Poland-focused property fund management group First Property is looking to kick on this year as the effects of recent purchases start feeding through to the bottom line.

Profit before tax in the year to 31 March rose 13.0% to £2.95m from £2.61m the year before, despite much of the company's rents being paid in euros, a currency which put in a poor show against sterling for much of last year.

Revenue grew to £7.11m from £6.46m but diluted earnings per share from continuing operations remained static at 1.90p.

Chief executive Ben Habib told Sharecast, however, that he is expecting earnings growth to pick up this year, helped by a full year of fee income from recently acquired assets.

The group ended the period with net assets of £16.57m, versus £15.65m a year earlier, and a cash balance of £5.44m, down from £10.1m the year before, of which £1.9m is held within Fprop Opportunities, which is 84.1% owned by the group.

Bizarrely, though the group is looking to dilute its stake by recruiting neww investors in Fprop Opportunites, its Poland-focused fund, this will have the effect of dampening earnings growth, at least in the short term.

"Assuming we don't raise any new money for the fund, it should throw off considerable chunks of cash for us this year," Habib said.

Turning to the UK, Habib said the company will not be joining the rush to buy property in the nation's capital.

"I appreciate I am in a minority among my peers, but I think the London property market is overvalued," Habib opined.

"Yields are down to 4% in the West End and 5% in the City, historically very low yields, and you are not going to make a lot of money at those rates. Hold the properties for, say, five years, and about 18 months of your rental income is consumed by costs," he argued, adding that, in his view, the prices cannot be justified in a UK economy that is "sick" and dependent on a convalescing banking sector.

First Property's preference is to invest in high yielding assets in the UK provinces rather than gamble on trading assets in the hope of achieving capital appreciation.

"We're much more yield orientated. We look for retail tenants operating at the value end of the market who are relatively recession resistant; names such as Matalan and Home Bargains. We particularly like properties with lease arrangements negotiated post-2009, post-credit crunch," Habib said.

Given the company's revenue stream is affected by the value of the euro Habib is obviously concerned about the current crisis of confidence in the eurozone area, brought on by Greece's enduring problems. Despite that, he still thinks Poland, where much of the company's investment focus is directed, is a better bet than the UK.

"I am hopeful that Europe will learn from the debacle that was the Lehman collapse and that Greece's problems will be resolved in an orderly fashion," Habib concluded.

The group has proposed a final dividend of 0.74p, making the full year dividend 1.06p, up from 1.03p last year.

At 16:24 (21/6/11), the shares were down a penny on the day at 22.5p.

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