First Property Regulatory News (FPO)

Date: 11 June 2015

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 2015

First Property Group plc (AIM: FPO), the property fund manager and investor, today announces its preliminary results for the twelve months ended 31 March 2015.

Financial highlights:

* Excludes the Group's non-controlling interests in four other FPAM managed funds.

** Calculated according to EPRA triple net valuation methodology, which includes fair values of i) financial instruments ii) debt and iii) deferred taxes.

Operational Highlights (and explanatory notes):

· The increase in profit before tax to £8.08 million (2014: £6.60 million) was largely attributable to the contribution made to earnings by:

o Fund Management - The performance fee earned by the Group of £3.2 million (2014: nil) on profits realised by Fprop PDR.

o Group Properties:

i. The purchase by the Group and FOP of six properties in Poland and Romania during the year which made a contribution to the Group's profit before unallocated overheads and tax of £2.27 million (2014: nil). These acquisitions also resulted in £1.84 million of negative goodwill, a non-cash item which has been credited to the Income Statement; and

ii. The full year contribution to profit before unallocated overheads and tax from the additional properties purchased by the Group and FOP in the previous year of £1.83 million (2014: £676,000).

· Final dividend increased to 1 penny per share (2014: 0.79 pence per share), an increase of 27%, which together with the interim dividend of 0.35 pence (2014: 0.33 pence) equates to a dividend for the year of 1.35 pence per share (2014: 1.12 pence per share).

· New fund established in January 2015 on behalf of Shipbuilding Industry Pension Scheme (SIPS) with a commitment of £125 million for an initial term of ten years targeting investments in the United Kingdom. The Group's UK efforts are now concentrated on investing this.

· Funds under management in Central and Eastern Europe (CEE) once again rated by Investment Property Databank (IPD) as the best performing versus the IPD CEE universe, now for the annualised periods from 2005 to the end of each of the years between 31December 2008 and 31 December 2014.

· The impact of a weaker Euro versus Sterling during the year resulted in profit before tax being some £258,000 lower than it would otherwise have been.

Commenting on the results, Ben Habib, Chief Executive of First Property Group, said:

"The financial year just ended has been transformational for the Group principally because of the six investments made by it and FOP in Poland and Romania, which should yield recurring profit before unallocated overheads and tax of just over £6 million per annum. These earnings will more than replace the fee income we used to earn from the USS fund which expires in August 2015 and which at its peak amounted to some £3 million per annum.

"The Group's future earnings are substantially underpinned, its balance sheet is strong, the economies in which we operate are growing, we have investment mandates which will result in the Group's earnings growing and we are working on new interesting transactions. I therefore look to the future with excitement and confidence."

A briefing for analysts will be held at 10.00hrs today at the Group's headquarters, 35 Old Queen Street, London, SW1H 9JA. A conference call facility will also be available on +44 (20) 7984 7578, passcode: 540877. A copy of the accompanying investor presentation can be accessed simultaneously at http://www.fprop.com/plc-results/81/88/. A recorded copy of the call will subsequently be posted on the Company website, www.fprop.com.

For further information please contact:

Notes to investors and editors:

First Property Group plc is a property fund manager and investor with operations in the United Kingdom and Central Europe. 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 in the UK and Central Europe;

· Group Properties - principal investments by the Group, currently comprising:

o Six directly owned properties in Poland and Romania;

o Five properties in Poland held by Fprop Opportunities plc (FOP), an FPAM managed fund in which the Group is a 76.2% shareholder;

o Non-controlling interests in four other funds managed by FPAM.

FPAM funds have ranked No.1 versus the Investment Property Databank (IPD) Central & Eastern Europe (CEE) universe for the annualised periods from the commencement of its operations in Poland in 2005 to the end of each of the years between 31 December 2008 and 31 December 2014.

First Property Asset Management Limited is authorised and regulated by the Financial Conduct Authority. Further information about the Company and its products can be found at: www.fprop.com.

CHIEF EXECUTIVE'S STATEMENT

Financial results

I am pleased to report final results for the twelve months ended 31 March 2015.

Revenue earned by the Group increased to £18.52 million (2014: £18.05 million) yielding a profit before tax of £8.08 million (2014: £6.60 million). The increase in profit before tax is principally attributable to the contribution to earnings made by:

· Fund Management - the performance fee earned by the Group of £3.2 million (2014: nil) on profits realised by Fprop PDR.

· Group Properties:

i. The purchase by the Group and FOP of six properties in Poland and Romania during the year which made a contribution to the Group's profit before unallocated overheads and tax of £2.27 million (2014: nil). These acquisitions also resulted in £1.84 million of negative goodwill, a non-cash item which has been credited to the Income Statement; and

ii. The full year contribution to profit before unallocated overheads and tax from the additional properties purchased by the Group and FOP in the previous year of £1.83 million (2014: £676,000).

Diluted earnings per share were 6.93 pence (2014: 4.53 pence).

The Group ended the period with net assets of £31.02 million (2014: £23.46 million).

Its cash balances increased to £12.24 million (2014: £11.28 million) despite having made some £80 million of new, leveraged property investments. Of this cash, £3.26 million (2014: £4.14 million) was held by Fprop Opportunities plc (FOP), which is 76.2% owned by the Group and £573,000 (2014: £528,000) was held by Corp SA (90% owned by the Group), the property management company for Blue Tower in Warsaw.

Dividend

The Directors have resolved to recommend increasing the final dividend to 1 penny per share (2014: 0.79 pence per share), an increase of 27%, which together with the interim dividend of 0.35 pence per share (2014: 0.33 pence per share) equates to a dividend for the year of 1.35 pence per share (2014: 1.12 pence per share). The substantial increase in the final dividend results from the material increase in the Group's underlying recurring earnings and the Directors' confidence in the sustainability of these.

The proposed final dividend will be paid on 30 September 2015 to shareholders on the register at 21 August 2015, and is subject to shareholder approval at the forth coming annual general meeting.

REVIEW OF OPERATIONS

Key Points

The annualised earnings before unallocated overheads and tax of just over £6 million which the Group expects to earn from the six properties acquired by it and FOP during the year, more than replaces the fee income we used to earn from the USS fund which expires in August 2015 and which, at its peak, amounted to some £3 million per annum.

When the earnings from the six new property investments are combined with the Group and FOP's existing investments, the annualised recurring contribution to the Group's profit before unallocated overheads and tax will amount to some £9.5 million.

Our development activity in the United Kingdom, via Fprop PDR, made a contribution to the Group of £3.86 million and yielded investors in that fund a total return of £16.6 million on equity deployed of £30.35 million, translating into a net return on equity of 53% and an IRR of 98% per annum. Fprop PDR is likely to make a further contribution to profit before unallocated central overheads and tax of some £1 million for the year to 31 March 2016, resulting from transactions concluded last year. However, the Permitted Development Rights legislation is due to expire in May 2016 and we do not therefore expect any further transactions to be undertaken by Fprop PDR, unless the legislation is extended in some way.

The Group's UK efforts are now concentrated on investing the £125 million fund management mandate awarded to us by SIPS.

PROPERTY FUND MANAGEMENT (First Property Asset Management Ltd or FPAM)

As at 31 March 2015 aggregate assets under management, calculated by reference to independent third party valuations, stood at £327 million (2014: £357 million), including some £142 million (2014: £69 million) of properties held by the Group. Of these, 33% were located in the UK, 65% in Poland and 2% in Romania. With the exception of Fprop PDR, fees are levied by FPAM by reference to funds under management excluding cash and cash commitments.

Revenue earned by this division amounted to £6.14 million (2014: £4.27 million), resulting in a profit before unallocated central overheads and tax of £4.44 million (2014: £2.63 million) and representing 40% (2014: 29%) of Group profit before unallocated central overheads and tax.

Revenue from the USS fund reduced to £1.54 million (2014: £2.5 million) as a result of disposals by the fund. Following the expiry of the USS fund management contract FPAM's fund management fee income, excluding performance fees, will amount to some £1.35 million per annum.

First Property Asset Management Ltd (FPAM) now manages eight closed-end funds, having established one new fund during the year under review. A brief synopsis of the value of assets and maturity of each of these funds is set out below:

*Not subject to recent revaluation

Independent fund performance analysis:

Our investments in Central and Eastern Europe (CEE) have once again been ranked No.1 by Investment Property Databank (IPD) against the IPD CEE universe, now for the annualised periods from the commencement of FPAM's operations in Poland in 2005 to the end of each of the years between 31 December 2008 and 31 December 2014.

New business:

Poland - we are in preliminary discussions with potential investors to establish a new fund targeting minimum rates of return on equity invested of 15% per annum.

TOTAL GROUP PROPERTIES

The Group increased its property holdings (including those held by FOP) from five to eleven during the year under review, as set out below:

1 The contribution to Group profit from its two new property investments in Poland was for the period from 15 December 2014 to 31 March 2015.

2 The contribution to Group profit from its three new property investments in Romania was for the period from 27 July 2014 to 31 March 2015.

3 The contribution to FOP's profit (which is consolidated into the accounts of the Group) from its one new property investment in Poland was for the period from 19 September 2014 to 31 March 2015.

It is the Group's policy to carry its investments at the lower of cost or market value for accounting purposes.

Other Property Interests:

Group Properties also comprises non-controlling interests in four other funds managed by FPAM, as set out in the table below.

Non controlling interest in funds managed by FPAM at 31 March 2015:

Revenue from Group Properties, including FOP, amounted to £12.38 million (2014: £13.78 million), generating a profit before unallocated central overheads and tax of £6.57 million (2014: £6.32 million) and representing 60% (2014: 71%) of Group profit before unallocated central overheads and tax.

The reduction in revenue was attributable to the Group ceasing its development activities in the UK, which were instead carried out by Fprop PDR.

The increase in profit before unallocated central overheads and tax was attributable to:

i. The purchase by the Group and FOP of six properties in Poland and Romania during the year which made a contribution to the Group's profit before unallocated overheads and tax of £2.27 million (2014: nil). These acquisitions also resulted in £1.84 million of negative goodwill, a non-cash item which has been credited to the Income Statement; and

ii. The full year contribution to profit before unallocated overheads and tax from the additional properties purchased by the Group and FOP in the previous year of £1.83 million (2014: £676,000).

Commercial property markets outlook

Poland:

GDP growth in Poland, Europe's sixth largest economy, accelerated to 3.4% in 2014 and is forecast to grow by the same amount in 2015 and 2016. Rent levels for commercial property are generally sustainable, subject to location. Capital values remain largely unchanged from their credit crunch lows and yield some 2-3% more than equivalent property in Western Europe. In addition, Poland's banking sector is well capitalised and keen to lend against property at record low interest rates.

Poland is a tangential beneficiary of the quantitative easing taking place in the euro zone, which has boosted economic activity in Germany and by association Poland; some 40% of Poland's trade is with Germany. QE has also, amongst other things, suppressed euro interest rates and the value of the euro (the currency in which most Polish commercial property transacts and in which rents are paid), translating into reduced capital values for non-euro based investors. Given this confluence of circumstances, we believe the business case for property investment in Poland to be highly compelling.

United Kingdom:

The UK was the fastest growing major advanced economy in 2014, growing at 2.8%, and is forecast by the OBR to grow by 2.5% in 2015. Consumer confidence is at a twelve year high and occupier demand for commercial property is growing across the board. This is slowly manifesting itself in increasing property values and rising rents. Investment demand, including from international investors, continues to spread into the regions.

We expect the newly elected Government to continue its efforts to loosen the planning system to enable higher rates of new development. We shall be looking out in particular for any news of its intention to extend Permitted Development Rights (PDR) beyond its current scheduled expiry in May 2016.

Current Trading and Prospects

The financial year just ended has been transformational for the Group principally because of the six investments made by it and FOP in Poland and Romania, which should yield recurring profit before unallocated overheads and tax of just over £6 million per annum. These earnings will more than replace the fee income we used to earn from the USS fund which expires in August 2015 and which at its peak amounted to some £3 million per annum.

The Group's future earnings are substantially underpinned, its balance sheet is strong, the economies in which we operate are growing, we have investment mandates which will result in the Group's earnings growing and we are working on new interesting transactions. I therefore look to the future with excitement and confidence.

Ben Habib

Chief Executive

11 June 2015

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2015

All operations are continuing.

CONSOLIDATED SEPARATE STATEMENT

OF OTHER COMPREHENSIVE INCOME

for the year ended 31 March 2015

CONSOLIDATED BALANCE SHEETS

As at 31 March 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2015

CONSOLIDATED CASH FLOW STATEMENTS

for the year ended 31 March 2015

1. Basis of preparation

· These preliminary financial statements have not been audited and are derived from the statutory accounts within the meaning of section 434 of the Companies Act 2006. They have been prepared in accordance with the Group's accounting policies that will be applied in the Group's annual financial statements for the year ended 31 March 2015. These are consistent with the policies applied for the year ended 31 March 2014. These accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted by the European Union (EU). Whilst the financial information included in this preliminary statement has been prepared in accordance with IFRS, this announcement does not itself contain sufficient information to fully comply with IFRS. The comparative figures for the financial year ended 31 March 2014 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.

· These preliminary financial statements were approved by the Board of Directors on 10 June 2015.

2. Revenue

Revenue from continuing operations consists of revenue arising in the United Kingdom 20% (2014: 53%), Poland 74% (2014: 47%) and Romania 6% (2014: nil). All revenue relates solely to the Group's principal activities.

3. Segment reporting 2015

Segment reporting 2014

Interest income from the cash that is 100% controlled is not allocated to a separate segment, because cash is managed centrally, and is netted off against unallocated central overheads. Head office costs and overheads that are common to all segments are shown separately under unallocated central overheads. Assets, liabilities and costs which relate to Group central activities have not been allocated to business segments.

The geographic location of physical non-current assets is UK £2,229,000 (2014: £2,424,000), Poland £109,568,000 (2014: £48,934,000) and Romania £5,080,000 (2014: £Nil).

4. Business acquisitions

The Group directly made three acquisitions:

- On 27 July 2014 the Group took control of Felix Development SRL. Felix owns three properties located in Romania; and

- On 15 December 2014 the Group acquired a beneficial interest in the entire issued share capital in Corktree Sp z.o.o and Gdynia Podolska Sp. z.o.o. for €2.65m and €2.25m respectively. Both Corktree's and Gdynia Podolska's main assets are office buildings in Poland.

The Group's subsidiary Fprop Opportunities plc (FOP) made one further acquisition during the year. On 19 September 2014 it acquired all the share capital in Zinga Poland Sp. z.o.o for €378,000. Zinga's main asset is an office block in Warsaw, Central Poland.

Following all four purchases a total of £1.84m of negative goodwill was generated.

5. Tax expense

The tax charge includes actual current and deferred tax for continuing operations.

Brought forward tax losses, have been utilised and partially offset against profits arising in the UK. These tax losses were not previously recognised as a deferred tax asset due to insufficient foreseeable taxable income being earned in the UK.

As a result of the above the effective tax rate for the Group is -4.1% (2014:15%).

The deferred tax credit is largely attributable to the acquisitions of Corktree and Gdynia Podolska during the year. This has been created as a result of the nil value paid for the deferred tax asset on acquisition. The deferred tax asset has been restricted to two years worth of profits.

6. Earnings/NAV per share

The following numbers of shares have been used to calculate both the basic and diluted earnings per share:

The following earnings have been used to calculate both the basic and diluted earnings per share:

7. Goodwill

8. Investment properties

Investment properties owned by the Group, and indirectly via FOP are stated at cost less depreciation and accumulated impairment losses. The properties were valued by CBRE, Polish Properties and BNP Paribas at the Group's financial year-end at €176.73 million (2014: €63.96 million), the Sterling equivalent at closing foreign exchange rates being £127.86 million (2014: £52.88 million). On acquisition of the Gdynia Podolska property during the year the Directors took the decision to depreciate the property over the lease term. In the Director's opinion the property's estimated residual value at the end of the period of ownership will be lower than the carrying value. No other property has been depreciated as the estimated residual value is expected to be higher than the carrying value.

9. Investment in associates and other financial assets

The Group has the following investments:

The Group's investments in associated companies is held at cost plus its share of post-acquisition profits assuming the adoption of the cost model for accounting for investment properties under IAS40 and comprises the following:

If the Group had adopted the alternative fair value model for accounting for investment properties, the carrying value of the investment in associates would have increased by £504,000 (2014: £775,000) to £1,175,000 (2014: £1,450,000).

The Group holds two unlisted investments in funds managed by it. Both are held at fair value. All of the assets have been classified as available for sale. In the Directors' view the fair value has been estimated to be not materially different from their carrying value. Fair value has been arrived at by applying the Group's percentage holding in the investments of the fair value of their net assets.

10. Inventories - land and buildings

11. Trade and other receivables

12. Trade and other payables

13. Financial liabilities

Loans repayable by FOP to third party shareholders are repayable in October 2020.

Seven bank loans and three finance leases (all denominated in foreign currencies) totalling £107,777,000 (2014: £49,332,000) included within financial liabilities are secured against investment properties owned by the Group and Fprop Opportunities plc (FOP) and the property owned by the Group shown under inventories. These bank loans and finance leases are otherwise non-recourse to the Group's assets.

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 35 Old Queen Street, London, SW1H 9JA.