First Property Regulatory News (FPO)

Date: 5 June 2013

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 2013

First Property Group plc (AIM: FPO), the commercial property fund management group, today announces its preliminary results for the 12 months ended 31 March 2013.

Financial highlights:

Notes:

1. Impact of foreign currency translation on profit before tax: £228,000 decrease.

2. Profit before tax in 2012 benefitted from a one-off foreign currency exchange gain of £213,000.

Operational highlights:

·; Assets under management reduced marginally during the year as a result of a reduction in values of properties managed, offset by £3.9 million foreign currency translation gains.

·; There was one property acquired by funds managed by the Group for a total consideration of £4 million.

·; There were no properties sold by the funds managed and one property sold by the Group for a total consideration of some PLN 11,950,000 (£2,309,000).

·; Funds under management in Central and Eastern Europe once again rated by Investment Property Databank (IPD) as the best performing versus the IPD Central & Eastern European universe, now for the seven years to 31 December 2012.

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

"Last year was a year dominated by the turbulence created by the European sovereign debt crisis and the general weakness in the UK and European economies. Given this uncertainty we only made one property investment.

"The investment landscape has improved considerably since then and we are actively targeting new investment purchases both in the UK and Poland. We anticipate reporting on these as the current year unfolds.

"We are proud of the fact that within all this turbulence our funds have, once again, been ranked as the best performing versus the IPD Central & Eastern European universe, now for the seven year period to 31 December 2012."

A briefing and conference call for analysts will be held at 09.30hrs today at the Group's headquarters, 35 Old Queen Street, London, SW1H 9JA. A conference call facility will also be available on +44 (20) 3139 4830 (PIN number 33971633#). 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 co-investing direct commercial property fund manager with operations in the United Kingdom and Central Europe. Its business model is to:

·; Raise third party funds to invest in income producing commercial property;

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

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

The investment performance of its funds under management in Poland and in Central Europe has again been ranked No.1 versus the Investment Property Databank (IPD) universe for Central & Eastern Europe (CEE), now for the seven years to 31 December 2012. The Group's performance had previously been ranked No.1 versus the IPD CEE universe over the three, four, five and six years to 31 December 2008, 2009, 2010 & 2011 respectively.

CHIEF EXECUTIVE'S STATEMENT

Financial results

I am pleased to report final results for the twelve months ended 31 March 2013.

Revenue earned by the Group increased to £10.64 million (2012: £9.34 million) yielding a profit before tax of £3.54 million (2012: £3.97 million). The reduction in the Group's profit before tax can largely be attributed to a weaker Euro, which resulted in a reduction of £228,000 and the fact that the prior year's profit before tax included a one-off foreign exchange gain of £213,000. Diluted earnings per share were 2.18 pence (2012: 2.73 pence), a reduction of some 20%, even though the profit before tax only reduced by some 11%, because of an increased corporation tax charge for the year.

The Group ended the period with net assets of £18.54 million (2012: £17.36 million) and a cash balance of £12.98 million (2012: £9.98 million). Of this, £4.76 million (2012: £4.76 million) was held by Fprop Opportunities plc (84.1% owned by the Group at 31 March) and £642,000 (2012: £669,000) was held by Corp SA (68.3% owned by the Group), the property management company for Blue Tower in Warsaw.

Dividend

The Directors have resolved to recommend maintaining the final dividend at 0.75 pence (2012: 0.75 pence), which together with the interim dividend of 0.33 pence (2012: 0.33 pence) equates to a dividend for the year of 1.08 pence (2012: 1.08 pence). The final dividend, if approved, will be paid on 27 September 2013 to shareholders on the register at 30 August 2013.

Review of operations

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

As of 31 March 2013 aggregate assets under management were £353 million (2012: £365 million). Of these, 26% were located in the UK and 71% in Poland. There were no sales of properties made by funds under management and only one purchase of £4.0 million.

Revenue earned by this division reduced by 7.3% to £4.02 million (2012: £4.34 million), resulting in a profit before tax of £2.84 million (2012: £3.07 million). This represents 58% (2012: 55%) of Group profit before tax and unallocated central overheads. The decline in our fund management fee income of some £319,000 is primarily due to adverse movements in the foreign exchange rate from an average of €1.2260/£1 during the period compared to €1.161/£1 during the same period last year.

We currently manage six closed-end funds. A brief synopsis of the value of assets and maturity of each of these funds is set out below:

* Not subject to recent revaluation

Our UK fund, UK PPP mainly targets retail warehousing and properties let to discount retailers, ideally where rents have been established post the onset of the credit crunch. Of the properties owned by the fund some 42% by value are retail warehousing, of which 60% by value are let to discount retailers and 40% by value are subject to leases renewed or entered into after 2009. The weighted average unexpired lease term of the properties owned by the fund is over 10 years and the vacancy level is only 0.6%. UK PPP is generating an un-geared return on equity of 6.45% per annum for its investors and is nearly fully invested. We continue to seek to raise a new fund to mimic this investment strategy but the fund raising market remains difficult.

At 31 March 2013 Fprop Opportunities plc (FOP) held some £4.76 million of cash available for investment. Following the year-end FOP raised an additional £3.71 million, including a subscription by the Group of £2.0 million. As a result of this new fund raising the Group's interest in FOP has reduced to 76.2% from 84.1% last year. FOP is working on the acquisition of a number of new investments, on which we hope to report later in the year.

As shareholders will be aware, the USS Fprop Managed Property Portfolio, our largest fund under management, will expire in 2015. We have therefore begun to work on a resolution to that fund in advance of 2015 whilst protecting the overall fee income of First Property. We are confident that these plans and the investment of the Group's cash balances will go a long way towards mitigating any reduction in fee income.

Our funds under management have once again been ranked by Investment Property Databank (IPD) as the best performing against the Central & Eastern European universe, now for the seven years to 31 December 2012.  

Group Properties

Group Properties comprise a 28% interest in an office building, Blue Tower, located in Warsaw's central business district and shareholdings in four of the six funds managed by FPAM (as set out in the table below). Our interests in these 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 Fprop Opportunities plc (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 book or market value for accounting purposes.

Our interest in the Blue Tower building was acquired by the Group in December 2008 for £8.3 million (USD12.9 million) and is now valued at some £12.85 million (USD19.5 million). The investment contributed £962,000 to pre-tax profit during the year to 31 March 2013, representing a return on equity invested of 48% over the year. Our investment in this property has proven to be an excellent one and it is our intention to acquire a greater interest in the building if the opportunity should arise.

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

 1pre-tax income return divided by the amount of equity invested

 2 represents dividend received

 3 after non-controlling interest

Revenue from Group Properties, including FOP, was £4.3 million (2012: £5.0 million), excluding the sale proceeds of £2.3 million from the sale of Bacha, resulting in a profit before central overhead costs of £2.1 million, representing 42% of Group profit before central overhead costs. The reduction in revenue was largely attributable to the sale of the Bacha property in September 2012 and the adverse effect of the average foreign exchange rate during the year.

The results of FOP, of which 84.1% was owned by the Group at the year-end, are consolidated in these accounts. FOP's revenue and profit before tax for the year to 31 March 2013 amounted to £2.1 million (2012: £2.33 million) and £1.0 million (2012: £1.22 million) respectively, whereas the Group's 84.1% share of these amounted to £1.77 million (2012: £1.96 million) and £0.84 million (2012: £1.03 million) respectively. Profit before tax from FOP for the year ended 31 March 2012 benefited from a one-off realised foreign exchange gain of £213,000. Since the year-end the Group has invested a further £2.0 million in FOP. The net effect of this new subscription, which was part of £3.71 million of new equity raised by FOP, is to reduce the Group's majority shareholding from 84.1% to 76.2%.

Our shareholdings in our two other Polish funds, 5th Property Trading and Regional Property Trading, contributed £145,000 (2012: £182,000) to the Group's profit before tax. We do not have a controlling interest in these funds and they are accounted for as "shares in associates".

Our co-investment in UK PPP contributed £58,000 (2012: £63,000) of dividend income to the Group and is accounted for as a separate line item in our Income Statement.

Fund raising

The market for fund raising remains challenging. However, as reported in the review of our fund management activities, we raised an additional £3.71 million for FOP since the year-end. FOP now has £8.5 million of equity available to it for new investments. We expect to raise additional funds for FOP once we have invested the majority of its equity.

 In the UK we are seeking investors interested in our UK PPP investment strategy, described above and which is delivering a return on equity to investors of 6.45% per annum based on funds invested.

Commercial property markets outlook

The euro zone economies remain weak even though capital markets have recovered and investment appetite seems to be on an upswing. There is still a long way to go before government and consumer balance sheets are repaired and we therefore expect continued economic weakness and low interest rates for the foreseeable future.

Poland:

Poland's growth in GDP in 2012 was some 2%, down from 4.3% in 2011. GDP growth is expected to slow further in the current year to 1.2% before picking up again in 2014 to 2.2%. Even so, such a GDP growth rate would still leave Poland close to, if not at, the top of EU member countries. Interest rates in Poland are also likely to remain low for some time. This factor, coupled with Poland's faster rate of economic growth and the higher yields available in its investment property market, should result in Polish commercial property continuing to deliver attractive rates of return.

Turnover in the Polish commercial property investment market in 2012 was €2.6 billion versus a low of €600 million in 2009 and a previous high in 2006 of €5.2 billion. It would appear that investor appetite for Polish property has therefore increased but the bulk of this turnover is made up by large property transactions. Investors continue to target prime investment property and the gap between prime and secondary property remains large.

United Kingdom:

The UK's growth in GDP in 2012 was better than expected at 0.2%. There was widespread speculation of a triple dip recession but GDP growth in the first quarter of 2013 came in at 0.3%.

Turnover in the UK commercial property investment market in 2012 was £40.8 billion versus £37.8 billion in 2011. Of this, £22.8 billion comprised investments in Central London. The gap between Central London and the rest of the UK remains large, with property values in London rising by about 7.3% but otherwise generally declining by some 3.6% in 2012. It would appear that investors are beginning to look outside London to seek higher returns and a number of commentators are expecting a pickup in values of regional property later this year.  

Current Trading and Prospects

Last year was a year dominated by the turbulence created by the European sovereign debt crisis and the general weakness in the UK and European economies. Given this uncertainty we only made one property investment.

The investment landscape has improved considerably since then and we are actively targeting new investment purchases both in the UK and Poland. We anticipate reporting on these as the current year unfolds.

We are proud of the fact that within all this turbulence our funds have, once again, been ranked as the best performing versus the IPD Central & Eastern European universe, now for the seven year period to 31 December 2012.

Ben Habib

Chief Executive

5 June 2013

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2013

CONSOLIDATED SEPARATE STATEMENT OF

OTHER COMPREHENSIVE INCOME

for the year ended 31 March 2013

CONSOLIDATED BALANCE SHEETS

As at 31 March 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2013

CONSOLIDATED CASH FLOW STATEMENTS

for the year ended 31 March 2013

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 2013.These are consistent with the policies applied for the year ended 31 March 2012. 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 2012 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 3 June 2013.

2. Revenue

Revenue from continuing operations consist of revenue arising in the United Kingdom 10% (2012: 10%) and Poland 90% (2012: 90%), and all relates solely to the Group's principal activities.

3. Segment reporting 2013

Segment reporting 2012

Fprop Opportunities plc (FOP) a pan European fund was launched in October 2010. The Group owned 84.1% of this fund (as at 31 March 2013) through seed capital with the intention of raising further third party investment from co-investees, thereby diluting its stake to associate status. Management has concluded that it does not suit the criteria for existing segments and that for purposes of transparency and clarity it should be reported as a separate segment.

Interest income from the cash that is 100% controlled, is not allocated to a separate segment, because all 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 non-current assets is UK £1,526,000 (2012: £1,442,000) and Poland £20,480,000 (2012: £20,302,000).

4. Tax expense

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

The deferred tax charge has arisen partly as a result of the accelerated tax depreciation on the Blue Tower and the other properties, and partly due to the reversal of the deferred tax asset following the sale of the Bacha property. The deferred tax asset on the Bacha property has been created in respect of accrued interest on shareholder loans which was expected to be relieved against tax when they were repaid. However, there remain unused tax losses in relation to this property which are now unlikely to be utilised in the near future and therefore the directors have formed the view that the tax asset should be reversed.

There was insufficient taxable income earned in the UK with which to relieve operating costs incurred in the UK. This should have given rise to a deferred tax asset. However, the Group is not able to recognise this deferred tax asset in these accounts because the directors have formed the view that such a tax asset would be unlikely to be utilised in the near future.

As a result of the above the effective tax rate payable by the Group increased to 21% (2012: 13%).

5. Earnings 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

6. Investment properties

Investment properties indirectly owned by the Group, via FOP are stated at cost. The properties were valued by CBRE at the Group's financial year-end at €26.10 million (2012: €26.60 million), the Sterling equivalent at closing foreign exchange rates being £22.10 million (2012: £22.20 million). The properties have not been depreciated as in the directors' opinion the properties estimated residual value at the end of the period of ownership should be higher than the carrying value.

7. 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 £861,000 (2012: £905,000) to £1,476,000 (2012: £1,404,000).

The Group holds two investments, one unlisted, the other listed. 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 the carrying value. Fair value for the unlisted investment has been arrived at by applying the Group's percentage holding in this investment of the fair value of the net assets of the fund. Fair value for the listed investment has been derived from the quoted share price at the year-end.

The addition in investments is in respect of the Group's 0.9% interest in the UK Pension Property Portfolio L.P.

8. Inventories - land and buildings

The disposal refers to the sale of Bacha, a property located in Warsaw, Poland in September 2012. The remaining property, Blue Tower, also located in Warsaw, Poland has a fair value of £12.85 million at 31 March 2013 (2012: £12.30 million).

9. Trade and other receivables

10. Trade and other payables

11. Financial liabilities

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

Two bank loans and one finance lease (all denominated in foreign currencies) totalling £23,751,000 (2012: £23,722,000) included within financial liabilities are secured against investment properties owned by Fprop Opportunities plc (FOP) and the property owned by the Group shown under inventories.

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.