First Property Regulatory News (FPO)

First Property Group plc

Interim Results for the six months to 30 September 2014

First Property Group plc (AIM: FPO), the property fund management group, today announces its interim results for the six months to 30 September 2014.

Financial Highlights:

Explanatory Notes and Highlights:

· The impact of a weaker Euro versus Sterling during the period compared to the same period last year resulted in profit before tax being c£177,000 lower than it would otherwise have been.

· The increase in profit before tax to £5.42 million (2013: £1.91 million) was largely attributable to the contribution made to earnings by:

o Fund Management:

The performance fee earned by the Group of £1.9 million (2013: nil) on profits made by Fprop PDR. Fprop PDR sold six properties during the period with a total value of £28.2 million and earned a net profit, after the deduction of the Group's performance fee, of £7.7 million for its investors.

o Group Properties:

i. The two investments made by FOP in the second half of last year resulted in a contribution to the Group's profit before tax during the period of £585,000 (2013: nil).

ii. The increase in the Group's interest in Blue Tower from 28.5% to 48.2% in the second half of last year resulted in an increased contribution to the Group's profit before tax during the period of £741,000 (2013: £566,000).

iii. The purchase and subsequent refinancing by the Group of three properties in Romania made a contribution to the Group's profit before tax during the period of £1.26 million (2013: nil). It should be noted that of the £1.26 million, £1.12 million represents a non-cash item on the recognition of negative goodwill created by the refinancing of the bank loan secured on the properties.

· Interim dividend increased by 6% to 0.35 pence per share (2013: 0.33 pence per share).

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

"I am very pleased by the continued good progress made by the Group.

"The investments made by Fprop Opportunities Plc and ourselves last year have made a material contribution to the Group's earnings in the first half and we expect this to continue. In addition, Fprop PDR has delivered some excellent trading profits for its investors and the Group.

"The opportunities available to Fprop PDR are not as plentiful as they were last and earlier this year but we expect it to continue to earn trading profits from its activities.

"Our balance sheet is strong, the visibility of our earnings into 2015 and beyond is continually improving and I look to the future with confidence."

A briefing for analysts will be held at 09:30hrs today at the headquarters of First Property Group plc, 35 Old Queen Street, London, SW1H 9JA. Participants can also attend by telephone on +44 (20) 3364 5719 (pin 868413) or online via http://www.livemeeting.com/cc/premconfeurope/ by entering name, meeting ID 3719600 and password pw3556. A recorded copy of the audio 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 with operations in the United Kingdom and Central Europe. The investment performance of its funds under management is ranked No.1 versus the Investment Property Databank (IPD) universe for Central & Eastern Europe (CEE) over the eight years to 31 December 2013, having previously ranked No.1 versus the IPD CEE universe over the three, four, five, six and seven years to 31 December 2008, 2009, 2010, 2011 and 2012 respectively.

The business model of First Property Group is to:

· Raise and manage third party funds to invest in property;

· Co-invest in these funds and thereby earn a return on its own capital invested; and

· Earn fees for the management of these funds. Fees earned are typically a function of the value of assets under management as well as the performance of the funds.

Further information about the Company can be found at: www.fprop.com.

CHIEF EXECUTIVE'S STATEMENT

Financial Results

I am pleased to report interim results for the six months ended 30 September 2014.

Revenue earned by the Group amounted to £7.79 million (2013: £4.27 million) yielding a profit before tax of £5.42 million (2013: £1.91 million). The increase in revenue and profit before tax is mainly attributable to the contribution made to earnings by:

· Fund Management:

o The performance fee of some £1.9 million (2013: nil) on profits made by Fprop PDR.

· Group Properties:

o The two investments made by Fprop Opportunities plc (FOP) in the second half of last year resulted in a contribution to the Group's profit before tax during the period of £585,000 (2013: nil).

o The increase in the Group's interest in Blue Tower from 28.5% to 48.2% in the second half of last year resulted in an increased contribution to the Group's profit before tax during the period of £741,000 (2013: £566,000).

o The purchase and subsequent refinancing by the Group of three properties in Romania made a contribution to the Group's profit before tax during the period of £1.26 million (2013: nil). It should be noted that of this, £1.12 million represents a non-cash item on the recognition of negative goodwill created by the refinancing of the bank loan secured on the properties.

Diluted earnings per share were 4.07 pence (2013: 1.27 pence).

The Group ended the period with net assets of £26.62 million (2013: £19.45 million). Its cash balance was £12.05 million (2013: £10.60 million), of which £4.28 million (2013: £8.51 million) was held by Fprop Opportunities plc (76.2% owned by the Group) and £481,000 (2013: £539,000) 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 increase the interim dividend by 6% to 0.35 pence per share (2013: 0.33 pence per share) which will be paid on 15 January 2015 to shareholders on the register at 19 December 2014, with an ex-dividend date of 18 December 2014.

Review of Operations

Property Fund Management (First Property Asset Management Ltd or FPAM)

As at 30 September 2014 assets under management were valued at £309 million (2013: £338 million). Of these, 66% were located in Poland and 34% in the UK. There were ten property sales and three property purchases made by funds under management during the period. The reduction in the value of assets under management is primarily attributable to the value of properties sold exceeding the value of properties purchased.

Revenue earned by this division increased by 82% to £3.55 million (2013: £2.02 million), resulting in a profit before tax and unallocated central overhead costs of £2.90 million (2013: £1.41 million). This represents 49.4% (2013: 61.3%) of Group profit before tax and unallocated central overhead costs. The increase in profit before tax of this division is largely attributable to the performance fee earned by the Group of £1.9 million, on profits made by Fprop PDR. The performance fee was received after the period end but is recognised in these accounts.

Fprop PDR acquired two properties with a total value of £11.2 million during the period and sold six properties with a total value of £28.2 million. The net profit earned for its investors from these sales, after the deduction of the performance fee, amounted to £7.7 million, representing an un-geared IRR of 46.8%.

A synopsis of each of the funds managed by the Group is set out below:

* Not subject to recent revaluation

The expiry of our fund management contract with USS in August 2015 is now less than a year away. This fund has so far sold seven properties, which have been acquired either by the Group or funds managed by FPAM. The anticipated earnings derived from these purchases should materially mitigate the decline in fee income the Group will experience when this fund management mandate comes to an end next year. Further sales by this fund are expected this and next year. Recurring annual fund management fee income has declined year on year by some £1.1 million per annum, caused largely by property disposals by the USS fund, but also by a weaker Euro and lower Polish property values.

UK PPP, which is fully invested in 21 recessionary-resilient UK properties, continues to generate an un-geared dividend yield of some 6.3% per annum. Capital values of the properties held by UKPPP have risen during the course of this year as the market for secondary property recovers. We expect this trend to continue. The portfolio of properties, which was assembled after the onset of the credit crunch, has an occupancy ratio of 98.9% and a weighted average unexpired lease term of over nine years.

FOP is invested in five Polish properties which are generating an aggregate annualised rate of return on equity in excess of 30% per annum.

Group Properties

Group Properties comprises four commercial properties held directly by the Group and shareholdings at the period end in five of the seven funds managed by FPAM.

Profit before tax and unallocated central overhead costs from Group Properties, including FOP (in which the Group is a 76.2% shareholder), was £2.97 million (2013: £0.89 million). This represents 50.6% (2013: 38.7%) of Group profit before tax and unallocated central overhead costs.

The increase in profit before tax earned by Group Properties resulted mainly from:

· The two investments made by FOP in the second half of last year which contributed £585,000 (2013: nil).

· The increase in the Group's interest in Blue Tower from 28.5% to 48.2% in the second half of last year which contributed £741,000 (2013: £566,000).

· The purchase and subsequent refinancing by the Group of three properties in Romania which made a contribution of £1.26 million (2013: nil). It should be noted that, of the £1.26 million, £1.12 million represents a non-cash item on the recognition of negative goodwill created by the refinancing of the bank loan secured on the properties.

Co-investments in FPAM managed funds at the year-end:

Our interests in FPAM's managed funds are accounted for, in the case of UK PPP as "dividend income", in the cases of 5th Property Trading Ltd and Regional Property Trading Ltd as "shares in associates", and in the case of FOP, on a consolidated basis because of the Group's majority shareholding. It is the Group's policy to carry its investments at the lower of cost or market value for accounting purposes, and to recognise dividends when received.

FOP's revenue and profit before tax for the half year to 30 September 2014 amounted to £2.65 million (2013: £1.05 million) and £796,000 (2013: £466,000) respectively, and the Group's 76.2% share of profit before tax amounted to £607,000 (2013: £355,000).

FOP's most recent investment was made on 19 September, when it acquired an office block in Warsaw valued at some €12 million, for an initial consideration of £294,000. The property is currently being refinanced following which FOP will be fully invested. We expect it to contribute some €450,000 (£355,000) to FOP's profit before tax during the second half of the year, of which the Group's share would amount to some €340,000 (£270,000).

Our shareholdings in our two other Polish funds, 5th Property Trading and Regional Property Trading, contributed £107,000 (2013: £96,000) to the Group's profit before tax.

Our co-investment in UK PPP contributed £30,000 (2013: £30,300) of dividend income to the Group and is accounted for as a separate line item in our Income Statement.

Our co-investment in Fprop PDR earned a dividend after the period end of £390,000, which will be accounted for in the results for the year to March 2015.

Commercial Property Markets Outlook

Poland:

Poland's economic success continues despite headwinds from the rest of Europe and Ukraine. Growth in GDP for 2014 is expected to be some 3% and is forecast to grow by a similar amount in 2015, building on its cumulative growth since 2009 of some 16%. This compares to a contraction in GDP across the Euro zone over the same period of -1.2%. Inflation is close to nil and the reference interest rate stands at 2% (following a recent 0.5% cut). The Polish Zloty/Euro exchange rate has been relatively stable at around PLN 4.1-4.3 for a number of years.

Occupational demand for commercial property has risen but so too has new supply across all property sectors. The rate of increase in supply is exceeding the rate of take-up and vacancy rates are forecast to rise, in particular for offices in Warsaw and regional shopping centres.

Investment demand is mainly from German, US and UK investors and is for prime properties of large lot sizes. The transaction volume for 2014 is expected to exceed €3 billion, similar to 2013, itself the highest volume since 2006.

Our investment focus remains on properties which international investors are not focused on and from which we can earn high rates of income return from rent alone.

United Kingdom:

The rate of GDP growth in the UK would appear to be moderating but it is still growing faster than most of Europe and at a faster rate than was expected a year ago. The growth rate for 2014 is expected to be around 3%, dropping to 2.7% in 2015.

Occupational demand has increased across all property sectors and rental growth is beginning to materialise, albeit from multi-year lows.

The weight of money in the investment market has resulted in rising values across all property sectors. Total returns have now exceeded the long term average for five consecutive quarters, a trend which we expect to continue but which makes us wary.

House prices have risen in all regions but price increases generally appear to have stalled, with some commentators suggesting price falls next year, in part due to the introduction of stricter mortgage lending criteria. However, the number of new housing starts, running at some 138,000 in the year to June 2014 (up by some 20% over the prior year), is still insufficient to address the structural imbalance between supply and demand, in particular in the south of England.

Current Trading and Prospects

I am very pleased by the continued good progress made by the Group.

The investments made by FOP and ourselves last year have made a material contribution to the Group's earnings in the first half and we expect this to continue. In addition, Fprop PDR has delivered some excellent trading profits for its investors and the Group.

The opportunities available to Fprop PDR are not as plentiful as they were last and earlier this year but we expect it to continue to earn trading profits from its activities.

Our balance sheet is strong, the visibility of our earnings into 2015 and beyond is continually improving and I look to the future with confidence.

Ben Habib

Chief Executive

25 November 2014

CONDENSED CONSOLIDATED INCOME STATEMENT

for the six months to 30 September 2014

CONDENSED CONSOLIDATED STATEMENT OF

COMPREHENSIVE INCOME

for the six months to 30 September 2014

CONDENSED CONSOLIDATED BALANCE SHEET

as at 30 September 2014

CONDENSED CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

for the six months to 30 September 2014

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the six months to 30 September 2014

NOTES TO THE CONDENSED CONSOLIDATED RESULTS

for the six months ended 30 September 2014

1. Basis of Preparation

· These interim condensed consolidated financial statements for the six months ended 30 September 2014 have not been audited or reviewed and do not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. They have been prepared in accordance with the Group's accounting policies as set out in the Group's latest annual financial statements for the year ended 31 March 2014 and are in compliance with IAS 34 "Interim Financial Reporting". 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).

· The comparative figures for the financial year ended 31 March 2014 are not the statutory accounts for the financial year but are abridged 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 interim financial statements were approved by a committee of the Board on 25 November 2014.

2. Segmental Analysis

Segment reporting six months to 30 September 2014

The parent holding company costs and related listing costs are shown separately under unallocated central costs. Assets, liabilities and costs that relate to Group central activities (including free cash) have not been allocated to business segments.

Revenue for the six months to 30 September 2014 from continuing operations consists of revenue arising in the United Kingdom 34% (2013: 13%) and Central and Eastern Europe 66% (2013: 87%) and all relates solely to the Group's principal activities.

Segment reporting six months to 30 September 2013

Segment reporting year to 31 March 2014

3. Tax Expense

The tax charge is based on a combination of actual current and deferred tax charged at an effective rate that is expected to apply to the profits for the full year.

4. Earnings per Ordinary Share

The basic earnings per ordinary share is calculated on the profit on ordinary activities after taxation and after non-controlling interests on the weighted average number of ordinary shares in issue, during the period.

Figures in the table below have been used in the calculations.

5. Investment Properties

6. Business Acquisition

The fair value of the net assets of Felix Development S.R.L. when the Group took control of it on 27 July 2014, were as follows:

7. Interest in Associates and Other Financial Assets

8. Trade and Other Receivables

9. Trade and Other Payables

10. Financial Liabilities

Loans repayable by FOP to third party shareholders are unsecured and repayable in August 2020.

Six bank loans and one finance lease (all denominated in foreign currencies) totalling £50.67 million (31 March 2014: £22.83 million) included within financial liabilities are secured against four investment properties owned by Fprop Opportunities plc (FOP), three investment properties owned by the Group and the one property owned by the Group shown under inventories.

The interim 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.