TIDMGRI
RNS Number : 1846Z
Grainger PLC
16 May 2019
16 May 2019
Grainger plc
Half year results for the six months ended 31 March 2019
Delivering growth through operational excellence:
Strong performance, with a step change in net rental income
Helen Gordon, Chief Executive of Grainger, the UK's largest
listed residential landlord, said:
"I am pleased to report a period of strong performance, in which
we delivered +33% growth in net rental income, supported by
like-for-like rental growth up +3.7%, and a +7% increase in profit
before tax.
"We continue to successfully execute our strategy to invest in
high quality new rental homes for the mid-market across the UK in
target cities, with an operational portfolio of over 8,400 rental
homes and a further c.8,200 new homes in our pipeline. Our strategy
is designed to enhance shareholder returns by delivering a step
change in our net rental income and thereby support strong dividend
growth.
"Following the successful acquisition of GRIP in December, a PRS
portfolio of c.1,700 rental homes in London, we have achieved a
significant increase in net rental income. The integration of GRIP
is ahead of plan and is beginning to deliver strong results. This
major acquisition along with our pipeline of PRS development
projects will see our net rental income more than double over the
coming years, delivering strong future dividend growth.
"Our leading position in the private rented sector (PRS) was
bolstered by our selection by Transport for London as their PRS
partner to develop over 3,000 new homes across an initial number of
seed sites in London. In addition to the TfL sites, our PRS
investment pipeline will deliver over 5,200 new homes, of which
GBP760m is secured and committed with a further GBP465m in the
planning or legals stages.
"Our recently completed development, Clippers Quay in Greater
Manchester, has seen strong lettings performance since its launch
in November 2018. The first phase of 135 apartments was fully let
in 4.5 months, with rents achieved +6.3% above ERV and a customer
rating of 4.9 stars out of five."
Key headlines
-- Net rental income(1) up +33% to GBP29.1m (HY18: GBP21.8m),
with a repositioned income profile toward rental income and less
reliance on sales
-- +3.7% like-for-like rental growth(2) across our entire
portfolio (HY18: 4.1%)
-- Adjusted earnings(3) were down slightly to GBP38.3m (HY18:
GBP40.9m) due to timing on sales and reduced development profits as
previously indicated.
-- Profit before tax(3) increased +7% to GBP54.3m (HY18:
GBP50.6m)
-- Interim dividend per share increased +10% to 1.73p per
share(4) (HY18: 1.57p(5) )
-- Integration of GRIP ahead of plan and delivering results with
operational efficiency targets achieved (32% gross to net improved
to 26%), GBP4m overheads savings secured, +3.4% rental growth
delivered and portfolio valuation uplift of GBP4.1m on the purchase
price.
-- Market value of our portfolio has risen +0.6%, with strong
growth in the regions, particularly in the South East, and East and
Midlands, +2.7% and +2.6% respectively.
-- EPRA NNNAV(6) of 271p per share at the period end was stable
compared with 270p per share post rights issue (FY18: 286pps
restated for the bonus adjustment of the rights issue). Uplifts in
earnings and valuations were largely offset by the payment of the
final dividend (3.18pps) and the write off of goodwill.
-- Significant positive structural drivers continue to support a
professionalised, large scale PRS, with a growing trend of private
landlords exiting the sector.
Growing rents - increasing net rental income returns and
securing new investments
-- In addition to overall net rental income increasing +33%, we
achieved strong like-for-like rental growth across our entire
portfolio of +3.7% (HY18: 4.1%), with +3.4% growth on our PRS homes
(HY18: 3.2%) and +4.4% annualised growth on regulated tenancy rent
reviews (HY18: 5.5%).
-- Our secured PRS pipeline now stands at GBP760m(7) . We have a
further GBP465m of investment opportunities in the planning or
legals stages, and over 3,000 new homes via our partnership with
TfL, representing an estimated c.GBP600m investment by
Grainger.
-- We maintained our gross to net (property operating costs
ratio) at 26.2% (FY18: 26.0%, HY18: 25.9%).
-- Occupancy within our PRS portfolio remains high, increasing
50bps to 97.5% (FY18: 97.0%).
-- +10% growth in our interim dividend to 1.73p per share (HY18:
1.57p), supported by the growth in net rental income over the
period.
Simplified and focused - a platform ready for growth
-- Our strategic focus to simplify and focus our business and
build scalability in our operational platform continues to serve us
well.
-- The acquisition of GRIP further simplifies our business and
provides Grainger with the full benefit of its pipeline in London
and the South East. The integration of the portfolio is well
advanced and delivering strong results.
-- Overheads for the Group remain stable as we continue to keep
costs under tight control at GBP13.8m for the half year (HY18:
GBP13.5m) and we are investing in our technology platform to
enhance the scalability of our platform further.
-- Improved financial reporting - following the repositioning of
our investment portfolio and income profile, we have revised our
segmental reporting to reflect our PRS and regulated tenancy
portfolios.
Strong financial performance
-- Net rental income up +33% to GBP29.1m (HY18: GBP21.8m)
-- +3.7% like-for-like rental growth across our entire portfolio
(HY18: 4.1%)
-- Adjusted earnings were down slightly to GBP38.3m (HY18:
GBP40.9m) due to timing on sales and reduced development profits as
previously indicated.
-- Profit before tax increased +7% to GBP54.3m (HY18:
GBP50.6m)
-- EPRA NNNAV of 271p per share at the period end was stable
compared with 270p per share post rights issue (FY18: 286pps
restated for the bonus adjustment of the rights issue). Uplifts in
earnings and valuations were largely offset by the payment of the
final dividend (3.18pps) and the write off of goodwill.
Regulated portfolio performing well and sales resilient
-- Valuations and achieved sales prices from our regulated
tenancy portfolio were solid.
-- The market value of our regulated tenancy portfolio rose by
+0.3% (HY18: 0.8%).
-- Year to date, we have been selling vacant residential
properties 0.4% ahead of previous valuations (FY18 vacant
possession value).
-- Sales velocity remains strong with our 'keys to cash' metric
measuring 112 days, the same as in September last year when we
reported our full year results.
-- A lower opening sales pipeline from a strong finish last
year, reducing development activity and seasonality with weighting
toward the second half, led to a reduced number of properties
available for sale in the first half of the year, resulting in a
lower profit from sales of GBP31.3m (HY18: GBP38.9m).
-- We remain confident in our ability to deliver a robust sales
performance for the full year due to a strong sales pipeline(8) as
at 30 April 2019 of GBP128m (30 April 2018: GBP127m), providing
good visibility for the second half.
Financing and capital structure
-- Average cost of debt stood at 3.2% for the first half of the
year, reflecting our flexible capital structure and the tenor of
the financing terms.
-- Net debt(9) of GBP1,080m reflecting our continuing investment
into PRS assets, including the consolidation of 100% of GRIP's debt
post the acquisition (FY18: GBP866m, HY18: GBP912m)
-- Loan to value(9) of 37.2% (FY18: 37.1%, HY18: 39.0%)
Outlook
The investment case for a professionalised, large-scale PRS
remains strong, with growing positive structural drivers, and
Grainger is in a leading position to benefit.
Over 2019 we will deliver a number of our early investments from
our pipeline, namely Clippers Quay in Greater Manchester, Gunhill
in Hampshire, Finzels Reach in Bristol and Eccy Village in
Sheffield (1,152 homes). From this year, our pipeline of PRS
development schemes will begin to deliver at scale.
Grainger's fully integrated business and operational platform
are designed for growth, and as we grow there will be further
opportunities to enhance shareholder returns and profitability
through operational leverage. Our investment in technology will
support this further.
We are in a strong position to deliver a good performance in the
second half of the year and a positive overall result. The
acquisition of GRIP significantly accelerated our growth strategy
to enhance shareholder returns and we have repositioned the income
profile of the business. We expect our pipeline to more than double
our net rental income over coming years and will directly lead to
sustainable dividend growth.
(1) Refer to Note 5 for net rental income calculation.
(2) Rental growth is the average increase in rent charged across
our portfolio on a like-for-like basis.
(3) Refer to Note 2 for profit before tax and adjusted earnings
reconciliation.
(4) Dividend - The dividend of 1.73p per share (gross) amounting
to GBP10.6m will be paid on 5 July 2019 to shareholders on the
register at the close of business on 31 May 2019. Shareholders will
again be offered the option to participate in a dividend
re-investment plan and the last day for election is 14 June 2019 -
refer also to Note 10.
(5) Comparative pence per share measure has been restated by a
bonus adjustment factor of 1.1066 following the rights issue in
December 2018.
(6) Refer to Note 3 for reconciliation of EPRA measures and EPRA
performance measures section at the end of this document.
(7) PRS pipeline has been restated from a cumulative investment
figure since 2016 to remaining development investment projects to
be delivered.
(8) Completed sales, contracts exchanged, with solicitors and
available for sale.
(9) Refer to Note 18 for net debt and LTV calculations.
Future reporting dates
-- Trading update - September 2019
-- Full year results - 27 November 2019
Half year results presentation
Grainger plc will be holding a presentation of the results at
8:45am (UK time) today, 16 May 2019 and will be broadcast live via
webcast and a telephone dial-in facility (details below).
Webcast details:
To view the webcast, please go to the following URL link.
Registration is required.
http://webcasting.brrmedia.co.uk/broadcast/5c9a4c22ec650d01c34f4607
The webcast will be available for six months from the date of
the presentation.
Conference call details:
Call: +44 (0)330 336 9125
Confirmation Code: 3593262
A copy of the presentation slides will also be available to
download on Grainger's website
(http://corporate.graingerplc.co.uk/) from 8:30am (UK time).
For further information, please contact:
Investor relations
Kurt Mueller, Grainger plc: +44 (0) 20 7940 9500
Media
Ginny Pulbrook / Geoffrey Pelham-Lane, Camarco: +44 (0) 20 3757 4992 / 4985
Forward-looking statements disclaimer
This publication contains certain forward-looking statements.
Any statement in this publication that is not a statement of
historical fact including, without limitation, those regarding
Grainger plc's future financial condition, business, operations,
financial performance and other future events or developments
involving Grainger, is a forward-looking statement. Such statements
may, but not always, be identified by words such as 'expect',
'estimate', 'project', 'anticipate', 'believe', 'should', 'intend',
'plan', 'could', 'probability', 'risk', 'target', 'goal',
'objective', 'may', 'endeavour', 'outlook', 'optimistic',
'prospects' and similar expressions or variations on these
expressions. By their nature, forward-looking statements involve
inherent risks, assumptions and uncertainties as they relate to
events which occur in the future and depend on circumstances which
may or may not occur and go beyond Grainger's ability to control.
Actual outcomes or results may differ materially from the outcomes
or results expressed or implied by these forward-looking
statements. Factors which may give rise to such differences include
(but are not limited to) changing economic, financial, business,
regulatory, legal, political, industry and market trends, house
prices, competition, natural disasters, terrorism or other social,
political or market conditions. Grainger's principal risks are
described in more detail in its Annual Report and Accounts. These
and other factors could adversely affect the outcome and financial
effects of the events specified in this publication. The
forward-looking statements reflect knowledge and information
available at the date they are made and Grainger plc does not
intend to update on the forward-looking statements contained in
this publication.
This publication is for information purposes only and no
reliance may be placed upon it. No representative or warranty,
either expressed or implied, is provided in relation to the
accuracy, completeness or reliability of the information contained
in this publication. Past performance of securities in Grainger plc
cannot be relied upon as a guide to the future performance of such
securities.
This publication does not constitute an offer for sale or
subscription of, or solicitation of any offer to buy or subscribe
for, any securities of Grainger plc.
Chief Executive's review
Overview
Grainger remains committed to delivering strong, sustainable
shareholder returns through investing in high quality rental homes
in the UK for the mid-market. Our strategy to grow rents, simplify
and focus the business and build on our experience as a responsible
landlord continues to deliver strong results.
We have delivered a strong performance over the first half of
this financial year. We have accelerated our growth strategy which
will enhance shareholder returns through the acquisition of GRIP
and wider PRS pipeline. We have bolstered our strong investment
pipeline with the successful appointment by TfL as their PRS
partner to deliver over 3,000 new homes in London. Our integrated
business model will deliver operational leverage as we grow,
further enhancing shareholder returns, and our investment in
technology will further underpin operational leverage and
profitability over time.
Financial performance over the past six months has equally been
strong. We have increased net rental income by a third (+33%),
delivered growth in profit before tax of +7% and achieved
like-for-like rental growth of +3.7%.
Our total operational portfolio consists of c.8,400 rental homes
of which c.4,900 are in our PRS portfolio and c.3,500 are regulated
tenancies. Our pipeline now totals GBP1,825m with GBP760m of
secured PRS projects, a further GBP465m of schemes within the
planning or legal process and an estimated c.GBP600m through our
PRS partnership with TfL. Together, our pipeline will see us
deliver over 8,200 new rental homes. Once completed, these new
investments will more than double our net rental income and provide
us with sustainable dividend growth of the same scale.
The strong levels of cash generation from our regulated tenancy
portfolio and asset recycling programme, along with our strong
capital structure, enables us to internally fund our current
pipeline, putting us in a strong position to deliver on our growth
plans.
In a country with a shortage of housing and severe housing
affordability challenges, we believe our commitment to investing in
mid-market rental housing in the UK is the right one and
socially-compelling.
Our Environmental, Social and Governance (ESG) credentials are
well recognised externally with our FTSE4Good listing, our #3
ranking in the Global Real Estate Sustainability Benchmark, our
Gold Award for Best Practice Sustainability Reporting by EPRA, our
B-rating within the CDP Programme for climate change management and
our recent 'Prime' rating by ISS-oekom for corporate
responsibility.
Key highlights
We have had a number of achievements over the first half of our
financial year.
GRIP integration ahead of plan and delivering results
The integration of GRIP, a 1,700 PRS home portfolio
predominantly located in London, is ahead of plan and already
delivering strong results.
We swiftly implemented operational improvements on day one,
improving gross to net leakage from 32% down to below 26%. The
market value of the GRIP portfolio increased by GBP4.1m from the
purchase price and we have achieved rental growth of +3.4%,
supported by value-add initiatives.
We voluntarily exited GRIP from the REIT regime and delisted it
from the Jersey stock exchange. This has enabled us to secure
overheads savings of c.GBP4m per annum, and we plan to refinance
the debt from the portfolio this summer in order to reduce the cost
of debt and extend maturities.
Following the acquisition S&P increased the Group's credit
rating to BB+.
New PRS investments
The most significant achievement over the period, in respect of
new PRS investment opportunities, was the selection by TfL as their
PRS partner to deliver over 3,000 homes across a number of
well-located seed sites in London.
In addition, we conditionally agreed to acquire two further
schemes during the period, Hale Wharf in Tottenham Hale, North
London (108 homes, c.GBP41m) and 373 PRS homes at Exchange Square
in Birmingham for GBP77m, supplementing our growing portfolio in
these target locations.
Pipeline progress
Construction has successfully completed at Clippers Quay in
Greater Manchester (614 homes) and leasing continues to exceed
expectations. Following the success of pre-leasing 54% of the first
phase (135 units), it is now fully let in 4.5 months. We are
actively leasing the second phase of 155 homes and will shortly be
launching the third phase. Across the scheme, we are achieving
rents +6.3% above ERV and lettings velocity is also ahead of
underwriting.
Leasing at Gunhill (107), our PRS scheme at our Wellesley
project in Hampshire, is performing strongly and ahead of
underwriting with rents +10.3% above underwriting.
We will shortly be launching our PRS scheme at Finzels Reach in
Bristol (known as "Hawkins & George", 194 homes) where we are
already receiving strong early interest from potential
customers.
Later in the year, we expect construction to complete at Eccy
Village (renamed Brook Place) in Sheffield (237 PRS homes).
Our scheme at Hale Wharf in Tottenham Hale, North London which
we had agreed to acquire on a conditional basis in December 2018
from Waterside Places, has seen significant progress with these
conditions now met and construction having commenced.
Construction has also commenced on our direct development scheme
in Newbury, West Berkshire (232 PRS homes).
Strong operational performance
We have achieved strong like-for-like rental growth of +3.7% on
our stabilised, let portfolio. Gross to net leakage remains tightly
managed at 26.2%. We have increased the occupancy within our PRS
portfolio by 50 bps to 97.5%. We have strong customer retention. On
average our customers stay with us 32 months.
Political update
In April the Government announced proposals to abolish Section
21 no-fault evictions, but also strengthen grounds for possession
and expedite the court process for landlord-tenant disputes. This
proposal is targeted predominantly at the private landlord and
buy-to-let market, and we have cautiously welcomed the proposals
subject to all three aspects being delivered simultaneously.
We maintain an open and constructive dialogue with the
Conservative Government, Labour Party and the Mayor of London's
office, extolling the benefits that a professional rental market
can bring to the UK, including the creation of new homes for key
workers, job creation, and facilitating better productivity and
labour mobility.
Outlook - Leading in a growth market
The actions we have taken over the past few years puts Grainger
in a strong position to deliver sustainable growth that will
enhance shareholder returns, backed by strong structural market
tailwinds.
We have successfully assembled a pipeline of attractive
investments that will generate market-leading returns and more than
double our net rental income allowing us to sustainably grow our
dividend for years to come.
This year we will complete, launch and lease up a number of new,
exciting schemes in Manchester, Bristol, Hampshire and Sheffield.
From this year forward, completed schemes from our pipeline will
begin to meaningfully contribute to earnings, further enhancing the
income profile of the business with greater recurring rental income
in line with our stated strategy.
Our successful selection by TfL as their PRS partner will
support further long-term growth by supplementing our pipeline from
2021 onward when we are targeting construction commencing on some
of the first TfL sites.
As our pipeline now begins to deliver and materially enhance net
rental income, we will begin to reap the benefits of operational
leverage, having put in place a strong platform for growth.
Helen Gordon
Chief Executive
16 May 2019
Financial review
Since setting out our strategy in January 2016, we have been
working toward transitioning Grainger to a business more reliant on
recurring rental income through investing in the PRS, with the aim
of enhancing shareholder returns.
The past six months have seen us accelerate this growth
strategy, and I am pleased to report that we have repositioned the
income profile of the business through the acquisition of GRIP, a
1,700 home PRS portfolio. The integration of this portfolio,
following the acquisition on 20 December 2018, is ahead of plan and
already delivering results.
Boosted with the additional income from GRIP for part of the
period, I am also pleased to report strong operational performance
with a significant increase in net rental income and continued
market-leading like-for-like rental growth. Starting this year, we
begin to see our pipeline of new investments complete and
materially enhance our net rental income, underpinning strong
future dividend growth.
Grainger benefits from strong cash generation through sales from
our regulated tenancy portfolio and the liquidity of our assets
allows us to actively manage our portfolio through asset recycling.
Together with headroom, we are able to fund our current pipeline
through existing operations.
The GBP1,825m pipeline we have assembled over the past few
years, most recently through our new partnership with TfL, is
targeted to deliver a five-fold increase in net rental income from
the level at the start of our strategy, representing a fundamental
transformation for Grainger. As we grow we will benefit further
from operational leverage and through this transformation we will
enhance shareholder returns over the coming years.
Highlights
Income returns HY18 HY19 Change
------------------------------------ --------- --------- ----------
Rental growth (like-for-like) 4.1% 3.7% (40) bps
- PRS 3.2% 3.4% +20 bps
- Regulated tenancies (annualised) 5.5% 4.4% (110) bps
Net rental income (Note 5) GBP21.8m GBP29.1m +33%
Adjusted earnings (Note 2) GBP40.9m GBP38.3m (6)%
Adjusted EPS (diluted, after tax)
(Note 2) 7.2p 5.7p (21)%
Profit before tax (Note 2) GBP50.6m GBP54.3m +7%
Dividend per share (Note 10) 1.57p 1.73p +10%
Earnings per share (diluted, after
tax) (Note 9) 9.1p 9.0p (1)%
------------------------------------ --------- --------- ----------
Capital returns FY18 HY19 Change
---------------------------------- -------- ---------- ---------
EPRA NAV per share (Note 3) 314p
EPRA NAV post rights issue per
share 292p 294p +1%
EPRA NNNAV per share (Note 3) 286p
EPRA NNNAV post rights issue per
share 270p 271p +0%
Net debt (Note 18) GBP866m GBP1,080m +25%
Group LTV (Note 18) 37.1% 37.2% +10 bps
Cost of debt (average) 3.4% 3.2% (20) bps
Reversionary surplus GBP277m GBP331m +19%
---------------------------------- -------- ---------- ---------
Income statement
Our income statement has seen a significant transition following
the acquisition of GRIP with a greater reliance on stable,
recurring rental income rather than profit from sales. We remain
focused on cost control as we look to benefit from the inherent
operational leverage within our well-established platform as our
pipeline delivers.
During the six months, we delivered an increase in net rental
income of +33% to GBP29.1m. Importantly the full impact of the GRIP
acquisition is still to come, as we only benefited from just over
three months contribution in the period. Taking account of the full
impact of GRIP, annualised passing rent now stands at GBP67m,
compared to our net rental income at FY18 of GBP43.8m. Adjusted
earnings were down slightly to GBP38.3m (HY18: GBP40.9m) due to
timing on sales and reduced development profits as we transition
towards a rental income led business.
Income statement (GBPm) HY18 HY19 Change
--------------------------------- ------- ------- -------
Net rental income 21.8 29.1 +33%
Profit from sales - residential 32.3 26.5 (18)%
Profit from sales - development 6.6 4.8 (27)%
Mortgage income (CHARM) (Note
15) 2.9 2.8 (3)%
Management fees 2.8 2.2 (21)%
Joint ventures and associates 1.5 1.8 +20%
Overheads (13.5) (13.8) +2%
Pre-contract costs (0.3) (0.6) +100%
Net finance costs (13.2) (14.5) +10%
------- ------- -------
Adjusted earnings 40.9 38.3 (6)%
Valuation movements 9.8 31.7
Derivative movements (0.1) -
Other adjustments* - (15.7)
------- ------- -------
Profit before tax 50.6 54.3 +7%
--------------------------------- ------- ------- -------
* See further details below.
Rental income
The strong structural drivers in the PRS continue to underpin
good rental growth. With a GBP1,343m operational PRS portfolio and
a pipeline of GBP1,825m we are well placed to benefit from these
structural market tailwinds. On top of the structural drivers, our
targeted portfolio, strong customer offering, and efficient
platform mean we continue to outperform the market, and the
like-for-like rental growth we are able to achieve is a testament
to this.
The GRIP acquisition has delivered a step change in our rental
income profile. Gross rental income increased to GBP39.4m (HY18:
GBP29.4m) and net rental income is up +33% to GBP29.1m (HY18:
GBP21.8m), with just over three months of the rental income from
GRIP combined with strong underlying rental growth.
In the six-month period, we delivered like-for-like rental
growth across the portfolio of +3.7%. In our PRS portfolio, we
secured like-for-like rental growth of +3.4%, ahead of the market
of +2.1% (average based on ONS, Countrywide and HomeLet). At the
same time, we secured +4.4% annualised growth on regulated tenancy
rent reviews.
The increasing strength of our income profile combined with a
strong cost focus supports enhanced returns. Our gross to net
(property operating costs ratio) was 26.2% (HY18: 25.9%).
Grainger's net rental income is broadly split (65%:35%) between PRS
and regulated tenancies for the half year, a step change on our
previous year end position which was c.50:50.
GBPm
------------------------ ------
HY18 Net rental income 21.8
Disposals (0.7)
Acquisitions (inc
GRIP) 6.9
Rental growth 1.1
HY19 Net rental income 29.1
------
YoY growth +33%
------------------------ ------
Sales
We have delivered a strong performance from sales activities,
with profit of GBP31.3m (HY18: GBP38.9m). Vacant sales performance
remained robust with sales prices achieved slightly ahead of
previous valuations and sales velocity remained consistent. We saw
lower volumes of vacant properties available for sale due to a
strong performance at the end of last year, and reduced development
activity, reflecting the completion of our contract with RBKC. We
remain confident in the outlook for the full year.
Residential sales
Sales of tenanted and other properties have delivered GBP52.3m
revenue (HY18: GBP25.6m) and GBP13.0m profit in HY19 (HY18:
GBP13.5m). These sales provide capital for recycling into PRS
investments, helping us accelerate our strategic transition.
Vacant property sales delivered GBP28.2m revenue (HY18:
GBP38.3m) and GBP13.5m profit (HY18: GBP18.8m). Following a strong
close to FY18, we started the year with a lower pipeline than the
prior year. Pricing however remained robust with vacant residential
sales completing slightly ahead of September 2018 vacant possession
values. Sales velocity remained consistent with rolling underlying
annual keys to cash of 112 days, in line with FY18.
Development activity
Development activity generated GBP11.9m of revenue and a GBP4.8m
of profit in the first half, 27% below the prior year (HY18:
GBP6.6m) as our development for sale activities wind down. Profits
in the period relate to the completion of our development
partnership with RBKC.
Sales
HY18 HY19
------------------------- -------------------------
Revenue Profit Revenue Profit
------ ------
Units Units
sold GBPm GBPm sold GBPm GBPm
---------------------- ------ -------- ------- ------ -------- -------
Residential sales
on vacancy 99 38.3 18.8 80 28.2 13.5
Tenanted and other
sales 104 25.6 13.5 277 52.3 13.0
------ -------- ------- ------ -------- -------
Residential sales
total 203 63.9 32.3 357 80.5 26.5
Development activity - 41.5 6.6 - 11.9 4.8
---------------------- ------ -------- ------- ------ -------- -------
Overall sales 203 105.4 38.9 357 92.4 31.3
---------------------- ------ -------- ------- ------ -------- -------
Valuation movement
Profit before tax benefitted from a positive movement in
valuations of +GBP31.7m.
Other adjustments
Other adjustments that are one-off in nature for the period were
GBP15.7m. This relates to the goodwill write off and associated
transaction costs incurred in relation to the acquisition of
GRIP.
Financing and capital structure
With an LTV of 37.2%, an average cost of debt of 3.2% and a
business model that generates significant cash flows to fund our
PRS pipeline, Grainger's capital structure offers a robust yet
flexible platform from which to execute our growth strategy.
Cashflow and investment
We generated GBP103m of cash from operations in the six months
ended 31 March 2019 and invested GBP98m into our property portfolio
in the period, comprising GBP91m into our secured PRS investment
pipeline, GBP3m into development and refurbishment activities and
GBP4m into regulated tenancy acquisitions.
Net debt increased to GBP1,080m (FY18: GBP866m, HY18: GBP912m)
reflecting the consolidation of 100% of GRIP's debt post the
acquisition and continued investment in our pipeline. Group loan to
value was 37.2% (FY18: 37.1%, HY18: 39.0%).
With respect to our GBP760m secured pipeline, total spend up to
31 March 2019 was GBP271m.
Finance costs
Our overall finance cost was higher than the prior year at
GBP14.5m (HY18: GBP13.2m) due to the consolidation of the GBP217.0m
GRIP debt facilities. However, the average cost of debt reduced for
the first half at 3.2%, down 20bps from FY18. Our marginal cost of
debt on our headroom is 1.8%.
Capital structure
Following the consolidation of GRIP the capital structure
remains in a similar position to prior to the deal, and provides us
with significant capacity to fund our pipeline.
HY18 FY18 HY19
--------------------------- -------- -------- ----------
Net debt GBP912m GBP866m GBP1,080m
Loan to value 39.0% 37.1% 37.2%
Cost of debt (average) 3.5% 3.4% 3.2%
Incremental cost of debt < 2% < 2% 1.6%
Interest cover 4.1x 4.5x 4.2x
Headroom GBP271m GBP388m GBP395m
Weighted average facility
maturity^ 4.7 6.1 5.0
Hedging 81% 91% 91%
--------------------------- -------- -------- ----------
^ Including extension options; excluding these options it is 3.9
years (HY18), 5.7 years (FY18) and 4.7 years (HY19).
Balance sheet
Following the transformational GRIP acquisition, the business is
now a predominantly PRS business with our operational PRS portfolio
worth GBP1,343m, comprising 4,893 homes, while our regulated
tenancy portfolio has a market value of GBP1,077m, comprising 2,986
homes.
Market value balance sheet (GBPm) FY18 HY19
----------------------------------------------- ------ --------
Residential - PRS 591 1,343
Residential - regulated tenancies 1,107 1,077
Residential - mortgages (CHARM) 82 80
Forward Funded - PRS under development 198 217
Development work in progress 100 119
Investment in JVs/associates 146 25
------ --------
Total investments 2,224 2,861
Net debt (866) (1,080)
Other assets/liabilities 99 20
------ --------
EPRA NAV 1,457 1,801
Deferred and contingent tax - trading
assets (109) (102)
Deferred and contingent tax - investment
assets (22) (12)
Fair value of fixed rate debt and derivatives (2) (22)
------ --------
EPRA NNNAV 1,324 1,665
------ --------
EPRA NAV (pence per share) 314
EPRA NAV - post rights issue (pence
per share) 292 294
EPRA NNNAV (pence per share) 286
EPRA NNNAV - post rights issue (pence
per share) 270 271
LTV 37.1% 37.2%
----------------------------------------------- ------ --------
EPRA NNNAV was 271p per share (FY18: 286pps) at the half year
end. The opening FY18 NAV has been restated to reflect the bonus
adjustment factor of the rights issue with the potential dilution
for those who didn't participate resulting in a post rights EPRA
NNNAV of 270p per share. The modest valuation growth in the period
was offset by the write-off of goodwill on the GRIP acquisition and
the final FY18 dividend payment (3.18pps).
EPRA NNNAV includes deferred and contingent tax liabilities
associated with revaluations of our portfolio, which will
crystallise over time as we dispose of assets.
Our EPRA NAV and NNNAV measures, however, exclude a reversionary
surplus of GBP331m (54pps). This is the difference between the
market value of our assets whilst they are tenanted and the value
we could realise if they became vacant today and were sold.
The following table shows the movement in EPRA NNNAV in the
period.
EPRA NNNAV movement
------------------------------------------------------------------------
GBPm Pence per share
------ ----------------
EPRA NNNAV at 30 September 2018 1,324 286
Rights issue (net proceeds) 335 (16)
------ ----------------
Adjusted NNNAV at 30 September 2018 1,659 270
Adjusted earnings 38 6
Revaluations (trading & investment property) 34 6
Disposals (trading assets) (21) (3)
Tax (current, deferred & contingent) 6 1
Derivatives / other (20) (3)
Dividends (15) (3)
GRIP goodwill and acquisition costs (16) (3)
EPRA NNNAV at 31 March 2019 1,665 271
---------------------------------------------- ------ ----------------
Dividend
In line with our policy to distribute 50% of annual net rental
income, with a one-third payment at the interim stage, our interim
dividend has increased by +10% to 1.73p on a per share basis (HY18:
1.57pps(5) ).
Property portfolio
Our portfolio has transitioned significantly in the past few
years, and now more than half of our assets are within our PRS
portfolio by value. This transition will continue as our pipeline
of PRS schemes complete and add to our portfolio, and as our
regulated tenancy portfolio unwinds and funds our investment into
our pipeline.
Portfolio summary - property
assets
Market Vacant possession Reversionary
value value surplus
31 March 2019 No. units GBPm GBPm GBPm
------------------------------ ---------- ------- ------------------ -------------
Residential - PRS 4,893 1,343 1,472 129
Residential - regulated
tenancies 2,986 1,077 1,279 202
Residential - mortgages
(CHARM) 552 80 80 -
Forward Funded - PRS work
in progress - 217 217 -
Development work in progress - 119 119 -
------------------------------ ---------- ------- ------------------ -------------
Total investments 8,431 2,836 3,167 331
Property portfolio valuations
The value of our portfolio has proven resilient, with the market
value increasing by +0.6% over the six month period (FY18: +1.6%,
HY18: +0.9%). This compares favourably with the major house price
indices with Halifax down -0.2% and Nationwide down -0.1% over the
same period. The resilience of our portfolio is due to the strong
locations and attractiveness of our properties and their low
volatility price point (average property price is GBP349k).
As illustrated in the table below, we have seen relatively flat
valuations in Central and Inner London, some positive movement in
Outer London of +0.5%, modest growth of +1.4% in the North West,
and between +2 and +3% growth in the South East, and East and
Midlands.
Regional performance Units Market value Change since
HY19 GBPm FY18
---------------------- ------ ------------- -------------
Central and Inner
London 2,335 1,217 0.0%
Outer London 964 386 +0.5%
South East 944 214 +2.7%
South West 554 162 +0.6%
East and Midlands 741 128 +2.6%
North West 1,858 254 +1.4%
Other regions 483 59 +0.6%
Total 7,879 2,420 +0.6%
----------------------- ------ ------------- -------------
The table above includes PRS and regulated tenancy assets only.
It excludes 552 units and GBP80m of market value relating to
mortgages (CHARM).
Summary and outlook
We have repositioned the income profile of Grainger, as we had
set out in our strategy in January 2016.
Our market has significant positive structural growth drivers
and we are in a leading position to benefit from this. The pipeline
we have assembled will see us deliver the right product, in the
right locations, at the right price. This will more than double our
net rental income over the coming years and enhance shareholder
returns as we benefit from a greater resilient and sustainable
income profile.
The acquisition of GRIP accelerated our growth strategy,
supporting strong growth in net rental income. Its integration is
ahead of plan and delivering results. Our balance sheet is strong
and our capital structure is well positioned to support our growth
plans.
Through our GBP1,825m pipeline we have good visibility on the
significant increase in rental income to be delivered over the next
few years, driving strong earnings and dividend growth in the
coming years. Together, our regulated tenancy portfolio, asset
recycling programme and capital structure, enable us to internally
fund our pipeline. As we grow the business, shareholder returns
will be further enhanced through operational leverage.
Grainger is on track to strengthen its market leading position
in the UK's private rented sector and deliver market leading
returns.
Vanessa Simms
Chief Financial Officer
16 May 2019
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
Helen Gordon Vanessa Simms
Chief Executive Officer Chief Financial Officer
16 May 2019 16 May 2019
Independent Review Report to Grainger plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2019 which comprises the Condensed
Consolidated Income Statement, the Condensed Consolidated Statement
of Other Comprehensive Income, the Condensed Consolidated Statement
of Financial Position, the Condensed Consolidated Statement of
Changes in Equity, the Condensed Consolidated Statement of Cash
Flows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2019 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
The impact of uncertainties due to the UK exiting the European
Union on our review
Uncertainties related to the effects of Brexit are relevant to
understanding our review of the condensed financial statements.
Brexit is one of the most significant economic events for the UK,
and at the date of this report its effects are subject to
unprecedented levels of uncertainty of outcomes, with the full
range of possible effects unknown. An interim review cannot be
expected to predict the unknowable factors or all possible future
implications for a company and this is particularly the case in
relation to Brexit.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in Note 1a, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Richard Kelly
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
16 May 2019
Consolidated income statement
Unaudited
2019 2018
For the 6 months ended 31 March Notes GBPm GBPm
----------------------------------------------------------------- ------ --------- --------
Group revenue 4 107.0 135.3
----------------------------------------------------------------- ------ --------- --------
Net rental income 5 29.1 21.8
Profit on disposal of trading property 6 29.5 38.7
Profit on disposal of investment property 7 1.8 0.6
Income from financial interest in property assets 15 2.7 3.9
Fees and other income 8 2.2 2.8
Administrative expenses (13.8) (13.5)
Other expenses (3.6) (0.3)
Impairment of goodwill 24 (12.7) -
Impairment of inventories to net realisable value (0.1) (0.1)
Reversal of impairment of joint venture 14 9.8 2.4
----------------------------------------------------------------- ------ --------- --------
Operating profit 44.9 56.3
Net valuation gains on investment property 11 22.1 5.4
Change in fair value of derivatives - (0.1)
Finance costs (15.0) (14.4)
Finance income 0.5 1.2
Share of profit of associates after tax 13 0.5 1.5
Share of profit of joint ventures after tax 14 1.3 0.7
----------------------------------------------------------------- ------ --------- --------
Profit before tax 2 54.3 50.6
Tax charge for the period 19 (5.0) (8.5)
----------------------------------------------------------------- ------ --------- --------
Profit for the period attributable to the owners of the Company 49.3 42.1
----------------------------------------------------------------- ------ --------- --------
Basic earnings per share (2018 restated, Note 1f) 9 9.0p 9.1p
Diluted earnings per share (2018 restated, Note 1f) 9 9.0p 9.1p
----------------------------------------------------------------- ------ --------- --------
Consolidated statement of comprehensive income
Unaudited
2019 2018
For the 6 months ended 31 March Notes GBPm GBPm
---------------------------------------------------------------------------------------- ------ ---------- --------
Profit for the period 2 49.3 42.1
---------------------------------------------------------------------------------------- ------ ---------- --------
Items that will not be transferred to the consolidated income statement:
Actuarial loss on BPT Limited defined benefit pension scheme 20 (1.5) (0.9)
Items that may be or are reclassified to the consolidated income statement:
Fair value movement on financial interest in property assets 15 - (0.1)
Changes in fair value of cash flow hedges (9.2) 1.2
---------------------------------------------------------------------------------------- ------ ---------- --------
Other comprehensive income and expense for the period before tax (10.7) 0.2
---------------------------------------------------------------------------------------- ------ ---------- --------
Tax relating to components of other comprehensive income:
Tax relating to items that will not be transferred to the consolidated income statement 19 0.3 0.2
Tax relating to items that may be or are reclassified to the consolidated income
statement 19 1.7 (0.2)
Total tax relating to components of other comprehensive income 2.0 -
---------------------------------------------------------------------------------------- ------ ---------- --------
Other comprehensive income and expense for the period after tax (8.7) 0.2
---------------------------------------------------------------------------------------- ------ ---------- --------
Total comprehensive income and expense for the period attributable to the owners of the
Company 40.6 42.3
---------------------------------------------------------------------------------------- ------ ---------- --------
Consolidated statement of financial position
Audited
Unaudited 31 March 2019 30 Sept 2018
As at Notes GBPm GBPm
-------------------------------------------------- ------ ------------------------ --------------
ASSETS
Non-current assets
Investment property 11 1,456.4 589.7
Property, plant and equipment 0.2 0.3
Investment in associates 13 7.6 134.0
Investment in joint ventures 14 17.4 11.6
Financial interest in property assets 15 80.1 82.2
Retirement benefits 20 - 0.9
Deferred tax assets 19 4.9 3.4
Intangible assets 8.6 4.7
--------------------------------------------------- ------ ------------------------ --------------
1,575.2 826.8
-------------------------------------------------- ------ ------------------------ --------------
Current assets
Inventories - trading property 12 712.3 799.3
Trade and other receivables 16 77.3 150.4
Derivative financial instruments 18 0.9 4.4
Cash and cash equivalents 141.0 109.3
931.5 1,063.4
-------------------------------------------------- ------ ------------------------ --------------
Total assets 2,506.7 1,890.2
--------------------------------------------------- ------ ------------------------ --------------
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 18 1,210.6 960.1
Retirement benefits 20 0.4 -
Provisions for other liabilities and charges 1.2 1.3
Deferred tax liabilities 19 25.4 29.9
--------------------------------------------------- ------ ------------------------ --------------
1,237.6 991.3
-------------------------------------------------- ------ ------------------------ --------------
Current liabilities
Interest-bearing loans and borrowings 18 - 1.1
Trade and other payables 17 68.2 70.7
Provisions for other liabilities and charges 0.9 0.7
Current tax liabilities 10.4 7.4
Derivative financial instruments 18 10.5 3.4
--------------------------------------------------- ------ ------------------------ --------------
90.0 83.3
-------------------------------------------------- ------ ------------------------ --------------
Total liabilities 1,327.6 1,074.6
--------------------------------------------------- ------ ------------------------ --------------
NET ASSETS 1,179.1 815.6
--------------------------------------------------- ------ ------------------------ --------------
EQUITY
Issued share capital 30.6 20.9
Share premium account 436.2 111.4
Merger reserve 20.1 20.1
Capital redemption reserve 0.3 0.3
Cash flow hedge reserve (7.0) 0.5
Available-for-sale reserve - 6.0
Retained earnings 695.8 656.4
--------------------------------------------------- ------ ------------------------ --------------
Equity attributable to the owners of the Company 1,176.0 815.6
Non-controlling interests 3.1 -
-------------------------------------------------- ------ ------------------------ --------------
TOTAL EQUITY 1,179.1 815.6
--------------------------------------------------- ------ ------------------------ --------------
Consolidated statement of changes in equity
------------------------------------------------------------------------------------------------------------------------ ---------
Cash
Issued Share Capital flow Available- Non-
share premium Merger redemption hedge for-sale Retained controlling Total
capital account reserve reserve reserve reserve earnings interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Balance as
at 1 October
2017 20.9 111.1 20.1 0.3 (2.1) 6.5 588.5 - 745.3
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Profit for
the period 2 - - - - - - 42.1 - 42.1
Other comprehensive
income/(loss)
for the period - - - - 1.0 (0.1) (0.7) - 0.2
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Total comprehensive
income - - - - 1.0 (0.1) 41.4 - 42.3
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Award of SAYE
shares - 0.2 - - - - - - 0.2
Purchase of
own shares - - - - - - (0.2) - (0.2)
Share-based
payments charge 21 - - - - - - 0.8 - 0.8
Dividends
paid - - - - - - (13.6) - (13.6)
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Total transactions
with owners
recorded directly
in equity - 0.2 - - - - (13.0) - (12.8)
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Balance as
at 31 March
2018 20.9 111.3 20.1 0.3 (1.1) 6.4 616.9 - 774.8
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Profit for
the period - - - - - - 45.3 - 45.3
Other comprehensive
income/(loss)
for the period - - - - 1.6 (0.4) 1.2 - 2.4
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Total comprehensive
income - - - - 1.6 (0.4) 46.5 - 47.7
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Award of SAYE
shares - 0.1 - - - - - - 0.1
Purchase of
own shares - - - - - - (0.1) - (0.1)
Share-based
payments charge - - - - - - 0.3 - 0.3
Dividends
paid - - - - - - (7.2) - (7.2)
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Total transactions
with owners
recorded directly
in equity - 0.1 - - - - (7.0) - (6.9)
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Balance as
at 30 September
2018 20.9 111.4 20.1 0.3 0.5 6.0 656.4 - 815.6
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Profit for
the period 2 - - - - - - 49.3 - 49.3
Other comprehensive
loss for the
period - - - - (7.5) - (1.2) - (8.7)
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Total comprehensive
income - - - - (7.5) - 48.1 - 40.6
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Issue of share
capital 23 9.7 324.8 - - - - - - 334.5
Purchase of
own shares - - - - - - (0.9) - (0.9)
Share-based
payments charge 21 - - - - - - 0.9 - 0.9
Acquisition
of non-controlling
interests 24 - - - - - - - 3.1 3.1
Transfer of
available-for-sale
reserve 1b - - - - - (6.0) 6.0 - -
Dividends
paid 10 - - - - - - (14.7) - (14.7)
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Total transactions
with owners
recorded directly
in equity 9.7 324.8 - - - (6.0) (8.7) 3.1 322.9
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Balance as
at 31 March
2019 30.6 436.2 20.1 0.3 (7.0) - 695.8 3.1 1,179.1
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ------------- ---------
Consolidated statement of cash flows
Unaudited
2019 2018
For the 6 months ended 31 March Notes GBPm GBPm
---------------------------------------------------- ------ -------- --------
Cash flow from operating activities
Profit for the period 49.3 42.1
Depreciation and amortisation 0.4 0.4
Impairment of goodwill 24 12.7 -
Net valuation gains on investment property 11 (22.1) (5.4)
Net finance costs 14.5 13.2
Share of profit of associates and joint ventures 13,14 (1.8) (2.2)
Profit on disposal of investment property 7 (1.8) (0.6)
Share-based payment charge 21 0.9 0.8
Change in fair value of derivatives - 0.1
Reversal of impairment of joint venture 14 (9.8) (2.4)
Income from financial interest in property assets 15 (2.7) (3.9)
Tax 19 5.0 8.5
Cash generated from operating activities before
changes in working capital 44.6 50.6
Decrease/(increase) in trade and other receivables 73.9 (3.5)
(Decrease)/increase in trade and other payables (10.5) 13.6
(Decrease)/increase in provisions for liabilities
and charges (0.1) 0.1
Decrease in inventories 15.5 22.7
---------------------------------------------------- ------ -------- --------
Cash generated from operating activities 123.4 83.5
Interest paid (16.9) (16.0)
Tax paid (8.4) (7.3)
Payments to defined benefit pension scheme 20 (0.3) (0.3)
---------------------------------------------------- ------ -------- --------
Net cash inflow from operating activities 97.8 59.9
---------------------------------------------------- ------ -------- --------
Cash flow from investing activities
Acquisition of subsidiary net of cash acquired 24 (350.9) -
Proceeds from sale of investment property 26.4 2.2
Proceeds from financial interest in property
assets 15 4.8 4.3
Dividends received 13,14 - 0.5
Investment in associates and joint ventures 13,14 - (5.2)
Loans advanced to associates and joint ventures 13,14 (1.4) (2.0)
Loans repaid by associates and joint ventures 13,14 5.7 6.2
Acquisition of investment property 11 (96.9) (110.4)
Acquisition of property, plant and equipment
and intangible assets (4.1) (0.9)
---------------------------------------------------- ------ -------- --------
Net cash outflow from investing activities (416.4) (105.3)
---------------------------------------------------- ------ -------- --------
Cash flow from financing activities
Net proceeds from issue of share capital 23 334.5 -
Awards of SAYE options - 0.2
Purchase of own shares (0.9) (0.2)
Proceeds from new borrowings 84.7 285.0
Payment of loan costs (0.5) (2.1)
Repayment of borrowings (52.8) (216.3)
Dividends paid 10 (14.7) (13.6)
---------------------------------------------------- ------ -------- --------
Net cash inflow from financing activities 350.3 53.0
---------------------------------------------------- ------ -------- --------
Net increase in cash and cash equivalents 31.7 7.6
Cash and cash equivalents at the beginning of
the period 109.3 88.9
Cash and cash equivalents at the end of the
period 141.0 96.5
---------------------------------------------------- ------ -------- --------
Notes to the unaudited interim financial results
1. Accounting policies
1a Basis of preparation
These condensed interim financial statements are unaudited and
do not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006. This condensed consolidated interim
financial information has been prepared in accordance with the
Disclosure and Transparency Rules of the Finance Conduct Authority
and International Accounting Standard 34 (IAS 34) 'Interim
Financial Reporting' as adopted by the European Union. The interim
condensed financial statements should be read in conjunction with
the annual financial statements for the year ended 30 September
2018 which have been prepared in accordance with International
Financial Reporting Standards ('IFRS') as adopted by the European
Union.
With the exception of the changes detailed in Note 1b, the
accounting policies used are consistent with those contained in the
Group's last annual report and accounts for the year ended 30
September 2018 which is available on the Group's website
(www.graingerplc.co.uk). The Grainger business is not judged to be
highly seasonal, therefore comparatives used for the six month
period ended 31 March 2019 Consolidated Income Statement are the
six month period ended 31 March 2018 Consolidated Income Statement.
It is therefore not necessary to disclose the Consolidated Income
Statement for the full year ended 30 September 2018 (available in
the last annual report).
The comparative figures for the financial year ended 30
September 2018 are not the Company's statutory accounts for that
financial year. Those accounts have been reported on by the
Company's auditor and delivered to the registrar of companies. The
report of the auditor was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
The financial information included in this announcement has been
prepared in accordance with EU endorsed IFRS, IFRS IC
interpretations and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
All property assets are subject to a Directors' valuation at the
half year end, supported by an independent external valuation on a
sample basis. The Group's financial derivatives were valued as at
31 March 2019 in-house by a specialised treasury management system,
using a discounted cash flow model and market information. The fair
value is derived from the present value of future cash flows
discounted at rates obtained by means of the current yield curve
appropriate for those instruments.
Taxation is calculated based upon the best estimate of the
weighted average corporation tax rate expected for the full
year.
1b Adoption of new and revised International Financial Reporting Standards
New standards and interpretations in the year
New standards, amendments and interpretations that have been
published and are therefore mandatory for the Group's accounting
periods beginning on or after 1 October 2017 and later periods are
disclosed on page 94-96 of the Annual Report and Accounts for the
year ended 30 September 2018.
Notes to the unaudited interim financial results continued
IAS 40 Investment Property - The amendment to IAS 40 that
widened the scope for transfers to and from investment property was
effective for the Group from 1 October 2018. The Group has assessed
its property classifications across its entire portfolio at the
effective date and concluded that trading property with a cost of
GBP71.5m and market value of GBP73.4m be reclassified as investment
property. Further details are shown in Note 11.
IFRS 9 Financial Instruments - IFRS 9, which replaced IAS 39
Financial Instruments: Recognition and Measurement, was effective
for the Group from 1 October 2018. The abolishment of the
available-for-sale financial asset classification has resulted in
CHARM being classified as fair value through profit and loss
(FVTPL). This does not impact the carrying value of CHARM on the
consolidated statement of financial position, but does impact the
attribution of movements in fair value which are now taken through
the consolidated income statement in full. As a result, the GBP6.0m
opening balance of the available-for-sale reserve was transferred
to retained earnings in the period.
There are no material impacts from the adoption of IFRS 9 in
relation to hedge accounting or impairment provisions against trade
receivables in respect of expected credit losses.
IFRS 15 Revenue from Contracts with Customers - there has been
no transitional impact or material impact on the Group following
IFRS 15 becoming effective from 1 October 2018. Additional
disclosures as required by the standard will be presented in the
Group's 2019 annual report and accounts.
New standards not yet effective
IFRS 16 Leases - IFRS 16, which is effective for the Group from
1 October 2019, is expected to have an immaterial impact on the
overall net assets and the consolidated income statement of the
Group on adoption. As a lessor, the Group's position is
substantially unchanged. As a lessee of office space, the asset and
corresponding lease liability will be presented in the statement of
financial position and in the notes to the financial statements
upon adoption of the standard.
1c Group risk factors
The principal risks and uncertainties facing the Group are set
out in the Risk Management report on pages 34-36 of the 2018 Annual
Report and Accounts.
A number of risks faced by the Group are not directly within our
control such as the wider economic and political environment.
Risks are outlined on pages 32-33 of the 2018 Annual Report and
Accounts. There have been no significant updates to risk, or
failures of control, within the reporting period.
1d Forward-looking statements
Certain statements in this interim announcement are
forward-looking. Although the Group believes that the expectations
reflected in these forward-looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. We undertake no obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise.
Notes to the unaudited interim financial results continued
1e Significant judgements and estimates
Full details of critical accounting estimates are given on pages
96-100 of the 2018 Annual Report and Accounts. New critical
accounting estimates in the period were:
Business combination
In line with the Group's accounting policy on business
combinations, the Group considers at the time of the transaction
whether the acquisition represents the acquisition of a business
under IFRS 3 Business Combinations or the acquisition of an asset.
The Group accounts for a business combination when an integrated
set of activities are acquired in addition to the property. This
gives consideration to what constitutes a business in its own right
and involves looking through the corporate wrapper. In order to be
defined as a business, the entity should be capable of being
conducted and managed separately and the pure legal form is not
necessarily a determining factor in its own right.
The Group has assessed this in relation to the acquisition of
GRIP REIT plc ('GRIP') and concluded the acquisition constitutes a
business combination. The acquisition and related transaction costs
have therefore been accounted for in accordance with IFRS 3 in
these financial statements.
Goodwill arising on business combination
As the GRIP acquisition has been categorised as a business
combination, any premium paid over the fair value of the assets
acquired is treated as goodwill.
Goodwill has been assessed for impairment on acquisition. As no
definitive and measurable portfolio premium can be ascribed to the
combined value of the properties, an impairment charge for the
goodwill recognised of GBP12.7m has been taken to the consolidated
income statement.
Valuation of assets
Valuations for the GRIP portfolio at 30 September 2018 and 31
December 2018, being GRIP's year end, were performed by CBRE
Limited. To align GRIP with the Group's portfolio, the valuation of
certain GRIP residential properties will be transitioned from CBRE
Limited to Allsop LLP where appropriate.
1f Prior period restatement
Following the rights issue completed in December 2018, pence per
share comparatives have been restated using a bonus adjustment
factor of 1.1066. This is based on the ratio of a mid-market share
price of 255.3 pence per share on 30 November 2018, the business
day before the shares started trading ex-rights and the theoretical
ex-rights price at that date of 230.7 pence per share. Restated
comparatives include diluted earnings per share - adjusted (Note
2), EPRA NAV and EPRA NNNAV (Note 3), earnings per share (Note 9)
and dividends (Note 10).
Notes to the unaudited interim financial results continued
2. Analysis of profit before tax
The table below provides adjusted earnings, which is one of
Grainger's key performance indicators. The metric is utilised as a
key measure to aid understanding of the performance of the
continuing business and excludes valuation movements and other
adjustments that are one-off in nature, which do not form part of
the normal ongoing revenue or costs of the business and, either
individually or in aggregate, are material to the reported Group
results.
For the 6 months
ended
31 March
(Unaudited) 2019 2018
------------------------------------------------ -------------------------------------------------
Other Adjusted Other Adjusted
GBPm Statutory Valuation adjustments earnings Statutory Valuation adjustments earnings
----------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------- ----------
Group revenue 107.0 - - 107.0 135.3 - - 135.3
----------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------- ----------
Net rental
income 29.1 - - 29.1 21.8 - - 21.8
Profit on
disposal
of trading
property 29.5 - - 29.5 38.7 (0.4) - 38.3
Profit on
disposal
of investment
property 1.8 - - 1.8 0.6 - - 0.6
Income from
financial
interest in
property
assets 2.7 0.1 - 2.8 3.9 (1.0) - 2.9
Fees and other
income 2.2 - - 2.2 2.8 - - 2.8
Administrative
expenses (13.8) - - (13.8) (13.5) - - (13.5)
Other expenses (3.6) - 3.0 (0.6) (0.3) - - (0.3)
Impairment of
goodwill (12.7) - 12.7 -
Impairment of
inventories
to net
realisable
value (0.1) 0.1 - - (0.1) 0.1 - -
Reversal of
impairment
of joint
venture 9.8 (9.8) - - 2.4 (2.4) - -
----------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------- ----------
Operating profit 44.9 (9.6) 15.7 51.0 56.3 (3.7) - 52.6
Net valuation
gains
on investment
property 22.1 (22.1) - - 5.4 (5.4) - -
Change in fair
value
of derivatives - - - - (0.1) 0.1 - -
Finance costs (15.0) - - (15.0) (14.4) - - (14.4)
Finance income 0.5 - - 0.5 1.2 - - 1.2
Share of profit
of
associates
after
tax 0.5 - - 0.5 1.5 (0.5) - 1.0
Share of profit
of
joint ventures
after
tax 1.3 - - 1.3 0.7 (0.2) - 0.5
----------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------- ----------
Profit before
tax 54.3 (31.7) 15.7 38.3 50.6 (9.7) - 40.9
Tax charge for
the
period (5.0) (8.5)
----------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------- ----------
Profit for the
period
attributable to
the
owners of the
Company 49.3 42.1
----------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------- ----------
Diluted earnings
per share -
adjusted
(2018 restated)
Note 1f 5.7p 7.2p
----------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------- ----------
Notes to the unaudited interim financial results continued
Income from financial interest in property assets ('CHARM')
comprises income from the asset calculated at the effective
interest rate, shown as adjusted earnings, and any movements in
future cash flow projections related to the asset, are shown within
valuations. Further details are shown in Note 15.
Profit before tax in the adjusted columns above of GBP38.3m
(2018: GBP40.9m) is the adjusted earnings of the Group. Adjusted
earnings per share assumes tax of GBP7.3m (2018: GBP7.8m) in line
with the current standard UK corporation tax rate of 19.0% (2018:
19.0%), divided by the weighted average number of diluted shares as
shown in Note 9.
Other adjustments in 2019 comprise GBP12.7m goodwill written off
and GBP3.0m transaction costs and subsequent structuring costs in
relation to the acquisition of GRIP.
3. Segmental Information
IFRS 8, Operating Segments requires operating segments to be
identified based upon the Group's internal reporting to the Chief
Operating Decision Maker ('CODM') so that the CODM can make
decisions about resources to be allocated to segments and assess
their performance. The Group's CODM is the Chief Executive
Officer.
Following the acquisition of GRIP in December 2018, the
provision of management information relating to segmental reporting
has been amended. The amended format improves clarity of reporting,
separating the previous Residential segment to enable visibility of
performance between PRS and Reversionary segments, aligned to the
management of the organisation. The PRS segment includes stabilised
PRS assets as well as PRS under construction due to direct
development and forward funding arrangements, both for wholly owned
assets and the Group's interest in joint ventures and associates as
relevant. The Reversionary segment includes regulated tenancies, as
well as CHARM. The Development segment that included legacy
strategic land and development arrangements is reported in the
Other segment, along with administrative expenses.
The key operating performance measure of profit or loss used by
the CODM is adjusted earnings before tax, valuation and other
adjustments. The CODM reviews by segment two key statement of
financial position measures of net asset value. These are EPRA Net
Asset Value ('EPRA NAV') and EPRA Triple Net Asset Value ('EPRA
NNNAV').
Information relating to the Group's operating segments is set
out in the tables below. The tables distinguish between adjusted
earnings, valuation movements and other adjustments and should be
read in conjunction with Note 2.
Notes to the unaudited interim financial results continued
March 2019 Income statement (unaudited)
For the 6 months ended 31 March
2019
GBPm PRS Reversionary Other Total
---------------------------------------- ------ ------------- ------- -------
Group revenue
Segment revenue - external 33.6 60.7 12.7 107.0
---------------------------------------- ------ ------------- ------- -------
Net rental income 18.8 10.3 - 29.1
Profit on disposal of trading property 1.6 23.1 4.8 29.5
Profit on disposal of investment
property 1.8 - - 1.8
Income from financial interest
in property assets - 2.8 - 2.8
Fees and other income 1.4 0.1 0.7 2.2
Administrative expenses - - (13.8) (13.8)
Other expenses (0.6) - - (0.6)
Net finance costs (8.2) (5.8) (0.5) (14.5)
Share of trading profit of joint
ventures and associates after tax 0.5 - 1.3 1.8
---------------------------------------- ------ ------------- ------- -------
Adjusted earnings 15.3 30.5 (7.5) 38.3
Valuation movements 31.7
Other adjustments (15.7)
---------------------------------------- ------ ------------- ------- -------
Profit before tax 54.3
---------------------------------------- ------ ------------- ------- -------
A reconciliation from adjusted earnings to adjusted EPRA
earnings is detailed in the table below, with further details shown
in the EPRA performance measures section at the end of this
document:
For the 6 months ended 31 March
2019
GBPm PRS Reversionary Other Total
-------------------------------------- ------ ------------- ------ -------
Adjusted earnings 15.3 30.5 (7.5) 38.3
Profit on disposal of investment
property (1.8) - - (1.8)
Previously recognised profit through
EPRA NAV / EPRA NNNAV - (21.8) - (21.8)
-------------------------------------- ------ ------------- ------ -------
Adjusted EPRA earnings 13.5 8.7 (7.5) 14.7
-------------------------------------- ------ ------------- ------ -------
March 2018 Income statement (unaudited) - restated
The table below has been restated in accordance with revised
segmental reporting.
For the 6 months ended 31 March
2018
GBPm PRS Reversionary Other Total
---------------------------------------- ------ ------------- ------- -------
Group revenue
Segment revenue - external 18.9 73.8 42.6 135.3
---------------------------------------- ------ ------------- ------- -------
Net rental income 11.4 10.4 - 21.8
Profit on disposal of trading property - 31.7 6.6 38.3
Profit on disposal of investment
property 0.6 - - 0.6
Income from financial interest
in property assets - 2.9 - 2.9
Fees and other income 2.2 0.1 0.5 2.8
Administrative expenses - - (13.5) (13.5)
Other expenses (0.3) - (0.3)
Net finance costs (5.2) (7.1) (0.9) (13.2)
Share of trading profit of joint
ventures and associates after tax 1.5 - - 1.5
---------------------------------------- ------ ------------- ------- -------
Adjusted earnings 10.2 38.0 (7.3) 40.9
Valuation movements 9.7
Other adjustments -
---------------------------------------- ------ ------------- ------- -------
Profit before tax 50.6
---------------------------------------- ------ ------------- ------- -------
Notes to the unaudited interim financial results continued
A reconciliation from adjusted earnings to adjusted EPRA
earnings is detailed in the table below:
For the 6 months ended 31 March
2018
GBPm PRS Reversionary Other Total
-------------------------------------- ------ ------------- ------ -------
Adjusted earnings 10.2 38.0 (7.3) 40.9
Profit on disposal of investment
property (0.6) - - (0.6)
Previously recognised profit through
EPRA NAV / EPRA NNNAV - (27.8) - (27.8)
-------------------------------------- ------ ------------- ------ -------
Adjusted EPRA earnings 9.6 10.2 (7.3) 12.5
-------------------------------------- ------ ------------- ------ -------
Segmental assets
The two principal net asset value measures reviewed by the CODM
are EPRA NAV and EPRA NNNAV. These measurements reflect the current
market value of trading property owned by the Group rather than the
lower of historical cost and net realisable value. These measures
are considered to be a more relevant reflection of the value of the
assets owned by the Group.
EPRA NAV is the statutory net assets plus the adjustment
required to increase the value of trading stock from its statutory
accounts value of the lower of cost and net realisable value, to
its market value. In addition, the statutory statement of financial
position amounts for both deferred tax on property revaluations and
derivative financial instruments net of deferred tax, including
those in joint ventures and associates, are added back to statutory
net assets. Finally, the market value of Grainger plc shares owned
by the Group are added back to statutory net assets.
EPRA NNNAV reverses some of the adjustments made between
statutory net assets and EPRA NAV. All of the adjustments for the
value of derivative financial instruments net of deferred tax,
including those in joint ventures and associates, are reversed. The
adjustment for the deferred tax on property revaluations is also
reversed. In addition, adjustments are made to net assets to
reflect the fair value, net of deferred tax, of the Group's fixed
rate debt and to deduct from net assets the contingent tax
calculated by applying the expected rate of tax to the adjustment
to increase the value of trading stock from its statutory accounts
value of the lower of cost and net realisable value, to its market
value.
These measures are set out below by segment along with a
reconciliation to the summarised statutory statement of financial
position:
March 2019 Segment net assets (unaudited)
PRS Reversionary Other Total Pence
per
GBPm share
-------------------------- -------- ------------- ------ -------- -------
Total segment net assets
(statutory) 915.6 233.8 29.7 1,179.1 -
-------------------------- -------- ------------- ------ -------- -------
Total segment net assets
(EPRA NAV) 1,027.4 728.8 44.9 1,801.1 294
-------------------------- -------- ------------- ------ -------- -------
Total segment net assets
(EPRA NNNAV) 997.4 644.4 22.9 1,664.7 271
-------------------------- -------- ------------- ------ -------- -------
Notes to the unaudited interim financial results continued
March 2019 Reconciliation of EPRA NAV measures (unaudited)
Adjustments
to market
value, Deferred
Statutory deferred EPRA NAV and Derivatives/ EPRA NNNAV
balance tax and balance contingent fixed balance
GBPm sheet derivatives sheet tax rate debt sheet
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Investment property 1,456.4 - 1,456.4 - - 1,456.4
Investment in joint
ventures and associates 25.0 - 25.0 - - 25.0
Financial interest
in property assets 80.1 - 80.1 - - 80.1
Inventories - trading
property 712.3 587.3 1,299.6 - - 1,299.6
Cash and cash equivalents 141.0 - 141.0 - - 141.0
Other assets 91.9 3.7 95.6 - 5.4 101.0
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Total assets 2,506.7 591.0 3,097.7 - 5.4 3,103.1
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Interest-bearing loans
and borrowings (1,210.6) - (1,210.6) - (16.7) (1,227.3)
Deferred and contingent
tax liabilities (25.4) 20.5 (4.9) (114.6) - (119.5)
Other liabilities (91.6) 10.5 (81.1) - (10.5) (91.6)
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Total liabilities (1,327.6) 31.0 (1,296.6) (114.6) (27.2) (1,438.4)
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Net assets 1,179.1 622.0 1,801.1 (114.6) (21.8) 1,664.7
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
September 2018 Segment net assets (audited) - restated
The table below has been restated in accordance with revised
segmental reporting.
PRS Reversionary Other Total Pence
per
share
restated
(Note
GBPm 1f)
-------------------------- ------ ------------- ------ -------- ----------
Total segment net assets
(statutory) 486.0 244.3 85.3 815.6 -
-------------------------- ------ ------------- ------ -------- ----------
Total segment net assets
(EPRA NAV) 607.6 754.7 94.8 1,457.1 314
-------------------------- ------ ------------- ------ -------- ----------
Total segment net assets
(EPRA NNNAV) 564.6 666.9 92.2 1,323.7 286
-------------------------- ------ ------------- ------ -------- ----------
September 2018 Reconciliation of EPRA NAV measures (audited)
Adjustments
to market
value, Deferred
Statutory deferred EPRA NAV and Derivatives/ EPRA NNNAV
balance tax and balance contingent fixed balance
GBPm sheet derivatives sheet tax rate debt sheet
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Investment property 589.7 - 589.7 - - 589.7
Investment in joint
ventures and associates 145.6 0.4 146.0 - (0.4) 145.6
Financial interest
in property assets 82.2 - 82.2 - - 82.2
Inventories - trading
property 799.3 607.1 1,406.4 - - 1,406.4
Cash and cash equivalents 109.3 - 109.3 - - 109.3
Other assets 164.1 2.7 166.8 - 4.9 171.7
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Total assets 1,890.2 610.2 2,500.4 - 4.5 2,504.9
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Interest-bearing loans
and borrowings (961.2) - (961.2) - (3.4) (964.6)
Deferred and contingent
tax liabilities (29.9) 27.9 (2.0) (131.1) - (133.1)
Other liabilities (83.5) 3.4 (80.1) - (3.4) (83.5)
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Total liabilities (1,074.6) 31.3 (1,043.3) (131.1) (6.8) (1,181.2)
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Net assets 815.6 641.5 1,457.1 (131.1) (2.3) 1,323.7
--------------------------- ---------- ------------- ---------- ------------ ------------- -----------
Notes to the unaudited interim financial results continued
4. Group revenue
Unaudited
2019 2018
GBPm GBPm
----------------------------------------------------------- --------- --------
Gross rental income (Note 5) 39.4 29.4
Gross proceeds from disposal of trading property (Note 6) 65.4 103.1
Fees and other income (Note 8) 2.2 2.8
----------------------------------------------------------- --------- --------
107.0 135.3
----------------------------------------------------------- --------- --------
5. Net rental income
Unaudited
2019 2018
GBPm GBPm
----------------------------- --------- -------
Gross rental income 39.4 29.4
Property operating expenses (10.3) (7.6)
----------------------------- --------- -------
29.1 21.8
----------------------------- --------- -------
6. Profit on disposal of trading property
Unaudited
2019 2018
GBPm GBPm
-------------------------------------------------- -------- --------
Proceeds from disposal of trading property 61.1 77.8
Revenue from construction contract 4.3 25.3
-------------------------------------------------- -------- --------
Gross proceeds from disposal of trading property 65.4 103.1
Selling costs (1.2) (1.6)
-------------------------------------------------- -------- --------
Net proceeds from disposal of trading property 64.2 101.5
Carrying value of trading property sold (31.2) (43.1)
Carrying value of construction contract expenses (3.5) (19.7)
-------------------------------------------------- -------- --------
29.5 38.7
-------------------------------------------------- -------- --------
Amounts relating to the construction contract included in the
above table relate to the Group's development of properties in the
arrangement with the Royal Borough of Kensington and Chelsea. The
Group managed and funded the construction of a number of sites and
received a developer's priority return at a fixed rate margin
recoverable from the sale of completed residential units to third
parties. The construction contract is accounted for as a cost plus
contract in line with IFRS 15 Revenue from Contracts with
Customers, with construction concluding in 2019.
7. Profit on disposal of investment property
Unaudited
2019 2018
GBPm GBPm
------------------------------------------------------ --------- -------
Gross proceeds from disposal of investment property 27.0 2.3
Selling costs (0.6) (0.1)
------------------------------------------------------ --------- -------
Net proceeds from disposal of investment property 26.4 2.2
Carrying value of investment property sold (Note 11) (24.6) (1.6)
------------------------------------------------------ --------- -------
1.8 0.6
------------------------------------------------------ --------- -------
Notes to the unaudited interim financial results continued
8. Fees and other income
Unaudited
2019 2018
GBPm GBPm
------------------------------------------ --------- --------
Property and asset management fee income 2.1 2.5
Other sundry income 0.1 0.3
------------------------------------------ --------- --------
2.2 2.8
------------------------------------------ --------- --------
9. Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit or
loss attributable to the owners of the Company by the weighted
average number of ordinary shares in issue during the period,
excluding ordinary shares purchased by the Group and held both in
Trust and as treasury shares to meet its obligations under the
Long-Term Incentive Plan ('LTIP'), Deferred Bonus Plan ('DBP') and
Save As You Earn ('SAYE') schemes, on which the dividends are being
waived.
Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of shares in issue by the dilutive effect
of ordinary shares that the Company may potentially issue relating
to its share option schemes and contingent share awards under the
LTIP and DBP, based upon the number of shares that would be issued
if 31 March 2019 was the end of the contingency period. Where the
effect of the above adjustments is antidilutive, they are excluded
from the calculation of diluted earnings per share.
Unaudited
31 March 2019 31 March 2018
------------------------------ --------------------------------- ---------------------------------
Restated (Note
1f)
Profit Weighted Profit Weighted
for average Earnings for average Earnings
the number per the number per
period of shares share period of shares share
GBPm (millions) (pence) GBPm (millions) (pence)
------------------------------ -------- ------------ --------- -------- ------------ ---------
Basic earnings per share
Profit attributable to
equity holders 49.3 545.8 9.0 42.1 460.5 9.1
Effect of potentially
dilutive securities
Share options and contingent
shares - 2.7 - - 2.7 -
------------------------------ -------- ------------ --------- -------- ------------ ---------
Diluted earnings per share
Profit attributable to
equity holders 49.3 548.5 9.0 42.1 463.2 9.1
------------------------------ -------- ------------ --------- -------- ------------ ---------
10. Dividends
The Company has announced an interim dividend of 1.73p (March
2018 restated - Note 1f: 1.57p) per share which will return
GBP10.6m (March 2018: GBP7.2m) of cash to shareholders. In the six
months ended 31 March 2019, the final dividend for the year ended
30 September 2018 which amounted to GBP14.7m has been paid.
Notes to the unaudited interim financial results continued
11. Investment property
Audited
Unaudited 31 March 30 Sept
2019 2018
GBPm GBPm
------------------------------------------------- ------------------- ---------
Opening balance 589.7 391.0
Additions 96.9 179.7
Acquired through business combination (Note 24) 700.8 -
Transfer from inventories 71.5 -
Disposals (Note 7) (24.6) (3.6)
Net valuation gains 22.1 22.6
Closing balance 1,456.4 589.7
------------------------------------------------- ------------------- ---------
12. Inventories
Unaudited 31 March Audited 30 Sept
2019 2018
GBPm GBPm
--------------------------------------------------- ------------------- ----------------
Opening balance 799.3 841.3
Additions 19.3 77.6
Transfer to investment property (71.5) -
Disposals (34.7) (119.1)
Impairment of inventories to net realisable value (0.1) (0.5)
--------------------------------------------------- ------------------- ----------------
Closing balance 712.3 799.3
--------------------------------------------------- ------------------- ----------------
13. Investment in associates
Audited
Unaudited 31 March 30 Sept
2019 2018
GBPm GBPm
-------------------------------------------------------------------------------------- ------------------- ---------
Opening balance 134.0 123.2
Share of profit for the period 0.5 7.2
Dividends received - (2.2)
Further investment(1) - 5.2
Investment eliminated on consolidation following acquisition (109.7) -
Loan eliminated on consolidation following acquisition (18.2) -
Loans advanced to associates 1.0 5.2
Loans repaid by associates - (4.9)
Share of change in fair value of cash flow hedges taken through other comprehensive
income - 0.3
Closing balance 7.6 134.0
-------------------------------------------------------------------------------------- ------------------- ---------
(1) There were no additional amounts invested by the Group in
GRIP in the period prior to its acquisition in December 2018 (2017:
GBP5.2m).
The closing balance comprises share of net assets of GBPnil
(September 2018: GBP109.2m) and net loans due from associates of
GBP7.6m (September 2018: GBP24.8m).
The investment eliminated on consolidation following acquisition
of GBP109.7m represents the Group's share of net assets in GRIP
which became a subsidiary of Grainger on 20 December 2018 (see Note
24).
Notes to the unaudited interim financial results continued
As at 31 March 2019, the Group's interest in associates was as
follows:
% of ordinary Country of Accounting
share capital incorporation period end
held
--------- --------------- --------------- -------------
Vesta LP 20.0 United Kingdom 30 September
--------- --------------- --------------- -------------
14. Investment in joint ventures
Unaudited 31 March Audited 30 Sept
2019 2018
GBPm GBPm
------------------------------------------------------------------------------- ------------------- ----------------
Opening balance 11.6 74.4
Share of profit for the period 1.3 0.6
Dividends received - (0.1)
Reversal of impairment 9.8 5.5
Loans advanced to joint ventures 0.4 0.2
Loans repaid by joint ventures (5.7) (9.1)
Disposal - (60.0)
Share of change in fair value of cash flow hedges taken through other
comprehensive income - 0.1
------------------------------------------------------------------------------- ------------------- ----------------
Closing balance 17.4 11.6
------------------------------------------------------------------------------- ------------------- ----------------
The closing balance comprises share of net assets of GBP1.1m
(September 2018: net liabilities of GBP0.2m) and net loans due from
joint ventures of GBP16.3m (September 2018: GBP11.8m).
At 31 March 2019, the Group's interest in joint ventures was as
follows:
% of ordinary
share capital Country of Accounting
held incorporation period end
---------------------------- --------------- --------------- -------------
Curzon Park Limited 50 United Kingdom 31 March
Helical Grainger (Holdings) 31 March
Limited 50 United Kingdom
Lewisham Grainger Holdings 30 September
Limited 50 United Kingdom
CCZ a.s. 50 Czech Republic 30 September
---------------------------- --------------- --------------- -------------
15. Financial interest in property assets ('CHARM'
portfolio)
Unaudited
31 March Audited 30 Sept
2019 2018
GBPm GBPm
-------------------------------------------------------- ---------- ----------------
Opening balance 82.2 86.1
Cash received from the instrument (4.8) (9.9)
Amounts taken to income statement 2.7 6.5
Amounts taken to other comprehensive income before tax - (0.5)
-------------------------------------------------------- ---------- ----------------
Closing balance 80.1 82.2
-------------------------------------------------------- ---------- ----------------
The CHARM portfolio is a financial interest in equity mortgages
held by the Church of England Pensions Board as mortgagee. It is
accounted for under IFRS 9 and is measured at fair value through
profit and loss.
It is considered to be a Level 3 financial asset as defined by
IFRS 13. The financial asset is included in the fair value
hierarchy within Note 18.
Notes to the unaudited interim financial results continued
16. Trade and other receivables
Unaudited 31 March Audited 30 Sept
2019 2018
GBPm GBPm
----------------------------------------- ------------------- ----------------
Rent and other tenant receivables 2.9 2.3
Deduct: Provision for impairment (1.0) (0.5)
----------------------------------------- ------------------- ----------------
Rent and other tenant receivables - net 1.9 1.8
Amounts recoverable on contracts 34.8 112.0
Other receivables 38.9 34.8
Prepayments 1.7 1.8
----------------------------------------- ------------------- ----------------
77.3 150.4
----------------------------------------- ------------------- ----------------
Amounts recoverable on contracts primarily relate to the
receivables on the arrangement with the Royal Borough of Kensington
and Chelsea (Note 6).
Other receivables include GBP25.8m (September 2018: GBP15.6m)
due from land and property sales, receivable by no later than July
2019.
17. Trade and other payables
Unaudited 31 March Audited 30 Sept
2019 2018
GBPm GBPm
------------------------------- ------------------- ----------------
Deposits received 7.0 3.1
Trade payables 18.4 20.6
Tax and social security costs 1.1 0.5
Accruals 38.0 44.4
Deferred income 3.7 2.1
------------------------------- ------------------- ----------------
68.2 70.7
------------------------------- ------------------- ----------------
18. Interest-bearing loans and borrowings and financial risk
management
Unaudited Audited
31 March 30 Sept
2019 2018
GBPm GBPm
--------------------------------------------- ---------- ---------
Current liabilities
Non-bank financial institution - 1.1
- 1.1
--------------------------------------------- ---------- ---------
Non-current liabilities
Bank loans - Pounds Sterling 790.1 533.4
Bank loans - Euro 0.9 0.9
Non-bank financial institution 73.4 79.8
Corporate bond 346.2 346.0
1,210.6 960.1
--------------------------------------------- ---------- ---------
Total interest-bearing loans and borrowings 1,210.6 961.2
--------------------------------------------- ---------- ---------
The above analyses of loans and borrowings are net of
unamortised costs and the discount on issuance of the corporate
bond. As at 31 March 2019, unamortised cost totalled GBP10.8m
(September 2018: GBP10.9m) and the outstanding discount was GBP1.3m
(September 2018: GBP1.4m).
Notes to the unaudited interim financial results continued
Categories of financial instrument
The Group holds financial instruments such as financial interest
in property assets, trade and other receivables (excluding
prepayments), derivatives, cash and cash equivalents. For all
assets and liabilities excluding interest-bearing loans the book
value was the same as the fair value as at 31 March 2019 and as at
30 September 2018.
As at 31 March 2019, the fair value of interest-bearing loans is
greater than the book value by GBP16.7m (September 2018: GBP3.4m),
but there is no requirement under IFRS 9 to adjust the carrying
value of loans, all of which are stated at amortised cost in the
consolidated statement of financial position.
Net debt
The table below sets out the calculation of net debt and
LTV:
Unaudited 31 March Audited 30 Sept
2019 2018
GBPm GBPm
-------------------------------------------------------------- ------------------- ----------------
Gross debt 1,210.6 961.2
Cash (excluding restricted cash) (131.0) (94.9)
-------------------------------------------------------------- ------------------- ----------------
Net debt 1,079.6 866.3
-------------------------------------------------------------- ------------------- ----------------
Market value of properties 2,756.0 1,996.1
Other property related assets 145.6 336.2
-------------------------------------------------------------- ------------------- ----------------
Total market value of properties and property related assets 2,901.6 2,332.3
-------------------------------------------------------------- ------------------- ----------------
LTV 37.2% 37.1%
-------------------------------------------------------------- ------------------- ----------------
Market risk
The Group is exposed to market risk through interest rates,
foreign exchange fluctuations, the availability of credit and house
price movements relating to the Tricomm Housing portfolio and the
CHARM portfolio. The Group is not significantly exposed to equity
price risk or to commodity price risk.
Fair values
IFRS 13 sets out a three-tier hierarchy for financial assets and
liabilities valued at fair value. These are as follows:
Level 1 - quoted prices (unadjusted) in active markets for
identical assets and liabilities;
Level 2 - inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly or
indirectly; and
Level 3 - unobservable inputs for the asset or liability.
Notes to the unaudited interim financial results continued
The following table presents the Group's assets and liabilities
that are measured at fair value:
Unaudited Audited
31 March 2019 30 September 2018
---------------------- ---------------------
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
---------------------------------------------------------------------- -------- ------------ ------- ------------
Level 3
---------------------------------------------------------------------- -------- ------------ ------- ------------
CHARM 80.1 - 82.2 -
Investment property 1,456.4 - 589.7 -
---------------------------------------------------------------------- -------- ------------ ------- ------------
1,536.5 - 671.9 -
---------------------------------------------------------------------- -------- ------------ ------- ------------
Level 2
---------------------------------------------------------------------- -------- ------------ ------- ------------
Interest rate swaps - in cash flow hedge accounting relationships 0.9 10.5 4.2 3.4
Interest rate caps - not in cash flow hedge accounting relationships - - 0.2 -
0.9 10.5 4.4 3.4
---------------------------------------------------------------------- -------- ------------ ------- ------------
The significant unobservable inputs affecting the carrying value
of the CHARM portfolio are house price inflation and the effective
interest rate. A reconciliation of movements and amounts recognised
in the income statement and other comprehensive income are detailed
in Note 15.
The investment valuations provided by Allsop LLP and CBRE
Limited are based on RIC's Professional Valuation Standards, but
include a number of unobservable inputs and other valuation
assumptions.
The fair value of swaps and caps were valued in-house by a
specialised treasury management system, using first a discounted
cash flow model and market information. The fair value is derived
from the present value of future cash flows discounted at rates
obtained by means of the current yield curve appropriate for those
instruments. As all significant inputs required to value the swaps
and caps are observable, they fall within Level 2.
The reconciliation between opening and closing balances for
Level 3 is detailed in the table below:
Audited
Unaudited 31 March 2019 30 Sept 2018
Assets - Level 3 GBPm GBPm
------------------------------------------------- ------------------------ --------------
Opening balance 671.9 477.1
Acquired through business combination (Note 24) 700.8 -
Amounts taken to income statement 24.8 29.1
Other movements 139.0 165.7
------------------------------------------------- ------------------------ --------------
Closing balance 1,536.5 671.9
------------------------------------------------- ------------------------ --------------
Notes to the unaudited interim financial results continued
19. Tax
The tax charge for the period of GBP5.0m (2018: GBP8.5m)
recognised in the consolidated income statement comprises:
Unaudited
2019 2018
GBPm GBPm
---------------------------------------------------------------------- -------- --------
Current tax
Corporation tax on profit 11.5 9.6
Adjustments relating to prior periods (0.2) 0.4
---------------------------------------------------------------------- -------- --------
11.3 10.0
---------------------------------------------------------------------- -------- --------
Deferred tax
Origination and reversal of temporary differences (6.3) (1.5)
(6.3) (1.5)
---------------------------------------------------------------------- -------- --------
Total tax charge for the period in the consolidated income statement 5.0 8.5
---------------------------------------------------------------------- -------- --------
The Group works in an open and transparent manner and maintains
a regular dialogue with HM Revenue & Customs. This approach is
consistent with the 'low risk' rating we have been awarded by HM
Revenue & Customs, and to which the Group is committed.
In addition to the above, a deferred tax credit of GBP2.0m
(2018: GBPnil) was recognised within other comprehensive income
comprising:
Unaudited
2019 2018
GBPm GBPm
------------------------------------------------------------------ -------- --------
Deferred tax
Actuarial deficit on BPT Limited pension scheme (0.3) (0.2)
Fair value movement in cash flow hedges and exchange adjustments (1.7) 0.2
------------------------------------------------------------------ -------- --------
Amounts recognised in other comprehensive income (2.0) -
------------------------------------------------------------------ -------- --------
Deferred tax balances comprise temporary differences
attributable to:
Unaudited 31 March 2019 Audited 30 Sept 2018
GBPm GBPm
--------------------------------------------------------------------- ------------------------ ---------------------
Deferred tax assets
Short-term temporary differences 2.7 3.1
Actuarial deficit on BPT Limited pension scheme 0.6 0.3
Fair value movement in derivative financial instruments and
cumulative exchange adjustments 1.6 -
--------------------------------------------------------------------- ------------------------ ---------------------
4.9 3.4
--------------------------------------------------------------------- ------------------------ ---------------------
Deferred tax liabilities
Trading property uplift to fair value on business combinations (8.9) (9.3)
Investment property revaluation (11.6) (18.6)
Short-term temporary differences (3.7) (0.8)
Equity component of available-for-sale financial asset - (1.1)
Fair value movement on financial interest in property assets (1.2) -
Fair value movement in derivative financial instruments and
cumulative exchange adjustments - (0.1)
--------------------------------------------------------------------- ------------------------ ---------------------
(25.4) (29.9)
--------------------------------------------------------------------- ------------------------ ---------------------
Total deferred tax (20.5) (26.5)
--------------------------------------------------------------------- ------------------------ ---------------------
Notes to the unaudited interim financial results continued
Deferred tax has been predominantly calculated at a rate of 17%
(September 2018: 17%) in line with changes to the main rate of
corporation tax from 1 April 2020 which have been substantively
enacted.
In addition to the tax amounts shown above, contingent tax based
on EPRA market value measures, being tax on the difference between
the carrying value of trading properties in the statement of
financial position and their market value has not been recognised
by the Group. This contingent tax amounts to GBP99.8m (September
2018: GBP103.2m).
20. Retirement benefits
The Group retirement benefit asset decreased by GBP1.3m to a
liability of GBP0.4m in the six months ended 31 March 2019. The
Group obtained an updated valuation of the assets and liabilities
of the pension scheme for the purposes of the annual financial
statements. The movement has arisen from changes in assumptions of
GBP1.5m (primarily market observable discount rates) and a GBP0.1m
loss on plan assets, reduced by GBP0.3m company contributions. The
principal actuarial assumptions used to reflect market conditions
as at 31 March 2019 are as follows:
Unaudited Audited
31 March 2019 30 Sept 2018
% %
------------------------------------------ --------------- --------------
Discount rate 2.45 2.80
Retail Price Index (RPI) inflation 3.20 3.05
Consumer Price Index (CPI) inflation 2.20 2.05
Salary increases 3.70 3.55
Rate of increase of pensions in payment 5.00 5.00
Rate of increase for deferred pensioners 2.20 2.05
------------------------------------------ --------------- --------------
21. Share-based payments
The Group operates a number of equity-settled, share-based
compensation plan comprising awards under a Long-Term Incentive
Plan ('LTIP'), a Deferred Bonus Plan ('DBP'), a Share Incentive
Plan ('SIP') and a Save As You Earn Scheme ('SAYE'). The share
based payments charge recognised in the income statement for the
period is GBP0.9m (2018: GBP0.8m).
22. Related party transactions
During the period ended 31 March 2019, the Group transacted with
its associates and joint ventures (details of which are set out in
Notes 13 and 14). The Group provides a number of services to its
associates and joint ventures. These include property and asset
management services for which the Group receives fee income. The
related party transactions recognised in the income statement and
statement of financial position are as follows:
Unaudited
31 March 2019 31 March 2018
------------------------- -------------------------
Fees Period end Fees Period end
recognised balance recognised balance
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ----------- ------------ -----------
GRIP REIT PLC(1) 840 - 1,959 1,190
Vesta Limited Partnership 528 528 264 -
Lewisham Grainger Holdings Limited 155 155 - -
Walworth Investment Properties Limited - - 20 20
1,523 683 2,243 1,210
---------------------------------------- ------------ ----------- ------------ -----------
Notes to the unaudited interim financial results continued
Unaudited Audited
------------------------------------------------ -----------------------------------------------
31 March 2019 31 March 2019 31 March 2019 31 March 2018 30 Sept 2018 30 Sept 2018
Interest Period end loan Interest Interest Period end loan Interest
recognised balance rate recognised balance rate
GBP'000 GBPm % GBP'000 GBPm %
------------------- -------------- ---------------- -------------- -------------- ---------------- -------------
GRIP REIT PLC(1) 125 - Nil and 4.75 367 18.2 Nil and 4.75
Vesta Limited
Partnership - 7.6 Nil - 6.6 Nil
Lewisham Grainger
Holdings Limited - 0.3 Nil - - -
Curzon Park
Limited(2) - 16.3 Nil - 21.9 Nil
Helical Grainger
(Holdings) Limited - - Nil - 7.5 Nil
King Street
Developments
(Hammersmith)
Limited(3) - - Nil - 0.3 Nil
CCZ a.s. (6) (0.3) 4.00 (6) (0.4) 4.00
119 23.9 361 54.1
------------------- -------------- ---------------- -------------- -------------- ---------------- -------------
(1) Related party transactions in relation fees and interest
received from GRIP relate to the period prior to acquisition on 20
December 2018.
(2) The amount disclosed above is the gross loan amount. A
provision was made against the loan in the prior period but has
since been reversed.
(3) King Street Developments (Hammersmith) Limited is a
wholly-owned subsidiary of Helical Grainger (Holdings) Limited in
which the Group has a 50% joint venture interest.
23. Issue of share capital
In December 2018, the Group completed a 7 for 15 rights issue at
an issue price of 178.0p raising a total amount of GBP334.5m net of
costs. The rights issue increased the number of shares in issue by
194,758,491 shares, with shares being issued with a nominal value
of GBP0.05 per share. This increased issued share capital by
GBP9.7m and the share premium account by GBP324.8m.
24. Business combinations
On 20 December 2018, the Group completed the acquisition of the
remaining 75.1% interest in GRIP from joint venture partner APG for
cash consideration of GBP396.6m. This comprised cash paid for the
remaining shares of GBP341.3m and the repayment of loans and
accrued interest owing to APG totalling GBP55.3m.
The acquisition of GRIP was accounted for as a business
combination due to the integrated set of activities acquired in
addition to the properties. Accordingly, transaction and subsequent
structuring costs incurred in relation to the acquisition of
GBP3.0m have been expensed in the consolidated income
statement.
For the period 20 December 2018 to 31 March 2019, GRIP
contributed revenue of GBP8.7m and profit of GBP10.0m to the
Group's results. If the acquisition had occurred on 1 October 2018,
the consolidated revenue would have been GBP113.7m and consolidated
profit would have been GBP67.0m for the 6 months ended 31 March
2019.
Notes to the unaudited interim financial results continued
The fair value of the identifiable assets and liabilities of
GRIP acquired as at the date of acquisition were:
Fair value recognised on acquisition
Note GBPm
---------------------------------------- ----- -------------------------------------
Investment property 11 700.8
Trade and other receivables 0.9
Cash and cash equivalents 45.7
Trade and other payables (12.7)
Interest-bearing loans and borrowings (289.7)
Derivative financial instruments (1.2)
Total identifiable net assets acquired 443.8
---------------------------------------- ----- -------------------------------------
The valuation techniques used for measuring the fair value of
material assets acquired were as follows:
Material assets acquired Valuation technique
-------------------------------------- ----------------------------------------------------------------------------
Investment property GRIP's property portfolio was valued externally by CBRE Limited and Allsop
LLP. The valuations
took into account whether the block is managed as a whole or a group of
individual units and
valued accordingly. Valuation on the basis of how the properties are
managed is deemed to
be the highest and best use of the property. The valuation of properties
under construction
assesses the market value of the property upon completion less estimated
cost of work to complete
and where appropriate an adjustment to take into account the remaining
construction and stabilisation
risks.
Interest-bearing loans and borrowings Nominal amounts owed to lenders plus interest payable that has been
adjusted for the difference
between the contractual interest rate on the loans and borrowings and the
market interest
rate. The Directors' do not consider the difference between the contractual
interest rate
and the market interest rate to result in a material adjustment.
-------------------------------------- ----------------------------------------------------------------------------
Goodwill arising from the acquisition has been recognised as
follows:
GBPm
------------------------------------------------------ --------
Consideration transferred 341.3
Fair value of non-controlling interest acquired 3.1
Fair value of pre-existing equity interests 109.7
Recognition of deferred tax liability on acquisition 2.4
Fair value of identifiable net assets recognised (443.8)
Goodwill 12.7
------------------------------------------------------- --------
Goodwill recognised on acquisition of GBP12.7m represents the
premium paid over the fair value of the net assets acquired.
Goodwill has been subsequently assessed for impairment. As no
definitive and measurable portfolio premium can be ascribed to the
combined value of the properties, an impairment charge for the full
amount of goodwill recognised on acquisition has been taken to the
Group's consolidated income statement.
Notes to the unaudited interim financial results continued
As part of the acquisition, the Group acquired the
non-controlling interest held by APG in GRIP for GBP3.1m. This cost
forms part of the acquisition of GRIP.
At 31 March 2019, there remained a 10% non-controlling interest
in GRIP Unit Trust 6, a wholly-owned subsidiary of the Group, held
by BY Development Limited. This interest is shown separately in the
consolidated statement of financial position. On 13 May 2019, the
10% non-controlling interest was acquired by the Group for
GBP3.1m.
EPRA Performance Measures - Unaudited
EPRA Earnings
2019 2018
---------------------------- ---------------------------
Pence Pence
Earnings Shares per Earnings Shares per
GBPm millions share GBPm millions share
--------------------------------------- --------- --------- ------ -------- --------- ------
Earnings per IFRS income statement 54.3 548.5 9.9 50.6 463.1 10.9
Adjustments to calculate adjusted
EPRA Earnings, exclude:
i) Changes in value of investment
properties, development properties
held for investment and other
interests (22.0) - (4.0) (6.4) - (1.4)
ii) Profits or losses on disposal
of investment properties, development
properties held for investment
and other interests (1.8) - (0.3) (0.6) - (0.1)
iii) Profits or losses on sales
of trading properties including
impairment charges in respect
of trading properties (21.7) - (3.9) (28.1) - (6.1)
iv) Tax on profits or losses on
disposals - - - - - -
v) Negative goodwill/goodwill
impairment - - - - - -
vi) Changes in fair value of financial
instruments and associated close-out
costs - - - 0.1 - -
vii) Acquisition costs on share
deals and non-controlling joint
venture interests 15.7 - 2.9 - - -
viii) Deferred tax in respect
of EPRA adjustments - - - - - -
ix) Adjustments i) to viii) in
respect of joint ventures (9.8) - (1.8) (3.1) - (0.7)
x) Minority interests in respect
of the above - - - - - -
Adjusted EPRA Earnings/Earnings
per share 14.7 548.5 2.8 12.5 463.1 2.6
--------------------------------------- --------- --------- ------ -------- --------- ------
EPRA NAV
2019 2018
-------------------------- --------------------------
NAV NAV
Net pence Net pence
assets Shares per assets Shares per
GBPm millions share GBPm millions share
---------------------------------------- ------- --------- ------ ------- --------- ------
NAV from the financial statements 1,179.1 613.6 192 815.6 463.5 176
Include:
i.a) Revaluation of investment
property - - - - - -
i.b) Revaluation of investment
property under construction - - - - - -
i.c) Revaluation of other non-current
investments 6.2 - 1 7.0 - 1
ii) Revaluation of tenant leases
held as finance leases - - - - - -
iii) Revaluation of trading properties 587.3 - 96 607.1 - 131
Exclude:
iv) Fair value of financial instruments 8.0 - 1 (0.8) - -
v.a) Deferred tax 20.5 - 4 27.9 - 6
v.b) Goodwill as a result of deferred
tax - - - - -
Include/exclude:
Adjustments i) to v) above in respect
of joint venture interests - - - 0.3 - -
EPRA NAV/EPRA NAV per share 1,801.1 613.6 294 1,457.1 463.5 314
Rights issue - - - 334.5 150.1 (22)
EPRA NAV/EPRA NAV per share post
rights issue 1,801.1 613.6 294 1,791.6 613.6 292
---------------------------------------- ------- --------- ------ ------- --------- ------
EPRA Performance Measures (continued)
EPRA NNNAV
2019 2018
-------------------------- ----------------------------
NNNAV NNNAV
Net pence Net pence
assets Shares per assets Shares per
GBPm millions share GBPm millions share
--------------------------------------- ------- --------- ------ ------- --------- ------
EPRA NAV 1,801.1 613.6 294 1,457.1 463.5 314
Include:
i) Fair value of financial instruments (8.0) - (1) 0.5 - -
ii) Fair value of debt (13.8) - (2) (2.8) - -
iii) Deferred tax (114.6) - (20) (131.1) - (28)
EPRA NNNAV/EPRA NNNAV per share 1,664.7 613.6 271 1,323.7 463.5 286
Rights issue - - - 334.5 150.1 (16)
EPRA NNNAV/EPRA NNNAV per share
post rights issue 1,664.7 613.6 271 1,658.2 613.6 270
--------------------------------------- ------- --------- ------ ------- --------- --------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR AAMBTMBMBTIL
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