First Property Regulatory News (FPO)

22 Nov 2007 07:02

First Property Group PLC22 November 2007 Date: 22 November 2007 On behalf of: First Property Group plc ("First Property" or "the Group") Embargoed: 0700hrs First Property Group plc Interim Results 2007 First Property Group plc (AIM: FPO), the AIM-listed property services groupspecialising in property asset management, today announces its interim resultsfor the six months to 30 September 2007. Financial Highlights: • Transformation of Group demonstrated by growth in assets under management of 167% to £240 million (2006: £90 million) underpinning strong interim performance • Profit on ordinary activities before taxation grew 167% to £1.6 million (2006: £0.6 million) • Increase in diluted Earnings per Share of 174% to 0.96p (2006: 0.35p) • Group declares its first interim dividend of 0.15 pence per share • Revenue from asset management increased 150% to £1 million (2006: £0.4 million) • First Property Services generated a pre-tax profit of £345,000 (2006: £79,000) • Positive cash flow of some £2 million - no bank borrowings Operational Highlights: • Recent credit market turmoil has not affected chosen markets of Poland and Romania • Capacity to acquire a further £200 million of property on behalf of the fund managed for the Universities Superannuation Scheme • Strategic emphasis - to grow asset management division - continues to progress successfully • FSA registration gained in May 2007 enabling the Group to build further portfolio of funds • The Group now manages £226 million (€323 million) of property in Central and Eastern Europe, representing 94% of the total portfolio • Pipeline of a further £20 million (€28 million) of property under offer • UK commercial property market remains significantly over-valued A briefing for analysts will be held at 09:30hrs today at RedleafCommunications, 9-13 St Andrew Street, London EC4A 3AF Commenting on the results, Ben Habib, Chief Executive of First Property, said, "This has been a good interim period for the Group. We are delighted with theprogress being made with the Group's overall operations, in particular, theprofit growth resulting from the company's strategic transformation put in placelast year. "Our portfolio of property assets under management during the period increasedsubstantially and the Company's asset management activities continue to progressstrongly in Poland which appears largely unaffected by the recent credit crunch. "Given our capacity to acquire a further £200 million of property on behalf ofthe fund we manage for the Universities Superannuation Scheme and prospects forgrowth in our asset management division, I look forward to the rest of the yearwith confidence." For further information contact: First Property Group plc Tel: 020 7731 2844Ben Habib (Chief Executive) www.fprop.com Redleaf Communications Tel: 020 7822 0200Emma Kane/Adam Leviton al@redleafpr.com Arden Partners Tel: 020 7398 1600Chris Hardie (Director Corporate Finance) • Publication quality photos are available from Redleaf Communications CHIEF EXECUTIVE'S STATEMENT Results and dividend I am pleased to report our interim results for the six months to 30 September2007, which reflect a marked increase in the Group's profits. Revenue has increased by 5% to £5,401,000 (2006: £5,148,000), earning a doublingin gross profit to £2,512,000 (2006: £1,255,000) and yielding a profit onordinary activities before taxation of £1,555,000 (2006: £559,000). Diluted earnings per ordinary share was 0.96 pence (2006: 0.35 pence). In view of the significant increase in profits, the Directors have reviewed theGroup's dividend policy and have resolved to declare an interim dividend of 0.15pence per share which will be paid on 21 December 2007 to shareholders on theregister at 30 November 2007. The final dividend for the year will be decided atthe end of the year once the full year's results are known. For the financial year ending 31 March 2008, the Group will prepare its annualconsolidated statements in accordance with International Financial ReportingStandards (IFRS) accepted by the European Union and implemented in UK. Thesehalf year financial statements are therefore prepared based on IFRS. Review of operations Property asset management Revenue earned by this division amounted to £1,057,000 (2006: £375,000). We now have some £240 million of property assets under management (2006: £90million). Of these, approximately 85% by number and value are located in Poland,9% in Romania and only 6% in the UK. Our experience of the Central and Eastern European property markets continues tobear out our expectations of the region. We are able to purchase prime propertyon yields of some 6% to 7%, which are significantly higher than the prevailingEuro interest rates of 4.5%, with very real prospects for rental growth. Equallypertinently, the recent credit market turmoil has not noticeably affected ourchosen markets of Poland and Romania. Indeed, the Polish Zloty has gone fromstrength to strength over the last three months, which is in stark contrast tothe weakening of both the US Dollar and Sterling against the Euro. The value of the properties we manage has increased substantially over the lastsix months both as a result of new acquisitions and by increases in theindividual value of properties previously acquired. There has been much published about the recent reduction in values of UKcommercial property. In our view, at current levels of interest rates, the UKmarket remains significantly over valued. We anticipate that there will be acontinued reduction in these values over the coming months. As such we areunlikely to reverse, for some time to come, the decision we took in 2005 to moveaway from the UK markets. We are working on the acquisition of some Eur 30 million (£20 million) ofproperty in Poland at the moment. This is a smaller pipeline than we wouldideally like but we remain judicious in our buying decisions and will notsacrifice quality for speed. We have the capacity to acquire a further £200 million of property on behalf ofthe fund we manage for the Universities Superannuation Scheme and prospects forgrowth in our asset management division are therefore good, without factoring inany new funds we may raise in the future. Property trading Revenue from this activity was £1,941,000 (2006: £3,037,000), producing a profitbefore tax of £728,000 (2006: £415,000). This result includes a profit beforetax of £549,000, earned on the sale of a property to an associated company(further details of which are set out in Note 10 below) and a realised currencygain of £78,000. We have recently acquired an exciting trading opportunity in Warsaw for some £2million, being a dysfunctional office block in need of redevelopment. Subject togaining planning consent for its demolition and a new residential development wewould expect to make a healthy return on our purchase. We would not expect to beable to crystallise this return during the current financial 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. FPS has had an excellent first half and earned revenues of £2,350,000 (2006:£1,573,000) and a profit before tax of £345,000 (2006:79,000). The business managed to secure a number of new clients. However, it is worthnoting that 80% of its revenue was earned from its existing client base,indicating the strength of its client relationships. With its experienced management team, I am confident that FPS will continue todeliver good results. Current trading and prospects I am delighted by our performance in the first half which has yielded excellentresults for our clients as well as a pre-tax profit for the Group of £1,555,000being 31% higher than last year's full year pre-tax profit of £1,186,000. The asset management division should continue to grow at a fast rate, furtheradding to our revenue streams and improving the visibility and security of ourincome. We are an operationally geared business and a given rate of growth inour assets under management should lead to a substantially greater growth in ourprofits. The expertise we have and our proven track record, coupled with our ability toraise funds independently now that we are FSA registered means that we should beable to continue scaling up our business in the years ahead. Ben HabibChief Executive 22 November 2007 CONSOLIDATED INCOME STATEMENT for the six months to 30 September 2007 Notes Six months to Six months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Total Total Total Results Results Results £'000 £'000 £'000 Revenue - continuing 5,401 5,148 7,854 operations Total revenue 4/5 5,401 5,148 7,854 Cost of sales - continuing (2,889) (3,893) (5,216) operations Gross profit 2,512 1,255 2,638 Net operating (1,067) (775) (1,611) expenses Operating profit - continuing 1,445 480 1,027 operations Total operating 1,445 480 1,027 profit Income from - 46 116 investments Share of 50 26 76 associated companies' profits after tax Net interest 60 7 (33) receivable / (payable) Profit on ordinary 6 1,555 559 1,186 activities before taxation Taxation on profit 7 (319) (133) (227) on ordinary activities Profit on ordinary 1,236 426 959 activities before minority interest Equity minority (101) (28) (44) interest Profit for the 1,135 398 915 period Earnings per 8 1.02p 0.36p 0.82p Ordinary 1p share - basic Earnings per 8 0.96p 0.35p 0.80p Ordinary 1p share - diluted CONSOLIDATED BALANCE SHEET as at 30 September 2007 Notes As at 30 As at 30 As at 31 Sept Sept March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Non current assets Goodwill 25 25 25 Tangible assets 154 152 139 Investments - Share of 9 (24) 259 274 associates net assets 155 436 438 Current assets Inventory - land and 398 2,103 2,314 buildings Receivables 10 6,131 5,673 4,267 Cash at bank and in hand 3,856 3,046 2,522 10,385 10,822 9,103 Current liabilities : 11 (1,819) (3,880) (1,812) Net current assets 8,566 6,942 7,291 Total assets less current 8,721 7,378 7,729 liabilities Non current liabilities : 11 (48) (194) (41) amounts falling due after more than one year Net assets 8,673 7,184 7,688 Equity Called up Share capital 1,116 1,116 1,116 Share premium 5,298 5,298 5,298 Merger reserve 5,823 5,823 5,823 Foreign Exchange 128 11 80 Translation Reserve Retained Earnings (3,793) (5,072) (4,653) Equity minority interest 101 8 24 Equity shareholders' funds 8,673 7,184 7,688 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period ended 30 September 2007 Share Share Merger Foreign Purchase Retained Equity capital premium reserve Exchange of own Earnings Minority Translation Shares Interest Reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2006 1,116 5,298 5,823 70 - (5,315) (20)Profit/(Loss) for the - - - - 398 28period Movement on Foreign Exchange Translation Reserve - - - (59) - -Purchase of Treasury - - - - - -Shares Dividends Paid - - - - (168) -At 30 Sept 2006 1,116 5,298 5,823 11 - (5,085) 8Profit/(Loss) for the - - - - - 518 16period Movement on Foreign Exchange Translation Reserve - - - 69 - - -Purchase of Treasury - - - - (86) - -Shares Dividends Paid - - - - - - -At 1 April 2007 1,116 5,298 5,823 80 (86) (4,567) 24Profit/(Loss) for the - - - - - 1,135 101period Movement on Foreign - - - 48 - - Exchange Translation Reserve - - Purchase of Treasury - - (81) Shares Dividends Paid - - - - - (194) (24)At 30 Sept 2007 1,116 5,298 5,823 128 (167) (3,626) 101 SUMMARISED CONSOLIDATED CASH FLOW STATEMENT for the six months to 30 September 2007 Notes Six months to Six months Year to 31 30 Sept 2007 to 30 Sept 2006 March 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash flows from operating activities Operating profit 1,445 480 1,027 Depreciation and profit/loss 35 34 51 on disposal of fixed assets Profit on disposal of (19) - (46) investments Movement in foreign exchange 48 (59) 10 translation reserve Decrease / (increase) in stock 1,916 595 384 Decrease / (increase) in (1,864) 14 1,419 debtors (Decrease) / increase in 821 (69) (307) creditors Net cash from operating 2,382 995 2,538 activities Cash flows from financing activities Equity dividends paid (194) (168) (168) Minority interest dividend (24) - - paid Dividends received - - 117 Interest received 71 28 99 Interest paid (11) (21) (132) Net cash used in financing (158) (161) (84) activities Taxation (175) (47) (367) Capital expenditure and financial investment Purchase of tangible fixed (68) (13) (45) assets Purchase of goodwill - (9) (9) Purchase of investments - (30) (54) Purchase of treasury shares (81) - (86) Sale of tangible fixed assets 19 44 54 Sale of investments 33 74 132 Net cash used in investing (97) 66 (8) activities Net increase in cash and cash 1,952 853 2,079 equivalents Cash and cash equivalents at beginning of period 1,816 (263) (263) Cash and cash equivalents at end of period 3,768 590 1,816 NOTES TO THE CONSOLIDATED RESULTS for the six months ended 30 September 2007 1. Basis of preparation and transition to International FinancialReporting Standards • For all periods up to and including 31 March 2007, the Group prepared its financial statements in accordance with UK Generally Accepted Accounting Principles ("UK GAAP") . For the financial year ending 31 March 2008, the Group will prepare its annual consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and implemented in the UK. • In preparing these financial statements, the Group started from an opening balance sheet as at 1 April 2006, the Group's effective date of transition to IFRS, and considered those changes in accounting policies and other restatements required by IFRS. • The Group has applied IFRS as expected to be applicable for the year ended 31 March 2008. These are subject to ongoing review and endorsements by the European Commission, and possible amendment by the International Accounting Standards Board, and are therefore subject to possible changes. These potential changes and the development of industry consensus could result in the need to change the basis of accounting or presentation of certain financial information from that presented in this document. • These half year financial statements have not been audited and do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. They have been prepared in accordance with the Group's accounting policies based on IFRS standards that are expected to apply for the financial year ending 31 March 2008. • The comparative figures for the financial year ended 31 March 2007 are not the statutory accounts for the financial year but are abridged from those accounts prepared under UK GAAP 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 237 (2) or (3) of the Companies Act 1985. • The interim financial statements were approved by the Board of Directors on 21 November 2007. 2. Principal items arising from the transition from UK GAAP to IFRS • The group half year financial statements have been prepared based on IFRS. The accounting policies and methods of computation used in the preparation of these half year financial statements are consistent with those used in the financial statements for the year ended 31 March 2007 except where there are differences between UK GAAP and IFRS. The main differences between the group financial statements prepared under UK GAAP and those under IFRS are detailed below: • The cash flow statement has been prepared in conformity with IAS 7 "cash flow statements" • No other material adjustments have been identified during the transition from UK GAAP to IFRS that require a restatement of prior period results and as such no reconciliations have been presented. 3. Goodwill and intangible assets • The purchase method of accounting is applied to all business combinations. • The costs of intangible assets acquired through a business combination is deemed to be their fair value at acquisition. • The excess of purchase consideration paid over the fair value of the assets acquired is treated as purchased goodwill and capitalized as an intangible asset. Goodwill is not amortised but is subject to an annual impairment review. • Impairment reviews are carried out to ensure that goodwill and intangible assets are not carried above their recoverable amounts. Any amortisation or impairment write downs are changed to the income statement. • The fair values of the intangible assets acquired have been capitalized as intangible assets in accordance with IFRS 3 " Business Combinations" 4. Revenue consists of revenue arising in the United Kingdom 47% (2006:58%) and Central and Eastern Europe 53% (2006: 42%) and all relates solely tothe Group's principal activities. 5. Segment Information Revenue Six months Six months 12 months ended 30 Sept ended 30 Sept ended 31 2007 2006 March 2007 Property Asset Management 1,057 375 1,362 Property Trading 1,941 3,037 3,252 Property facilities management 2,350 1,573 2,870 Other fees and income 53 163 370 5,401 5,148 7,854 6. Segment Information Profit before tax Six months Six months 12 months ended 30 ended 30 Sept ended 31 Sept 2007 March 2006 2007 Property Asset Management 893 303 1,166 Property Trading 728 415 481 Property facilities management 345 79 122 Other fees and income 43 196 226 Unallocated central costs (454) (434) (809) 1,555 559 1,186 7. The tax charge is based on the effective rate that is expected to applyto the profits for the full year. 8. The basic earnings per Ordinary Share is calculated on the profit onordinary activities after taxation and after minority interest on the weightedaverage number of Ordinary Shares in issue, excluding the number of treasuryshares held during the period, of 111,069,694 (30 September 2006: 111,601,115and 31 March 2007: 111,556,731). The diluted earnings per Ordinary Share iscalculated on an adjusted profit on ordinary activities after taxation of £1,152,000 (2006: £401,000) and an adjusted number of Ordinary shares in issue of119,507,194 (2006: 115,051,115). 9. Investments - Share of associates' net assets Six months Six months 12 months ended 30 ended ended 31 Sept 2007 30 Sept 2006 March 2007 Cost of investment 158 205 170 Share of accumulated post tax 154 54 104 profit Less: Share of profit after tax (336) - - on sale of property to associate (24) 259 274 10. Receivables Six months Six months 12 months ended 30 ended 30 Sept ended 31 Sept 2007 2006 March 2007 Trade receivables 2,184 984 1,335 Amounts due from undertakings 3,555 4,436 2,663 in which the company has a participation interest Other receivables 87 75 11 Prepayments and accrued income 305 178 247 Other taxation - - 11 6,131 5,673 4,267 During the period under review, the Group sold a multi-let office block yielding a net operating income of some £260,000 per annum for a cash consideration of £2,963,000, which is to be settled shortly. The proceeds from the sale will be retained by the Group for use as additional capital. The sale was made to an associated company, 5th Property Trading Poland Sp.zo.o, in which the Group has a 40.79% equity interest and the results for the period therefore only recognise 59.21% of the revenue and profit before taxation arising on the sale, being £1,754,000 and 549,000 respectively. B. N. Habib is a director of the associated company and consequently thetransaction is a related party transaction within the meaning of the AIM Rulesfor Companies. Accordingly, Alasdair Locke and George Digby, being independentdirectors of First Property for the purposes of this transaction, havingconsulted with the Company's nominated adviser Arden Partners plc, consider thatthe terms of the transaction are fair and reasonable insofar as First PropertyGroup plc is concerned. 11. Current Liabilities Six months Six months 12 months ended 30 ended 30 ended 31 Sept 2007 Sept 2006 March 2007 Bank loans - 2,243 645 Trade payables 649 467 411 Corporation tax payable 258 221 69 Other taxation and social 228 92 260 security Other payables and accruals 526 715 322 Deferred income 118 122 85 Finance Leases 40 20 20 1,819 3,880 1,812 Non current Liabilities Finance Leases 48 194 41 12. The interim results are being circulated to all shareholders. Further copiescan be obtained from the registered office at 17 Quayside Lodge, William MorrisWay, London SW6 2UZ. This information is provided by RNS The company news service from the London Stock Exchange