First Property Regulatory News (FPO)

6 Jun 2007 07:01

First Property Group PLC06 June 2007 FIRST PROPERTY GROUP PLC ("First Property", "Fprop" or the "Company") PRELIMINARY RESULTS SHOW CONTINUED GROWTH AND A TREBLING OF ASSETS UNDER MANAGEMENT First Property (AIM: FPO), the property asset manager, announces preliminaryresults for the year ended 31 March 2007. Financial Highlights • As predicted, turnover reduced to £7,854,000 (2006: £8,312,000) as a result of a shift in the Group's activities away from its property transaction and underwriting businesses to focus on its asset management activities. • Profit on ordinary activities before taxation and goodwill amortisation increased to £1,199,000 (restated 2006: £1,154,000). • Recommended dividend for the year increased by 16.67% to 0.175p per share (2006: 0.15p) • Significant shift in income away from property trading profits to asset management fee income thus materially improving visibility of revenues for 2008. Corporate Highlights • Assets under management trebled to over £150 million (2006: £51 million). • 85% of assets under management are located in Central and Eastern Europe. • This portfolio earned a pre tax return on equity of between 7% and 8% from rent alone. • This rate of return increases to over 20% per annum when combined with the increases in value of the properties over the last year. • Over Eur 100 million (£68 million) of property currently under offer on behalf of the funds managed by First Property. • Strategic emphasis on growing the asset management division and thus reducing dependence on transaction underwriting and trading, continues to be successfully progressed. Post Year End Highlights • Universities Superannuation Scheme doubled its investment mandate with First Property from £50 million to £100 million, which once fully invested will result in assets under management increasing to over £400 million. • Part IV FSA registration awarded, allowing First Property to raise and manage funds directly from the public as well as institutional shareholders. • Acquisition of three office blocks in Poland, Romania and the UK, with an aggregate value of some €90 million (£61 million) on behalf of funds managed. • Forward commitment in the region of €70 million (£47 million) agreed to acquire a retail centre, which is to be built in Bytom, southern Poland on behalf of funds managed. Commenting on the results, Ben Habib, chief executive, said, "The Group hasagain experienced a hugely positive year, with assets under management treblingto over £150 million. The strategic emphasis on growing our asset managementdivision has been successfully progressed. This, coupled with our recentlyawarded FSA part IV registration, which enables us to raise funds independently,means that we should be able to continue scaling up our business over the nextfew years. I remain very confident about the Group's prospects." For further information: Ben Habib Richard Sunderland/Rachel DrysdaleFirst Property Group plc Tavistock CommunicationsTel 020 7731 2844 Tel: 020 7920 3150www.fprop.com rsunderland@tavistock.co.uk CHIEF EXECUTIVE'S STATEMENT Results and dividend I am pleased to report the results for the year to 31 March 2007, which has beenboth a successful and transformational year for the Group. As predicted when we reported last year, turnover has reduced to £7,854,000(2006: £8,312,000), but the gross profit earned has increased to £2,638,000(2006: £2,318,000), yielding a profit on ordinary activities before taxation andgoodwill amortisation of £1,199,000 (restated 2006: £1,154,000). Diluted earnings per ordinary share before goodwill amortisation were slightlylower than the previous year at 0.80 pence (restated 2006: 0.82 pence),reflecting the minority shareholder interest taken in First Property ServicesLtd. Pursuant to the requirements of FRS 20, we have provided in the profit and lossaccount, as an expense, the value of management share options which vested inthe period under review. The effect of this new accounting standard on the yearto 31 March 2007 was to reduce profit by £31,000 (2006: £13,000). As a result ofthe implementation of the new accounting standard the accounts for the year to31 March 2006 have been restated. I reported last year that the Group was experiencing major changes in itsbusiness as income derived from property underwriting and trading reduced andfee income derived from asset management increased. What was uncertain was therate at which this transformation would take place. As it happens, we have doneso at a fast rate. Assets under management trebled to over £150 million (2006:£51 million) and the significant increase in fee income demonstrates the extentof this transformation. Dividend On the basis of these results, and our confidence in the Company's future, theDirectors have resolved to recommend an increased dividend for the year of 0.175pence per share (restated 2006: 0.15 pence per share), which, if approved, willbe paid on 28 September 2007 to shareholders on the register at 24 August 2007. Review of operations Property asset management Revenue earned by this division amounted to £1,362,000 (2006: £503,000). Of thefees earned, £310,000 (2006: £217,000) was in respect of super performance fees. We now have over £150 million of property assets under management (2006: £51million). Of these, over 85% by number and value are located in Central andEastern Europe. Our experience of the Central and Eastern European property markets continues tobear out our expectations of the region. We are finding many more attractiveproperties to acquire than in the UK, as evidenced by the rapid growth of ouractivities there. In addition, at the time of writing the funds we manage haveover Eur 100 million (£68 million) of property under offer, which is goingthrough the due diligence process. The pre-tax rates of return on equity earned from rent alone by our variousfunds remains healthy, notwithstanding the recent increases in interest rates,earning a rate of between 7% and 8% per annum. When combined with the increasesin value of the properties over the last year, this rate of return increases toover 20% per annum. We were pleased to announce last week that the Universities SuperannuationScheme (USS) has doubled its investment mandate with us, from an initial £50million to a £100 million commitment. Together with gearing and once fullyinvested this mandate should result in assets under management exceeding £400million. USS first provided us with a mandate of £50 million in 2005, giving the Companya remit to invest up to £200 million in commercial property in Central andEastern Europe and the United Kingdom. The initial mandate is now over 70%complete. As mentioned above we are working on acquiring a further Eur 100million (£68 million) of property, which if acquired will more than fullyutilise the initial £50 million. The Group's growth remains focussed on asset management activities. As such, werecently applied for, and received, Part IV registration with the FinancialServices Authority. The Part IV FSA registration allows us to raise, andsubsequently manage, funds directly from the public, rather than solely frominstitutional and professional investors. We will now be able to access fundsfrom a broad range of investors and structure a wide variety of investmentvehicles, including publicly quoted investment companies, unit trusts as well asregulated and unregulated investment schemes. Property transaction underwriting and trading Turnover from this activity was £3,252,000 (2006: £7,375,000), producing a grossprofit contribution of £515,000 (2006: £1,547,000). This lower result was inline with our expectations for this division for the reasons set out above. We are now coming across interesting trading opportunities in Central andEastern Europe. We will therefore be exploring opportunities for this divisionin the region, looking to replace some of the reduction in profit that it hasrecently experienced. We expect to see evidence of this improvement in the 2008financial year. First Property Services Ltd (FPS) FPS, in which we acquired a 60% interest in February 2006, is engaged in theprovision of facilities maintenance and building services to clients in thecommercial property sector. For the year to 31 March 2007, its first full year in the Group, FPS earnedrevenues of £2,870,000 and a profit before tax of £122,000. In view of the factthat this was effectively the company's first full year of trading within theGroup the result was good. FPS operates independently of our other divisions and we are therefore able toreport on it as a stand alone entity, with its own independent profit and lossaccount. The other divisions have a degree of overlap in personnel, which is whywe only report their revenues and, in the case of the property trading division,gross profit (as opposed to profit before tax). The margins available in this business are lower than those we earn from assetmanagement and property trading. It nevertheless has a healthy book of clientsand an experienced work force and is I believe capable of achieving goodreturns. Given the nature of the business it is difficult to assess its likelyperformance for the current year, but it has made a good start. Online activities Online activities contributed revenues of £302,000 (2006: £258,000). We expectthe division to contribute a result of the same order of magnitude for the yearto 31 March 2008. Strategy Our strategy, which is now well established, remains to grow our sustainablelines of revenue, most notably through our asset management division. We willalso aim to create further value through the trading of suitable properties. Current trading and prospects I am delighted by the rapid transformation of the Group over the last year. As aresult of this we enter the current year with greater visibility of earningsderived primarily from our asset management division. The asset management division should continue to grow at a rapid rate, furtheradding to our revenue streams and improving the visibility and security of ourincome. We now have a good track record as property asset managers and understand how toapply these skills to international property markets. If our current chosengeographic areas become less attractive than they are at present (which we donot anticipate), we believe that we will not find it difficult to repositionourselves in other growth areas. This expertise, coupled with our ability to raise funds independently now thatwe are FSA registered, means that we should be able to continue scaling up ourbusiness in the years ahead. Given the above I remain very confident about the Group's prospects. Ben HabibChief Executive6 June 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 March 2007 2007 2006 2006 2006 Restated Restated Restated (Unaudited) Audited Audited Audited---------------------------------------------------------------------------- Notes Total Before Goodwill Total results goodwill amortisation result amortisation £'000 £'000 £'000 £'000---------------------------------------------------------------------------- Turnover- continuing operations 2 7,854 8,312 - 8,312----------------------------------------------------------------------------Total turnover 7,854 8,312 - 8,312 Cost of sales (5,216) (5,994) - (5,994)----------------------------------------------------------------------------Gross profit 2,638 2,318 - 2,318 Net operating expenses (1,611) (1,139) (391) (1,530)----------------------------------------------------------------------------Operating profit- continuing operations 1,027 1,179 (391) 788----------------------------------------------------------------------------Total operating profit 1,027 1,179 (391) 788 Income - fixed asset investment 116 2 - 2 Share of associatedcompany's profit before tax 89 23 - 23 Net interest payable (33) (50) - (50)----------------------------------------------------------------------------Profit on ordinaryactivities before taxation 2 1,199 1,154 (391) 763 Taxation on ordinary activities (240) (236) - (236)----------------------------------------------------------------------------Profit for the year before minority interest 959 918 (391) 527 Equity minority interest (44) 20 - 20----------------------------------------------------------------------------Profit for the year 915 938 (391) 547 Earnings per Ordinary 1p share - basic 3 0.82p 0.84p 0.49p - diluted 3 0.80p 0.82p 0.48p CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSESfor the year ended 31 March 2007 Notes 2007 2006 Restated (Unaudited) Audited Exchange differences on translation of foreign operations 6 10 70 Net Gain recognised directly in Reserves 6 10 70 Profit for year after tax 6 748 407 Total recognised gains for year 758 477 CONSOLIDATED BALANCE SHEETat 31 March 2007 2007 2006 Restated (Unaudited) Audited----------------------------------------------------------------------------- Notes Group Group £'000 £'000Fixed assetsIntangible assets 25 16Tangible assets 139 220Investments 274 230----------------------------------------------------------------------------- 438 466-----------------------------------------------------------------------------Current assetsStocks 2,314 2,698Debtors 4,267 5,706Cash at bank and in hand 2,522 1,189----------------------------------------------------------------------------- 9,103 9,593-----------------------------------------------------------------------------Creditors: amounts falling due within one year (1,836) (2,975)-----------------------------------------------------------------------------Net current assets 7,267 6,618-----------------------------------------------------------------------------Total assets less current liabilities 7,705 7,084-----------------------------------------------------------------------------Creditors: amounts falling due after one year (41) (92)-----------------------------------------------------------------------------Net assets 7,664 6,992----------------------------------------------------------------------------- Capital and reservesCalled up share capital 5 1,116 1,116Share premium 6 5,298 5,298Merger reserve 6 5,823 5,823Foreign Exchange TranslationReserve 6 80 70Profit and loss account 6 (4,653) (5,315)-------------------------------------------------------------------------------Equity shareholders' funds 7 7,664 6,992------------------------------------------------------------------------------- CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 March 2007 Notes 2007 2006 £'000 £'000 (Unaudited) (Audited) Net cash inflow/(outflow) from operating activities 8 2,538 (850)-------------------------------------------------------------------------------Returns on investments and servicing of finance- Dividends paid (167) (140)- Dividends received 116 2- Interest paid (132) (151)- Interest received 99 101-------------------------------------------------------------------------------Net cash (outflow) from returns on investments and servicing of finance before taxation (84) (188)Taxation (367) (1)Capital expenditure and financial investment- Purchase of tangible fixed assets (45) (222)- Purchase of intangible fixed assets (9) (16)- Purchase of fixed asset investments (54) (111)- Sale of tangible fixed assets 54 7- Sale of fixed asset investments 132 -- Purchase of minority interest - (336)-------------------------------------------------------------------------------Net cash (outflow)/ from capital expenditure and financial investment (289) (679)-------------------------------------------------------------------------------Cash inflow/(outflow) before management of liquid resources and financing 2,165 (1,717)-------------------------------------------------------------------------------Management of liquid resources- Decrease/(increase) in short term deposits 9 (1,311) 508Financing- Purchase of own shares (86) -- Bank overdraft (3) 3- Finance Lease (84) 145- Loans advanced - 1,304- Loan repayments (659) (134)-------------------------------------------------------------------------------Net cash (outflow)/inflow from management of liquid resources and financing (2,143) 1,826-------------------------------------------------------------------------------Increase in cash in the year 9 22 109------------------------------------------------------------------------------- Reconciliation of net cash flow to movement in net funds Notes 2007 2006 £'000 £'000Increase in cash in the year 22 109Movement in short term deposits 1,311 (508)Movement in loans and bank overdraft 746 (1,318)-------------------------------------------------------------------------------Movement in net funds in the year 2,079 (1,717)Net funds at 1 April (263) 1,454-------------------------------------------------------------------------------Net funds at 31 March 9 1,816 (263)------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS 1. Basis of preparation The figures for the year ended 31 March 2007 are unaudited and are not fullfinancial statements. The figures for the years ended 31 March 2007 and 31 March2006 are non-statutory. The figures for the year ended 31 March 2006 areextracts from the full financial statements delivered to the Registrar ofCompanies, as restated to comply with FRS 20. The report of the auditors onthose financial statements was unqualified and contained no statements undereither Section 237(2) or 237(3) of the Companies Act 1985. 2. Segmental analysis Turnover Profit/(loss) before tax------------------------------------------------------------------------------- 2007 2006 2007 2006 £'000 £'000 £'000 £'000------------------------------------------------------------------------------- Business analysis - continuing operations Property underwriting and related services 3,252 7,375 494 1,407 Property asset management 1,362 503 1,166 502 Property contracting and maintenance 2,870 136 122 (51) Property online sales 163 59 163 59 Database provision and web services 139 199 61 75 Other fees 68 40 2 - Unallocated central costs - - (809) (838)------------------------------------------------------------------------------- 7,854 8,312 1,199 1,154------------------------------------------------------------------------------- The profit/(loss) before tax attributable for each activity is stated afterallocating direct net operating expenses. 3. Earnings per share The calculation of basic earnings per share is based on the profit on ordinaryactivities after taxation and minority interest, namely £915,000 (restated 2006: £938,000) and on 111,601,115 (2006: 111,601,115) ordinary shares being theweighted average number of ordinary shares in issue and ranking for dividendduring the year. The calculation of diluted earnings per share is based on an adjusted profit onordinary activities after taxation and minority interest of £956,000 (restated 2006: £944,000) and on 120,038,615 (2006: 114,901,115) ordinary sharesbeing the adjusted weighted average number of ordinary shares at the year-endincluding shares under option which are exercisable at less than the marketprice at the year-end. 4. Dividend on ordinary shares 2007 2006 £'000 £'000-------------------------------------------------------------------------------Final Dividend paid for previous year 167 140------------------------------------------------------------------------------- 167 140------------------------------------------------------------------------------- 5. Called-up share capital 2007 2006 £'000 £'000-------------------------------------------------------------------------------Authorised240,000,000 (2006: 240,000,000) Ordinary shares of 1p each 2,400 2,400Allotted, called up and fully paid111,601,115 (2006: 111,601,115) Ordinary shares of 1p each 1,116 1,116------------------------------------------------------------------------------- 6. Share premium account and reserves Group Share Foreign Merger Purchase of Profit Premium Exchange Reserve own shares and Loss Translation Account Reserve £'000 £'000 £'000 £'000 £'000 At 1 April 2006 5,298 70 5,823 - (5,315) Profit for the financial period - - - - - Increase in foreignexchange translationreserve - 10 - - - Purchase of TreasuryShares - - - (86) - Profit for theyear after taxand dividends - - - - 748 -------------------------------------------------------------------------------At 31 March 2007 5,298 80 5,823 (86) (4,567)------------------------------------------------------------------------------- During the year the Company purchased 450,000 of its own ordinary shares whichare held in treasury, at a price of 19 pence per share. 7. Reconciliation of movements in equity shareholders' funds Group 2007 2006 £'000 £'000-------------------------------------------------------------------------------Opening shareholders' funds 6,992 6,515Profit for the year 915 547New share capital issued - -Purchase of Treasury Shares (86) -Dividends paid (Note 3) (167) (140)Increase in foreign exchange translation reserve 10 70-------------------------------------------------------------------------------Closing shareholders' funds 7,664 6,992------------------------------------------------------------------------------- 8. Reconciliation of operating profit to net cash inflow/(outflow) fromoperating activities 2007 2006 £'000 £'000-------------------------------------------------------------------------------Operating profit 1,027 788Depreciation and profit/(loss) on disposal of fixed assets 51 18(Profit) on disposal of fixed asset investments (48) -Amortisation of goodwill - 391Movement in foreign exchange translation reserve 10 70Decrease/(increase) in stocks 384 1,303Decrease/(increase) in trade debtors 1,150 (3,892)Decrease/(Increase) in prepayments and other debtors 269 (261)Increase/(decrease) in trade creditors 77 149Increase/(decrease) in taxation and social security 47 (54)(Decrease)/increase in other creditors, accruals and deferred income (431) 638-------------------------------------------------------------------------------Net cash inflow/(outflow) from operating activities 2,536 (850)------------------------------------------------------------------------------- 9. Reconciliation of movement in net funds 1 April 2006 Cash flow 31 March 2007 £'000 £'000 £'000 Cash at bank and in hand 1,189 1,333 2,522Short term deposits (501) (1,311) (1,812)-------------------------------------------------------------------------------Cash (excluding short term deposits) 688 22 710Short term deposits 501 1,311 1,812Debt due within one yearOverdraft (3) 3 -Finance Lease (53) 33 (20)Property loan (1,304) 659 (645)Debt due after one yearFinance Lease (92) 51 (41)------------------------------------------------------------------------------- (263) (2,079) 1,816------------------------------------------------------------------------------- 10. International Financial Reporting Standards The Company is adopting IFRS accounting standards for the year ending 31 March2008. It is the Directors' intention that an impact analysis, showing the effectof the material changes on the March 2007 financial statements, will be producedat or before the reporting of the Group's interim accounts for the six monthsending September 2007. 11. Report circulation Copies of this preliminary results announcement are available from the Company'sregistered office at 17 Quayside, William Morris Way, London SW6 2UZ and on itswebsite at www.fprop.com. Copies of the Annual Report and Accounts will be sent to shareholders by 10August 2007 for approval at the Annual General Meeting to be held on 7 September2007 and will also be available at the Company's registered office and itswebsite at www.fprop.com. This information is provided by RNS The company news service from the London Stock Exchange