TIDMGRI
RNS Number : 7954F
Grainger PLC
19 November 2020
19 November 2020
Grainger plc
("Grainger", the "Group", or the "Company")
Full-year audited financial results
Year ended 30 September 2020
Continued growth despite a challenging market
-- +16% growth in net rental income
-- 97% average rent collection
-- +3.0% like-for-like rental growth
-- No employees furloughed
-- No government financial support
-- Dividend increased +5% on a per share basis
Grainger plc, the UK's largest listed residential landlord with
8,941 operational rental homes and 8,950 in its pipeline, today
announces its financial results for the year to 30 September
2020.
Helen Gordon, Chief Executive, said:
"We have continued to invest, grow and improve the business,
while delivering strong results and attractive returns for our
shareholders. This year has emphasised the importance of a good
home like never before, and Grainger's unrelenting focus on
providing good quality, safe homes with great customer service, has
proved as relevant as ever during these challenging times.
"We have continued to pursue our ESG commitments with enthusiasm
through the year, including good progress toward our plan to
achieve our target of net zero carbon in the operation of our
buildings by 2030 and our community engagement plan underlining the
importance the Grainger team places on delivering positive social
value.
"Having successfully navigated the business through the
political uncertainties at the start of the year, we faced the
challenge of the Covid-19 pandemic determined to emerge stronger.
Our strategy to respond by "innovating, communicating and
improving" underpinned our strong performance for the year.
"Our in-house operating platform has proved its value, enabling
us to continue to serve our customers and continue to let and sell
properties in a Covid-secure manner, with minimal reliance on
external third parties. Average occupancy for the year remained
high at 95%, rent collection remained robust at 97% on average and
we have continued to deliver rental growth. We delivered a strong
sales performance, in line with last year, achieving prices at
premiums to valuation.
"Throughout the year we continued to deliver and invest in high
quality modern rental homes. We successfully progressed the lease
up of Brook Place in Sheffield and launched Solstice Apartments in
Milton Keynes and Millet Place in East London. In total, we
launched 612 new rental homes this year. We successfully secured
planning committee approval for our Waterloo scheme, our Besson
Street scheme in partnership with Lewisham Borough Council, and for
our Southall Sidings scheme through Connected Living London, our
partnership with TfL. We also expanded our pipeline with six new
schemes, representing over GBP400m of new investment and 1,475 new
homes. We have the potential to more than double net rental income
again through the schemes in our investment pipeline.
"In the first half of the financial year we successfully raised
equity for our growth plans followed by a bond issue in the summer,
and we enter our new financial year in a position of both financial
and operational strength which will enable us to continue to
deliver good quality, safe homes to a growing number of customers,
as well as long term, attractive returns to shareholders."
Key financial headlines
-- Resilient recurring rental income
The defensive quality of our portfolio has demonstrated its
importance during the year, benefitting from mid-market pricing,
attractive locations and great design, coupled with our fully
integrated, in-house operating platform.
o Net rental income up +16% to GBP73.6m (FY19: GBP63.5m)
o +3.0% like-for-like rental growth(1) across our portfolio
(FY19: 3.6%)
-- +2.5% in our PRS portfolio
-- +4.6% in our regulated tenancy portfolio
o Average rent collection for the year of 97% paid on time and
99% for the month of September
o Average occupancy for the year of 95%, with occupancy at the
end of September at 91%
-- Continued growth in dividend: +5% increase in proposed total
dividend(2) of 5.47p per share (FY19: 5.19p)
-- Robust sales performance delivers strong and consistent
cashflow
o Vacant sales delivered GBP65.9m of revenue (FY19: GBP77.2m)
and GBP35.2m of profit (FY19: GBP38.8m)
o Prices achieved were strong at 2.0% ahead of previous
valuations
o From our asset recycling programme, sales delivered GBP67.1m
of revenue (FY19: GBP89.2m) and GBP26.8m of profit (FY19:
GBP20.4m)
o 67% of sales profit delivered in the second half of the year
during the period of lockdown, a result of our swift action to
ensure we could continue to transact safely
-- Continued growth in our PRS pipeline
o Six new schemes secured, adding GBP413m of additional new
investment to our pipeline, and 1,475 new PRS homes
o Total pipeline now GBP2.1bn and 8,950 new homes (secured
GBP1,085m, planning & legals GBP429m and TfL GBP600m), which
when complete has the potential to more than double our net rental
income from c.GBP74m to c.GBP176m
o Approaching completion of Apex Gardens in London and The
Filaments in Manchester following slight delays over the summer
owing to lockdown and social distancing on site
-- Strong balance sheet and liquidity
o Successful equity raise and bond issue, with strong investor
backing for accelerating our strategy and new regional PRS
investments
o We are in a strong liquidity position with GBP650m of total
available headroom, ensuring that we have enough funding capacity
to finance our entire committed investment pipeline
o Prudent LTV at 33.4% (FY19: 37.1%)
o No debt maturities until November 2022, with a weighted
average debt maturity of 6.6 years (FY19: 5.8 years)
o Average cost of debt reduced to 3.1% (FY19: 3.2%)
Financial Highlights
Income return FY19 FY20 Change
---------------------------------------------------- --------- --------- --------
Rental growth (like-for-like) (1) 3.6% 3.0% (69) bps
PRS rental growth (like-for-like) 3.4% 2.5% (88) bps
Regulated tenancy rental growth (like-for-like) 4.4% 4.6% +21 bps
Net rental income (Note 5) GBP63.5m GBP73.6m +16%
Adjusted earnings (Note 2) GBP82.5m GBP81.8m (1)%
Profit before tax (Note 2) GBP131.3m GBP110.8m (16)%
Earnings per share (diluted) (Note
9) 19.8p 14.2p (28)%
Dividend per share (Note 10) (2) 5.19p 5.47p +5%
---------------------------------------------------- --------- --------- --------
Capital return FY19 FY20 Change
------------------------------------ --------- --------- ---------
EPRA NDV per share (Note 3) 272p 276p +1%
EPRA NTA per share (Note 3) 278p 285p +3%
Net debt GBP1,097m GBP1,032m (6)%
Group LTV 37.1% 33.4% (371) bps
Cost of debt (average) 3.2% 3.1% (12) bps
Reversionary surplus GBP302m GBP301m (0)%
Total Property Return(3) 5.0% 5.4% 40 bps
Total Accounting Return (NTA basis)
(Note 3) 3.7% 3.6% (16) bps
------------------------------------ --------- --------- ---------
Secured pipeline
-------------------------------------------- ------------
Total investment value GBP1,085m
Total units 4,311 units
Total number of schemes 19
Total number of schemes under construction 12
Targeted net rental income GBP54m
Targeted gross yield on cost (weighted
average) 6.5%
-------------------------------------------- ------------
Planning & legal pipeline
----------------------------------------------------------
Total investment value GBP429m
Total units 1,639 units
Total number of schemes 7
Targeted net rental income GBP20m
Targeted gross yield on cost (weighted
average, estimate) 6.5%
-------------------------------------------- ------------
ESG benchmark performance
------------------------------- ---------------------------
FTSE4Good 94(th) percentile & 11(th)
consecutive year
ISS ESG Prime Rating
MSCI ESG 'AA'
Sustainalytics ESG Risk Rating Low Risk
EPRA sBPR Gold Award
------------------------------- ---------------------------
ESG long-term commitments
---------------------------------------------------------------
1. Net zero carbon of our buildings' operations by 2030
2. Deliver enhanced investment decisions through incorporating
ESG considerations
3. Measure and deliver positive social value
4. Diversity and inclusion: Ensure Grainger's workforce is
reflective of society
---------------------------------------------------------------
Future reporting dates
----------------------- ------------
2021
AGM & Trading update 10 February
Half year results 13 May
Trading update September
Full year results 18 November
----------------------- ------------
(1) Like-for-like rental growth is the change in gross rental
income in a period as a result of tenant renewals or a change in
tenant. It applies to changes in gross rents on a comparable basis
and excludes the impact of acquisitions, disposals and changes
resulting from refurbishments.
(2) Dividends - Subject to approval at the AGM, the final
dividend of 3.64p per share (gross) amounting to GBP24.5m will be
paid on 15 February 2021 to Shareholders on the register at the
close of business on 29 December 2020. Shareholders will again be
offered the option to participate in a dividend reinvestment plan
and the last day for election is 25 January 2021. An interim
dividend of 1.83p per share amounting to a total of GBP12.3m was
paid to Shareholders on 3 July 2020.
(3) Total Property Return (TPR) represents the change in gross
asset value, net of capital expenditure incurred, plus net income,
expressed as a percentage of gross asset value.
-S-
For further information:
Grainger plc Camarco (Financial PR adviser)
Kurt Mueller Ginny Pulbrook / Geoffrey Pelham-Lane
London Office Tel: +44 (0) 20 +44 (0) 20 3757 4992/4985
7940 9500
Full year results presentation
Grainger plc will be holding a virtual webcast presentation of
the Company's results at 9:30am (UK time) today, 19 November 2020
(details below).
A copy of the presentation slides will be available to download
on Grainger's website ( https://corporate.graingerplc.co.uk ) from
9:00am (UK time).
Webcast details:
To view the webcast, please go to the following URL link.
Registration is required.
https://webcasting.brrmedia.co.uk/broadcast/5f9967b04351411bdbe63237
The webcast will be available for six months from the date of
the presentation.
Dial in details:
Call: +44 (0)330 336 9411 or 0800 279 7204
Confirmation Code: 1129199
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.
Chairman's statement
Delivering for all our stakeholders in unprecedented times
Dear Shareholders
Grainger has delivered another year of strong performance and
significant growth, demonstrating good progress and proving its
resilience against a backdrop of economic uncertainty.
In February the Company raised additional funds from its
Shareholders to fund faster growth. The equity raise was a great
success and I would like to thank our Shareholders for their
support. As a result, we entered this period of significant
uncertainty with a very strong balance sheet, strong operating
metrics and consequently we have continued to deliver for all our
stakeholders.
As we approached lockdown in March the management team were
taking significant action to ensure the safety of our employees and
customers. Based on a robust analysis of the risks the business
faced the Board took the decision to continue to support the growth
strategy and the dividend policy agreed.
Throughout this period the Company chose not to use any of the
Government's support schemes. It moved most of its people to
working at home and started to deploy some of its technology
investments to help deliver 'virtually'. The Board would like to
thank all of our people, right across the Company, who rose to the
challenge of working in this new way.
Being a landlord brings with it great responsibility, which is
why health and safety has always been the highest priority for
Grainger. The Board remains committed to best in class health and
safety standards through the enhanced Live.Safe programme and is
pleased that the Housing Minister and the Secretary of State have
singled out Grainger for its work in leading the way on building
design in relation to fire safety.
Last year the Board signed off on an ambitious set of long-term
Environmental, Social and Governance commitments, and I'm pleased
to say good progress has been made on a number of these. From a
portfolio-wide study of the social value created by Grainger's
buildings to the completion of a renewable energy procurement
project and the integration of sustainability considerations into
investment decision-making, ESG is firmly embedded across our
business.
Grainger also recently joined members from Green Building
Councils across the world in signing up to the Net Zero Carbon
Buildings Commitment, which requires all buildings within our
direct control to
operate at net zero carbon by 2030.
The Board remains committed to having a diverse and inclusive
organisation and we are pleased with the progress made this year
with the establishment of Grainger's first Diversity &
Inclusion network, which is already very active.
This year an external review of the Board's effectiveness was
carried out and while there were a number of helpful
recommendations that are covered in our Annual Report and Accounts,
the conclusion of the review was that the Board is effective in the
way that it works.
Following on from strong rental growth and a solid overall
performance, I am pleased to announce a proposed final dividend of
3.64p per share. This equates to a total dividend for the year of
5.47p per
share, a 5% increase on a per share basis compared to the prior
year.
As we look ahead to 2021 and beyond, the business is well
positioned. The foundations are solid, and the progress made this
year will stand Grainger in good stead for the months and years
ahead. Our pipeline will deliver a further 8,950 new high-quality
homes and we will continue to build vibrant communities across the
UK.
Mark Clare
Chairman
18 November 2020
Chief Executive's statement
A good home has never been so important
We have delivered a strong set of results and now have recurring
net rental income at double that at the start of our strategy less
than five years ago. Whilst our regulated tenancy business is now a
smaller part of our business, we delivered sales profit in line
with previous years.
This year more than ever I am pleased to report that your
Company has had an unrelenting focus on providing good, safe homes
and great customer service, as our residents have spent more time
at home and we have been committed to serving them well. Grainger
has proved resilient in the face of challenging times for many
businesses and we have continued to invest, grow and improve.
In the first half of the financial year, against a backdrop of a
political uncertainty, we pushed forward with our strategy for
growth. We progressed the lease-up of our regional scheme at Brook
Place in Sheffield which launched in September 2019. We launched
Solstice Apartments in Milton Keynes in February 2020, followed by
our scheme Millet Place at Pontoon Dock in July which is a joint
venture with Local Pensions Partnership. In total, we successfully
delivered 612 new rental homes this year.
We have delivered strong growth and our net rental income is up
16%. Our portfolio has proved resilient, with rent collection
between 95-99%, which is considerably higher than the commercial
real estate sectors. Like-for-like rental growth at 3.0% is lower
than last year (FY19: 3.6%) but reflects the increased number of
renewals at 2.5% as we have been focused on retaining customers.
Our average occupancy was 95%.
The private rental market generally has seen higher levels of
churn and pressure on rents and we have outperformed due to the
quality of our assets, our mid-market position and importantly, the
quality of our people and operating platform.
Our sales are broadly in line with last year. This is a good
result bearing in mind the impact of election uncertainty and
Brexit in the first half, and the Covid-19 pandemic and the closure
of estate agents for a large part of the second half of our
financial year.
Our sales team were creative and innovative during this time,
establishing direct listings on Rightmove for properties and
virtual and socially distanced viewings. It is important to point
out that our sales are of older, vacant properties and therefore
even at the height of the Covid-19 lockdown we were able to
organise safe viewings and continue with sales.
67% of our sales profit this year was delivered in the second
half of the financial year during the Covid-19 lockdown, evidencing
that our sales have once again proved to be resilient even in
challenging times.
A pipeline for growth
In total, our existing PRS portfolio is valued at GBP1,696m, our
secured pipeline is GBP1,085m and we have a further GBP429m in
planning and legals, with our Transport for London (TfL) joint
venture representing a further potential value of GBP600m. Our
plans will see Grainger's portfolio of PRS homes double again in
the next five years.
We have focused on regional high-performing cities. We were
successful in securing schemes in Guildford, Birmingham, Cardiff
and Nottingham. We also added to our London portfolio in Waterloo
and in Canning Town to complement our Argo Apartments scheme,
adding a total of 1,475 new homes to our pipeline for growth.
This exciting pipeline of new schemes was the foundation for an
equity raise in February this year and this, together with our
strong operational cash flows and careful management of cost, meant
we went into the Covid-19 pandemic and lockdown with a strong and
resilient balance sheet, the details of which you can find in the
financial review.
Both quantity and quality of our pipeline for growth has
improved. Recent events have not slowed our appetite for growth and
we have continued to focus on acquisitions in our target cities.
During this time we have also continued to secure planning
permissions for 784 new homes for our schemes in joint venture with
the London Borough of Lewisham at Besson Street, and our joint
venture with TfL at Southall and our Waterloo project redeveloping
part of our current estate. We worked with local authorities to
progress our schemes through the planning process using remote,
online planning committee meetings.
We remain disciplined in assessing the future desirability of
our homes in terms of specification, geography and scale and have
undertaken over GBP67m of asset recycling, making the most of the
resilience in investment values of the private rented sector market
during this time.
We will continue to be rigorous in the analysis of our existing
portfolio and new opportunities to ensure that we maintain the best
quality portfolio to deliver enhanced Shareholder returns and good
long-term rental homes.
The strength of our people
The Grainger team has been remarkable during this year,
demonstrating their enthusiasm for improving the way we care for
our customers and homes. We have found new ways of working and
harnessed new technology. As the Government was asking everyone to
work from home where possible, the Grainger team responded with a
clear strategy to innovate, communicate and improve the business
during the Covid--19 lockdown.
In our innovation we found new ways of working. Harnessing our
investment in technology meant that with the exception of cleaning,
security and maintenance employees, as a business we went to 100%
home-working in just three days, returning safely to the offices
gradually from May. We used technology to organise sales and
lettings and customer service. We communicated more with our
customers and set up a 'buddy system' through our Resident Services
team to establish how our customers were coping with the Covid-19
lockdown and whether we could do anything to support them. We also
communicated with our suppliers, developers and contractors to
ensure that their businesses were resilient.
In the first half of the year we undertook a comprehensive
review of best practice with our Resident Services team and
reworked over 300 separate activities which deliver excellent
service to our customers. This was subsequently turned into an
induction, training and continuous improvement manual and will be
used to ensure consistently high standards as this business
continues to grow.
I am proud of the level of support and engagement the Grainger
team has shown this year. Internally, our employee engagement has
improved across all areas of the business with scores on "giving
something back" being particularly high.
This is one of the reasons we devised our Community Engagement
plan which I describe later.
We have also used this year to refresh the Grainger values.
Following extensive internal consultation we have evolved our
values to ensure they align with the business we are today and that
they represent all of our stakeholders. Our new values: People at
the heart, Every home matters, Leading the way and Exceeding
expectations, demonstrate our commitment to being a best in class
landlord, employer and partner, whilst also reaffirming our
ambitions to lead the UK private rented sector.
The Grainger team is leading the way in a new market. Our
business model is designed to benefit from collaboration. Our
leadership in this relatively new sector is supported by our
innovation and creativity, and the collaboration between Grainger's
in-house specialists is essential. It was for this reason that we
started a detailed return to office planning at the end of April
this year to make our offices Covid secure and available for
employees from the end of May. The majority of our teams in London,
Newcastle and Manchester started working on a rota basis from late
July.
Our commitment to continue to invest in our workforce meant that
we invested in several areas of their personal development. The
Grainger Academy, which provides online and face to face learning,
launched several new modules enabling anyone with spare capacity
during the Covid-19 lockdown to spend time investing in their own
personal development. We switched our Flexible Manager programme
online and launched a new initiative which flows from our talent
management activities to invest in young leaders of the future in
the business.
We continued to recruit into important roles during this time
including our Chief Information Officer, our Head of Operations and
Onboarding, our Head of Health and Safety, our Head of Research and
our Head of Procurement. I make no apology for sharing with you a
lot of detail about the quality and commitments and investment in
the Grainger team. Their activities have and will continue to
provide better customer service and enhanced returns for
Shareholders.
Covid-19
The second half of our financial year has been dominated by the
Covid-19 pandemic.
The business successfully withstood these testing times and we
did not furlough any employees nor did we seek any Government
support, and we continue to pay a dividend. Shareholders were
justifiably requesting more insight and understanding of the impact
of Covid-19 on our business and we increased Shareholder engagement
and moved both our half year presentation and our capital markets
update to online presentations. We also undertook almost double the
number of Shareholder meetings.
Our strategy to concentrate on strong recurring income from one
of the most utilised real estate sectors and our strategy to
concentrate on the mid-market has proved resilient as it protected
Shareholder value.
As we went into the Covid-19 lockdown, we made considerable
investment in responding to Government requests to evaluate how the
various Government initiatives could help our residents.
Our rent collection and customer collection teams were able to
guide residents through the help available. We wrote to our
customers asking them to make contact if they had any financial
worries or queries. Whilst this was an additional burden for the
teams, it did ensure that we could help our vulnerable residents
and we have maintained rent collections at above 95% since March
with our September rent collection at 99%.
All of our development and contracting partners responded
quickly to new forms of working to create a Covid secure
environment, enabling the construction teams to continue. Delays
have been held to a minimum on all but two schemes, where we
delayed start on site in order to avoid starting the schemes at the
height of the lockdown.
Government
Grainger's leadership in the private rented sector, as well as
my role as President of the British Property Federation (July 2019
to July 2020), enabled us increased access and engagement with
Government at a time when they were concerned about the ability of
renters to pay rent. The Government held meetings with us to
discuss our concerns about increased support for renters, the ban
on evictions and remedies for anti-social behaviour.
Our country's undersupply of good quality housing has been a key
concern of governments over the last 25 years. Grainger's
contribution to solving this problem by developing a high-quality,
professionalised private rented sector has led to high levels of
government engagement.
In the first half we saw a change of government and a new team
at the Ministry of Housing, Communities and Local Government
(MHCLG). We engaged with them on many aspects of Government policy.
In addition to the Covid-19 response and supporting renters, we
discussed topics such as health and safety, regulatory reform, the
planning white paper and the impact of rent controls on the
investment market. Whilst some European countries advocate rent
control, in March the Secretary of State wrote to the Mayor of
London setting out his reasoning why he would not support rent
control and the detrimental impact it would have on investment in
the housing market.
The Government also acknowledged our leadership in health and
safety in the design of new homes.
Health and safety
Grainger is the market leader with the largest operational PRS
portfolio in the UK and we are determined that leadership should
include a leadership in health and safety matters. It is essential
that all Grainger residents feel safe in their home and all
Grainger employees feel safe in their workplaces. Live.Safe is our
internal health and safety cultural change programme which was
launched in March 2019. This year we updated this to Live.Safe
2.0.
We commissioned an independent safety survey across the business
in February and again in August and can see improvements across the
whole business. We can also benchmark ourselves against other
industries and real estate companies and we exceed our benchmark in
six out of eight factors. Our commitment is strong to improving
this further. We are harnessing technology to support our
inspection, analysis, controls and compliance.
I am proud that the Housing Minister and Secretary of State have
singled out Grainger for its work in leading the way on building
design in relation to fire safety.
The investment we have made into health and safety in our new
build projects will future-proof our homes; and our programme of
improvements to our older schemes is underway, supported by a
dedicated team.
Environmental
Future-proofing our portfolio and protecting the environment is
at the heart of our bold move to achieve net zero carbon operation
in our buildings by 2030. This means we will improve our portfolio,
harness new technologies and commission greener buildings.
The Company has taken major steps forward this year as we joined
the UK Green Building Council and our Board approved our pathway to
2030. More details on our work can be found in our Annual Report
and Accounts.
Our commitment to community engagement has also improved during
the year. We undertook a comprehensive review of not only how we
support and engage the communication in our buildings, but also in
the wider communities. The whole business created a community
blueprint of best practice for community engagement from the design
and planning of our buildings through to settling our residents
into the community and the powerful impact that can have on
people's perceptions of home and citizenship.
Concluding remarks
We have a strong business in a resilient sector. The PRS market
is forecast to continue to grow significantly, and, as a market
leader with a secured pipeline of over GBP1bn, we are particularly
well placed for the future. Our continued growth this year despite
the challenging conditions of Covid-19 pandemic proves the
strengths of our strategy, operating platform and business model.
By continuing to provide exceptional homes and exceptional service,
we look forward to serving more customers and communities as well
as providing growing returns for our Shareholders.
I would like to thank all the Grainger team for their
outstanding effort in delivering this year's strong
performance.
Helen Gordon
Chief Executive
18 November 2020
Financial review
FY20 has been another year of good performance, benefiting from
our strategic transition into the Private Rented Sector (PRS) and
the strength of our in-house operating platform. Our business has
performed well and proven resilient in a challenging market given
the uncertainty from Brexit, a UK general election and the impact
of the Covid-19 lockdown. Our performance has a greater alignment
to the performance fundamentals of PRS which remain strong and are
underpinned by an on-going undersupply of housing.
We continue to increase our proportion of earnings generated
from net rental income. During the year we increased net rents by
16% further increasing the reliance on recurring rental income. We
have also continued to sell well, with sales in line with the prior
year. This performance has been driven by the strength of our
in-house operating platform, our mid-market strategy, and the
strength of our balance sheet.
Our balance sheet is strong with good liquidity to support our
growth strategy. We raised GBP187m of equity in February and issued
a GBP350m bond in July with good support from our investors and
both offerings were oversubscribed multiple times. With significant
headroom we are well placed to manage any near-term economic
uncertainty and take advantage of the potential opportunities that
present themselves in our market.
The resilience of our business is reflected in our ability to
maintain our dividend policy and we continue to distribute 50% of
our net rental income, and the proposed dividend for the year is
5.47p per share.
Financial highlights
Income return FY19 FY20 Change
----------------------------------- --------- --------- --------
Rental growth (like-for-like) 3.6% 3.0% (69) bps
Net rental income (Note 5) GBP63.5m GBP73.6m +16%
Adjusted earnings (Note 2) GBP82.5m GBP81.8m (1)%
Profit before tax (Note 2) GBP131.3m GBP110.8m (16)%
Earnings per share (diluted) (Note
9) 19.8p 14.2p (28)%
Adjusted EPRA earnings (Note 3) GBP28.8m GBP26.1m (9)%
Dividend per share (Note 10) 5.19p 5.47p +5%
----------------------------------- --------- --------- --------
Capital return FY19 FY20 Change
------------------------------------ --------- --------- ---------
EPRA NTA per share (Note 3) 278p 285p +3%
Net debt GBP1,097m GBP1,032m (6)%
Group LTV 37.1% 33.4% (371) bps
Cost of debt (average) 3.2% 3.1% (12) bps
Reversionary surplus GBP302m GBP301m (0)%
Total Property Return 5.0% 5.4% 40 bps
Total Accounting Return (NTA basis)
(Note 3) 3.7% 3.6% (16) bps
------------------------------------ --------- --------- ---------
Income statement
We have continued to enhance the composition of our earnings
with a further increase in the proportion of earnings derived from
recurring net rental income which now represents 54% of our income.
This
transition is a key component of our strategy and recurring net
rental income will grow further as our pipeline continues to
deliver. Our continued focus on driving cost efficiency enables us
to utilise the inherent operational leverage in our business as we
continue to manage our costs and invest in technology to further
support this position.
Adjusted earnings decreased marginally by 1% to GBP81.8m (FY19:
GBP82.5m) with the increase in net rental income offset by lower
development profits of GBP4.2m (FY19: GBP7.4m) as we conclude our
development for sale activity and focus our development activity on
our PRS investment pipeline.
Income statement (GBPm) FY19 FY20 Change
------------------------------ ------ ------ --------
Net rental income 63.5 73.6 +16%
Profit on sale of assets -
residential 60.4 59.4 (2)%
Profit on sale of assets -
development 7.4 4.2 (43)%
CHARM income (Note 15) 5.5 5.1 (7)%
Management fees 4.4 3.5 (20)%
Overheads (28.0) (28.7) +2%
Pre-contract costs (0.6) (0.6) +0%
Joint ventures and associates 2.0 (0.7) (135)%
Net finance costs (32.1) (34.0) +6%
------ ------ --------
Adjusted earnings 82.5 81.8 (1)%
Valuation movements 66.4 29.7 (55)%
Derivative movements (0.5) - (100)%
Other adjustments (17.1) (0.7) (96)%
------ ------ --------
Profit before tax 131.3 110.8 (16)%
------------------------------ ------ ------ --------
Rental income
Net rental income increased by 16% to GBP73.6m (FY19: GBP63.5m)
with GBP12.0m delivered from PRS investment and GBP1.5m from rental
growth offset by a reduction of GBP3.4m from asset disposals as
part of our asset recycling programme and the natural vacancy in
our regulated portfolio. Our gross to net operating cost ratio
continues to improve as we grow the business, with our stabilised
portfolio at 25.0% (FY19: 25.2%) and our overall ratio at 25.9%
(FY19: 26.1%) which includes our new developments.
Despite the challenging market conditions, our like-for-like
rental growth remained resilient at 3.0% (FY19: 3.6%) with 2.5%
rental growth in our PRS portfolio (FY19: 3.4%) and 4.6% in our
regulated tenancy portfolio (FY19: 4.4%), with positive growth
across all regions. Rent collections have remained consistently
high at an average of 97% paid on time over the year and 99% in the
month of September, demonstrating the strength of our in-house
operations and customer relationships.
GBPm
----------------------- -----
FY19 Net rental income 63.5
Disposals (3.4)
PRS investment 12.0
Rental growth 1.5
FY20 Net rental income 73.6
-----
YoY growth +16%
----------------------- -----
Sales
Sales profits remained resilient despite the impact on the wider
housing market from Brexit, the general election and the Covid-19
lockdown. We delivered GBP63.6m of sales profit (FY19: GBP67.8m)
with the profit relating to residential sales broadly in line with
the prior year and a decrease in development as we conclude our
development for sale activity. Our sales activity continues to
provide strong cash generation to fund further investment in our
PRS investment pipeline.
Residential sales
Our residential sales continued to deliver a strong and
consistent cash flow despite the challenges of the market. Over the
year we continued to sell well with both volumes and pricing in
line with our expectation at the start of the year. This strong
performance was a result of the actions we have taken to enable the
sales process to continue throughout the Covid-19 lockdown through
selling vacant properties safely, leveraging direct marketing,
virtual viewings and a reconfigured sales process to ensure minimal
disruption.
Vacant property sales remained robust delivering GBP65.9m of
revenue (FY19: GBP77.2m) and GBP35.2m of profit (FY19: GBP38.8m) .
The annualised vacancy rate within our regulated tenancy portfolio
was 6.4%. The prices achieved were strong with the sales prices
2.0% ahead of previous valuations on average and a sales
transaction velocity (keys to cash) of 120 days (FY19: 111 days).
This again demonstrates the resilience of returns generated by our
regulated portfolio throughout the economic cycle. Sales of
tenanted and other properties delivered GBP72.8m of revenue (FY19:
GBP97.3m) and GBP24.2m of profit (FY19: GBP21.6m).
Development activity
Development for sale activity generated GBP4.2m of profit, 43%
below the prior year (FY19: GBP7.4m) as we shift our development
focus to our PRS investment assets where gains are accounted for
through the balance sheet.
FY19 FY20
------- -----------------------
Sales (GBPm) Revenue Profit Revenue Profit
Residential sales on
vacancy 77.2 38.8 65.9 35.2
Tenanted and other
sales 97.3 21.6 72.8 24.2
------- ------ ------- ------
Residential sales
total 174.5 60.4 138.7 59.4
Development activity 18.6 7.4 5.4 4.2
--------------------- ------- ------ ------- ------
Overall sales 193.1 67.8 144.1 63.6
--------------------- ------- ------ ------- ------
Overheads
Maintaining an efficient operating platform is a key business
objective with an inflationary increase in FY20 to GBP28.7m (FY19:
GBP28.0m). Despite a significant increase in the size of our
business over recent years our overheads are positioned for growth
and have remained flat as the benefits of scale feed directly into
increased earnings.
Joint ventures
Income from joint ventures and associates decreased to GBP(0.7)m
loss (FY19: GBP2.0m profit) which reflects our share of
pre-planning costs in the development phases, whilst the prior year
benefitted from three months of profit from GRIP, our co-investment
vehicle with APG, prior to our acquisition.
Profit before tax is below the previous year as a result of
lower levels of valuation uplift on our investment assets.
Balance sheet
Our balance sheet is in a strong position with significant
headroom to support the further growth in our PRS portfolio. Our
PRS portfolio now makes up 63% of our overall asset base with this
proportion set to grow as our pipeline continues to deliver.
Market value balance sheet (GBPm) FY19 FY20
---------------------------------------------- ------- -------
Residential - PRS 1,526 1,624
Residential - regulated tenancies 1,017 968
Residential - mortgages (CHARM) 76 73
Forward Funded - PRS work in progress 160 231
Development work in progress 120 147
Investment in JVs/associates 33 42
------- -------
Total investments 2,932 3,085
Net debt (1,097) (1,032)
Other liabilities (14) -
------- -------
EPRA NRV 1,821 2,053
Deferred and contingent tax - trading assets (102) (109)
Exclude: intangible assets (11) (23)
------- -------
EPRA NTA 1,708 1,921
Add back: intangible assets 11 23
Deferred and contingent tax - investment
assets (19) (24)
Fair value of fixed rate debt and derivatives (34) (57)
------- -------
EPRA NDV 1,666 1,863
---------------------------------------------- ------- -------
EPRA NRV pence per share 297 304
EPRA NTA pence per share 278 285
EPRA NDV pence per share 272 276
---------------------------------------------- ------- -------
Reversionary surplus (excluded from NAV -
GBPm) 302 301
Reversionary surplus (pence per share) 49 45
---------------------------------------------- ------- -------
The EPRA NAV measures exclude the reversionary surplus in our
portfolio which stands at GBP301m. This represents the difference
between the market value of our assets used in our balance sheet
and the value we could realise if they became vacant.
EPRA Net Tangible Assets (NTA) is the most relevant NAV measure
for our business as it reflects the tax that will crystallise on
our trading portfolio, whilst excluding the mark to market
movements on fixed rate debt and derivatives which are unlikely to
be realised. The table below shows how EPRA NTA has grown during
the year.
EPRA NTA movement
----------------------------------------------------------------------
GBPm Pence per share
------ ----------------
EPRA NTA at 30 September 2019 1,708 278
Adjusted earnings 82 12
Valuations (trading & investment property) 68 10
Disposals (trading assets) (53) (8)
Tax (current, deferred & contingent) (22) (3)
Dividends (34) (5)
Intangible assets (12) (1)
Equity placing 183 2
EPRA NTA at 30 September 2020 1,920 285
-------------------------------------------- ------ ----------------
EPRA NTA i ncreased by 3% during the year to 285p per share
(FY19: 278p per share). The growth has been delivered through 10pps
valuation growth, 4pps increase through earnings and sales profits
above the market valuation, offset by tax and dividend payments.
The investment in our CONNECT technology platform is excluded from
EPRA NTA.
Property portfolio performance
Our portfolio delivered valuation growth of 3.1% despite the
uncertain market backdrop. Our stabilised PRS portfolio increased
by 2.5% and regulated portfolio at 4.0%, with positive growth
across all regions. The valuation movements reflect differing
valuation methodologies across our portfolio with our regulated
portfolio valued on a discount to vacant possession value, whereas
the majority of our PRS valuations are based upon a net rent and
yield basis meaning rental growth is the key driver of valuation
growth.
Financing and capital structure
Our capital structure is in the strongest position it has been
in for a number of years as we have executed our funding strategy
to diversify our lending sources and align our assets and
liabilities. Following the equity raise and bond issue during this
financial year, our LTV now stands at 33.4% (FY19: 37.1%), our
average cost of debt in the year was down to 3.1% (FY19: 3.2%), and
an increased weighted average debt maturity of 6.6 years (FY19: 5.8
years).
Net debt decreased from GBP1,097m to GBP1,032m. In addition to
the equity raise and bond issue, we generated GBP104m of operating
cash flow and GBP67m proceeds from asset recycling and invested
GBP224m into our pipeline and property portfolio, which were the
key movements in the year.
Following our GBP350m bond issue in July we now have no debt
maturities until November 2022.
Our liquidity position is strong with GBP650m of total available
headroom, ensuring that we have enough funding capacity to finance
our entire committed investment pipeline comfortably within our
target LTV range. This low risk approach to balance sheet
management was reflected in S&P reiterating our credit rating
and outlook statement in May at a time of particular uncertainty as
a result of the Covid-19 lockdown.
FY19 FY20
------------------------------------ ---------- ----------
Net debt GBP1,097m GBP1,032m
Loan to value 37.1% 33.4%
Cost of debt 3.2% 3.1%
Incremental cost of debt 1.7% 1.6%
Headroom GBP430m GBP650m
Weighted average facility maturity
(years) 5.8 6.6
Hedging 98% 100%
------------------------------------- ---------- ----------
Summary and outlook
Our strategic transition to a PRS focused business was rooted in
the compelling, resilient, low risk returns that we believed we
could generate, and the long-term supply-demand imbalance in rental
housing that underpins this investment case remains as relevant as
ever. In a year where the market experienced challenging events our
business model continued to deliver a strong performance.
Whilst there may be some near-term economic challenges ahead,
the fundamentals of our business remain in very good shape. Our
strong balance sheet ensures that we will be well placed to
optimise on the market opportunity and continue to grow our
business.
Vanessa Simms
Chief Financial Officer
18 November 2020
Consolidated income statement
2020 2019
For the year ended 30 September Notes GBPm GBPm
--------------------------------------------------------------- ------ ------- -------
Group revenue 4 214.0 222.8
--------------------------------------------------------------- ------ ------- -------
Net rental income 5 73.6 63.5
Profit on disposal of trading property 6 61.6 66.6
Profit on disposal of investment property 7 2.3 1.9
Income from financial interest in property assets 15 5.2 4.2
Fees and other income 8 7.5 4.4
Administrative expenses (28.7) (28.0)
Other expenses (2.4) (4.4)
Impairment of goodwill 25 - (12.7)
Impairment of inventories to net realisable value 12 (0.7) (0.4)
Reversal of impairment of joint venture 14 - 9.8
--------------------------------------------------------------- ------ ------- -------
Operating profit 118.4 104.9
Net valuation gains on investment property 11 29.8 57.5
Change in fair value of derivatives (1.4) (0.4)
Finance costs (34.9) (32.8)
Finance income 0.4 0.3
Share of profit of associates after tax 13 0.1 0.4
Share of (loss)/profit of joint ventures after tax 14 (1.6) 1.4
--------------------------------------------------------------- ------ ------- -------
Profit before tax 2 110.8 131.3
Tax charge 20 (18.0) (16.4)
--------------------------------------------------------------- ------ ------- -------
Profit for the year attributable to the owners of the Company 92.8 114.9
--------------------------------------------------------------- ------ ------- -------
Basic earnings per share 9 14.3p 19.9p
Diluted earnings per share 9 14.2p 19.8p
--------------------------------------------------------------- ------ ------- -------
Consolidated statement of comprehensive income
2020 2019
For the year ended 30 September Notes GBPm GBPm
--------------------------------------------------------------------------------------------- ------ ------ -------
Profit for the year 2 92.8 114.9
--------------------------------------------------------------------------------------------- ------ ------ -------
Items that will not be transferred to the consolidated income statement:
Actuarial loss on BPT Limited defined benefit pension scheme 21 (1.2) (3.2)
Items that may be or are reclassified to the consolidated income statement:
Changes in fair value of cash flow hedges (3.3) (17.8)
--------------------------------------------------------------------------------------------- ------ ------ -------
Other comprehensive income and expense for the year before tax (4.5) (21.0)
--------------------------------------------------------------------------------------------- ------ ------ -------
Tax relating to components of other comprehensive income:
Tax relating to items that will not be transferred to the consolidated income statement 20 0.3 0.6
Tax relating to items that may be or are reclassified to the consolidated income statement 20 1.0 3.0
--------------------------------------------------------------------------------------------- ------ ------ -------
Total tax relating to components of other comprehensive income 1.3 3.6
--------------------------------------------------------------------------------------------- ------ ------ -------
Other comprehensive income and expense for the year after tax (3.2) (17.4)
--------------------------------------------------------------------------------------------- ------ ------ -------
Total comprehensive income and expense for the year attributable to the owners of the
Company 89.6 97.5
--------------------------------------------------------------------------------------------- ------ ------ -------
Consolidated statement of financial position
2020 2019
As at 30 September Notes GBPm GBPm
---------------------------------------------- ------ -------- --------
ASSETS
Non-current assets
Investment property 11 1,778.9 1,574.6
Property, plant and equipment 2.0 0.3
Investment in associates 13 14.7 11.7
Investment in joint ventures 14 27.3 21.6
Financial interest in property assets 15 73.3 76.4
Deferred tax assets 20 7.8 5.6
Intangible assets 16 22.5 11.2
----------------------------------------------- ------ -------- --------
1,926.5 1,701.4
---------------------------------------------- ------ -------- --------
Current assets
Inventories - trading property 12 657.4 700.0
Trade and other receivables 17 31.3 40.5
Current tax assets 6.4 -
Cash and cash equivalents 369.1 189.3
1,064.2 929.8
---------------------------------------------- ------ -------- --------
Total assets 2,990.7 2,631.2
----------------------------------------------- ------ -------- --------
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 19 1,391.9 1,176.8
Trade and other payables 18 1.3 -
Retirement benefits 21 2.4 1.7
Provisions for other liabilities and charges 1.2 1.2
Deferred tax liabilities 20 36.7 32.7
----------------------------------------------- ------ -------- --------
1,433.5 1,212.4
---------------------------------------------- ------ -------- --------
Current liabilities
Interest-bearing loans and borrowings 19 - 100.0
Trade and other payables 18 73.3 73.6
Provisions for other liabilities and charges 0.3 0.4
Current tax liabilities - 4.0
Derivative financial instruments 19 20.6 17.3
----------------------------------------------- ------ -------- --------
94.2 195.3
---------------------------------------------- ------ -------- --------
Total liabilities 1,527.7 1,407.7
----------------------------------------------- ------ -------- --------
NET ASSETS 1,463.0 1,223.5
----------------------------------------------- ------ -------- --------
EQUITY
Issued share capital 33.8 30.7
Share premium account 616.3 436.5
Merger reserve 20.1 20.1
Capital redemption reserve 0.3 0.3
Cash flow hedge reserve (16.6) (14.3)
Retained earnings 809.1 750.2
----------------------------------------------- ------ -------- --------
TOTAL EQUITY 1,463.0 1,223.5
----------------------------------------------- ------ -------- --------
Consolidated statement of changes in equity
Cash
Issued Share Capital flow Available-
share premium Merger redemption hedge for-sale Retained Non-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 2018 20.9 111.4 20.1 0.3 0.5 6.0 656.4 - 815.6
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Profit for the year 2 - - - - - - 114.9 - 114.9
Other comprehensive
loss for the year - - - - (14.8) - (2.6) - (17.4)
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Total comprehensive
income - - - - (14.8) - 112.3 - 97.5
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Issue of share
capital 24 9.8 324.8 - - - - - - 334.6
Award of SAYE
shares - 0.3 - - - - - - 0.3
Purchase of own
shares - - - - - - (1.0) - (1.0)
Share-based
payments charge 22 - - - - - - 1.7 - 1.7
Dividends paid - - - - - - (25.2) - (25.2)
Fair value of
non-controlling
interest acquired
through business
combination 25 - - - - - - - 3.1 3.1
Acquisition of
non-controlling
interest 25 - - - - - - - (3.1) (3.1)
Transfer of
available-for-sale
reserve - - - - - (6.0) 6.0 - -
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Total transactions
with owners
recorded directly
in equity 9.8 325.1 - - - (6.0) (18.5) - 310.4
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Balance as at
30 September 2019 30.7 436.5 20.1 0.3 (14.3) - 750.2 - 1,223.5
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Profit for the year 2 - - - - - - 92.8 - 92.8
Other comprehensive
loss for the year - - - - (2.3) - (0.9) - (3.2)
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Total comprehensive
income - - - - (2.3) - 91.9 - 89.6
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Issue of share
capital 24 3.1 179.4 - - - - - - 182.5
Award of SAYE
shares - 0.4 - - - - - - 0.4
Purchase of own
shares - - - - - - (0.1) - (0.1)
Share-based
payments charge 22 - - - - - - 1.1 - 1.1
Dividends paid - - - - - - (33.5) - (33.5)
IFRS 16 transition
adjustment - - - - - - (0.5) - (0.5)
Total transactions
with owners
recorded directly
in equity 3.1 179.8 - - - - (33.0) - 149.9
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Balance as at
30 September 2020 33.8 616.3 20.1 0.3 (16.6) - 809.1 - 1,463.0
-------------------- ------ -------- -------- -------- ----------- -------- ----------- --------- ---------------- --------
Consolidated statement of cash flows
2020 2019
For the year ended 30 September Notes GBPm GBPm
---------------------------------------------------- ------ -------- --------
Cash flow from operating activities
Profit for the year 2 92.8 114.9
Depreciation and amortisation 1.5 1.5
Impairment of goodwill 25 - 12.7
Net valuation gains on investment property 11 (29.8) (57.5)
Net finance costs 34.5 32.5
Share of loss/(profit) of associates and joint 13,
ventures 14 1.5 (1.8)
Profit on disposal of investment property 7 (2.3) (1.9)
Share-based payment charge 22 1.1 1.7
Change in fair value of derivatives 1.4 0.4
Reversal of impairment of joint venture 14 - (9.8)
Income from financial interest in property assets 15 (5.2) (4.2)
Tax 20 18.0 16.4
Cash generated from operating activities before
changes in working capital 113.5 104.9
Decrease in trade and other receivables 9.7 110.5
Increase/(decrease) in trade and other payables 3.8 (2.7)
Decrease in provisions for liabilities and charges (0.1) (0.7)
Decrease in inventories 29.5 27.8
---------------------------------------------------- ------ -------- --------
Cash generated from operating activities 156.4 239.8
Interest paid (37.4) (37.1)
Tax paid (25.4) (18.0)
Payments to defined benefit pension scheme 21 (0.5) (0.6)
---------------------------------------------------- ------ -------- --------
Net cash inflow from operating activities 93.1 184.1
---------------------------------------------------- ------ -------- --------
Cash flow from investing activities
Acquisition of subsidiary net of cash acquired 25 - (350.9)
Acquisition of non-controlling interest 25 - (3.1)
Proceeds from sale of investment property 7 36.2 59.4
Proceeds from financial interest in property
assets 15 8.3 10.0
Investment in joint ventures 14 (5.5) (2.9)
13,
Loans advanced to associates and joint ventures 14 (4.7) (6.7)
13,
Loans repaid by associates and joint ventures 14 - 5.7
Acquisition of investment property 11 (195.3) (212.6)
Acquisition of property, plant and equipment
and intangible assets (12.3) (7.9)
---------------------------------------------------- ------ -------- --------
Net cash outflow from investing activities (173.3) (509.0)
---------------------------------------------------- ------ -------- --------
Cash flow from financing activities
Net proceeds from issue of share capital 24 182.5 334.6
Award of SAYE shares 0.4 0.3
Purchase of own shares (0.1) (1.0)
Proceeds from new borrowings 697.0 430.2
Payment of loan costs (4.9) (4.3)
Settlement of derivative contracts (1.4) -
Repayment of borrowings (580.0) (329.7)
Dividends paid (33.5) (25.2)
---------------------------------------------------- ------ -------- --------
Net cash inflow from financing activities 260.0 404.9
---------------------------------------------------- ------ -------- --------
Net increase in cash and cash equivalents 179.8 80.0
Cash and cash equivalents at the beginning of
the year 189.3 109.3
Cash and cash equivalents at the end of the
year 369.1 189.3
---------------------------------------------------- ------ -------- --------
Notes to the preliminary financial results
1. Accounting policies
1a Basis of preparation
The board approved this preliminary announcement on 18 November
2020. The financial information included in this preliminary
announcement does not constitute the Group's statutory accounts for
the years ended 30 September 2019 or 30 September 2020. Statutory
accounts for the year ended 30 September 2019 have been delivered
to the Registrar of Companies. The statutory accounts for the year
ended 30 September 2020 will be delivered to the Registrar of
Companies following the Company's annual general meeting.
The auditors, KPMG LLP, have reported on the accounts for both
years. The reports were unqualified, did not include reference to
any matters by way of emphasis and did not contain statements under
section 498 (2) or (3) of the Companies Act 2006.
These financial statements for the year ended 30 September 2020
have been prepared under the historical cost convention except for
the following assets and liabilities, and corresponding income
statement accounts, which are stated at their fair value;
investment property; derivative financial instruments; and
financial interest in property assets.
The accounting policies used are consistent with those contained
in the Group's full annual report and accounts for the year ended
30 September 2020.
The financial information included in this preliminary
announcement has been prepared in accordance with EU endorsed
International Financial Standards ('EU IFRS'), IFRIC
interpretations and those parts of the Companies Act 2006
applicable to companies reporting under EU IFRS.
1b Adoption of new and revised International Financial Reporting Standards and interpretations
New standards and interpretations in the year
The following new standards, amendments to standards and
interpretations issued in the year were effective for the Group
from 1 October 2019. The most significant of these, and the impact
on the Group's accounting, are set out below:
IFRS 16 Leases - IFRS 16 replaces IAS 17 Leases and is effective
for the Group from 1 October 2019. As a lessor, the Group's
position is substantially unchanged. As a lessee of office space,
the asset and corresponding lease liability are now presented in
the statement of financial position and in the notes to the
financial statements.
On 1 October 2019, the Group recognised property, plant and
equipment of GBP2.2m and a corresponding lease liability of
GBP3.2m, with an adjustment to retained earnings on transition.
A number of new standards, amendments to standards and
interpretations have been issued but are not yet effective for the
Group and have not been early adopted. The application of these new
standards, amendments and interpretations are not expected to have
a material impact on the Group's financial statements.
1c Significant judgements and estimates
Estimates
i. Valuation of property assets
Residential trading property is carried in the statement of
financial position at the lower of cost and net realisable value
and investment property is carried at fair value. The Group does,
however, in its principal non-GAAP net asset value measures, EPRA
NRV, EPRA NTA and EPRA NDV, include trading property at market
value. The adjustment in the value of trading property is the
difference between the statutory book value and its market value as
set out in Note 3. For investment property, market value is the
same as fair value. In respect of trading properties, market
valuation is the key assumption in determining the net realisable
value of those properties.
In all cases, forming these valuations inherently includes
elements of judgement and subjectivity with regards to the
selection of unobservable inputs. The valuation basis and key
unobservable inputs are outlined in Note 2 in the 2020 Annual
Report and Accounts.
The results and the basis of each valuation and their impact on
both the financial statements and market value for the Group's
non-GAAP net asset value measures are set out below:
% of properties
for which
external
valuer
PRS Reversionary Other Total provides
GBPm GBPm GBPm GBPm Valuer valuation
---------------------------- -------- --------------- ------ -------- -------------- ----------------
Trading property 112.2 500.6 44.6 657.4
Investment property 1,755.9 23.0 - 1,778.9
Financial asset
(CHARM) - 73.3 - 73.3
---------------------------- -------- --------------- ------ -------- -------------- ----------------
Total statutory
book value 1,868.1 596.9 44.6 2,509.6
---------------------------- -------- --------------- ------ -------- -------------- ----------------
Trading property
Allsop
Residential 201.9 944.3 - 1,146.2 LLP 79%
Developments - - 44.6 44.6 CBRE Limited 87%
Total trading property 201.9 944.3 44.6 1,190.8
---------------------------- -------- --------------- ------ -------- -------------- ----------------
Investment property
Allsop
LLP / CBRE
Residential 752.8 23.0 - 775.8 Limited 100%
Developments 102.9 - - 102.9 CBRE Limited 100%
New build PRS 636.4 - - 636.4 CBRE Limited 100%
Allsop
Affordable housing 136.6 - - 136.6 LLP 100%
Allsop
Tricomm housing 127.2 - - 127.2 LLP 100%
Total investment
property 1,755.9 23.0 - 1,778.9
---------------------------- -------- --------------- ------ -------- -------------- ----------------
Financial asset Allsop
(CHARM)(1) - 73.3 - 73.3 LLP
Total assets at
market value 1,957.8 1,040.6 44.6 3,043.0
---------------------------- -------- --------------- ------ -------- -------------- ----------------
Statutory book
value 1,868.1 596.9 44.6 2,509.6
Market value adjustment(2) 89.7 443.7 - 533.4
---------------------------- -------- --------------- ------ -------- -------------- ----------------
Total assets at
market value 1,957.8 1,040.6 44.6 3,043.0
---------------------------- -------- --------------- ------ -------- -------------- ----------------
Net revaluation
gain recognised
in the income statement
for wholly-owned
properties 29.8 - - 29.8
Net revaluation
gain relating to
joint ventures
and associates(3) 0.2 - - 0.2
---------------------------- -------- --------------- ------ -------- -------------- ----------------
Net revaluation
gain recognised
in the year(3) 30.0 - - 30.0
---------------------------- -------- --------------- ------ -------- -------------- ----------------
(1) Allsop provides vacant possession values used by the Directors to value the financial asset.
(2) The market value adjustment is the difference between the
statutory book value and the market value of the Group's
properties. Refer to Note 3 for market value net asset
measures.
(3) Includes the Group's share of joint ventures and associates revaluation gain after tax.
Judgments
i. Distinction between investment and trading property
The Group considers the intention at the outset when each
property is acquired in order to classify the property as either an
investment or a trading property. Where the intention is either to
trade the property or where the property is held for immediate sale
upon receiving vacant possession within the ordinary course of
business, the property is classified as trading property. Where the
intention is to hold the property for its long-term rental yield
and/or capital appreciation, the property is classified as an
investment property. The classification of the Group's properties
is a significant judgement which directly impacts the statutory net
asset position, as trading properties are held at the lower of cost
and net realisable value, whilst investment properties are held at
fair value, with gains or losses taken through the consolidated
income statement.
1d Group risk factors
The principal risks and uncertainties facing the Group are set
out in the Risk Management report of the 2020 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, including updates to principal risks, are outlined in the
2020 Annual Report and Accounts.
1e Going concern assessment
The Directors are required to make an assessment of the Group's
ability to continue to trade as a going concern for the foreseeable
future. Given the significant impact of Covid-19 on the
macro-economic conditions in which the Group is operating, the
Directors have placed a particular focus on the appropriateness of
adopting the going concern basis in preparing the financial
statements for the year ended 30 September 2020.
In making the going concern assessment, the Directors have
considered the Group's principal risks and their impact on
financial performance. The Directors have assessed the future
funding commitments of the Group and compared these to the level of
committed loan facilities and cash resources over the medium term.
In making this assessment, consideration has been given to
compliance with borrowing covenants along with the uncertainty
inherent in future financial forecasts and, where applicable,
severe sensitivities have been applied to the key factors affecting
financial performance for the Group.
The going concern assessment is based on the first 24 months of
the Group's viability model, which is based on a severe downside
scenario including the anticipated impact of Covid-19, reflecting
the following key assumptions:
-- Sustained reduction in rental levels of 3% per annum
-- Reduction in property valuations of 3% per annum, driven by
either yield expansion or house price deflation
-- 10% development cost inflation
-- Operating cost inflation of 10% per annum
-- Increase in finance costs of between 1.25% and 2%
No new financing is assumed in the assessment period, but
existing facilities are assumed to remain available. Throughout
this severe downside scenario, the Group has sufficient cash
reserves, with the loan-to-value covenant remaining less than 51%
and interest cover above 2.4x, for a period of at least 12 months
from the date of authorisation of the financial statements.
The Directors have also considered an extreme downside scenario,
including the following key assumptions:
-- Sustained reduction in rental levels of 5% per annum
-- Significant reduction in property valuations of 10% per annum
-- 15% development and operating cost inflation
-- Increase in finance costs of between 1.25% and 2%
Even in this extreme downside scenario and without the need for
further financing, the Group has sufficient cash reserves with the
loan-to-value covenant remaining less than 58% and interest cover
above 2.2x, for a period of at least 12 months from the date of
authorisation of the financial statements.
Based on these considerations, together with available market
information and the Directors experience of the Group's property
portfolio and markets, the Directors have continue to adopt the
going concern basis in preparing the accounts for the year ended 30
September 2020.
1f Forward-looking statements
Certain statements in this preliminary 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.
2. Analysis of profit before tax
The table below details 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.
2020 2019
------------------------------------------------ ------------------------------------ ----------
Other Adjusted Other Adjusted
GBPm Statutory Valuation adjustments earnings Statutory Valuation adjustments earnings
---------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Group revenue 214.0 - (4.0) 210.0 222.8 - - 222.8
---------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Net rental
income 73.6 - - 73.6 63.5 - - 63.5
Profit on
disposal
of trading
property 61.6 (0.3) - 61.3 66.6 (0.7) - 65.9
Profit on
disposal
of investment
property 2.3 - - 2.3 1.9 - - 1.9
Income from
financial
interest in
property
assets 5.2 (0.1) - 5.1 4.2 1.3 - 5.5
Fees and other
income 7.5 - (4.0) 3.5 4.4 - - 4.4
Administrative
expenses (28.7) - - (28.7) (28.0) - - (28.0)
Other expenses (2.4) - 1.8 (0.6) (4.4) - 3.8 (0.6)
Impairment of
goodwill - - - - (12.7) - 12.7 -
Impairment of
inventories
to net
realisable
value (0.7) 0.7 - - (0.4) 0.4 - -
Reversal of
impairment
of joint
venture - - - - 9.8 (9.8) - -
---------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Operating
profit 118.4 0.3 (2.2) 116.5 104.9 (8.8) 16.5 112.6
Net valuation
gains
on investment
property 29.8 (29.8) - - 57.5 (57.5) - -
Change in fair
value
of derivatives (1.4) - 1.4 - (0.4) 0.2 0.2 -
Finance costs (34.9) - 0.5 (34.4) (32.8) - 0.4 (32.4)
Finance income 0.4 - - 0.4 0.3 - - 0.3
Share of profit
of
associates
after
tax 0.1 (0.2) - (0.1) 0.4 0.2 - 0.6
Share of
(loss)/profit
of joint
ventures
after tax (1.6) - 1.0 (0.6) 1.4 - - 1.4
---------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Profit before
tax 110.8 (29.7) 0.7 81.8 131.3 (65.9) 17.1 82.5
Tax charge (18.0) (16.4)
---------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Profit for the
year
attributable
to the
owners of the
Company 92.8 114.9
---------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Diluted
adjusted
earnings per
share 10.2p 11.5p
---------------- ---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Profit before tax in the adjusted columns above of GBP81.8m
(2019: GBP82.5m) is the adjusted earnings of the Group. Adjusted
earnings per share assumes tax of GBP15.5m (2019: GBP15.7m) in line
with the standard rate of UK corporation tax of 19.0% (2019:
19.0%), divided by the weighted average number of shares as shown
in Note 9. The Group's IFRS statutory earnings per share are
detailed in Note 9.
The classification of amounts as other adjustments is a
judgement made by management and is a matter referred to the Audit
Committee for approval. The net GBP0.7m cost within other
adjustments in 2020 comprises GBP2.7m income relating to historic
non-core business, offset by GBP2.4m costs related to refinancing
activity and GBP1.0m restructuring costs. In 2019, other
adjustments primarily related to the acquisition of GRIP,
comprising GBP12.7m goodwill written off and GBP3.6m transaction
costs relating to acquisition, restructuring and refinancing costs,
as well as GBP0.8m costs in relation to the successful TfL joint
venture bid.
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 are the Executive
Directors.
The two significant segments for the Group are PRS and
Reversionary. 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 Other segment includes legacy strategic land and
development arrangements, 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 principal net asset value (NAV) measure reviewed by the CODM
is EPRA NTA which is considered to become the most relevant, and
therefore the primary NAV measure for the Group. EPRA NTA reflects
the tax that will crystallise in relation to the trading portfolio,
whilst excluding the volatility of mark to market movements on
fixed rate debt and derivatives which are unlikely to be realised.
Other NAV measures include EPRA NRV and EPRA NDV which we report
alongside EPRA NTA.
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.
2020 Income statement
GBPm PRS Reversionary Other Total
---------------------------------------- ------- ------------- ------- -------
Group revenue 77.9 128.4 3.7 210.0
Segment revenue - external
---------------------------------------- ------- ------------- ------- -------
Net rental income 53.8 19.6 0.2 73.6
Profit on disposal of trading property (0.1) 57.2 4.2 61.3
Profit on disposal of investment
property 2.0 0.3 - 2.3
Income from financial interest
in property assets - 5.1 - 5.1
Fees and other income 2.9 - 0.6 3.5
Administrative expenses - - (28.7) (28.7)
Other expenses (0.6) - - (0.6)
Net finance costs (21.9) (11.4) (0.7) (34.0)
Share of trading loss of joint
ventures and associates after tax (0.5) - (0.2) (0.7)
---------------------------------------- ------- ------------- ------- -------
Adjusted earnings 35.6 70.8 (24.6) 81.8
Valuation movements 29.7
Other adjustments (0.7)
---------------------------------------- ------- ------------- ------- -------
Profit before tax 110.8
---------------------------------------- ------- ------------- ------- -------
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:
GBPm PRS Reversionary Other Total
-------------------------------------- ------ ------------- ------- -------
Adjusted earnings 35.6 70.8 (24.6) 81.8
Profit on disposal of investment
property (2.0) (0.3) - (2.3)
Previously recognised profit through
EPRA market value measures - (53.4) - (53.4)
-------------------------------------- ------ ------------- ------- -------
Adjusted EPRA earnings 33.6 17.1 (24.6) 26.1
-------------------------------------- ------ ------------- ------- -------
2019 Income statement
GBPm PRS Reversionary Other Total
---------------------------------------- ------- ------------- ------- -------
Group revenue
Segment revenue - external 67.9 134.1 20.8 222.8
---------------------------------------- ------- ------------- ------- -------
Net rental income 42.6 20.6 0.3 63.5
Profit on disposal of trading property 1.6 56.9 7.4 65.9
Profit on disposal of investment
property 1.9 - - 1.9
Income from financial interest
in property assets - 5.5 - 5.5
Fees and other income 2.1 0.1 2.2 4.4
Administrative expenses - - (28.0) (28.0)
Other expenses (0.6) - - (0.6)
Net finance costs (19.4) (11.9) (0.8) (32.1)
Share of trading profit of joint
ventures and associates after tax 0.7 - 1.3 2.0
---------------------------------------- ------- ------------- ------- -------
Adjusted earnings 28.9 71.2 (17.6) 82.5
Valuation movements 65.9
Other adjustments (17.1)
---------------------------------------- ------- ------------- ------- -------
Profit before tax 131.3
---------------------------------------- ------- ------------- ------- -------
A reconciliation from adjusted earnings to adjusted EPRA
earnings is detailed in the table below:
GBPm PRS Reversionary Other Total
-------------------------------------- ------ ------------- ------- -------
Adjusted earnings 28.9 71.2 (17.6) 82.5
Profit on disposal of investment
property (1.9) - - (1.9)
Previously recognised profit through
EPRA market value measures - (51.8) - (51.8)
-------------------------------------- ------ ------------- ------- -------
Adjusted EPRA earnings 27.0 19.4 (17.6) 28.8
-------------------------------------- ------ ------------- ------- -------
Segmental assets
The principal net asset value measures reviewed by the CODM are
EPRA NRV, EPRA NTA and EPRA NDV. These measures 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 NRV is the Group's 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 NTA assumes that entities buy and sell assets, thereby
crystallising certain levels of deferred tax liabilities. For the
Group, deferred tax in relation to revaluations of its trading
portfolio is taken into account by applying the expected rate of
tax to the adjustment that increases the value of trading stock
from its statutory accounts value of the lower of cost and net
realisable value, to its market value. The measure also excludes
all intangible assets on the statutory balance sheet, including
goodwill.
EPRA NDV reverses some of the adjustments made between statutory
net assets, EPRA NRV and EPRA NTA. 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 investment property revaluations
excluded from EPRA NRV and EPRA NTA are also reversed, as is the
intangible adjustment in respect of EPRA NTA, except for goodwill
which remains excluded. In addition, adjustments are made to net
assets to reflect the fair value, net of deferred tax, of the
Group's fixed rate debt.
Total Accounting Return (NTA basis) of 3.6% is calculated from
the closing EPRA NTA of 285p per share plus the dividend of 5.47p
per share for the year, divided by the opening EPRA NTA of 280p per
share, which has been adjusted for the February 2020 equity
raise.
These measures are set out below by segment along with a
reconciliation to the summarised statutory statement of financial
position:
2020 Segment net assets
PRS Reversionary Other Total Pence
GBPm per share
-------------------------- -------- ------------- ------ -------- -----------
Total segment net assets
(statutory) 1,169.6 252.0 41.4 1,463.0 217
-------------------------- -------- ------------- ------ -------- -----------
Total segment net assets
(EPRA NRV) 1,291.2 696.1 65.5 2,052.8 304
-------------------------- -------- ------------- ------ -------- -----------
Total segment net assets
(EPRA NTA) 1,266.8 611.4 42.9 1,921.1 285
-------------------------- -------- ------------- ------ -------- -----------
Total segment net assets
(EPRA NDV) 1,242.3 611.4 8.8 1,862.5 276
-------------------------- -------- ------------- ------ -------- -----------
2020 Reconciliation of EPRA NAV measures
Adjustments Adjustments
Adjustments to deferred to
to market and contingent derivatives,
value, EPRA tax and fixed EPRA
Statutory deferred NRV intangibles EPRA rate debt NDV
balance tax and balance NTA balance and balance
GBPm sheet derivatives sheet sheet intangibles sheet
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Investment
property 1,778.9 - 1,778.9 - 1,778.9 - 1,778.9
Investment
in joint
ventures
and associates 42.0 - 42.0 - 42.0 - 42.0
Financial
interest
in property
assets 73.3 - 73.3 - 73.3 - 73.3
Inventories
- trading
property 657.4 533.4 1,190.8 - 1,190.8 - 1,190.8
Cash and cash
equivalents 369.1 - 369.1 - 369.1 - 369.1
Other assets 70.0 3.5 73.5 (22.5) 51.0 35.2 86.2
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total assets 2,990.7 536.9 3,527.6 (22.5) 3,505.1 35.2 3,540.3
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Interest-bearing
loans and
borrowings (1,391.9) - (1,391.9) - (1,391.9) (48.7) (1,440.6)
Deferred and
contingent
tax liabilities (36.7) 32.3 (4.4) (109.2) (113.6) (24.5) (138.1)
Other liabilities (99.1) 20.6 (78.5) - (78.5) (20.6) (99.1)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total liabilities (1,527.7) 52.9 (1,474.8) (109.2) (1,584.0) (93.8) (1,677.8)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Net assets 1,463.0 589.8 2,052.8 (131.7) 1,921.1 (58.6) 1,862.5
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
2019 Segment net assets
PRS Reversionary Other Total Pence
GBPm per share
-------------------------- -------- ------------- ------ -------- -----------
Total segment net assets
(statutory) 979.3 224.5 19.7 1,223.5 199
-------------------------- -------- ------------- ------ -------- -----------
Total segment net assets
(EPRA NRV) 1,090.4 689.9 40.6 1,820.9 297
-------------------------- -------- ------------- ------ -------- -----------
Total segment net assets
(EPRA NTA) 1,068.2 610.5 29.4 1,708.1 278
-------------------------- -------- ------------- ------ -------- -----------
Total segment net assets
(EPRA NDV) 1,048.8 610.5 6.4 1,665.7 272
-------------------------- -------- ------------- ------ -------- -----------
2019 Reconciliation of EPRA NAV measures
Adjustments
Adjustments to
to market Adjustments derivatives,
value, to deferred fixed
Statutory deferred EPRA NRV and contingent EPRA rate debt EPRA NDV
balance tax and balance tax and NTA balance and balance
GBPm sheet derivatives sheet intangibles sheet intangibles sheet
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Investment
property 1,574.6 - 1,574.6 - 1,574.6 - 1,574.6
Investment
in joint
ventures
and associates 33.3 - 33.3 - 33.3 - 33.3
Financial
interest
in property
assets 76.4 - 76.4 - 76.4 - 76.4
Inventories
- trading
property 700.0 548.8 1,248.8 - 1,248.8 - 1,248.8
Cash and
cash equivalents 189.3 - 189.3 - 189.3 - 189.3
Other assets 57.6 3.6 61.2 (11.2) 50.0 17.7 67.7
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total assets 2,631.2 552.4 3,183.6 (11.2) 3,172.4 17.7 3,190.1
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Interest-bearing
loans and
borrowings (1,276.8) - (1,276.8) - (1,276.8) (23.4) (1,300.2)
Deferred
and contingent
tax liabilities (32.7) 27.7 (5.0) (101.6) (106.6) (19.4) (126.0)
Other liabilities (98.2) 17.3 (80.9) - (80.9) (17.3) (98.2)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total liabilities (1,407.7) 45.0 (1,362.7) (101.6) (1,464.3) (60.1) (1,524.4)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Net assets 1,223.5 597.4 1,820.9 (112.8) 1,708.1 (42.4) 1,665.7
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
4. Group revenue
2020 2019
GBPm GBPm
-------------------------------------------------- ------ ------
Gross rental income (Note 5) 99.3 85.9
Gross proceeds from disposal of trading property
(Note 6) 107.2 132.5
Fees and other income (Note 8) 7.5 4.4
-------------------------------------------------- ------ ------
214.0 222.8
-------------------------------------------------- ------ ------
5. Net rental income
2020 2019
GBPm GBPm
----------------------------- ------- -------
Gross rental income 99.3 85.9
Property operating expenses (25.7) (22.4)
----------------------------- ------- -------
73.6 63.5
----------------------------- ------- -------
6. Profit on disposal of trading property
2020 2019
GBPm GBPm
-------------------------------------------------- ------- -------
Proceeds from disposal of trading property 107.2 127.2
Contract revenue - 5.3
-------------------------------------------------- ------- -------
Gross proceeds from disposal of trading property 107.2 132.5
Selling costs (2.3) (2.2)
-------------------------------------------------- ------- -------
Net proceeds from disposal of trading property 104.9 130.3
Carrying value of trading property sold (Note
12) (43.3) (59.2)
Carrying value of contract expenses (Note 12) - (4.5)
-------------------------------------------------- ------- -------
61.6 66.6
-------------------------------------------------- ------- -------
In the prior period, amounts relating to the contract revenue
and expenses relate to the Group's development of properties in the
arrangement with the Royal Borough of Kensington and Chelsea, with
construction concluding in 2019. 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.
7. Profit on disposal of investment property
2020 2019
GBPm GBPm
----------------------------------------------------- ------- -------
Gross proceeds from disposal of investment property 36.9 60.6
Selling costs (0.7) (1.2)
----------------------------------------------------- ------- -------
Net proceeds from disposal of investment property 36.2 59.4
Carrying value of investment property sold (Note
11) (33.9) (57.5)
----------------------------------------------------- ------- -------
2.3 1.9
----------------------------------------------------- ------- -------
8. Fees and other income
2020 2019
GBPm GBPm
------------------------------------------ ------ ------
Property and asset management fee income 2.2 3.8
Other sundry income 5.3 0.6
------------------------------------------ ------ ------
7.5 4.4
------------------------------------------ ------ ------
Included within other sundry income in the current year is
GBP1.6m recorded in relation to the settlement of historic legal
matters with respect to the Group's interest in the Czech Republic
and GBP2.4m following the resolution of a legal claim related to a
previous corporate transaction. Also included within other sundry
income is GBP1.3m (2019: GBP0.2m) liquidated and ascertained
damages (LADs) recorded to compensate the Group for lost rental
income resulting from the delayed completion of construction
contracts.
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 year,
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') and Deferred Bonus Plan ('DBP'),
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 30 September 2020 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.
30 September 2020 30 September 2019
-------------------------------- --------------------------------
Profit Weighted Profit Weighted
for average Earnings for average Earnings
the number per the number per
year of shares share year of shares share
GBPm (millions) (pence) GBPm (millions) (pence)
------------------------------ ------- ------------ --------- ------- ------------ ---------
Basic earnings per share
Profit attributable to
equity holders 92.8 649.1 14.3 114.9 578.5 19.9
Effect of potentially
dilutive securities
Share options and contingent
shares - 2.6 (0.1) - 2.7 (0.1)
------------------------------ ------- ------------ --------- ------- ------------ ---------
Diluted earnings per share
Profit attributable to
equity holders 92.8 651.7 14.2 114.9 581.2 19.8
------------------------------ ------- ------------ --------- ------- ------------ ---------
10. Dividends
Subject to approval at the AGM, the final dividend of 3.64p per
share (gross) amounting to GBP24.5m will be paid on 15 February
2021 to Shareholders on the register at the close of business on 29
December 2020. Shareholders will again be offered the option to
participate in a dividend reinvestment plan and the last day for
election is 25 January 2021. An interim dividend of 1.83p per share
amounting to a total of GBP12.3m was paid to Shareholders on 3 July
2020.
11. Investment property
2020 2019
GBPm GBPm
------------------------------------------------- -------- --------
Opening balance 1,574.6 589.7
------------------------------------------------- -------- --------
Acquisitions 37.7 32.4
Capital expenditure - completed assets 11.4 8.7
Capital expenditure - assets under construction 146.2 171.5
------------------------------------------------- -------- --------
Total additions 195.3 212.6
Acquired through business combination (Note 25) - 700.8
Transfer from inventories 13.1 71.5
Disposals (Note 7) (33.9) (57.5)
Net valuation gains 29.8 57.5
Closing balance 1,778.9 1,574.6
------------------------------------------------- -------- --------
12. Inventories
2020 2019
GBPm GBPm
--------------------------------------------------- ------- -------
Opening balance 700.0 799.3
Additions 14.5 36.3
Transfer to investment property (13.1) (71.5)
Disposals (Note 6) (43.3) (63.7)
Impairment of inventories to net realisable value (0.7) (0.4)
--------------------------------------------------- ------- -------
Closing balance 657.4 700.0
--------------------------------------------------- ------- -------
13. Investment in associates
2020 2019
GBPm GBPm
-------------------------------------------------------- ------ --------
Opening balance 11.7 134.0
Share of profit for the year 0.1 0.4
Investment eliminated on consolidation following
acquisition - (109.7)
Loan eliminated on consolidation following acquisition - (18.2)
Loans advanced to associates 2.9 5.1
Share of change in fair value of cash flow hedges
taken through other comprehensive income - 0.1
Closing balance 14.7 11.7
-------------------------------------------------------- ------ --------
The closing balance comprises share of net assets of GBP0.1m
(2019: GBPnil) and net loans due from associates of GBP14.6m (2019:
GBP11.7m). At the balance sheet date, there is no expectation of
credit losses on loans due.
In the prior year, the investment and loan eliminated on
consolidation following acquisition of GBP109.7m and GBP18.2m
respectively represents the Group's share of net assets in GRIP
which became a subsidiary of Grainger (see Note 25).
As at 30 September 2020, the Group's interest in active
associates was as follows:
% of ordinary Country of Accounting
share capital incorporation period end
held
--------- --------------- --------------- -------------
Vesta LP 20.0 UK 30 September
--------- --------------- --------------- -------------
14. Investment in joint ventures
2020 2019
GBPm GBPm
------------------------------------- ------ ------
Opening balance 21.6 11.6
Share of (loss)/profit for the year (1.6) 1.4
Reversal of impairment - 9.8
Further investment(1) 5.5 2.9
Loans advanced to joint ventures 1.8 1.6
Loans repaid by joint ventures - (5.7)
Closing balance 27.3 21.6
------------------------------------- ------ ------
(1) Grainger invested GBP5.5m into Connected Living London (BTR)
Limited in the year (2019: GBP2.9ml).
The closing balance comprises share of net assets of GBP8.0m
(2019: GBP4.1m) and net loans due from joint ventures of GBP19.3m
(2019: GBP17.5m). At the balance date, there is no expectation of
credit losses on loans due.
In the prior year, the impairment against loans made to the
Curzon Park Limited joint venture totalling GBP9.8m was reversed in
full. There are no impairments held against loans to joint ventures
at the reporting date .
At 30 September 2020, the Group's interest in active joint
ventures was as follows:
% of ordinary Accounting
share capital Country period
held of incorporation end
------------------------------ --------------- ------------------ -------------
Connected Living London (BTR) 30 September
Limited 51 UK
Curzon Park Limited 50 UK 31 March
Helical Grainger (Holdings) 31 March
Limited 50 UK
Lewisham Grainger Holdings 30 September
LLP 50 UK
CCZ a.s. 50 Czech Republic 30 September
------------------------------ --------------- ------------------ -------------
Following resolution of outstanding matters, CCZ a.s., the
Group's remaining joint venture interest in the Czech Republic, is
in liquidation as at 30 September 2020.
15. Financial interest in property assets ('CHARM'
portfolio)
2020 2019
GBPm GBPm
----------------------------------- ------ -------
Opening balance 76.4 82.2
Cash received from the instrument (8.3) (10.0)
Amounts taken to income statement 5.2 4.2
Closing balance 73.3 76.4
----------------------------------- ------ -------
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 19.
16. Intangible assets
2020 2019
GBPm GBPm
----------------- ------ ------
Opening balance 11.2 4.7
Additions 12.0 7.7
Amortisation (0.7) (1.2)
Closing balance 22.5 11.2
----------------- ------ ------
17. Trade and other receivables
2020 2019
GBPm GBPm
----------------------------------------- ------ ------
Rent and other tenant receivables 4.8 2.5
Deduct: Provision for impairment (2.4) (0.7)
----------------------------------------- ------ ------
Rent and other tenant receivables - net 2.4 1.8
Contract assets 3.3 18.5
Other receivables 23.0 18.0
Prepayments 2.6 2.2
----------------------------------------- ------ ------
Closing balance 31.3 40.5
----------------------------------------- ------ ------
The Group's assessment of expected credit losses involves
estimation given its forward-looking nature. This is not considered
to be an area of significant judgment or estimation due to the
balance of gross rent and other tenant receivables of GBP4.8m
(2019: GBP2.5m). Assumptions used in the forward looking assessment
have been adjusted in respect of Covid-19 to take into account
likely rent deferrals.
Contract assets in the prior year primarily relate to revenue
receivable on the arrangement with the Royal Borough of Kensington
and Chelsea (Note 6).
Other receivables include GBP9.3m (2019: GBP4.0m) due from land
sales, which is receivable no later than March 2022.
The fair values of trade and other receivables are considered to
be equal to their carrying amounts.
18. Trade and other payables
2020 2019
GBPm GBPm
-------------------------------- ------ ------
Current liabilities
Deposits received 7.2 7.5
Trade payables 16.4 17.5
Lease liabilities 0.9 -
Tax and social security costs 0.5 1.0
Accruals 44.2 42.8
Deferred income 4.1 4.8
-------------------------------- ------ ------
73.3 73.6
-------------------------------- ------ ------
Non-current liabilities
Lease liabilities 1.3 -
-------------------------------- ------ ------
1.3 -
-------------------------------- ------ ------
Total trade and other payables 74.6 73.6
-------------------------------- ------ ------
Within accruals, GBP28.4m comprises accrued expenditure in
respect of ongoing construction activities (2019: GBP28.2m).
19. Interest-bearing loans and borrowings and financial risk
management
2020 2019
GBPm GBPm
--------------------------------------------- -------- --------
Current liabilities
Non-bank financial institution - 100.0
- 100.0
--------------------------------------------- -------- --------
Non-current liabilities
Bank loans - Pounds sterling 352.2 483.8
Bank loans - Euro 0.9 0.9
Non-bank financial institution 346.2 345.7
Corporate bond 692.6 346.4
--------------------------------------------- -------- --------
1,391.9 1,176.8
--------------------------------------------- -------- --------
Total interest-bearing loans and borrowings 1,391.9 1,276.8
--------------------------------------------- -------- --------
During the year the Group issued a new ten-year GBP350.0m
corporate bond at 3.0% due July 2030.
The above analyses of loans and borrowings are net of
unamortised loan issue costs and the discount on issuance of the
corporate bond. As at 30 September 2020, unamortised costs totaled
GBP13.1m (2019: GBP12.9m) and the outstanding discount was GBP2.9m
(2019: GBP1.2m).
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 30 September 2020 and as
at 30 September 2019.
As at 30 September 2020, the fair value of interest-bearing
loans is greater than the book value by GBP48.7m (2019: GBP23.4m),
but there is no requirement under IFRS 9 to adjust the carrying
value of loans, all of which are stated at unamortised cost in the
consolidated statement of financial position.
Market risk
The Group is exposed to market risk through interest rates, 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.
The following table presents the Group's assets and liabilities
that are measured at fair value:
2020 2019
---------------------- ----------------------
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
------------------------------------------------------------------- -------- ------------ -------- ------------
Level 3
------------------------------------------------------------------- -------- ------------ -------- ------------
CHARM 73.3 - 76.4 -
Investment property 1,778.9 - 1,574.6 -
------------------------------------------------------------------- -------- ------------ -------- ------------
1,852.2 - 1,651.0 -
------------------------------------------------------------------- -------- ------------ -------- ------------
Level 2
------------------------------------------------------------------- -------- ------------ -------- ------------
Interest rate swaps - in cash flow hedge accounting relationships - 20.6 - 17.3
- 20.6 - 17.3
------------------------------------------------------------------- -------- ------------ -------- ------------
The significant unobservable inputs affecting the carrying value
of the CHARM portfolio are house price inflation and discount
rates. A reconciliation of movements and amounts recognised in the
consolidated income statement 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:
2020 2019
Assets - Level 3 GBPm GBPm
----------------------------------- -------- --------
Opening balance 1,651.0 671.9
Amounts taken to income statement 34.6 61.7
Other movements 166.6 917.4
----------------------------------- -------- --------
Closing balance 1,852.2 1,651.0
----------------------------------- -------- --------
20. Tax
The tax charge for the year of GBP18.0m (2019: GBP16.4m)
recognised in the consolidated income statement comprises:
2020 2019
GBPm GBPm
--------------------------------------------------- ------ ------
Current tax
Corporation tax on profit 20.3 16.4
Adjustments relating to prior years (5.3) (1.9)
--------------------------------------------------- ------ ------
15.0 14.5
--------------------------------------------------- ------ ------
Deferred tax
Origination and reversal of temporary differences 1.4 0.6
Adjustments relating to prior years 1.6 1.3
3.0 1.9
--------------------------------------------------- ------ ------
Total tax charge for the year 18.0 16.4
--------------------------------------------------- ------ ------
The 2020 current tax adjustments relating to prior years reflect
adjustments which have been included in submitted tax returns,
whilst deferred tax adjustments relate primarily to adjustments to
tax losses and capital allowances.
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.
The Group's results for this year are taxed at an effective rate
of 19.0% (2019: 19.0%).
In addition to the above, a deferred tax credit of GBP1.3m
(2019: GBP3.6m) was recognised within other comprehensive income
comprising:
2020 2019
GBPm GBPm
------------------------------------------------------------------ ------ ------
Actuarial loss on BPT Limited pension scheme (0.3) (0.6)
Fair value movement in cash flow hedges and exchange adjustments (1.0) (3.0)
------------------------------------------------------------------ ------ ------
Amounts recognised in other comprehensive income (1.3) (3.6)
------------------------------------------------------------------ ------ ------
Deferred tax balances comprise temporary differences
attributable to:
2020 2019
GBPm GBPm
---------------------------------------------------------------- ------- -------
Deferred tax assets
Short-term temporary differences 1.1 1.4
Losses carried forward 1.5 0.3
Actuarial deficit on BPT Limited pension scheme 1.2 0.9
Fair value movement in derivative financial instruments
and cumulative exchange adjustments 4.0 3.0
---------------------------------------------------------------- ------- -------
7.8 5.6
---------------------------------------------------------------- ------- -------
Deferred tax liabilities
Trading property uplift to fair value on business combinations (7.9) (8.3)
Investment property revaluation (25.0) (19.7)
Short-term temporary differences (2.6) (3.6)
Fair value movement in financial interest in property assets (1.2) (1.1)
(36.7) (32.7)
---------------------------------------------------------------- ------- -------
Total deferred tax (28.9) (27.1)
---------------------------------------------------------------- ------- -------
Deferred tax has been predominantly calculated at a rate of
19.0% (2019: 17.0%) in line with the enacted main rate of
corporation tax.
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 consolidated
statement of financial position and their market value has not been
recognised by the Group. This contingent tax amounts to GBP101.3m,
calculated at 19.0% (2019: GBP93.3m, calculated at 17.0%) and will
be realised as the properties are sold.
21. Retirement benefits
The Group retirement benefit liability increased by GBP0.7m to
GBP2.4m in the year ended 30 September 2020. This movement has
arisen from changes in assumptions of GBP1.1m (primarily market
observable discount rates) and loss on plan assets of GBP0.1m,
offset by GBP0.5m company contributions. The principal actuarial
assumptions used to reflect market conditions as at 30 September
2020 are as follows:
2020 2019
% %
------------------------------------------ ----- -----
Discount rate 1.50 1.70
Retail Price Index (RPI) inflation 3.05 3.30
Consumer Price Index (CPI) inflation 2.25 2.30
Salary increases 3.55 3.80
Rate of increase of pensions in payment 5.00 5.00
Rate of increase for deferred pensioners 2.25 2.30
------------------------------------------ ----- -----
22. 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 consolidated income
statement for the period is GBP1.1m (2019: GBP1.7m).
23. Related party transactions
During the year ended 30 September 2020, 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 consolidated income
statement and consolidated statement of financial position are as
follows:
2020 2019
----------------------- -----------------------
Fees Year end Fees Year end
recognised balance recognised balance
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- ------------ ---------
GRIP REIT PLC(1) - - 840 -
Connected Living London
(BTR) Limited 736 557 - -
Lewisham Grainger Holdings
LLP 270 611 341 341
Vesta Limited Partnership 184 139 803 126
---------------------------- ------------ --------- ------------ ---------
1,190 1,307 1,984 467
---------------------------- ------------ --------- ------------ ---------
2020 2019
---------------------------------------- ---------------------------------------
Interest Year end loan Interest Interest Year end loan Interest
recognised balance rate recognised balance rate
GBP'000 GBPm % GBP'000 GBPm %
-------------------------------- ------------- -------------- --------- ------------ -------------- ---------
GRIP REIT PLC(1) - - - 124 - -
CCZ a.s. - - - (6) (0.4) 4.00
Curzon Park Limited(2) - 17.0 Nil - 16.2 Nil
Lewisham Grainger Holdings LLP - 2.3 Nil - 1.7 Nil
Vesta LP - 14.6 Nil - 11.7 Nil
-------------------------------- ------------- -------------- --------- ------------ -------------- ---------
- 33.9 118 29.2
---------------------------------------------- -------------- --------- ------------ -------------- ---------
(1) Following the acquisition in the prior year, amounts
recognised from GRIP REIT PLC relate to pre-acquisition fees and
interest where the Group's interest was classified as an associate.
Following the acquisition, the results of GRIP REIT PLC are
consolidated in full into the results of the Group.
(2) The amount disclosed above is the gross loan amount. The
GBP9.8m provision previously held against the loan was reversed in
the prior year.
24. Issue of share capital
In February 2020, the Group issued 61,200,000 new shares at an
issue price of 305.0p raising a total amount of GBP182.5m net of
costs. The shares were issued with a nominal value of GBP0.05p per
share. This increased share capital by GBP3.1m and the share
premium account by GBP179.4m.
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
194,758,445 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.
25. Business combination in prior year
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 30 September 2019, GRIP
contributed revenue of GBP23.6m and profit of GBP23.9m to the
Group's results. If the acquisition had occurred on 1 October 2018,
the consolidated revenue would have been GBP229.5m and consolidated
profit would have been GBP129.9m for the year ended 30 September
2019.
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. 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.
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.
Following the acquisition, there remained a 10% non-controlling
interest in GRIP Unit Trust 6, a wholly-owned subsidiary of the
Group, held by BY Development Limited. On 13 May 2019, the 10%
non-controlling interest was acquired by the Group for GBP3.1m.
EPRA Performance Measures - Unaudited
The European Public Real Estate Association (EPRA) is the body
that represents Europe's listed property companies. The association
sets out guidelines and recommendations to facilitate consistency
in listed real estate reporting, in turn allowing stakeholders to
compare companies on a like-for-like basis. As a member of EPRA,
the Group is supportive of EPRA's initiatives and discloses
measures in relation to the EPRA Best Practices Recommendations
('EPRA BPR') guidelines. The most recent guidelines, updated in
October 2019, have been adopted by the Group.
EPRA Earnings
2020 2019
---------------------------- ---------------------------
Pence Pence
Earnings Shares per Earnings Shares per
GBPm millions share GBPm millions share
--------------------------------------- --------- --------- ------ -------- --------- ------
Earnings per IFRS income statement 110.8 651.7 17.0 131.3 581.2 22.6
Adjustments to calculate adjusted
EPRA Earnings, exclude:
i) Changes in value of investment
properties, development properties
held for investment and other
interests (29.9) - (4.6) (56.2) - (9.7)
ii) Profits or losses on disposal
of investment properties, development
properties held for investment
and other interests (2.3) - (0.4) (1.9) - (0.3)
iii) Profits or losses on sales
of trading properties including
impairment charges in respect
of trading properties (53.0) - (8.1) (52.1) - (9.0)
iv) Tax on profits or losses on
disposals - - - - - -
v) Negative goodwill/goodwill
impairment - - - 12.7 - 2.2
vi) Changes in fair value of financial
instruments and associated close-out
costs 1.9 - 0.3 0.8 - 0.1
vii) Acquisition costs on share
deals and non-controlling joint
venture interests - - - 3.8 - 0.7
viii) Deferred tax in respect
of EPRA adjustments - - - - - -
ix) Adjustments i) to viii) in
respect of joint ventures (0.2) - - (9.6) - (1.6)
x) Non-controlling interests in
respect of the above - - - - - -
xi) Other adjustments in respect
of adjusted earnings (1.2) - (0.2) - - -
--------------------------------------- --------- --------- ------ -------- --------- ------
Adjusted EPRA Earnings/Earnings
per share 26.1 651.7 4.0 28.8 581.2 5.0
--------------------------------------- --------- --------- ------ -------- --------- ------
Adjusted EPRA Earnings per share
after tax 3.2 4.1
--------------------------------------- --------- --------- ------ -------- --------- ------
Adjusted EPRA Earnings have been divided by the average number
of shares shown in Note 9 to these financial statements to
calculate earnings per share. Adjusted EPRA Earnings per share
after tax is calculated using the standard rate of UK Corporation
Tax of 19.0% (2019: 19.0%).
EPRA NRV, EPRA NTA and EPRA NDV
2020 2019
------------------------- -------------------------
EPRA EPRA EPRA EPRA EPRA EPRA
NRV NTA NDV NRV NTA NDV
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ------- ------- ------- ------- ------- -------
IFRS Equity attributable to shareholders 1,463.0 1,463.0 1,463.0 1,223.5 1,223.5 1,223.5
Include/Exclude:
i) Hybrid Instruments - - - - - -
----------------------------------------- ------- ------- ------- ------- ------- -------
Diluted NAV 1,463.0 1,463.0 1,463.0 1,223.5 1,223.5 1,223.5
Include:
ii.a) Revaluation of IP (if IAS
40 cost option is used) - - - - - -
ii.b) Revaluation of IPUC (if IAS
40 cost option is used) - - - - - -
ii.c) Revaluation of other non-current
investments 7.4 7.4 7.4 6.5 6.5 6.5
iii) Revaluation of tenant leases
held as finance leases - - - - - -
iv) Revaluation of trading properties 541.3 432.1 432.1 557.1 455.5 455.5
----------------------------------------- ------- ------- ------- ------- ------- -------
Diluted NAV at Fair Value 2,011.7 1,902.5 1,902.5 1,787.1 1,685.5 1,685.5
Exclude:
v) Deferred tax in relation to
fair value gains of IP 24.4 24.4 - 19.4 19.4 -
vi) Fair value of financial instruments 16.7 16.7 - 14.4 14.4 -
vii) Goodwill as a result of deferred
tax - - - - - -
viii.a) Goodwill as per the IFRS
balance sheet - (0.5) (0.5) - (0.5) (0.5)
viii.b) Intangible as per the IFRS
balance sheet - (22.0) - - (10.7) -
Include:
ix) Fair value of fixed interest
rate debt - - (39.5) - - (19.3)
x) Revalue of intangibles to fair
value - - - - - -
xi) Real estate transfer tax - - - - - -
----------------------------------------- ------- ------- ------- ------- ------- -------
NAV 2,052.8 1,921.1 1,862.5 1,820.9 1,708.1 1,665.7
Fully diluted number of shares
NAV 675.3 675.3 675.3 613.8 613.8 613.8
NAV pence per share 304 285 276 297 278 272
----------------------------------------- ------- ------- ------- ------- ------- -------
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.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR GPGQGGUPUGRR
(END) Dow Jones Newswires
November 19, 2020 02:00 ET (07:00 GMT)
Grainger (LSE:GRI)
Historical Stock Chart
From Mar 2024 to Apr 2024
Grainger (LSE:GRI)
Historical Stock Chart
From Apr 2023 to Apr 2024