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 2022

 

First Property Group plc (AIM: FPO), the property fund manager and investor with operations in the United Kingdom and Central Europe, today announces its preliminary results for the twelve months ended 31 March 2022.

 

Highlights:

 

·      Profit before tax of £7.08 million (2021: loss before tax of £5.09 million)

·      Value of directly owned property at market value at 31 March 2022: £42.24 million (31 March 2021: £41.57 million)

·      Net debt at 31 March 2022: £17.24 million (31 March 2021: £18.85 million)

·      Market value of shares owned by the Group in FPAM managed funds (Investments and Associates) at 31 March 2022: £30.60 million (31 March 2021: £27.47 million)

·      Cash reserves at 31 March 2022: £6.42 million (31 March 2021: £16.24 million)

·      One new fund established during the year, Fprop Fulcrum Property LP

·      Third party AUM at 31 March 2022: £516.5 million (31 March 2021: £527.2 million)

·      Total AUM at 31 March 2022: £559 million (31 March 2021: £569 million)

·      Weighted average unexpired fund management contract term at 31 March 2022: 3 years, 3 months (31 March 2021: 3 years, 11 months)

·      Final dividend of £0.25 pence per share (2021: £nil)

 

 

Financial summary:

	Unaudited year to 31 March 2022	Audited year to 31 March 2021	Percentage change
Income Statement:
Statutory profit/(loss) before tax	£7.08m	(£5.09m)	239.1%
Diluted earnings per share	6.01p	(6.59p)	191.2%
Total dividend per share	0.50p	0.45p	11.1%
Average €/£ exchange rate	1.1754	1.1246	-
Balance Sheet at year end:
Investment properties and inventories at book value	£36.20m	£34.95m	3.6%
Investment properties and inventories at market value	£42.24m	£41.57m	1.6%
Cash balances	£6.42m	£16.24m	(60.5%)
Cash per share	5.81p	14.71p	(60.5%)
Gross debt*	£23.66m	£35.09m	(32.6%)
Net debt*	£17.24m	£18.85m	(8.5%)
Gearing ratio at book value**	34.90%	48.82%	-
Gearing ratio at market value***	30.69%	42.05%	-
Net assets at book value	£44.14m	£36.79m	20.0%
Net assets at market value.	£53.43m	£48.36m	10.5%
Adjusted net assets per share (EPRA basis)	47.28p	42.80p	10.5%
Year-end €/£ rate	1.1834	1.1739	-
* Debt comprises Financial Liabilities and Other Financial Liabilities and excludes Lease Liabilities
**Gearing ratio = Gross debt excluding lease liabilities divided by gross assets at book value.
***Gearing ratio = Gross debt excluding lease liabilities divided by gross assets at market value.

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

 

"The year has seen a sharp turnaround in our fortunes, principally due to the restructuring of a finance lease secured against a property owned by the Group in Gdynia, Poland, which resulted in our debt liability being reduced by some £7.8 million.

 

"Our balance sheet remains strong with some £44 million of net assets. Of this some £6 million is in cash.

 

"The investment environment is volatile at present but with adversity comes opportunity and we are seeing some interesting market movements. Occupational demand is picking up from the lockdown induced lows which should result in a commensurate increase in the value of our properties."

 

A briefing for analysts will be held at 10:30hrs today via Investor Meet Company. To participate it is necessary to register at https://www.investormeetcompany.com/first-property-group-plc/register-investor and select to meet the Company. Those who have already registered and selected to meet the Company will be automatically invited. A copy of the accompanying investor presentation and a recording of the call will be posted on the Company's website.

 

 

 

For further information please contact:

 

First Property Group plc	Tel: +44 (20) 7340 0270
Ben Habib (Chief Executive Officer) Laura James (Group Finance Director) Jeremy Barkes (Director, Business Development)	www.fprop.com investor.relations@fprop.com
Jill Aubrey (Company Secretary)
Allenby Capital (NOMAD & Broker)	Tel: + 44 (0) 20 3328 5656
Nick Naylor / Freddie Wooding (Corporate Finance) Amrit Nehal (Equity Sales)

 

Newgate Communications (PR)	Tel: + 44 7540106366
Robin Tozer / Richard Bicknell / Max Richardson	firstproperty@secnewgate.co.uk

 

 

Notes to Investors and Editors:

 

First Property Group plc is an award-winning property fund manager and investor with operations in the United Kingdom and Central Europe. Its focus is on higher yielding commercial property with sustainable cash flows. The Company is flexible and takes an active approach to asset management. 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. FPAM currently manages thirteen funds which are invested across the United Kingdom, Poland and Romania.

 

·      Group Properties - principal investments by the Group, to earn a return on its own capital, usually in partnership with third parties. Investments include seven directly held properties in Poland and Romania, and non-controlling interests in eleven of the thirteen funds.

 

Quoted on AIM, the Company has offices in London, Warsaw and Bucharest. Around one third of the shares in the Company are owned by management and their families. Further information about the Company and its properties can be found at: www.fprop.com.

 

CHIEF EXECUTIVE'S STATEMENT

Financial performance

 

I am pleased to report the Company's preliminary results for the year ended 31 March 2022.

 

Revenue earned during the year by the Group was £8.65 million (31 March 2021: £12.12 million) yielding a profit before tax of £7.08 million (31 March 2021: loss before tax of £5.09 million).

The reduction in revenue was mainly due to the expiry, in February 2021, of the lease at our office block in Gdynia, Poland, which resulted in a £3.20 million reduction in rental income from this property in the year.

Paradoxically the increase in profit before tax largely came from the same property, where a restructuring of the finance lease resulted in a reduction of €9.0 million (£7.81 million) in the amount owed to the lending bank (from €25.0 million to €16.0 million). As part of the transaction €4.0 million of this debt was settled by the Group, leaving a residual liability of €12.0 million to be paid by June 2024 on which no interest is payable.

The Group ended the year with net assets, excluding non-controlling interests, of £44.14 million (2021: £36.79 million), equating to 40.00 pence per share (2021: 33.33 pence per share). It is the accounting policy of the Group to carry its properties and interests in associates at the lower of cost or market value.

The net assets of the Group, when adjusted to their market value less any deferred tax liabilities (EPRA basis), was £53.43 million or 47.28 pence per share (31 March 2021: £48.36 million or 42.80 pence per share).

Gross debt at the year end reduced by 32.6% to £23.66 million (31 March 2021: £35.09 million). Net debt reduced to £17.24 million (31 March 2021: £18.85 million). This in turn reduced the Group's gearing ratio to 34.90% with properties at their book value (31 March 2021: 48.82%) and to 30.69% with properties at their market value (31 March 2021: 42.05%).

Group cash balances at the year-end stood at £6.42 million (31 March 2021: £16.24 million, 31 March 2020: £7.34 million), equivalent to 5.81 pence per share (31 March 2021: 14.71 pence per share, 31 March 2020: 6.65 pence per share). The reduction was mainly attributable to the payment of £3.43 million (€4 million) in part settlement of the debt secured on Gdynia and new investments of £3.63 million in two UK funds, Fprop UK Special Opportunities LP and Fprop Fulcrum Property LP. Other exceptional uses of cash included £1.93 million in respect of a rent guarantee granted over CH8, an office building in Warsaw, as a condition of its sale, and £1.76 million in capital expenditure, mainly to develop a mini supermarket in Wawer, a suburb of Warsaw.

 

Diluted net profit per share was 6.01 pence (2021: a diluted net loss of 6.59 pence).

 

 

Dividend

 

In view of the marked improvement in the Group's position since the Covid lockdown induced set-back, the Directors have resolved to pay a final dividend of 0.25 pence per share (2021: nil), which together with the interim dividend of 0.25 pence per share (2021: 0.45 pence per share), equates to a dividend for the year of 0.50 pence per share.

 

The proposed final dividend will be paid on 29 September 2022 to shareholders on the register at 26 August 2022 and is subject to shareholder approval at the forthcoming annual general meeting on 27 September 2022.

 

The full year's dividend is covered 12 times.

 

 

REVIEW OF OPERATIONS

PROPERTY FUND MANAGEMENT

Third party assets under management ended the year at £516.5 million (31 March 2021: £527.2 million). The decrease was attributable to sales of properties valued at some £32.7 million offset by purchases of properties worth some £10.0 million and an increase in the value of the remainder of the portfolio of some £12.0 million.

One new fund was raised during the year, Fprop Fulcrum Property LP, which had invested £10.0 million by year end, purchasing two properties in the UK. The fund is open ended and further subscriptions and investments are expected. Notices for redemptions may not be given before August 2024, with redemptions taking place 12 months after any such notices are served.

During the year two other funds managed by FPAM sold, for £39.2 million, eight properties in the UK which had been valued at £32.7 million.

One fund, Fprop Romanian Supermarkets Ltd, was closed during the year having earned an internal rate of return over its seven-year life of 42% per annum.

Fund management fees are generally levied monthly by reference to the value of properties. In the case of Fprop Offices LP, the Group is entitled to a share of total profits in lieu of fund management fees and to receive annual payments on account equivalent to 10% of total cumulative income profits and realised capital gains. These payments are adjusted annually, if necessary, for any overpayments made in previous years up to a maximum of total past cumulative payments received.

Revenue earned by this division increased by 19% to £4.04 million (2021: £3.39 million), resulting in profit before unallocated central overheads and tax increasing by 11% to £1.44 million (2021: £1.30 million). The increase was primarily due to an increase in performance fees to £578,000 (2021: £40,000) in the form of profit share earned from Fprop Offices LP.

At the year end fund management fee income, excluding performance fees and the profit share from Fprop Offices LP, was being earned at an annualised rate of £2.66 million (31 March 2021: £2.90 million).

The weighted average unexpired fund management contract term at the year-end was 3 years, 3 months (31 March 2021: 3 years, 11 months).

The reconciliation of movement in third party funds under management during the year is shown below:

	Funds managed for third parties (including funds in which the Group is a minority shareholder)
	UK £m	CEE £m	Total £m	No. of properties
As at 1 April 2021	349.8	177.4	527.2	68
Purchases	10.0	-	10.0	2
Property sales	(32.7)	-	(32.7)	(8)
Capital expenditure	3.3	2.2	5.5	-
Property revaluation	15.1	(7.3)	7.8	-
FX revaluation	-	(1.3)	(1.3)	-
As at 31 March 2022	345.5	171.0	516.5	62

 

 

An overview of the value of assets and maturity of each of the funds is set out below:

 

Fund	Country of investment	Fund expiry		Assets under management at market value at 31 March 2022	No. of properties	% of total third-party assets under management	Assets under management at market value at 31 March 2021
			£m.				£m.
SAM & DHOW	UK	Rolling		*	*	*	*
5PT	Poland	Dec 2022		7.7	3	1.5	7.7
OFFICES	UK	Jun 2024		136.4	5	26.4	133.5
SIPS	UK	Jan 2025		140.6	24	27.2	134.3
FOP	Poland	Oct 2025		64.5	5	12.5	61.6
FRS	Romania	Jan 2026		**	**	**	**
FGC	Poland	Mar 2026		21.3	1	4.1	21.1
UK PPP	UK	Jan 2027		41.5	12	8.0	64.8
SPEC OPPS	UK	Jan 2027		17.0	4	3.3	17.2
FKR	Poland	Mar 2027		19.4	1	3.8	20.7
FCL	Romania	Jun 2028		8.5	1	1.7	8.7
FPL	Poland	Jun 2028		49.6	4	9.6	57.6
FULCRUM	UK	Indefinite		10.0	2	1.9	-
Total Third-Party AUM				516.5	62	100.0	527.2

 

* Not subject to recent revaluation.

** Fund closed during the year and in the process of being liquidated.

 

The sub sector weightings of investments by funds is set out in the table below:

	UK	Poland	Romania	Total	% of Total
	£m.	£m.	£m.	£m.
Offices	204.2	93.2	8.6	306.0	59.2
Retail warehousing	93.3	-	-	93.3	18.1
Supermarkets	48.0	17.9	-	65.9	12.8
Shopping centres	-	51.3	-	51.3	9.9
Industrial	-	-	-	-	-
Total	345.5	162.4	8.6	516.5	100.0
% of Total Third-Party AUM	66.9%	31.4%	1.7%	100.0%

 

GROUP PROPERTIES

Group Properties comprised seven directly owned commercial properties in Poland and Romania valued at £42.24 million (31 March 2021: seven valued at £41.57 million) and interests in eleven of the thirteen funds (classified as Associates and Investments) in which the Group's share is valued at £30.60 million (31 March 2021: £27.47 million).

The contribution to Group profit before tax and unallocated central overheads from this division was £8.60 million (2021: loss £5.14 million) representing 85.70% of Group profit before unallocated central overheads and tax. The increase was mainly driven by the restructuring of the finance lease secured against our office property in Gdynia, Poland, which resulted in the amount owed reducing by €9.00 million (£7.81 million), as previously described.  

1.     Directly owned Group Properties (all accounted for under the cost model):

Two of the Group's seven directly owned properties account for 68% by market value (£28.84 million) of their total value. Both are office buildings in Poland of which one is in Warsaw (11,000 m²) and the other in Gdynia (13,500 m²). The other five properties, representing 32% by market value (£13.40 million), comprise three mini-supermarkets in Poland (one recently developed), an office block in Bucharest and a warehouse in Tureni, Romania.

Country	Sector	No. of properties as at 31 March 2022	Book value as at 31 March 2022	Market value as at 31 March 2022	No. of properties as at 31 March 2021	Market value as at 31 March 2021	*Contribution to Group profit before tax 31 March 2022	*Contribution to Group profit before tax 31 March 2021
			£m.	£m.		£m.	£m.	£m.
Poland	Offices	2	25.87	28.84	2	29.46	**8.14	(4.59)
Poland	Supermarkets	3	6.42	7.47	3	5.85	***0.20	0.12
Romania	Office and logistics	2	3.92	5.93	2	6.26	0.37	0.32
Total		7	36.21	42.24	7	41.57	8.71	(4.15)

 

*Prior to the deduction of direct overhead and unallocated central overhead expenses.

**Includes €9.00 million (£7.81 million) debt reduction following restructuring of the finance lease at Gdynia.

***Of which two are let and the third is being redeveloped, scheduled for completion in FY2023.

 

The seven directly owned properties generated a profit before unallocated central overheads and tax of £7.48 million (31 March 2021: loss of £5.80 million). The increase was almost entirely attributable to the restructuring of the finance lease secured against the office block in Gdynia, as already described.  This debt restructuring is the main explanation for the reduction in Group debt by 33% to £23.66 million (31 March 2021: £35.09 million. The loans secured against the seven properties are held in separate non-recourse special purpose vehicles.

 

Interest costs on the Group's debt amounted to £0.33 million (2021: £0.74 million) in the year. This equates to an average borrowing cost of 1.39% per annum when expressed as a percentage of total outstanding Group debt of £23.66 million, or 2.44% if the deferred consideration of €12.00 million (£10.14 million) in respect of the Group property in Gdynia, on which no interest is payable, is excluded.

 

Of the Group's interest-bearing loans, the interest rate is fixed on 25% (2021: 27%) and is floating on the balance of 75% (2021: 73%). A one percentage point increase in interest rates would impact the cost of the floating rate loans and would increase the Group's annual interest bill by £0.10 million per annum (2021: £0.31 million). The fixed rate loans expire in 2025 (£2.79 million) and 2029 (£0.62 million).

 

	31 March 2022	31 March 2021
	£m.	£m.
Book value of directly owned properties	36.21	34.95
Market value of directly owned properties	42.24	41.57
Gross debt (all non-recourse to Group)	23.66	35.09
LTV at book value	65.34%	100.41%
LTV at market value	56.01%	84.41%
Weighted average borrowing cost	1.39%	1.60%

 

 

The average vacancy rate across all seven properties is 35%. If the office property in Gdynia were to be excluded, due to its high level of vacancy, the vacancy rate would reduce to 5%. As announced on 13 May 2022, the property in Gdynia is now 20% let and we expect the new main tenant, the District Court in Gdynia, to attract other tenants to the building.

The weighted average unexpired lease term (WAULT) as at 31 March 2022 was 5 years, 7 months (2021: 4 years, 9 months).

2.     Associates and Investments

 

These comprise non-controlling interests in eleven of the thirteen funds managed by FPAM and are valued at £30.60 million (31 March 2021: £27.47 million). Of these, seven are accounted for as Associates and held at the lower of cost or fair value (the "cost model"), and four are accounted for as Investments in funds and held at fair value.

The contribution to Group profit before tax and unallocated central overheads from its seven Associates and four Investments increased by 71% to £1.12 million (31 March 2021: £0.66 million) mainly due to an increase in the value of the Group's 44% share in Fprop Opportunities plc (FOP).  

Fprop Phoenix Ltd made a loss after tax of which the Group's share amounted to £0.62 million (2021: loss of £0.38 million). This is a turnaround investment which has been impacted by a combination of lockdowns and corresponding working from home, together with a near 50% increase in the supply of office space in Krakow since we first acquired the park out of administration in 2017. We have done much to improve the asset during our ownership: we have resolved legacy legal issues including obtaining clean title over parts which were deficient and upgraded the rental proposition to include first class amenities such as a creche, kindergarten, gym, sports ground, BBQ area and conference centre, amongst other things. However, it is 80% vacant and with a 16% office vacancy rate in Krakow, we expect it will take some time to lease up. We do however expect this investment to generate substantial profits in due course.

An overview of the Group's Associates and Investments is set out in the table below:

Fund	% owned by First Property Group	Book value of First Property's share in fund	Current market value of holdings	Group's share of post-tax profits earned by fund 31 March 2022	Group's share of post-tax profits earned by fund 31 March 2021
	%	£'000	£'000	£'000	£'000
a) Associates
5PT	40.6	1,344	1,344	97	119
FRS	24.1	-	-	47	50
FOP	43.8	11,983	11.983	1,044	256
FGC	28.2	2,700	2.826	221	179
FKR	18.1	1,580	1,580	(12)	166
FPL	23.4	913	4,619	(617)	(378)
FCL	17.4	615	798	67	78
Sub Total		19,135	23,150	847	470

 

b) Investments
UK PPP	0.9	431	431	100	54
FULCRUM	2.5	262	262	-	-
SPEC OPPS	11.1	4,754	4,754	23	34
OFFICES	1.6	1,998	1,998	148	97
Sub Total		7,445	7,445	271	185

 

Total

26,580

30,595

1,118

655

 

 

Commercial Property Markets Outlook

Poland:

GDP is expected to grow by 4% in 2022. The annual rate of inflation reached 13.9% in May but is expected to moderate to around 6% in 2023. The National Bank of Poland has led interest rate rises in Europe, with its benchmark reference rate now standing at 6.0%. It has also indicated that it is closer to the end of its interest rate raising cycle than the beginning, and that it may start to reverse increases in interest rates by the end of 2023.

Investment demand for commercial property has abated but continued economic growth and an influx of refugees and businesses from Ukraine should sustain occupational demand. Meanwhile, the effects of inflation, in particular in the cost of building materials and labour (which far exceeds the general rate of inflation), should curtail new supply forcing rents to rise.

Rental values in Poland are contractually mostly linked to Eurozone inflation, which also offers protection from inflation as long as the economy remains buoyant.

Prime commercial yields generally range from 5-6% but may soften as interest rates rise.

United Kingdom:

The UK is forecast to fall into recession. Inflation is running at over 10% per annum. The Bank of England base interest rate is still low at 1.25%, having risen from 0.1% in December 2021. Further increases in interest rates are expected. The yield curve currently flattens out at just under 3%.

Investor demand for commercial property polarised during the lockdown induced lows, between those sectors which benefit from online trading and could operate during lockdowns, such as logistics and essential retailers, and other sectors such as offices, hotels and non-essential retailers which depend on physical trading. The disparity in valuations between sectors is still wide.

The values of offices have been adversely impacted by changing working habits. However, the supply of offices has also reduced due to conversions to alternative uses and a substantial increase in building costs. Any increase in tenant demand should therefore result in rental growth.

Current Trading and Prospects

The year has seen a sharp turnaround in our fortunes, principally due to the restructuring of a finance lease secured against a property owned by the Group in Gdynia, Poland, which resulted in our debt liability being reduced by some £7.8 million.

Our balance sheet remains strong with some £44 million of net assets. Of this some £6 million is in cash.

The investment environment is volatile at present but with adversity comes opportunity and we are seeing some interesting market movements. Occupational demand is picking up from the lockdown induced lows which should result in a commensurate increase in the value of our properties.

 

 

Ben Habib

Chief Executive

23 June 2022

 

 

 

FINANCE DIRECTOR'S REVIEW

Profit before tax for the year was £7.08 million (2021: loss before tax £5.09 million).

 

The results were dominated by an exceptional gain of €9.00 million (£7.81 million) from the restructuring in June 2021 of the finance lease secured against the Group's office block in Gdynia, Poland. The loss in the prior year was mainly due to the recognition of an impairment of £7.02 million in the value of this property following the expiry of the lease to its sole tenant.

 

The contribution from Associates and Investments increased to £1.12 million (2021: £0.65 million). The explanation for this increase is in the 'Share of results in associates' section below.

 

Group net assets excluding non-controlling interests increased by 20.0% to £44.14 million (31 March 2021: £36.79 million) mainly due to the reduction in borrowings which resulted from the restructuring of the finance lease at Gdynia.

 

Gross debt excluding IFRS 16 lease liabilities reduced to £23.66 million (31 March 2021: £35.09 million) mainly due to the restructuring of the finance lease at Gdynia. Of this £10.14 million is deferred consideration on which no interest is payable. Net debt excluding IFRS 16 lease liabilities reduced to £17.24 million (31 March 2021: £18.85 million).

 

GOING CONCERN

 

Information on our approach and the result of our assessment is included in note 1 of the Financial Statements.

 

INCOME STATEMENT

 

A review of the operating and financial performance of the two trading divisions are included in the Chief Executive's Statement.

 

Revenue and Gross Profit

 

Revenue for the year reduced by £3.47 million or 29% to £8.65 million (2021: £12.12 million) mainly due to the expiry in February 2021 of the sole lease at the Group's office block in Gdynia. The contribution to rental income from this property reduced by £3.20 million in the year.

 

Gross profit (revenue less the cost of sales) reduced by £2.27 million or 28.4% to £5.72 million (2021: £7.99 million) due mainly to the property in Gdynia making a loss of £0.56 million (2021: profit £2.85 million).

 

Performance fee income

 

Performance fees totalled £0.56 million (2021: £0.04 million) and were entirely attributable to Fprop Offices LP (2021: £nil). Accumulated income in respect of this fund amounts to £1.97 million (2021: £1.38 million), all of which is subject to clawback in the event of losses by the Limited Partnership.

 

Operating expenses

 

Operating expenses increased by £0.10 million or 1% to £7.46 million (2021: £7.36 million).

 

Share of results in associates

 

The contribution from the Group's seven associates amounted to £0.85 million (2021: £0.47 million). The increase was mainly attributable to the Group's 44% share in Fprop Opportunities plc (FOP), which benefitted from an increase of £0.91 million in the fair value of the Group's interest (2021: decreased by £2.99 million).

 

Fprop Phoenix Ltd, in which the Group owns 23.4%, made a loss after tax of which the Group's share amounted to £0.62 million (2021: loss of £0.38 million).

 

Investment income (from other financial assets and investments)

 

Investment income from the Group's four investments in four (of the five) UK funds managed by FPAM increased by 42% to £0.27 million. (2021: £0.19 million).

 

Financing costs

 

Finance costs reduced to £0.33 million (2021: £0.74 million) mainly due to lower Group debt following restructuring of the financing of the property in Gdynia. All bank loans are denominated in Euros and all are used to finance properties valued in Euros.

 

Current tax

 

The current tax charged reduced marginally to £0.17 million (2021: £0.18 million).

 

The charge includes Polish and Romanian corporation tax where headline rates remain at 19% and 16% respectively.

 

STATEMENT OF FINANCIAL POSITION  

 

Investment Properties and Property held as Inventory (all held using the cost model)

 

The Group has adopted the "cost model" of valuation whereby investment properties are accounted for at the lower of cost less accumulated depreciation and impairments or fair market value.

 

The book value of the Group's seven directly owned properties at the year-end was £36.20 million (31 March 2021: £34.95 million). Their fair market value was £42.24 million (31 March 2021: £41.57 million).

 

Capital expenditure incurred on the Group's seven directly owned properties amounted to £1.76 million (2021: £0.37 million).

 

Foreign exchange revaluations amounted to £0.32 million (2021: £2.52 million).

 

Borrowings

 

Bank and other borrowings reduced to £23.66 million (31 March 2021: £35.09 million) mainly due to the restructuring of a debt secured on our property in Gdynia, whereby a payment of €16.00 million was agreed to be made in final settlement of the debt of €25.00 million. Of this €4.00 million was paid during the year and the remaining €12.00 million was deferred, interest free, for payment by June 2024. The €9.00 million reduction in the face value of the loan from €25.00 million down to €16.00 million was credited to the Income Statement.

 

The ratio of debt to gross assets at their market value (the gearing ratio) reduced to 30.69% (31 March 2021: 42.05%).

 

All bank loans are denominated in Euros and are non-recourse to the Group's assets.

 

Deposits of €0.65 million (31 March 2021: €0.75million) are held by lending banks in respect of four bank loans (31 March 2021: five) as security for Debt Service Cover Ratio (DSCR) covenants, of which €62,000 (31 March 2021: €98,000) are accounted for as prepayments.

 

Trade and Other Receivables

 

Trade and other receivables decreased by 16% to £4.33 million (31 March 2021: £5.15 million) due to a reduction in a tenant deposit at the property in Gdynia, following the expiry of the lease to its former tenant.

Provisions

 

Provisions decreased to £0.92 million (31 March 2021: £2.08 million) and are entirely in respect of the guaranteed space at CH8, Warsaw. Payments of £1.93 million in respect of fit out and rent guarantee costs were made in the year. The reduction in the provision is due to some 73% of the office space which is subject to the guarantee having been leased, as announced by RNS on 23 September 2021. The provision represents our best estimate of the Group's remaining liability over the life of the rent guarantee (until April 2025).

 

 Non-controlling Interests

 

The value of the Group's two non-controlling interests (10% of the share capital of Corp Sp. z o. o., the property management company to Blue Tower, Warsaw, and 23% of the share capital of E and S Estates Ltd, a fund invested in three properties in Poland) increased to £0.23 million (31 March 2021: £0.20 million).

 

Investment Revaluation Reserve

 

The investment revaluation reserve increased by £1.04 million to £0.68 million (2021: decreased by £0.36 million) mainly due to an increase of £0.90 million in the value of the Group's investment in Fprop UK Special Opportunities LP. In addition, the value of the Group's share in the other investments increased by £0.14 million of which the largest increase is in UK PPP LP, which increased by £0.10 million.

 

Foreign Exchange Translation Reserve

 

A weakening of the Polish Zloty against Sterling to PLN/ GBP 5.4868 (31 March 2021: PLN/ GBP 5.4443) resulted in the deficit in the foreign exchange translation reserve increasing to £3.30 million (31 March 2021: £3.11 million).

 

CASH and CASH FLOW

 

The Group's cash balance reduced to £6.42 million (31 March 2021: £16.24 million: 31 March 2020 £7.34 million) mainly as a result of investing and financing activities.

 

Net cash flow by activity in the year was:

 

·      Operating activities: -£1.44 million (2021: £38.73 million)

·      Investing activities: -£4.27 million (2021: £1.05 million)

·      Financing activities: -£4.08 million (2021: -£30.66 million)

·      Currency translation: loss of -£0.03 million (2021: loss of -£0.21 million)

·      Net cash flow: -£9.82 million (2021: £8.91 million)

 

The significant cash outflows in the year were:

 

·      £3.63 million: Investment in two UK funds (Fprop Special Opportunities LP and Fprop Fulcrum Property LP).

·      £3.43 million (€4 million): Debt restructuring at Group property in Gdynia;

·      £1.76 million: Capital expenditure, mainly at one of the Group's mini supermarkets held in the consolidated entity, E and S Estates Sp. z o.o.;

·      £1.30 million: Scheduled bank loan repayments;

·      £0.28 million: Interim dividend.

 

Significant cash inflows in the year included:

·      £1.29 million: Refinancing of the bank loan secured against the Group's two directly owned properties in Romania;

·      £1.08 million: Partial repayment of shareholder loan by FOP and payment of corresponding interest;

 

 

 

Laura James

 

Group Finance Director

 

 

 

 

 

 

 

 

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2022

 

	Notes	Year ended 31 March 2022   Total results £'000	Year ended 31 March 2021   Total results  £'000
Revenue	2	8,645	12,119
Cost of sales		(2,928)	(4,128)
Gross profit		5,717	7,991
Debt reduction following restructuring of finance lease	3	7,809	-
Profit on sale of an investment property		-	161
Recycled foreign exchange gain		-	1,163
Impairment loss to an investment property	7	-	(7,023)
Operating expenses		(7,464)	(7,363)
Operating profit/ (loss)		6,062	(5,071)
Share of associates' (loss)/profit after tax	9	(29)	3,467
Share of associates' revaluation gains/ (losses)	9	876	(2,997)
Investment income		271	185
Interest income	4	230	67
Interest expense	4	(330)	(740)
Profit/ (loss) before tax		7,080	(5,089)
Tax charge	5	(245)	(2,312)
Profit/ (loss) for the year		6,835	(7,401)
Attributable to:
Owners of the parent		6,779	(7,449)
Non-controlling interests		56	48
		6,835	(7,401)
Earnings/ (loss) per share:
Basic	6	6.14p	(6.75p)
Diluted	6	6.01p	(6.59p)

 

All operations are continuing.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 March 2022

 

	Year ended 31 March 2022 Total results	Year ended 31 March 2021 Total results
	£'000	£'000
Profit/ (loss) for the year	6,835	(7,401)
Other comprehensive income Items that may subsequently be reclassified to profit or loss
Exchange differences on retranslation of foreign subsidiaries	(189)	(685)
Foreign exchange profit recycled to the Income Statement	-	(1,163)
Net profit/ (loss) on financial assets at fair value through other comprehensive income	1,039	(119)
Taxation	-	-
Total comprehensive income for the year	7,685	(9,368)
Total comprehensive income for the year attributable to:
Owners of the parent	7,623	(9,440)
Non-controlling interests	62	72
	7,685	(9,368)

 

All operations are continuing.

 

STATEMENT OF FINANCIAL POSITION

First Property Group plc

Registered No. 02967020

As at 31 March 2022

			2022	2021
	Notes		Group £'000	Group £'000
Non-current assets
Investment properties	7		23,849	22,456
Right of use assets	8		1,018	686
Property, plant and equipment			128	157
Investment in Group undertakings			-	-
Investment in associates	9		19,135	18,577
Other financial assets at fair value through OCI	9		7,445	3,061
Other receivables	13		95	487
Goodwill	10		153	153
Deferred tax assets	11		1,599	1,518
Total non-current assets			53,422	47,095
Current assets
Inventories - land and buildings	12		12,352	12,494
Current tax assets			14	296
Right of use assets	8		446	-
Trade and other receivables	13		4,329	5,149
Cash and cash equivalents			6,419	16,244
Total current assets			23,560	34,183
Current liabilities
Trade and other payables	14		(3,388)	(3,447)
Provisions	15		(922)	(2,076)
Lease Liabilities	8		(410)	-
Financial liabilities	16		(4,212)	(22,637)
Current tax liabilities			(20)	(12)
Total current liabilities			(8,952)	(28,172)
Net current assets			14,608	6,011
Total assets less current liabilities			68,030	53,106
Non-current liabilities
Financial liabilities	16		(9,309)	(12,457)
Other financial liabilities	17		(10,141)	-
Lease Liabilities	8		(1,098)	(686)
Deferred tax liabilities	11		(3,112)	(2,974)
Net assets			44,370	36,989
Equity
Called up share capital			1,166	1,166
Share premium			5,791	5,791
Share-based payment reserve			179	179
Foreign exchange translation reserve			(3,297)	(3,108)
Purchase of own shares reserve			(2,653)	(2,653)
Investment revaluation reserve			684	(355)
Retained earnings			42,271	35,768
Equity attributable to the owners of the parent			44,141	36,788
Non-controlling interests			229	201
Total equity			44,370	36,989
Net assets per share	6		40.00p	33.33p

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2022

 

Group	Share capital	Share premium	Share-based payment reserve	Foreign exchange translation reserve	Purchase of own shares	Investment revaluation reserve	Retained earnings	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2021	1,166	5,791	179	(3,108)	(2,653)	(355)	35,768	201	36,989
Profit for the year	-	-	-	-	-	-	6,835	-	6,835
Net profit on financial assets at fair value through other comprehensive income	-	-	-	-	-	1,039	-	-	1,039
Exchange differences arising on translation of foreign subsidiaries	-	-	-	(189)	-	-	-	6	(183)
Foreign exchange profit recycled to the Income Statement	-	-	-	-	-	-	-	-	-
Total comprehensive income	-	-	-	(189)	-	1,039	6,835	6	7,691
Sale of treasury shares	-	-	-	-	-	-	-	-	-
Purchase of treasury shares	-	-	-	-	-	-	-	-	-
Exercise of Share Options	-	-	-	-	-	-	-	-	-
Non-controlling interests	-	-	-	-	-	-	(56)	56	-
Dividends paid	-	-	-	-	-	-	(276)	(34)	(310)
At 31 March 2022	1,166	5,791	179	(3,297)	(2,653)	684	42,271	229	44,370

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2021

 

Group	Share capital	Share premium	Share-based payment reserve	Foreign exchange translation reserve	Purchase of own shares	Investment revaluation reserve	Retained earnings	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2020	1,166	5,791	179	(1,260)	(2,653)	(236)	45,060	157	48,204
Loss for the year	-	-	-	-	-	-	(7,401)	-	(7,401)
Net (loss) on financial assets at fair value through other comprehensive income	-	-	-	-	-	(119)	-	-	(119)
Exchange differences arising on translation of foreign subsidiaries	-	-	-	(685)	-	-	-	24	(661)
Foreign exchange profit recycled to the Income Statement	-	-	-	(1,163)	-	-	-	-	(1,163)
Total comprehensive income	-	-	-	(1,848)	-	(119)	(7,401)	24	(9,344)
Sale of treasury shares	-	-	-	-	-	-	-	-	-
Purchase of treasury shares	-	-	-	-	-	-	-	-	-
Exercise of Share Options	-	-	-	-	-	-	-	-	-
Non-controlling interests	-	-	-	-	-	-	(48)	48	-
Dividends paid	-	-	-	-	-	-	(1,843)	(28)	(1,871)
At 31 March 2021	1,166	5,791	179	(3,108)	(2,653)	(355)	35,768	201	36,989

 

Foreign Exchange Translation Reserve

 

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign Group companies. This reserve is non distributable.

 

Share Based Payment Reserve

 

The Group grants certain of its employees' rights to its equity instruments as part of its share-based payment incentive plans. The value of these rights has been charged to the Income Statement and has been credited to the share-based payment reserve (which is a distributable reserve).

 

Purchase of Own Ordinary Shares

 

The cost of the Company's Ordinary Shares purchased by the Company for treasury purposes is held in this reserve. The reserve is non distributable.

 

Investment Revaluation Reserve

 

The change in fair value of the Group's financial assets measured at fair value through Other Comprehensive Income is held in this reserve and is non distributable.

 

CASH FLOW STATEMENTS

for the year ended 31 March 2022

 

		2022	2021
	Notes	Group £'000	Group £'000
Cash flows from operating activities
Operating profit/(loss)		6,062	(5,071)
Adjustments for:
Depreciation of investment property and property, plant & equipment		90	1,362
Debt reduction following restructuring of finance lease	3	(7,809)	-
Profit on the sale of investment property		-	(161)
Loss on the sale of inventory		-	217
Impairment loss on an investment property		-	7,023
Decrease/(increase) in inventories		38	(129)
Decrease/ (increase) in trade and other receivables		1,208	38,858
(Decrease)/ increase in trade and other payables		(1,213)	(2,607)
Other non-cash adjustments		65	(126)
Cash generated from operations		(1,559)	39,366
Taxes paid		118	(640)
Net cash flow from operating activities		(1,441)	38,726
Cash flow (used in)/ from investing activities
Capital expenditure on investment properties	7	(1,642)	(160)
Proceeds from partial disposal of financial assets held at fair value through Other Comprehensive Income		-	-
Purchase of property, plant & equipment	2	(33)	(134)
Proceeds from the sale of investment property		-	1,505
Investment in shares of new associates		-	(605)
Investment in funds	9b)	(3,633)	-
Proceeds from funds	9b)	290	-
Proceeds from investments in associates	9a)	48	172
Interest received		187	67
Dividends from associates	9a)	241	24
Distributions received		266	179
Net cash flow (used in)/ from investing activities		(4,276)	1,048
Cash flow (used in)/ from financing activities
Proceeds from bank loan		1,289	-
Repayment of bank loans		(1,297)	(25,077)
Repayment of finance lease		(3,434)	(2,970)
Sale of shares held in treasury		-	-
Purchase of new treasury shares		-	-
Exercise of share options		-	-
Interest paid	4	(330)	(740)
Dividends paid		(276)	(1,843)
Dividends paid to non-controlling interests		(34)	(28)
Net cash flow (used in)/ from financing activities		(4,082)	(30,658)
Net (decrease)/increase in cash and cash equivalents		(9,799)	9,116
Cash and cash equivalents at the beginning of the year		16,244	7,337
Currency translation (losses) on cash and cash equivalents		(26)	(209)
Cash and cash equivalents at the year end		6,419	16,244

 

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 2022. The policies have been consistently applied to all years presented unless otherwise stated below. These accounting policies are drawn up in accordance with UK-adopted International Accounting Standards ('IFRS'). 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 2021 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.

 

Going Concern

 

In a financial year impacted by COVID-19 and the economic adversity brought about by governments' policy responses to it, the Directors have carried out an analysis to support their view that the Group is a going concern and under which basis these financial statements have been prepared.

  

Analysis and scenario testing, was carried out on the Group's main divisional income streams, being asset management fees from the asset management division, rental income from its seven directly owned group properties and cash returns from its associates and investments.

 

a)    Asset Management Fee Income

 

Asset management fee income is primarily derived from its UK funds (53%), four of which are limited partnerships whose limited partners are a mix of pension funds and registered charities.

 

With one exception, fees are invoiced monthly and are calculated based on a percentage of the latest valuation, which for the UK funds is performed quarterly. In the one fund from which fees are not levied by reference to the properties valuation (Fprop Offices LP) a 7% decrease in property values in this fund would trigger a clawback of a proportion of the fees received. A 27% decrease would trigger the maximum clawback of fees recognised to date of £1.97 million.

 

In the two UK funds with borrowing there is headroom of 14% on current property values within the LTV covenant agreed with the lenders. The Directors believe all funds have access to adequate resources to remedy the remote possibility of any loan covenant breaches.

 

Asset management fees on the Group's Polish and Romanian managed funds are also levied as a percentage of funds under management, with reference to the most recent valuations, again with one exception where the fee is fixed (Fprop Phoenix Ltd). These funds are set up under the ownership of a UK limited company which in turn owns the company domiciled in the country that owns the property. Each of these local companies has borrowing secured on the property and is therefore ring fenced from the Group.

 

The longevity of this asset management fee income is determined by the fund's life which is fixed by agreement when each fund is first established. The weighted average unexpired fund management contract term is 3 years, 3 months.

 

b)    Rental Income from Group Properties

 

All seven Group Properties are located in Poland or Romania. These properties consist of three office blocks, a logistics warehouse, two mini-supermarkets and one plot of land currently under development into a mini-supermarket. All were independently valued on 31 March 2022 at £42.24 million (31 March 2021: £41.57 million).

 

The rental income has been reviewed and evaluated and no significant falls in collection rates are expected. The tenants are of good quality, as proven by excellent cash collection rates through and after the lockdown periods. Any renegotiation of rental payment terms that have been agreed are reflected in the analysis. Exposure to non-food retailers is very limited.

 

The property in Gdynia, Poland, was 97% vacant at 31 March 2022. As at 23 June 2022 it was 20% let however it could be a couple of years before this property again yields a significant income.

 

c)     Income from Associates and Investments

 

Analysis was also conducted on the returns from the Group's investment in its seven Associates. All funds invested in Poland and Romania have temporarily suspended distributions to shareholders and consequently no income for the Group was assumed from this source for the purposes of this test. All bank loan covenants were reviewed and tested against future decreases in valuation and net operating income.

 

Dividend income from the Group's UK investments was also stress tested and found not to have a significant impact.

 

Going Concern Statement

 

Based on the results of the analysis conducted as outlined above the Board believes that the Group has the ability to continue its business for at least twelve months from the date of approval of the financial statements and therefore has adopted the going concern basis in the preparation of this financial information.

 

New Standards and Interpretations

 

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 2022. On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted International Accounting Standards in its consolidated financial statements on 1 April 2022. This change constitutes a change in accounting framework however, there is no impact on recognition, measurement or disclosure.

 

The financial statements have been prepared in accordance with UK-adopted International Accounting Standards, (the 'applicable framework'), and have been prepared in accordance with the provisions of the Companies Act 2006 (the 'applicable legal requirements'). The policies have been consistently applied to all years presented unless otherwise stated below. 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 2021 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.

 

New standards impacting the Group have been adopted in the preliminary financial statements for the year ended 31 March 2022. These have given rise to the following changes in the Group's accounting policies, which have not had a material impact on the financial statements for the year ending 31 March 2022:

·      IFRS 16 (amended) - Covid-19-related Rent Concessions;

·      IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (amended) - Interest Rate Benchmark Reform - Phase 2.

 

The Group has not adopted any new IFRSs that are issued but not yet effective and it does not expect any of these changes to impact the group.

 

These preliminary financial statements were approved by the Board of Directors on 22 June 2022.

 

1.             Revenue

 

Revenue from continuing operations consists of revenue arising in the United Kingdom 27% (2021: 20%), Poland 59% (2021: 71%) and Romania 14% (2021: 9%). All revenue relates solely to the Group's principal activities.

2.             Segment Reporting 2022

 

	Fund Management Division	Group Properties Division
	Property fund management	Group properties	Associates and investments	Unallocated central overheads	Total
	£'000	£'000	£'000	£'000	£'000
Rental income	-	2,926	-	-	2,926
Service charge income	-	1,678	-	-	1,678
Sale of a property held in inventory	-	-	-	-	-
Asset management fees	3,463	-	-	-	3,463
Performance related fee income	578	-	-	-	578
Total revenue	4,041	4,604	-	-	8,645
Depreciation and amortisation	(36)	(24)	-	-	(60)
Operating profit	1,437	7,781	-	(3,156)	6,062
Share of results in associates	-	-	(29)	-	(29)
Fair value adjustment on associates	-	-	876	-	876
Investment income	-	-	271	-	271
Interest income	-	29	-	201	230
Interest payable	-	(330)	-	-	(330)
Profit/(loss) before tax	1,437	7,480	1,118	(2,955)	7,080
Analysed as:
Underlying profit/(loss) before tax before adjusting for the following items:	1,182	401	242	(1,449)	376
Provision in respect of rent guarantee	-	(629)	-	-	(629)
Debt reduction following restructuring of finance lease	-	7,809	-	-	7,809
Interest received on loan to FOP @12%	-	202	-	-	202
Fair value adjustment on associates	-	-	876	-	876
Performance related fee income	578	-	-	-	578
Staff incentives	(305)	(251)	-	(1,472)	(2,028)
Realised foreign currency (losses)/gains	(18)	(52)	-	34	(104)
Total	1,437	7,480	1,118	(2,955)	7,080
Assets - Group	891	44,693	7,445	4,818	57,847
Share of net assets of associates	-		19,135	-	19,135
Liabilities	(143)	(31,922)	-	(547)	(32,612)
Net assets	748	12,771	26,580	4,271	44,370
Additions to non-current assets
Property, plant and equipment	5	28			33
Investment properties	-	1,642	-	-	1,642
Trading stock	-	119	-	-	119

Segment Reporting 2021

	Fund Management Division	Group Properties Division
	Property fund management	Group properties	Associates and investments	Unallocated central overheads	Total
	£'000	£'000	£'000	£'000	£'000
Rental income	-	6,087	-	-	6,087
Service charge income	-	1,544	-	-	1,544
Sale of a property held in inventory	-	1,103	-	-	1,103
Asset management fees	3,345	-	-	-	3,345
Performance related fee income	40	-	-	-	40
Total revenue	3,385	8,734	-	-	12,119
Depreciation and amortisation	(21)	(1,425)	-	-	(1,446)
Operating profit	1,304	(5,090)	-	(1,285)	(5,071)
Share of results in associates	-	-	3,467	-	3,467
Fair value adjustment on associates	-	-	(2,997)	-	(2,997)
Investment income	-	-	185	-	185
Interest income	-	31	-	36	67
Interest payable	-	(740)	-	-	(740)
Profit/(loss) before tax	1,304	(5,799)	655	(1,249)	(5,089)
Analysed as:
Underlying profit/(loss) before tax before adjusting for the following items:	1,294	3,023	1,472	(1,213)	4,576
Provision in respect of rent guarantee	-	(1,030)	-	-	(1,030)
Profit on the sale of a Group Property	-	161	-	-	161
Loss on the sale of a Group Property held in inventory	-	(217)	-	-	(217)
Impairment to investment property	-	(7,023)	-	-	(7,023)
One-off additional income from our share of an associate (FOP)	-	-	2,180	-	2,180
Fair value adjustment on associates (FOP)	-	-	(2,997)	-	(2,997)
Recycled foreign exchange gain	-	1,163	-	-	1,163
Depreciation	-	(1,327)	-	-	(1,327)
Performance related fee income	40	-	-	-	40
Staff incentives	-	-	-	-	-
Realised foreign currency (losses)/gains	(30)	(549)	-	(36)	(615)
Total	1,304	(5,799)	655	(1,249)	(5,089)
Assets - Group	836	43,873	3,061	14,931	62,701
Share of net assets of associates	-	-	18,885	(308)	18,577
Liabilities	(120)	(44,001)	-	(168)	(44,289)
Net assets	716	(128)	21,946	14,455	36,989
Additions to non-current assets
Property, plant and equipment	27	110	-	-	137
Investment properties	-	160	-	-	160
Trading stock	-	213	-	-	213

3.             Debt reduction following restructuring of finance lease

 

The results reflect the reduction of €9.00 million (£7.81 million) in the amount owed to ING Bank (from €25 million to €16 million) in final settlement of the finance lease secured against the Group's directly held property in Gdynia. As part of the transaction ING was paid €4.00 million in June 2021. The remainder of the finance lease liability was replaced by an interest free deferred consideration of €12.00 million (£10.14 million) repayable by June 2024. The deferred consideration is reflected as an Other Financial Liability in the Statement of Financial Position.

 

4.             Interest Income

 

	2022	2021
	Group £'000	Group £'000
Interest income - bank deposits	-	26
Interest income - other	230	41
Total interest income	230	67

 

	2022	2021
	Group £'000	Group £'000
Interest expense - property loans	(326)	(467)
Interest expense - bank and other	(4)	(47)
Finance charges on finance leases	-	(226)
Total interest expense	(330)	(740)

 

5.             Tax Expense

 

	2022 Group £'000	2021 Group £'000
Analysis of tax charge for the year
Current tax	(172)	(179)
Deferred tax	(73)	(2,133)
Total tax charge for the year	(245)	(2,312)

 

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

 

The deferred tax charge in 2021 arose mainly as a result of the reversal of a previously recognised deferred tax asset following the repayment of the bank loan secured against the property CH8 in April 2020.

 

As in prior years, brought forward and current UK tax losses have not been recognised as a deferred tax asset due to insufficient foreseeable taxable income being earned in the UK.

 

6.             Earnings/NAV per Share

 

	2022	2021
Basic earnings per share	6.14p	(6.75p)
Diluted earnings per share	6.01p	(6.59p)
The following earnings have been used to calculate both the basic and diluted earnings per share:
	£'000	£'000
Basic earnings	6,779	(7,449)
Notional interest on share options assumed to be exercised	7	7
Diluted earnings assuming full dilution	6,786	(7,442)

 

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

 

 

	2022 Number	2021 Number
Weighted average number of Ordinary shares in issue (used for basic earnings per share calculation)	110,382,332	110,382,332
Number of share options	2,610,000	2,610,000
Total number of Ordinary shares used in the diluted earnings per share calculation	112,992,332	112,992,332

 

 

	2022	2021
Net assets per share	40.00p	33.33p
Adjusted net assets per share	47.28p	42.80p

 

 

The following numbers have been used to calculate both the net assets and adjusted net assets per share:
	2022	2021
	£'000	£'000
For net assets per share
Net assets excluding non-controlling interests	44,141	36,788
	£'000		£'000
For adjusted net assets per share
Net assets excluding non-controlling interests	44,141		36,788
Investment properties at fair value net of deferred tax	2,486		2,663
Inventories at fair value net of deferred tax	2,403		2,701
Investments in associates and other financial investments	4,016		5,827
Other items	381		381
Total	53,427		48,360

 

7.             Investment Properties

 

	2022	2021
	Group £'000	Group £'000
Investment properties
At 1 April	22,456	32,537
Capital expenditure	1,642	160
Disposal	-	(241)
Depreciation	(30)	(1,327)
Impairment loss to an investment property	-	(7,023)
Foreign exchange translation	(219)	(1,650)
At 31 March	23,849	22,456

 

Investment properties owned by the Group are stated at cost less depreciation and any accumulated impairment in value. The properties were valued at the Group's financial year end at €31.85 million (31 March 2021: €30.22 million), the Sterling equivalent at closing foreign exchange rates being £26.92 million (31 March 2021: £25.74 million).

 

In 2015 the Directors resolved to depreciate the value of the property in Gdynia over the remaining term of the lease, (which expired in February 2021) to reflect its residual value. No other property has been depreciated as their respective estimated residual values are expected to be higher than their carrying value.

 

An impairment in value of £7.02 million was recognised in 2021 in respect of the property in Gdynia.

 

Amounts recognised in the income statement:

 

	2022	2021
	Group £'000	Group £'000
Rental income from operating leases	2,926	6,087

 

i.      Leasing arrangements where the group is a lessor:

 

	2022	2021
	Group £'000	Group £'000
Minimum lease receipts under non-cancellable operating leases to be received:
Not later than one year	2,043	1,898
Later than one year and not later than five years	6,790	5,366
Later than five years	3,758	3,866
	12,591	11,130

 

Investment properties and property held within stock are comprised of commercial properties that are leased to third parties. The Group has approximately 38 leases granted to its tenants. These vary depending on the individual tenant and the respective property and demise but typically are let for a term of five years. The weighted average lease length of the leases granted was 5 years and 7 months (2021: 4 years and 9 months). No contingent rents are charged.

 

8.             Right of Use Assets and Lease Liabilities

 

This note provides information for leases where the group is a lessee. For leases where the group is a lessor, see note 7.

The amounts recognised in the financial statements in relation to the leases are as follows:

 

i.      Amounts recognised in the balance sheet:

 

	31 Mar 2022 £'000	31 Mar 2021 £'000
Right of use assets
Current	446	-
Non-current	1,018	686

 

 

 

	31 Mar 2022 £'000	31 Mar 2021 £'000
Lease Liabilities
Current	410	-
Non-current	1,098	686

 

There was one addition of £754,000 (2021: £nil) to the right of use assets and one addition to the lease liability of £767,999 (2021: £nil) during the financial year.

 

 

ii.     Amounts recognised in the Income Statement:

 

	2022	2021
	£'000	£'000
Depreciation/ Rent charge of right-of use-assets
Buildings	446	197
	446	197

 

	2022	2021
	£'000	£'000
Interest expense
Buildings	186	20
	186	20

 

 

iii.    Summary of the groups leasing activity:

 

The Group has reviewed the terms of its leases and has identified:

 

The lease of the UK office on St. James's Street, London, SW1A 1HD which commenced on 2 July 2020. A discount rate of 2.00% has been applied.

 

The lease by First Property Poland Sp. z o. o. (FPP), a subsidiary entity leasing office space from 5th Property Trading Poland Sp. z o. o. (a related party to the Group) which terminates on 31 March 2025. A discount rate of 2.75% has been applied representing its incremental borrowing rate.

 

The lease by First Property Poland Sp. z o. o. (FPP), a subsidiary entity leasing office space from Lublin Zana (a related party to the Group) which terminates on 31 December 2024

 

As at 31 March 2022 the Group has recognised a lease liability under IFRS 16 of £1.51 million (31 March 2021: £0.69 million) and a right of use asset of £1.46 million (2021: £0.69 million). The net credit to the Income Statement was £44,000. Rental contracts are typically made for fixed periods of six months to four years but may have extension options.

 

9.             Investment in Associates and Other Financial Assets and Investments

 

The Group has the following investments:

 

	2022	2021
	Group £'000	Group £'000
a) Associates
At 1 April	18,577	17,698
Additions	-	605
Disposals	-	-
Shareholder loan repayments	(48)	(172)
Share of associates' profit (loss) after tax	(29)	3,467
Share of associates' revaluation gains/ (losses)	876	(2,997)
Dividends received	(241)	(24)
At 31 March	19,135	18,577

 

The Group's investments in associated companies are accounted for under the "cost model" under IAS40 whereby the Group's share is held at cost plus its share of subsequent accumulated profits less dividends received. It comprises the following:

 

	2022	2021
	Group £'000	Group £'000
Investment in associates
5th Property Trading Ltd	1,652	1,555
Fprop Romanian Supermarkets Ltd	-	194
Fprop Galeria Corso Ltd	2,700	2,479
Fprop Krakow Ltd	1,580	1,592
Fprop Cluj Ltd	615	596
Fprop Phoenix Ltd	913	1,530
Fprop Opportunities plc	11,983	10,939
	19,443	18,885
Less: Share of profit after tax withheld on sale of property to 5th Property Trading Ltd in 2007	(308)	(308)
	19,135	18,577

 

If the Group had adopted the alternative "fair value" model for accounting for investment properties, the carrying value of the investments in associates would be £23.15 million (31 March 2021: £24.41 million).

 

The withheld profit figure of £0.31 million (2021: £0.31 million) represents the removal of the percentage of intercompany profit resulting from the sale of the property in 2007 to 5th Property Trading Ltd (an associate). The figure will reduce when there is a reduction in First Property Group's stake in 5th Property Trading Ltd.

 

	2022	2021
	Group £'000	Group £'000
b) Other financial assets and investments
At 1 April	3,061	3,174
Additions	3,633	6
Disposals	-	-
Repayments	(290)	-
Increase/ (decrease) in fair value during the year	1,041	(119)
At 31 March	7,445	3,061

 

The Group holds four (2021: three) unlisted investments in funds managed by it. Each is designated at fair value through "Other Comprehensive Income" (OCI) as per IFRS 9. The Directors' consider their fair value to be not materially different from their carrying value. Fair value has been calculated by applying the Group's percentage holding in the investments to the fair value of their net assets.

 

During the year the Group invested £0.25 million in a new fund that was established in association with Fulcrum Asset Management (Fprop Fulcrum Property LP) and also increased its investment by £3.38 million in the Group managed fund - Fprop UK Special Opportunities LP, increasing the Group's equity stake to 11.1%.

 

10.          Goodwill

 

	2022	2021
	Group £'000	Group £'000
At 1 April	153	153
At 31 March	153	153

 

The Directors have conducted an annual impairment test and concluded that no impairment was necessary because the estimated value in use was higher than the value stated.

 

11.          Deferred Tax

 

Deferred tax assets and liabilities are attributable to the following items:

	2022	2022	2022	2021	2021	2021
	Group net assets £'000	Group assets £'000	Group liabilities £'000	Group net assets £'000	Group assets £'000	Group liabilities £'000
Accrued interest payable	117	117	-	(1,021)	118	(1,139)
Accrued income	(4)	-	(4)	(13)	-	(13)
Foreign bank loan	(212)	203	(415)	899	902	(3)
Investment properties and inventories	(1,476)	1,119	(2,595)	(1,331)	427	(1,758)
Other temporary differences	62	160	(98)	10	71	(61)
At 31 March	(1,513)	1,599	(3,112)	(1,456)	1,518	(2,974)

 

 

12.          Inventories - Land and Buildings

 

	2022	2021
	Group £'000	Group £'000
Group properties for resale at cost
At 1 April	12,494	14,558
Capital expenditure	119	213
Disposal	-	(1,320)
Depreciation	(157)	(84)
Foreign exchange translation	(104)	(873)
At 31 March	12,352	12,494

 

The Group's total interest in Blue Tower (an office block in Warsaw) is 48.2% of the building. The fair value of this interest is €18.13 million (£15.32 million) down from €18.58 million (£15.83 million) at 31 March 2021 but is stated at cost as above.

 

The disposal in 2021 relates to the sale of another property related to Blue Tower. Consideration of £1.10 million was received in respect of this sale resulting in a loss on disposal of £0.22 million.

 

13.          Trade and Other Receivables

 

	2022	2021
	Group £'000	Group £'000
Current assets
Trade receivables	1,003	1,325
Less provision for impairment of receivables	(73)	(281)
Trade receivables net	930	1,044
Other receivables	2,299	3,408
Prepayments and accrued income	1,100	697
At 31 March	4,329	5,149

 

 

	2022 Group	2021 Group
Non-current assets	£'000	£'000
Other receivables	95	487

 

Other receivables, under non-current assets, relates to the deferred consideration from the sale of an investment property located in Romania. This has been discounted to reflect its current value.

 

 

14.          Trade and Other Payables

 

	2022	2021
	Group £'000	Group £'000
Current liabilities
Trade payables	1,105	2,052
Other taxation and social security	313	557
Other payables and accruals	1,917	691
Deferred income	53	147
At 31 March	3,388	3,447

 

15.          Provisions

 

	2022 Group	2021 Group
Current liabilities	£'000	£'000
At 31 March	922	2,076

 

The provision at 31 March 2022 represents a rent guarantee of £0.52 million (31 March 2021: £0.79 million) and fit-out costs of £0.40 million (31 March 2021: £1.29 million). These provisions are in respect of the rent guarantee given as part of the sale of CH8 which completed in April 2020.

 

 

16.          Financial Liabilities

 

	2022 Group £'000	2021 Group £'000
Current liabilities
Bank loan	4,212	1,194
Finance leases	-	21,443
At 31 March	4,212	22,637
Non-current liabilities
Bank loans	9,309	12,457
Finance leases	-	-
At 31 March	9,309	12,457

 

	2022 Group £'000	2021 Group £'000
Total obligations under bank loans and finance leases
Repayable within one year	4,212	22,637
Repayable within one and five years	7,364	11,116
Repayable after five years	1,945	1,341
At 31 March	13,521	35,094

 

Four bank loans all denominated in Euros and totalling £13.52 million (31 March 2021: £35.09 million), included within financial liabilities, are secured against investment properties owned by the Group and one property owned by the Group shown under inventories. These bank loans and the finance lease are otherwise non-recourse to the Group's assets.

 

During the year to 31 March 2022, terms were agreed with the Bank to restructure the financing of Gdynia for a final repayment of €16.00 million, of which €4.00 million was paid with the balance of €12.00 million due in June 2024. This deferred consideration is shown as an Other Financial Liability in the Statement of Financial Position.

 

The interest rate profile of the Group's financial liabilities at 31 March 2022 and 31 March 2021 was as follows:

 

	Floating rate financial liabilities £'000	Fixed rate financial liabilities £'000	Non- interest bearing £'000	Total     £'000
Bank loans	10,109	3,412	-	13,521
Finance lease obligations	-	-	-	-
Other financial liabilities	-	-	10,141	10,141
At 31 March 2022	10,109	3,412	10,141	23,662
Bank loans	9,903	3,748	-	13,651
Finance lease obligations	21,443	-	-	21,443
Other financial liabilities	-	-	-	-
At 31 March 2021	31,346	3,748	-	35,094

 

In order to mitigate potential interest rate increases, 57.3% of the loans are interest free or we have fixed the interest rate of these interest-bearing loans. A one percentage point increase in interest rates would increase the annual interest bill on the floating rate loans by £0.10 million per annum (2021: £0.31 million).

 

17.          Other Financial Liabilities

 

	2022 Group £'000	2021 Group £'000
Non-current liabilities	10,141	-

 

This non-current liability represents the balance of €12.00 million which was a result of the restructuring of a finance lease secured against the office tower in Gdynia. The restructuring resulted in the amount owed to ING bank in final settlement reducing by €9.00 million (£7.81 million). As part of the deal, the Group acquired the freehold of the property for €16.00 million of which €4.00 million has been paid and €12.00 million is repayable by June 2024. No interest is payable on this non-current liability. The deferred consideration is reflected as an Other Financial Liability in the Statement of Financial Position.

 

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 32 St James's Street, London, SW1A 1HD.