The first half of property fund management group First Property’s (LON:FPO) financial year was plain fare compared to what’s lined up for the second half.
The group saw profit before tax slide 13.6% to £1.91mln in the six months to the end of September from £2.21mln the year before, largely as a result of the lost income from, and last year’s profit on, the disposal of the group's own property in Mokotow, Warsaw, on 6 September 2012.
Net assets at the end of September had risen to £19.45mln from £17.84mln the year before, and are set for another leg-up before the financial year is over from the intended sale of two office properties in Bracknell and Woking, bought for a total of £3.4mln earlier this year.
The group has succeeded in gaining planning consent for the conversion of these offices to residential use, which will materially enhance their value.
Chief executive officer Ben Habib confessed to Proactive Investors that the interims were “a very boring set of results that do not reflect the progress we have made”.
Habib was enthused about the UK office purchases. “We bought them at a very good price. We should exit them at attractive values in the second half,” he said.
In October 2013, First Property announced the establishment of a new partnership with clients of a leading global investment business, to pump £12mln, initially, in to office purchases in the UK, with a view to converting these to residential use. The equity investment from the partners is set to increase to £40mln in the coming months, while First Property will also commit 5% of the total equity up to a limit of £2mln.
“We’ve got the lolly, and the residential market is very attractive in the UK,” Habib said.
The interim dividend has been held at 0.33p, putting the shares on a dividend yield of 4.29%. The shares currently trade at 25.19p, down 1.2% on the day.
House broker Arden Partners said the figures were in line with expectations. It has, however, adjusted its forecasts to reflect an earnings enhancing deal announced earlier this month.
That deal saw First Property acquire a further 19.7% share of the “Blue Tower” office building in Warsaw and a 22.3% interest in the tower’s management company CORP SA. As a result of the transaction First Property now owns 48.2% of Blue Tower and 90% of CORP SA.
“The acquisition price of €5.23mln was funded by €1.7mln of cash from the company with the balance funded by non-recourse bank debt. The associated earnings after finance costs are expected to be c. €0.46mln giving a return on the equity investment of c.27%,” Arden said.
Arden has increased its year to end-March 2014 profit before tax forecast by £0.1mln to £3.3mln, while the following year’s forecast has been upped to £3.6mln from £3.3mln.