments in
largely vacant office property in Gdynia and Blue Tower with the proceeds from
the sale of income producing property have not yet turned cashflow positive,
though reasonable leasing progress is being made.
The contribution to Group profit before tax and unallocated central overheads
from directly owned properties was £2.56 million (31 March 2022: £7.48
million) and the Associates and Investments contributed £0.87 million (31
March 2022: £1.12 million).
1. Directly owned Group Properties (all accounted for under the cost
model):
The book value of the Group's seven directly owned properties was £47.01
million (31 March 2022: seven properties with a book value of £36.20
million). The increase was mainly due to an additional investment of £7.44
million in Blue Tower, Warsaw and the consolidation of 5PT, which owns three
properties in Poland valued at £8.45 million, into the Group's accounts.
Their market value, based on valuations at 31 March 2023, was £53.97 million
(31 March 2022: seven properties valued at £42.24 million).
Country Sector Property/ No. of props 31 March 2023 Book value 31 March 2023 Market value 31 March 2023 *Contribution to Group profit before tax *Contribution to Group
Fund Name 31 March 2023 profit before tax
31 March 2022
£m. £m. £m. £m.
Poland Office Gdynia 1 14.20 14.50 (0.39) (0.86)
Poland Office Blue Tower 1 20.50 24.20 1.13 1.20
Poland Supermarket Praga 1 1.98 2.95 0.12 0.20
Romania Office Dr Felix 1 2.36 3.87 0.27 0.37
Poland Multi use 5PT*** 3 7.97 8.45 0.28 -
Total* 7 47.01 53.97 1.41 0.91
Profit from the sale of three investment properties 1.78 -
Debt restructuring on finance lease** - 7.81
Other overhead costs allocated to the Group Property division (0.63) (1.24)
Total contributions to PBT from Group Properties 2.56 7.48
* Prior to the deduction of direct overhead and unallocated central overhead
expenses.
**Includes €9.00 million (£7.81 million) debt reduction following
restructuring of the finance lease at Gdynia.
***5PT, a fund in which the Group gained a controlling interest (previously
recognised as an associate).
Two of the Group's seven directly owned properties account for 72% (£38.70
million) of their total market value. Both are office buildings in Poland of
which one is Blue Tower (in which the Group's 80.3% share totals circa 18,000
square metres) and the other is in Gdynia (circa 13,500 square metres).
On 12 August 2022 the Group acquired some 7,171 square meters in Blue Tower in
Warsaw at a price of £7.20 million. The purchase resulted in the Group's
interest in the building increasing from 48.2% to 80.3%. Some 5,159 square
metres of the newly acquired space was vacant at purchase.
The Group's office property in Gdynia is now 28% leased, up from 20% at 31
March 2022. When fully let it is anticipated that the building should generate
net operating income of over £1.90 million per annum.
The Group's other directly owned properties include an office block in
Bucharest, Romania valued at £3.87 million, and four properties in Poland
held by consolidated undertakings valued at £11.40 million. These comprise a
mini-supermarket in Warsaw held by E and S Estates Sp. Zo.o (E&S) (in
which the Group owns an aggregate 88.5% interest), and two retail units in
Warsaw, a mixed-use building in Warsaw, and an office block in Poznan all held
by 5PT (in which the Group owns 47.2% but is deemed to have control).
In August 2022 the Group sold a warehouse in Tureni, Romania for £3.11
million which realised a profit of £1.10 million.
In December 2022 the Group sold two supermarkets in Poland held by E&S for
£5.50 million which realised a profit of £0.68 million. The Group also
refinanced the last remaining property held by E&S, a supermarket valued
at £2.95 million, releasing some £1.50 million in cash.
The debt secured against these seven properties totalled £29.66 million (31
March 2022: £23.66 million), of which only £12.64 million was interest
bearing. The remainder (£17.02 million) represents deferred consideration in
respect of the Group's purchase of its additional share in Blue Tower and for
the office block in Gdynia.
Interest costs on the Group's debt amounted to £0.53 million (2022: £0.33
million). This equates to an average borrowing cost of 1.8% per annum when
expressed as a percentage of total outstanding Group debt of £29.66 million,
or 4.2% per annum if the deferred consideration of £17.02 million, on which
no interest is payable, is excluded.
31 March 2023 31 March 2022
£m. £m.
Book value of directly owned properties 47.01 36.20
Market value of directly owned properties 53.97 42.24
Gross debt undiscounted (all non-recourse to Group) 29.66 23.66
LTV at book value 63.09% 65.35%
LTV at market value 54.96% 56.01%
Average borrowing cost 1.8% 1.4%
The average vacancy rate across all seven properties is 23.60%.
The weighted average unexpired lease term (WAULT) as at 31 March 2023 was 5
years, 2 months (2022: 5 years, 7 months).
2. Associates and Investments
These comprise non-controlling interests in nine of the twelve funds managed
by FPAM and are valued at £25.27 million (31 March 2022: £30.60 million). Of
these, five are accounted for as Associates and held at the lower of cost or
fair value (the "cost model"), and four are accounted for as Investments in
funds and held at fair value.
The contribution to Group profit before tax and unallocated central overheads
from its Associates and Investments decreased by 22.3% to £0.87 million (31
March 2022: £1.12 million). The contribution was impacted by aggregate
impairment provisions of £0.90 million in the value of Fprop Krakow Ltd (FKR)
and Fprop Opportunities plc (FOP). In addition, another Associate, Fprop
Phoenix Ltd (FPL), made a loss after tax of which the Group's share amounted
to £0.85 million (2022: loss of £0.62 million).
An overview of the Group's Associates and Investments is set out in the table
below:
Fund % owned by Book value of First Property's share in Current market value of holdings Group's share Group's share
First Property fund of post-tax profits earned by fund of post-tax profits earned by fund
Group 31 March 2023 31 March 2022
% £'000 £'000 £'000 £'000
a) Associates (all invested in Poland and Romania)
5PT * - - - 97
FRS ** - - - 47
FOP 45.7 12,679 12,679 293 1,044
FGC 29.1 3,058 3,303 289 221
FKR 18.1 1,155 1,155 (426) (12)
FPL 23.4 60 2,682 (848) (617)
FCL 21.2 636 908 64 67
Sub Total 17,588 20,727 (628) 847
*Consolidated into the Group from May 2022
**In liquidation
b) Investments (all invested in the United Kingdom)
UK PPP 0.9 272 272 40 100
FULCRUM 2.5 185 185 9 -
SPEC OPPS 11.1 2,624 2,624 1,353 23
OFFICES 1.6 1,463 1,463 95 148
Sub Total 4,544 4,544 1,497 271
Total 22,132 25,271 869 1,118
3. New product: secured lending against commercial property
Post the year end the Group launched a senior debt product for secured lending
against commercial property.
With interest rates increasing and banks retreating from lending to commercial
property, the returns available in making relatively safe loans are
potentially more attractive than investing in the underlying property.
The loans will likely be up to £20 million in value; 65% of loan to value
(LTV); and interest only.
No new employees will, initially, be required to be employed to roll out this
product and the Group does not intend to use its own cash to make such loans.
It may, however, invest alongside third parties in any fund structures set up
to make such loans.
Commercial Property Markets Outlook
Poland:
The rate of growth in Poland's GDP is expected to slow from a rate of 5.1% in
2022 to 1.5% in 2023, compared to a pre-pandemic 10-year average of 3.6% per
annum, amidst high inflation, which peaked at over 17% per annum, and tighter
monetary conditions. The rate of inflation has, since its peak, reduced to
some 13% per annum.
The National Bank of Poland's key policy interest rate is currently at 6.75%
per annum.
Commercial property markets in Poland have slowed dramatically as interest
rates have increased and banks have withdrawn from lending to the sector. The
development of new buildings has similarly reduced.
However, continued economic growth and the influx of refugees and businesses
from Ukraine is sustaining occupational demand.
Rent review provisions in Polish leases are mostly contractually linked either
to the rate of inflation in Poland or the Eurozone. This offers landlords some
protection from inflation as long as the economy remains buoyant.
United Kingdom:
Economic growth in the United Kingdom is barely perceptible, compared to
growth rates of 1-3% per annum in the years leading up to the pandemic.
Inflation is the highest in the G7 group of developed nations, running at over
8% on an annualised basis. This in turn has led to successive increases in the
Bank of England base interest rate to 4.5% at the date of these results with
further rises forecast.
The investment market for commercial property has weakened in the face of
these headwinds. Offices have been particularly hard hit due to lockdowns and
the development of a work from home culture. The cost of ensuring that
buildings comply with net zero legislation is exacerbating the situation and
is resulting in wide value dispersion between those buildings which do comply,
those that can be made to comply and those for which compliance is too costly.
Rental values should over time be sustained by inflation and a reduction in
the supply of property in sectors which are over supplied, such as offices.
Current Trading and Prospects
These are a creditable set of results in extremely challenging times.
The end of lockdowns should have ushered in a more normal trading environment.
Instead, we are experiencing the severe impact of broken supply chains and
labour markets. Together with the war in Ukraine, the result has been
rocketing inflation and a concomitant increase in interest rates.
Consequently, investment markets have been hit hard, with a sharp reduction in
debt availability and the volumes of property being traded.
Occupational demand is generally holding up better than investment markets and
we are making some inroads in letting the space available at our office blocks
in Warsaw and Gdynia.
Given the general withdrawal of financing from the market, we have established
a platform for the provision of debt to finance commercial property
investments. It is too early to determine the likely success of this venture
but we believe it to be the right product, launched at the right time.
Ben Habib
Chief Executive
22 June 2023
GROUP FINANCE DIRECTOR'S REVIEW
Profit before tax for the year was £2.49 million (2022: £7.08 million)
largely driven by 'one off' sales of properties owned directly by the Group
which generated a profit of £1.78 million.
The profit in the prior year was bolstered due to an exceptional gain of
€9.00 million (£7.81 million) from the restructuring of the finance lease
secured against the Group's office block in Gdynia, Poland.
Group net assets excluding non-controlling interests increased to £43.44
million (31 March 2022 Restated: £42.77 million).
During the year the Group gained control of 5PT, a fund managed by FPAM in
which it owns a 47.2% share but is considered to have control in accordance
with the provisions of IFRS 10, resulting in its consolidation into these
accounts. The Group's share of its net assets at consolidation was £1.54
million. Previously, the Group's investment in this fund was accounted for as
an associate (31 March 2022: £1.34 million).
On 31 March 2023, the Group granted to employees the option to subscribe to
10,450,000 new ordinary shares in the Company at an exercise price of 23.5
pence per Ordinary Share, being the mid-market closing price on 30 March 2023.
The options granted resulted in an increase to 12,560,000 in the number of
outstanding options over Ordinary Shares, representing approximately 11.33% of
the Company's issued share capital. See note 6 of the financial statements for
further information on the terms of the options granted.
Gross debt, excluding lease liabilities, increased to £29.66 million (31
March 2022: £23.66 million) mainly due to the purchase of additional space in
Blue Tower, Warsaw. Of this gross debt, £17.02 million is deferred
consideration on which no interest is payable. Net debt, excluding lease
liabilities, reduced to £22.00 million (31 March 2022: £17.24 million).
GOING CONCERN
Information on our approach and the result of our assessment is included in
note 1 of the Financial Statements.
FPROP OFFICES LP CLAWBACK
The Group is entitled to a share of total profits in Fprop Offices LP in lieu
of fund management fees and to receive annual payments on account equivalent
to 10% of total cumulative income profits and capital gains. These payments
are adjusted annually, if necessary, for any overpayments made in previous
years up to a maximum of total past cumulative payments received. As at 31
March 2022, the Group had recognised a cumulative total of £1.97 million as
revenue in 2022 and prior years.
The combination of inflationary pressures, higher interest rates, a cost of
living crisis in the UK and an increase in employees working from home has
caused severe disruption to economic activity and a reduction in the value of
commercial property. During the period between 1 April 2022 and 31 March 2023,
the properties held by Fprop Offices LP reduced in value by 18%. As a result,
the Group considers that £1.97 million of revenue previously recognised will
need to be clawed back, with £1.38 million being the cumulative amount of
revenue recognised to 31 March 2021, being shown as a restatement of the
Financial Year 2022 and £0.59 million being reflected as a reduction to
revenue for the year to 31 March 2023.
See further information on the impact of this adjustment in the notes to the
financial statements.
INCOME STATEMENT
A review of the operating and financial performance of the two trading
divisions are included in the Chief Executive's Statement.
Revenue and Gross Profit
Revenue for the year decreased by £1.40 million or 16% to £7.25 million
(2022: £8.65 million).
Gross profit (revenue less the cost of sales) reduced by £0.73 million or 13%
to £4.99 million (2022: £5.72 million).
Performance fee income
Performance fees totalled a negative £0.37 million (2022: positive £0.58
million). It comprised £0.22 million earned from the sale of two properties
by two of the UK funds managed by FPAM and a provision for the clawback of
revenue of £0.59 million by Fprop Offices LP.
Operating expenses
Operating expenses decreased by £2.69 million or 36% to £4.77 million (2022:
£7.46 million) mainly due to a reduction in incentives paid to employees to
£0.11 million (2022: £2.03 million).
Share of results in associates
The contribution from the Group's associates amounted to a loss of £0.63
million (2022: profit £0.85 million) mainly due to an impairment provision of
£0.43 million in respect of the Group's 18.1% holding in Fprop Krakow Ltd
(FKR) and an impairment provision of £0.47 million in respect of the Group's
45.7% holding in Fprop Opportunities plc (FOP).
Fprop Phoenix Ltd (FPL), in which the Group owns 23.4%, made a loss after tax
of which the Group's share amounted to £0.85 million (2022: loss of £0.62
million).
Investment income (from other financial assets and investments)
Investment income from the Group's four investments in five of the UK funds
managed by FPAM increased by 455% to £1.50 million (2022: £0.27 million), of
which £1.35 million represented distributions from Fprop UK Special
Opportunities LP (Spec Opps).
Financing costs
Finance costs increased to £0.53 million (2022: £0.33 million) mainly due to
higher interest rates payable on our floating rate loans. All bank loans are
denominated in Euros, and all are used to finance properties valued in Euros.
Taxation
The tax charge increased to £0.45 million (2022: £0.25 million) of which
£0.38 million was in respect of the profit from the sale of two directly held
properties by E&S, a consolidated undertaking (2022: £Nil).
The charge includes Polish and Romanian corporation tax where headline rates
remain at 19% and 16% respectively.
STATEMENT OF FINANCIAL POSITION
Investment Properties (held using the cost model)
The Group has adopted the "cost model" of valuation whereby investment
properties are accounted for at the lower of cost less accumulated
depreciation and impairments or fair market value.
During the year the Group acquired an additional 7,171 square metres of office
space in Blue Tower for a consideration of £7.20 million, which is payable in
seven instalments over a six year period. Following this purchase, the Group's
interest in Blue Tower now amounts to 80.3% (2022: 48.2%) of the building. As
a result of this acquisition the Group reclassified the building from
Inventory to Investment Property. Following this reclassification, no
properties were held under inventory.
Following the Group's purchase of 6.57% of the shares in issue of 5PT during
the year, its interest in 5PT increased to 47.2%. The Group is now considered
to have a controlling interest in this fund (previously held as an associate).
As a result, the three commercial properties held by the fund were added to
Investment Properties with a fair value at the date of consolidation of £7.62
million.
The Group also disposed of three properties during the year. In August 2022 it
sold a warehouse in Tureni, Romania for £3.11 million which generated a
profit of £1.10 million after accounting for disposal costs.
In December 2022 E&S sold two supermarkets in Poland for £5.50 million
(€6.20 million) generating a profit after sale of £0.68 million.
At the year end the Group held seven properties. Their book value was £47.01
million (31 March 2022: seven properties valued at £36.20 million). Their
fair market value was £53.97 million (31 March 2022: £42.24 million).
Capital expenditure incurred on the Group's seven directly owned properties
amounted to £1.02 million (2022: seven properties, £1.76 million).
Foreign exchange revaluations amounted to a debit of £1.32 million (2022:
credit £0.22 million).
Borrowings
Bank and other borrowings (including deferred consideration) increased to
£29.66 million (31 March 2022: £23.66 million) mainly due to the purchase of
the additional space at Blue Tower but also due to the consolidation of 5PT
(£3.60 million) into these financial statements.
The ratio of debt to gross assets at their market value (the gearing ratio)
increased to 36.08% (31 March 2022: 31.25%).
All bank loans are denominated in Euros and are non-recourse to the Group's
assets.
Deposits of £0.64 million (31 March 2022: £0.55 million) are held by lending
banks in respect of four bank loans (31 March 2022: four) as security for Debt
Service Cover Ratio (DSCR) covenants and consequently this amount of cash and
cash equivalents was restricted as at 31 March 2023.
Trade and Other Receivables
Trade and other receivables decreased by £0.60 million to £3.73 million (31
March 2022: £4.33 million).
Provisions
Provisions decreased to £0.16 million (31 March 2022: £0.92 million) and are
entirely in respect of the space at Chalubinskiego (CH8), Warsaw, over which
commitments in respect of fit-out and rent guarantees were granted at its sale
in the Financial Year 2021. Payments of £0.37 million (2022: £1.93 million)
pursuant to this were made in the year. The reduction in the provision is due
to some 85% (2022: 73%) of the office space which is subject to the guarantee
having been leased. The provision represents our best estimate of the Group's
remaining liability over the life of the rent guarantee (until April 2025).
Non-controlling Interests
The value of the Group's three non-controlling interests increased to £2.03
million (31 March 2022: £0.23 million). Non-controlling interests consist of:
1. 10% of the share capital of Corp Sp. z o. o., the property
management company to Blue Tower, Warsaw;
2. 23% of the share capital of E and S Estates Ltd, a fund invested in
one property in Poland; and
3. 52.80% of the share capital of 5th Property Trading Ltd, a fund
invested in three commercial properties in Poland.
Investment Revaluation Reserve
The investment revaluation reserve decreased by £1.41 million (2022:
increased by £1.04 million) to a debit balance of £0.73 million mainly due
to a decrease in the value of the Group's investment in Fprop UK Special
Opportunities LP (Spec Opps) resulting from property sales by the UK Pension
Property Portfolio LP (UKPPP), a fund in which it holds an investment.
Foreign Exchange Translation Reserve
A strengthening of the Polish Zloty against Sterling to PLN 5.3267/ GBP (31
March 2022: PLN 5.4868/ GBP) resulted in a reduction in the deficit in the
foreign exchange translation reserve to £2.35 million (31 March 2022: £3.30
million).
Cash and cash equivalents
The Group's cash balance increased to £7.65 million (31 March 2022: £6.42
million) mainly as a result of investing and financing activities.
Laura James
Group Finance Director
22 June 2023
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2023
Year ended Year ended
31 March 2023 31 March 2022
Notes
Total results Total results
£'000 £'000
Revenue 2 7,249 8,645
Cost of sales (2,257) (2,928)
Gross profit 4,992 5,717
Debt reduction following restructuring of finance lease 3 - 7,809
Profit on sale of investment properties 1,779 -
Operating expenses (4,767) (7,464)
Operating profit 2,004 6,062
Share of associates' profit/(loss) after tax 9 273 (29)
Share of associates' revaluation (losses)gains 9 (901) 876
Investment income 1,497 271
Interest income 4 145 230
Interest expense 4 (530) (330)
Profit before tax 2,488 7,080
Tax charge 5 (449) (245)
Profit for the year 2,039 6,835
Attributable to:
Owners of the parent 1,919 6,779
Non-controlling interests 120 56
2,039 6,835
Earnings per share:
Basic 6 1.73p 6.14p
Diluted 6 1.70p 6.01p
All operations are continuing.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2023
Year ended Year ended
31 March 2023 31 March 2022 Total results
Total results
£'000 £'000
Profit for the year 2,039 6,835
Other comprehensive income
Items that may subsequently be reclassified to profit or loss
Exchange differences on retranslation of foreign subsidiaries 944 (189)
Net(loss)/ profit on financial assets at fair value through other (1,412) 1,039
comprehensive income
Taxation - -
Total comprehensive income for the year 1,571 7,685
Total comprehensive income for the year attributable to:
Owners of the parent 1,324 7,623
Non-controlling interests 247 62
1,571 7,685
All operations are continuing.
STATEMENT OF FINANCIAL POSITION
First Property Group plc
Registered No. 02967020
As at 31 March 2023
2023 2022
Notes Group Group
£'000 £'000
Non-current assets
Investment properties 7 47,009 23,849
Right of use assets 8 197 1,018
Property, plant and equipment 80 128
Investment in Group undertakings - -
Investment in associates 9a) 17,588 19,135
Other financial assets at fair value through OCI 9b) 4,544 7,445
Other receivables 14 - 95
Goodwill 11 153 153
Deferred tax assets 12 930 1,599
Total non-current assets 70,501 53,422
Current assets
Inventories - land and buildings 13 - 12,352
Current tax assets 79 14
Right of use assets 8 457 446
Trade and other receivables 14 3,729 4,329
Cash and cash equivalents 7,647 6,419
Total current assets 11,912 23,560
Current liabilities
Trade and other payables 15 (3,310) (4,764)
Provisions 16 (158) (922)
Lease Liabilities 8 (469) (410)
Financial liabilities 17 (1,116) (4,212)
Other financial liabilities 18 (939) -
Current tax liabilities (28) (20)
Total current liabilities (6,020) (10,328)
Net current assets 5,892 13,232
Total assets less current liabilities 76,393 66,654
Non-current liabilities
Financial liabilities 17 (11,519) (9,309)
Other financial liabilities 18 (16,082) (10,141)
Lease Liabilities 8 (267) (1,098)
Deferred tax liabilities 12 (3,050) (3,112)
Net assets 45,475 42,994
Equity
Called up share capital 1,166 1,166
Share premium 5,635 5,791
Share-based payment reserve 179 179
Foreign exchange translation reserve (2,353) (3,297)
Purchase of own shares reserve (2,440) (2,653)
Investment revaluation reserve (728) 684
Retained earnings 41,983 40,895
Equity attributable to the owners of the parent 43,442 42,765
Non-controlling interests 2,033 229
Total equity 45,475 42,994
Net assets per share 6 39.18p 38.74p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2023
Group Share capital Share premium Share-based payment reserve Foreign exchange translation reserve Purchase of own shares Investment revaluation Retained earnings Non-controlling interests Total
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 1,166 5,791 179 (3,297) (2,653) 684 40,895 229 42,994
2022
Profit for the year - - - - - - 2,039 - 2,039
Net loss on financial assets at fair value through other comprehensive income - - - - - (1,412) - - (1,412)
Purchase from treasury shares - (156) - - 213 - - - 57
Exchange differences arising on translation of foreign subsidiaries - - - 944 - - - 127 1,071
Transfer 5PT to subsidiary undertaking - - - - - - - 1,606 1,606
Total comprehensive income - (156) - 944 213 (1,412) 2,039 1,733 3,361
Non-controlling interests - - - - - - (120) 120 -
Dividends - - - - - - (831) (49) (880)
paid
At 31 March 2023 1,166 5,635 179 (2,353) (2,440) (728) 41,983 2,033 45,475
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Restated)
for the year ended 31 March 2022
Group Share capital Share premium Share-based payment reserve Foreign exchange translation reserve Purchase of own shares Investment revaluation Retained earnings Non-controlling interests Total
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 1,166 5,791 179 (3,108) (2,653) (355) 34,392 201 35,613
2021
Profit for the year - - - - - - 6,835 - 6,835
Net gain on financial assets at fair value through other comprehensive income - - - - - 1,039 - - 1,039
Exchange differences arising on translation of foreign subsidiaries - - - (189) - - - 6 (183)
Total comprehensive income - - - (189) - 1,039 6,835 6 7,691
Non-controlling interests - - - - - - (56) 56 -
Dividends - - - - - - (276) (34) (310)
paid
At 31 March 2022 1,166 5,791 179 (3,297) (2,653) 684 40,895 229 42,994
Foreign Exchange Translation Reserve
The translation reserve comprises all foreign exchange differences arising
from the translation of the financial statements of foreign Group companies.
This reserve is non distributable.
Share Based Payment Reserve
The Group grants certain of its employees' rights to its equity instruments as
part of its share-based payment incentive plans. The value of these rights has
been charged to the Income Statement and has been credited to the share-based
payment reserve (which is a distributable reserve).
Purchase of Own Ordinary Shares
The cost of the Company's Ordinary Shares purchased by the Company for
treasury purposes is held in this reserve. The reserve is non distributable.
Investment Revaluation Reserve
The change in fair value of the Group's financial assets measured at fair
value through Other Comprehensive Income is held in this reserve and is non
distributable.
CASH FLOW STATEMENTS
for the year ended 31 March 2023
Restated
2023 2022
Notes Group Group
£'000 £'000
Cash flows from operating activities
Operating profit/(loss) 2,004 6,062
Adjustments for:
Depreciation of investment property and property, plant & equipment 99 90
Debt reduction following restructuring of finance lease 3 - (7,809)
Profit on the sale of investment properties (1,779) -
Impairment loss on an investment property - -
Decrease/(increase) in inventories - 38
Decrease/ (increase) in trade and other receivables 777 1,208
(Decrease)/ increase in trade and other payables 4,189 (1,213)
Other non-cash adjustments 215 65
Cash generated from operations 5,505 (1,559)
Taxes paid (616) 118
Net cash flow from/(used in) operating activities 4,889 (1,441)
Cash flow (used in)/ from investing activities
Capital expenditure on investment properties 7 (1,017) (1,642)
Purchase of property, plant & equipment 2 (10) (33)
Proceeds from the sale of investment property 7 8,612 -
Purchase of investment property 13 (7,443) -
Investment in shares of new associates (606) -
Investment in funds 9b) (3) (3,633)
Proceeds from funds 9b) 1,492 290
Proceeds from investments in associates 9a) 176 48
Interest received 145 187
Dividends from associates 9a) - 241
Distributions received - 266
Net cash flow from/(used in) investing activities 1,346 (4,276)
Cash flow (used in)/ from financing activities
Proceeds from bank loan 1,474 1,289
Repayment of bank loans (5,215) (1,297)
Repayment of finance lease - (3,434)
Sale of shares held in Treasury 58 -
Interest paid 4 (530) (330)
Dividends paid (831) (276)
Dividends paid to non-controlling interests (49) (34)
Net cash flow (used in)/ from financing activities (5,093) (4,082)
Net /increase/decrease in cash and cash equivalents 1,142 (9,799)
Cash and cash equivalents at the beginning of the year 6,419 16,244
Currency translation gains/(losses) on cash and cash equivalents 86 (26)
Cash and cash equivalents at the year end 7,647 6,419
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 2023. The policies have been consistently applied to
all years presented unless otherwise stated below. These accounting policies
are drawn up in accordance with UK-adopted International Accounting Standards
('IFRS'). 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 2022 have been
restated as set out below under prior year adjustment and 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
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.
Analysis and scenario testing, was carried out on the Group's main divisional
income streams, being asset management fees from the asset management
division, rental income from its seven 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 (52%), four
of which are limited partnerships whose limited partners are a mix of pension
funds and registered charities. With one exception, fees are invoiced monthly
and are calculated based on a percentage of the latest valuation, which for
the UK funds is performed quarterly.
In the one fund from which fees are not levied by reference to the properties
valuation (Fprop Offices LP) a clawback of income can be triggered. As at 31
March 2022, a performance fee totalling of £1.97 million had been recognised
of which £1.41 million has been received in cash. As a result of falls in the
value of the properties held in this fund, the Group considers that £1.97
million will be clawed back in line with the contract. This is reflected in
the financial statements in the following manner;
· £1.38 million, being the cumulative amount of income recognised
to 31 March 2021. This amount is shown as a restatement of the 31 March 2022
Statement of Financial Position as set out in the Prior Year Adjustment note
below
· £0.59 million clawed back as a reduction in the performance fee
revenue included as part of the asset management revenue in the year ended 31
March 2023
· The Group will repay £0.25 million to Fprop Offices LP. At the
year end this amount was recognised in Trade and Other payables
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 (FPL)). 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 longevity of this asset management fee income 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 2 years, 9 months.
b) Rental Income from Group Properties
All seven Group Properties are located in Poland or Romania. These properties
consist of four office blocks, a mini-supermarket, one multi-let property and
ground-floor retail property. All were independently valued on 31 March 2023
at £53.97 million (31 March 2022: seven properties £42.24 million).
The rental income has been reviewed and evaluated 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 periods. Any
renegotiation of rental payment terms that have been agreed are reflected in
the analysis.
On 12 August 2022 the Group acquired some 7,171 square meters in Blue Tower in
Warsaw at a price of £7.20 million. The purchase resulted in the Group's
interest in the building increasing from 48.2% to 80.3%. Some 5,159 square
metres of the newly acquired space was vacant at purchase.
The Group's office property in Gdynia is now 28% leased, up from 20% at 31
March 2022. A further 72% of the office space in the building remains to be
leased. When fully let it is anticipated the building should generate net
operating income of over £1.90 million per annum.
c) Income from Associates and Investments
Analysis was also conducted on the returns from the Group's investment in its
four (2022: five) Associates.
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.
Going Concern Statement
Based on the results of the analysis conducted as outlined above the Board
believes that the Group has the ability to continue its business for at least
twelve 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.
Prior year adjustment
Fund management fees are generally levied monthly by reference to the value of
properties. 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
capital gains. These payments are adjusted annually, if necessary, for any
overpayments made in previous years up to a maximum of total past cumulative
payments received.
As at 31 March 2022, the Group had reflected cumulative revenue of £1.97
million. The Group recognised its share of the total profits of Fprop Offices
LP as performance fee income within asset management revenue.
The combination of inflationary pressures, higher interest rates, a cost of
living crisis in the UK and an increase in employees working from home has
caused severe disruption to economic activity and a reduction in the value of
commercial property. During the period between 1 April 2022 and 31 March 2023,
there was a 18% fall in the value of the properties held by Fprop Offices LP.
As a result, the Group considers that £1.38 million of the previously
recognised revenue should be reversed as a prior year adjustment to the 31
March 2022 financial statements and £0.59 million should be reflected as a
reduction to revenue for the year to 31 March 2023.
For the purposes of revenue recognition under IFRS 15, the profit share due to
the Group is a "variable consideration". Paragraph 56 of IFRS 15 places a
constraint upon the recognition of variable consideration, requiring that it
should only be recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised will not
occur when the uncertainty associated with the variable consideration is
subsequently resolved.
The IFRS rules require that the reduction in previously recognised variable
consideration should be presented as a prior period adjustment.
The following line items in the Statement of Financial Position in the
financial statements were impacted.
Year ended
31 March 2022
Retained Earnings
Retained Earnings as reported in the 2022 financial statements. 42,271
Prior year restatement due to IFRS 15 accounting treatment (1,376)
Retained Earnings as restated 40,895
Trade and other payables
Trade and other payables as reported in the 2022 financial statements. (3,388)
Prior year restatement due to IFRS 15 accounting treatment (1,376)
Trade and other payables (4,764)
Net Assets
Net assets excluding non-controlling interests as reported in the 2022 44,141
financial statements
Prior year restatement due to IFRS 15 accounting treatment (1,376)
Net assets as restated 42,765
Net Assets per share
Net assets per share as reported in the 2022 financial statements 40.00p
Prior year restatement due to IFRS 15 accounting treatment (1.26p)
Net assets per share as restated 38.74p
New Standards and Interpretations
New standards impacting the Group have been adopted in the preliminary
financial statements for the year-ended 31 March 2023, none of which have had
a significant impact to the financial statements:
· Annual Improvements to IFRS Standards 2018-2020 Cycle
· Amendments to IFRS 3 - Reference to the Conceptual Framework
· Amendments to IAS 16 - Property, Plant and Equipment: Proceeds
before Intended Use
· Amendment to IAS 37 - Onerous Contracts: Cost of Fulfilling a
Contract
The Group has not adopted any new IFRSs that are issued but not yet effective
and it does not expect any of these changes to impact the group.
These preliminary financial statements were approved by the Board of Directors
on 21 June 2023.
1. Revenue
Revenue from continuing operations consists of revenue arising in the United
Kingdom 12% (2022: 27%), Poland 75% (2022: 59%) and Romania 13% (2022: 14%).
All revenue relates solely to the Group's principal activities.
2. Segment Reporting 2023
Fund Management Division Group Properties Division
Property fund management Group properties Associates and investments Unallocated central overheads Total
£'000 £'000 £'000 £'000 £'000
Rental income - 3,614 - - 3,614
Service charge income - 1,115 - - 1,115
Sale of a property held in inventory - - - - -
Asset management fees 2,892 - - - 2,892
Performance related fee income (372) - - - (372)
Total revenue 2,520 4,729 - - 7,249
Depreciation and amortisation (36) (24) - - (60)
Operating profit 120 3,069 - (1,185) 2,004
Share of results in associates - - 273 - 273
Fair value adjustment on associates - - (901) - (901)
Investment income - - 1,497 - 1,497
Interest income - 20 - 125 145
Interest payable - (530) - - (530)
Profit/(loss) before tax 120 2,559 869 (1,060) 2,488
Analysed as:
Underlying profit/(loss) before tax before adjusting for the following items: 513 752 273 (1,089) 449
Provision in respect of rent guarantee - 511 - - 511
Profit on the sale of investment properties - 1,779 - - 1,779
Interest received on loan to FOP @12% - 125 - - 125
Fair value adjustment on associates - - (901) - (901)
UK fund distributions following sales of properties - - 1,497 - 1,497
Performance related fee income 222 - - - 222
Clawback of Office income (594) (594)
Staff incentives (44) (65) - - (109)
Realised foreign currency (losses)/gains 23 (543) - 29 (491)
Total 120 2,559 869 (1,060) 2,488
Assets - Group 795 54,525 4,544 4,727 64,591
Share of net assets of associates - - 17,588 - 17,588
Liabilities (71) (36,574) - (59) (36,704)
Net assets 724 17,951 22,132 4,668 45,475
Additions to non-current assets
Property, plant and equipment 8 2 - - 10
Investment properties - 1,017 - - 1,017
Trading stock - 7,443 - - 7,443
Segment Reporting 2022
Fund Management Division Group Properties Division
Property fund management Group properties Associates and investments Unallocated central overheads Total
£'000 £'000 £'000 £'000 £'000
Rental income - 2,926 - - 2,926
Service charge income - 1,678 - - 1,678
Asset management fees 3,463 - - - 3,463
Performance related fee income 578 - - - 578
Total revenue 4,041 4,604 - - 8,645
Depreciation and amortisation (36) (24) - - (60)
Operating profit 1,437 7,781 - (3,156) 6,062
Share of results in associates - - (29) - (29)
Fair value adjustment on associates - - 876 - 876
Investment income - - 271 - 271
Interest income - 29 - 201 230
Interest payable - (330) - - (330)
Profit/(loss) before tax 1,437 7,480 1,118 (2,955) 7,080
Analysed as:
Underlying profit/(loss) before tax before adjusting for the following items: 1,182 401 242 (1,449) 376
Provision in respect of rent guarantee - (629) - - (629)
Debt reduction following restructuring of finance lease - 7,809 - - 7,809
Interest received on loan to FOP @12% - 202 - - 202
Fair value adjustments on associates - - 876 - 876
Performance related fee income 578 - - - 578
Staff incentives (305) (251) - (1,472) (2,028)
Realised foreign currency (losses)/gains (18) (52) - (34) (104)
Total 1,437 7,480 1,118 (2,955) 7,080
Assets - Group 891 44,693 7,445 4,818 57,847
Share of net assets of associates - - 19,135 - 19,135
Liabilities (143) (33,348) - (547) (34,038)
Net assets 748 11,345 26,580 4,271 42,994
Additions to non-current assets
Property, plant and equipment 5 28 - - 33
Investment properties - 1,642 - - 1,642
Trading stock - 119 - - 119
3. Debt Reduction following Restructuring of Finance
Lease
The prior year results reflect the reduction of €9.00 million (£7.81
million) in the amount owed to ING Bank (from €25 million to €16 million)
in final settlement of the finance lease secured against the Group's directly
held property in Gdynia. As part of the transaction ING was paid €4.00
million in June 2021. The remainder of the finance lease liability was
replaced by interest free deferred consideration of €12.00 million (£10.54
million) repayable by June 2024. The deferred consideration is reflected as an
Other Financial Liability in the Statement of Financial Position.
4. Interest Income
2023 2022
Group Group
£'000 £'000
Interest income - bank deposits - -
Interest income - other 145 230
Total interest income 145 230
2023 2022
Group Group
£'000 £'000
Interest expense - property loans (516) (326)
Interest expense - bank and other (14) (4)
Total interest expense (530) (330)
5. Tax Expense
2023 2022
Group Group
£'000 £'000
Analysis of tax charge for the year
Current tax (559) (172)
Deferred tax 110 (73)
Total tax charge for the year (449) (245)
The tax charge includes current and deferred tax for continuing operations.
As in prior years, brought forward and current UK tax losses have not been
recognised as a deferred tax asset due to insufficient foreseeable taxable
income being earned in the UK.
6. Earnings/NAV per Share
2023 2022
Basic earnings per share 1.73p 6.14p
Diluted earnings per share 1.70p 6.01p
The following earnings have been used to calculate both the basic and diluted
earnings per share:
£'000 £'000
Basic earnings 1,919 6,779
Notional interest on share options assumed to be exercised 2 7
Diluted earnings assuming full dilution 1,921 6,786
The following numbers of shares have been used to calculate the basic and
diluted earnings per share and the net assets and adjusted net assets per
share:
2023 2022
Number Number
Weighted average number of Ordinary shares in issue 110,875,483 110,382,332
(used for basic earnings per share calculation)
Number of share options 2,110,000 2,610,000
Total number of Ordinary shares used in the diluted earnings per share 112,985,483 112,992,332
calculation
On 5 April 2022, an employee exercised 500,000 share options which had an
exercise price of 11.50p.
On 31 March 2023, the Group granted to employees the option to subscribe to
10,450,000 new ordinary shares in the Company at an exercise price of 23.50
pence per Ordinary Shares, being the mid-market closing price on 30 March
2023. The options have a term of ten years and unexercised options will expire
at midnight on 31 March 2033. The options granted will result in an increase
from 2,110,000 to 12,560,000 in the number of outstanding options over
Ordinary Shares, which represents approximately 11.33% of the Company's issued
share capital.
For the purpose of calculating diluted earnings per share, the number of
Ordinary Shares shall be the weighted average number of Ordinary Shares, plus
the weighted average number of Ordinary Shares that would be issued on the
conversion of all the dilutive potential Ordinary Shares into Ordinary Shares.
Options have a dilutive effect only when the average market price of the
Ordinary Shares during the period exceeds the exercise price of the options
and thus they are 'in the money'. Given the share options were granted on 31
March 2023 they have not been included in the diluted EPS calculation or the
adjusted net assets per share calculations.
2023 Restated 2022
Net assets per share 39.18p 38.74p
Adjusted net assets per share 46.50p 46.07p
The following numbers have been used to calculate both the net assets and
adjusted net assets per share:
2023 Restated 2022
£'000 £'000
For net assets per share
Net assets excluding non-controlling interests 43,442 42,765
£'000 £'000
For adjusted net assets per share
Net assets excluding non-controlling interests 43,442 42,765
Uplift of investment properties at fair value net of deferred tax 5,639 2,486
Uplift of inventories at fair value net of deferred tax - 2,403
Uplift of investments in associates and other financial investments to fair 3,139 4,016
value
Other items 324 381
Total 52,544 52,051
7. Investment Properties
2023 2022
Group Group
£'000 £'000
Investment properties
At 1 April 23,849 22,456
Reclassification of Inventory 19,795 -
Additions arising on consolidation 7,621 -
Capital expenditure 1,017 1,642
Disposal (6,459) -
Depreciation (134) (30)
Foreign exchange translation 1,320 (219)
At 31 March 47,009 23,849
During the year the Group acquired an additional 7,171m(2) of office space in
Blue Tower for a consideration of £7.20 million, which is payable in seven
instalments over a six year period. Following this purchase, the Group's
interest in Blue Tower (an office block in Warsaw) now represents 80.3% (2022:
48.2%) of the building. As a result of this acquisition the Group reclassified
the building from Inventory to Investment Property.
During the year the Group took control of 5th Property Trading Ltd, a fund in
which it previously held as a share of associate, as a result three additional
commercial properties were added to investment properties with a fair value at
the date of consolidation of £7.62 million (€9.07 million).
During the period the Group disposed of three properties. The first sale, in
August 2022, was of a warehouse in Tureni, Romania for £3.11 million which
generated a profit of £1.10 million after accounting for disposal costs. In
December 2022, the Group also disposed of two supermarkets in Poland on behalf
of a fund managed by the Group and in which the Group has an 88.5% interest.
These two properties sold for £5.50 million (€6.20 million) generating a
profit after sale of some £0.68 million.
At the year end the Group held seven properties.
Investment properties owned by the Group are stated at cost less depreciation
and any accumulated impairment in value. The properties were valued at the
Group's financial year end at €61.43 million (31 March 2022: €50.43
million including the property transferred from inventory), the Sterling
equivalent at closing foreign exchange rates being £53.97million (31 March
2022: £42.24 million including the property transferred from inventory).
Amounts recognised in the income statement:
2023 2022
Group Group
£'000 £'000
Rental income from operating leases 3,614 2,926
i. Leasing arrangements where the group is a lessor:
2023 2022
Group Group
£'000 £'000
Minimum lease receipts under non-cancellable operating leases to be received:
Not later than one year 2,113 2,043
Later than one year and not later than five years 5,190 6,790
Later than five years 2,546 3,758
9,849 12,591
Investment properties are comprised of commercial properties that are leased
to third parties. The Group has approximately 51 leases granted to its
tenants. These vary depending on the individual tenant and the respective
property and demise but typically are let for a term of five years. The
weighted average lease length of the leases granted was 5 years and 2 months
(2022: 5 years and 7 months). No contingent rents are charged.
8. Right of Use Assets and Lease Liabilities
This note provides information for leases where the group is a lessee. For
leases where the group is a lessor, see note 7.
The amounts recognised in the financial statements in relation to the leases
are as follows:
i. Amounts recognised in the balance sheet:
31 Mar 2023 31 Mar 2022
£'000 £'000
Right of use assets
Current 457 446
Non-current 197 1,018
31 Mar 2023 31 Mar 2022
£'000 £'000
Lease Liabilities
Current 469 410
Non-current 267 1,098
There was no additions (2022: one, £0.75 million) to the right of use assets
and no additions (2022: one, £77 million) to the lease liability) during the
financial year. There was one disposal of the 5PT right of use asset and
liability due to fact that 5PT has been consolidated in the current financial
year.
ii. Amounts recognised in the Income Statement:
2023 2022
£'000 £'000
Depreciation/ Rent charge of right-of use-assets
Buildings 457 446
457 446
2023 2022
£'000 £'000
Interest expense
Buildings 154 186
154 186
iii. Summary of the groups leasing activity:
The Group has reviewed the terms of its leases and has identified:
A lease of the UK office on St. James's Street, London, SW1A 1HD and a lease
by First Property Poland Sp. z o. o. (FPP) for an office in Poland.
As at 31 March 2023 the Group has recognised a lease liability under IFRS 16
of £0.74 million (31 March 2022: £1.51 million) and a right of use asset of
£0.65 million (2022: £1.46 million). The net debit to the Income Statement
was £39,000. Rental contracts are typically made for fixed periods of six
months to four years but may have extension options.
9. Investment in Associates and Other Financial Assets
and Investments
The Group has the following investments:
2023 2022
Group Group
£'000 £'000
a) Associates
At 1 April 19,135 18,577
Additions 606 -
Disposals (1,349) -
Shareholder loan repayments (176) (48)
Share of associates' profit (loss) after tax 273 (29)
Share of associates' revaluation gains/ (losses) (901) 876
Dividends received - (241)
At 31 March 17,588 19,135
The disposal during the year represents the Group gaining control of 5th
Property Trading Ltd, a fund which at 31 March 2022 it held 40.63%. Following
the purchase of additional shares in this company the Group is now deemed to
have control and has consolidated this fund into the Group. For further
information please see note 10.
The Group's investments in associated companies are accounted for under the
"cost model" under IAS40 whereby the Group's share is held at cost plus its
share of subsequent accumulated profits less dividends received. It comprises
the following:
2023 2022
Group Group
£'000 £'000
Investment in associates
5th Property Trading Ltd - 1,652
Fprop Galeria Corso Ltd 3,058 2,700
Fprop Krakow Ltd 1,154 1,580
Fprop Cluj Ltd 636 615
Fprop Phoenix Ltd 61 913
Fprop Opportunities plc 12,679 11,983
17,588 19,443
Less: Share of profit after tax withheld on sale of property to 5th Property - (308)
Trading Ltd in 2007
17,588 19,135
If the Group had adopted the alternative "fair value" model for accounting for
investment properties, the carrying value of the investments in the remaining
five associates would be £20.73 million (31 March 2022: six associates -
£23.15 million).
2023 2022
Group Group
£'000 £'000
b) Other financial assets and investments
At 1 April 7,445 3,061
Additions 3 3,633
Disposals - -
Repayments (1,492) (290)
Increase/ (decrease) in fair value during the year (1,412) 1,041
At 31 March 4,544 7,445
The Group holds four (2022: four) unlisted investments in funds managed by it.
Each is designated at fair value through "Other Comprehensive Income" (OCI) as
per IFRS 9. The Directors' consider their fair value to be not materially
different from their carrying value. Fair value has been calculated by
applying the Group's percentage holding in the investments to the fair value
of their net assets.
10. Business Acquisitions
At 1 April 2022, the Group held a 40.63% investment in 5th Property Trading
Ltd (5PT), a fund it manages on behalf of clients. This fund was accounted for
as a share of associate which had a book value of £1.34 million at 31 March
2022.
On 23 May 2022, following the purchase of additional shares in this fund, the
Group's holding increased to 46.59%, this combined with a Director, Ben
Habib's personal interest in the fund of 5.96%, the Group is considered to
have control. As a result, FPG consolidated these companies into the Group.
A further purchase of additional shares (0.61%) during the year brought the
Group's holding to 47.2%. At the year-end the Group is deemed to control
53.16% of the fund when including Ben Habib's personal interest.
Net assets acquired at acquisition:
£'000
Non- current assets
Investment properties 7,621
Property, plant and equipment 1
Investment in Group undertakings 1
Deferred tax asset 96
Total Non-current assets 7,719
Current assets
Trade and other receivables 106
Cash and cash equivalents 80
Total current assets 186
Current liabilities
Trade and other payables (139)
Current tax liabilities (3)
Total current liabilities (142)
Net current assets 44
Total assets less current liabilities 7,763
Non-current liabilities
Financial liabilities (3,745)
Deferred tax liabilities (708)
Net Assets 3,310
Equity attributable to the owners of the parent 1,542
Non-controlling interest 1,768
11. Goodwill
2023 2022
Group Group
£'000 £'000
At 1 April 153 153
At 31 March 153 153
The Directors have conducted an annual impairment test and concluded that no
impairment was necessary because the estimated value in use was higher than
the value stated.
12. Deferred Tax
Deferred tax assets and liabilities are attributable to the following items:
2023 2023 2023 2022 2022 2022
Group net assets £'000 Group assets £'000 Group liabilities £'000 Group net assets £'000 Group assets £'000 Group liabilities £'000
Accrued interest payable 106 106 - 117 117 -
Accrued income (5) - (5) (4) - (4)
Foreign bank loan (480) 130 (610) (212) 203 (415)
Investment properties and inventories (1,476) 604 (2,080) (1,476) 1,119 (2,595)
Other temporary differences (265) 90 (355) 62 160 (98)
At 31 March (2,120) 930 (3,050) (1,513) 1,599 (3,112)
13. Inventories - Land and Buildings
2023 2022
Group Group
£'000 £'000
Group properties for resale at cost
At 1 April 12,352 12,494
Additions 7,443 -
Reclassified as Investment Property (19,795) -
Capital expenditure - 119
Disposal - -
Depreciation - (157)
Foreign exchange translation - (104)
At 31 March - 12,352
During the year the Group acquired an additional 7,171m(2) of office space in
Blue Tower for a consideration of £7.20 million, which is payable in seven
instalments over a six year period. Following this purchase, the Group's
interest in Blue Tower (an office block in Warsaw) now represents 80.3% (2022:
48.2%) of the building. As a result of this acquisition the Group reclassified
the building from Inventory to Investment Property.
14. Trade and Other Receivables
2023 2022
Group Group
£'000 £'000
Current assets
Trade receivables 1,130 1,003
Less provision for impairment of receivables (242) (73)
Trade receivables net 888 930
Other receivables 1,820 2,299
Prepayments and accrued income 1,021 1,100
At 31 March 3,729 4,329
2023 2022
Group Group
Non-current assets £'000 £'000
Other receivables - 95
Other receivables, under non-current assets, relates to the deferred
consideration from the sale of an investment property located in Romania. This
has all been repaid.
15. Trade and Other Payables
2023 Restated 2022
Group Group
£'000 £'000
Current liabilities
Trade payables 1,227 1,105
Other taxation and social security 254 313
Other payables and accruals 1,701 3,293
Deferred income 128 53
At 31 March 3,310 4,764
16. Provisions
2023 2022
Group Group
Current liabilities £'000 £'000
At 31 March 158 922
The provision at 31 March 2023 represents a rent guarantee of £0.16 million
(31 March 2022: £0.52 million) and fit-out costs of £Nil (31 March 2022:
£0.40 million). These provisions are in respect of the rent guarantee given
as part of the sale of a property, CH8, which completed in April 2020.
17. Financial Liabilities
2023 2022
Group Group
£'000 £'000
Current liabilities
Bank loan 1,116 4,212
At 31 March 1,116 4,212
Non-current liabilities
Bank loans 11,519 9,309
At 31 March 11,519 9,309
2023 2022
Group Group
£'000 £'000
Total obligations under bank loans
Repayable within one year 1,116 4,212
Repayable within one and five years 8,080 7,364
Repayable after five years 3,439 1,945
At 31 March 12,635 13,521
Five bank loans all denominated in Euros and totalling £12.64 million (31
March 2022: £13.52 million), included within financial liabilities, are
secured against investment properties owned by the Group. These bank loans are
otherwise non-recourse to the Group's assets.
The interest rate profile of the Group's financial liabilities at 31 March
2023 and 31 March 2022 was as follows:
Interest bearing £'000 Non- Total
interest
bearing
£'000 £'000
Bank loans 12,635 - 12,635
Other financial liabilities - 17,021 17,021
At 31 March 2023 12,635 17,021 29,656
Bank loans 13,521 - 13,521
Other financial liabilities - 10,141 10,141
At 31 March 2022 13,521 10,141 23,662
A one percentage point increase in interest rates would increase the annual
interest bill by £0.13 million per annum (2022: £0.14 million).
18. Other Financial Liabilities
2023 2022
Group Group
£'000 £'000
Current liabilities 939 -
Non-current liabilities 16,082 10,141
2023 2022
Group Group
£'000 £'000
Total obligations under Other Financial Liabilities
Repayable within one year 939 -
Repayable within one and five years 14,317 10,141
Repayable after five years 1,765 -
At 31 March 2023 17,021 10,141
This non-current liability includes the balance of €12.00 million which was
a result of the restructuring of a finance lease secured against the office
tower in Gdynia. The restructuring resulted in the amount owed to ING bank in
final settlement reducing by €9.00 million (£7.81 million). As part of the
deal, the Group acquired the freehold of the property for €16.00 million of
which €4.00 million has been paid and €12.00 million is repayable by June
2024. No interest is payable on this non-current liability.
Non-current liabilities also includes the Group's new investment in Blue
Tower, Warsaw, which was financed by deferred consideration of PLN 40.40
million (£7.44 million). This liability, which is non-interest bearing, is
payable in seven instalments over six years. The first instalment of PLN 6.0
million (£1.07 million) was paid in September 2022.
The preliminary results are being circulated to all shareholders and can be
downloaded from the Company's web-site (www.fprop.com (http://www.fprop.com)
). Further copies can be obtained from the registered office at 32 St James's
Street, London, SW1A 1HD.
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