RNS Number : 5731DFirst Property Group PLC22 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:

Unaudited

year to

31 March 2023

Restated

Audited

year to

31 March 2022

Percentage

change

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 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)

Laura James (Group Finance Director)

Jeremy Barkes (Director, Business Development)

www.fprop.com

[email protected]

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.



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

£m

CEE

£m

Total

£m

No. of properties

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

-

Propertyrevaluation

(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

31 March 2023

No. of properties

% of total third-party assets under management

Assets under management at market value at

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/

Fund Name

No. of props 31 March 2023

Book value 31 March 2023

Market value 31 March 2023

*Contribution to Group profit before tax

31 March 2023

*Contribution to Group

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

First Property

Group

Book value of First Property's share in

fund

Current market value of holdings

Group's share

of post-tax profits earned by fund

31 March 2023

 Group's share

of post-tax profits earned by fund

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

Notes

Year ended

31 March 2023

Total results

£'000

Year ended

31 March 2022

Total results 

£'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

31 March 2023

Total results

Year ended

31 March 2022 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 comprehensive income

(1,412)

1,039

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

£'000

Group

£'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

reserve

Retained earnings

Non-controlling interests

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 April

2022

1,166

5,791

179

(3,297)

(2,653)

684

40,895

229

42,994

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

paid

-

-

-

-

-

-

(831)

(49)

(880)

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

reserve

Retained earnings

Non-controlling interests

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 April

2021

1,166

5,791

179

(3,108)

(2,653)

(355)

34,392

201

35,613

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

paid

-

-

-

-

-

-

(276)

(34)

(310)

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

2023

Restated

2022

Notes

Group

£'000

Group

£'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 financial statements

44,141

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

£'000

Group

£'000

Interest income - bank deposits

-

-

Interest income - other

145

230

Total interest income

145

230

2023

2022

Group

£'000

Group

£'000

Interest expense - property loans

(516)

(326)

Interest expense - bank and other

(14)

(4)

Total interest expense

(530)

(330)

5.             Tax Expense

2023

Group

£'000

2022

Group

£'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

Number

2022

Number

Weighted average number of Ordinary shares in issue

(used for basic earnings per share calculation)

110,875,483

110,382,332

Number of share options

2,110,000

2,610,000

Total number of Ordinary shares used in the diluted earnings per share calculation

112,985,483

112,992,332

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 value

3,139

4,016

Other items

324

381

Total

52,544

52,051

7.             Investment Properties

2023

2022

Group

£'000

Group

£'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 7,171m2 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

£'000

Group

£'000

Rental income from operating leases

3,614

2,926

i.      Leasing arrangements where the group is a lessor:

2023

2022

Group

£'000

Group

£'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

£'000

31 Mar 2022

£'000

Right of use assets

Current

457

446

Non-current

197

1,018

31 Mar 2023

£'000

31 Mar 2022

£'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

£'000

Group

£'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

£'000

Group

£'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 Trading Ltd in 2007

-

(308)

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

£'000

Group

£'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

£'000

Group

£'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

£'000

Group

£'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 7,171m2 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

£'000

Group

£'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

Group

2022

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

£'000

Group

£'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

Group

2022

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

Group

£'000

2022

Group

£'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

Group

£'000

2022

Group

£'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-

interest

bearing

£'000

Total

£'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

Group

£'000

2022

Group

£'000

Current liabilities

939

-

Non-current liabilities

16,082

10,141

2023

Group

£'000

2022

Group

£'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). Further copies can be obtained from the registered office at 32 St James's Street, London, SW1A 1HD.

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