TIDMGRI
RNS Number : 4535Y
Grainger PLC
13 May 2021
13 May 2021
Grainger plc
Half year financial results
for the six months ended 31 March 2021
Strong performance and continued growth trajectory
-- Adjusted Earnings up +11%
-- Like-for-like rental growth of +1.7%
-- Strong rent collection at 98%
-- Dividend maintained
-- Occupancy held at 89%
-- Lettings enquires up +86% since beginning of January
-- Pipeline delivery set to accelerate with 1,021 new homes this year
Helen Gordon, Chief Executive of Grainger, the UK's largest
listed residential landlord with 9,109 operational rental homes and
a GBP2.1bn pipeline of a further 8,851 rental homes, said:
"We have delivered a strong performance over the past six months
despite the impact of Covid-19. It has been a period of intense
operational activity, supporting our customers in their homes.
Adjusted earnings grew 11% over the period and our strong sales
performance more than offset a reduction in occupancy in our PRS
portfolio (89%) caused by Covid-19 lockdown restrictions. Our
rental income continued to prove resilient with very high levels of
rent collection at 98% and continued rental growth of 1.7%. We are
therefore maintaining our interim dividend at 1.83p(1) .
"We continue to progress our well-established growth strategy,
with new acquisitions for 490 new rental homes, major planning
approvals secured for a further 618 new rental homes, and over
1,000 new rental homes to be delivered this year.
"During the six-month period we have driven customer retention,
lettings and rental growth ahead of the market, leveraging our
in-house operating platform. There is positive market evidence,
including the +86% rise in lettings enquiries we have generated
since the beginning of the year, which suggests a strong lettings
market to come as we enter the peak summer period and all remaining
lockdown restrictions are lifted. This provides us with increasing
confidence for an improved performance for the second half of the
year subject to the UK economy reopening as currently expected.
"The many actions we have taken from the outset of our strategy
in 2016, focusing the business to what it is today and setting us
up for significant future growth and earnings potential, but also
the actions we took in the past six months, gives us a high level
of assurance that we are ready to capitalise on the UK's reopening
over the coming months, and pursue our long term growth plans."
Key highlights
-- +11% growth in Adjusted Earnings(2) , driven by +30% increase
in sales profits
-- Robust rental performance and positive outlook, evidenced by
+86% increase in enquiry levels since January
o Net rental income(3) of GBP34.7m (HY20: GBP37.0m), reflecting
planned asset recycling, lower occupancy and delays in pipeline
completions
o +1.7% like-for-like rental growth(4) in H1 across our total
portfolio (HY20: 3.4%)
-- 1.0% like-for-like rental growth in our PRS portfolio (HY20:
3.0%), reflecting our focus on customer retention, with rental
growth achieved across all regions, with a marginally stronger
performance outside London
-- 4.0% like-for-like rental growth in our regulated tenancy
portfolio (HY20: 4.5%), which contributes 27% of our total net
rental income
o Strong rent collection of 98%
o 1,086 new lets and 1,244 renewals secured in the period,
representing GBP12m and GBP15m of gross rent respectively, a strong
performance in a challenging market
o 4,974 prospective customer enquiries in H1
o +86% increase in enquiries since January, with month on month
growth
o Occupancy successfully maintained at 89% despite ongoing
lockdown restrictions; our regional portfolio experienced
marginally higher occupancy
-- Strong sales performance
o Sales profit up 30% to GBP29.6m (HY20: GBP22.8m)
-- Vacant sales from our regulated tenancy portfolio delivered
10% profit growth, with vacant sales achieving prices 0.6% ahead of
valuations. Sales took c.4 months to complete, H1 sales prices
achieved are typically more modest compared to H2.
-- The remainder of the growth in sales profit was delivered as
a result of our successful asset recycling activity (sale of
tenanted properties) to take advantage of strong market
conditions
-- H2 vacant sales expected to be stronger than H1 based on
current sales pipeline
-- Delivering growth with 1,021 new homes to be delivered this
year (508 homes delivered in H1 and 513 in H2), totalling c.GBP12m
of targeted net rental income once stabilised
o We have worked hard with our supply chain to overcome the
challenges of Covid-19 and have minimised disruption to our
pipeline delivery. Where delays are unrelated to Covid-19, Grainger
benefits from receiving compensation for lost rent through our
forward funding contract terms, totalling GBP0.8m for the
period.
-- Expanding our c.GBP2.1bn pipeline with new acquisitions and
planning contents secured, totalling 1,108 new homes
o Acquired Millwrights Place, Bristol - GBP63m, 231 homes
o Acquired Becketwell, Derby - GBP38m, 259 homes
o Planning secured at Nine Elms, London (TfL JV) - 479 homes
o Planning secured at Montford Place, Oval, London (TfL JV) -
139 homes
-- Achieved investment grade credit rating from Fitch for the
corporate and reaffirmed investment grade rating for our bond
Key actions
Our leading operating platform and the recent actions we have
taken to enhance it, ensure that we are well positioned to
capitalise on the summer rental momentum and continue to
successfully grow our portfolio and outperform the market.
-- Full roll out of Digital Leasing via our CONNECT technology
platform
-- Creation of a centralised customer service team, supporting
customer satisfaction and retention
-- Enhanced customer offering including doubled internet speed
to 250MB for free for all eligible customers
-- Expansion of our direct lettings activity and enhanced
digital marketing, increasing conversion rates and supporting lease
up of new schemes:
o Solstice Apartments, Milton Keynes, fully let, having launched
at the start of the pandemic
o Gatehouse Apartments, Southampton, 54 homes let / reserved
(41%) in six weeks
o The Filaments, Manchester, 54 homes let / reserved (14%) in
six weeks
-- ESG Leadership: We are continually building on Grainger's
positive social impact business model of delivering good quality,
mid-market rental homes with support for our customers and local
communities. We are reducing our environmental impact toward net
zero carbon and enhancing the diversity and inclusivity of our
workforce. We retained our top ESG benchmark scores.
Financial Highlights
Income returns HY20 HY21 Change
------------------------------------ --------- --------- ----------
Rental growth (like-for-like) 3.4% 1.7% (170) bps
- PRS 3.0% 1.0% (200) bps
- Regulated tenancies (annualised) 4.5% 4.0% (50) bps
Net rental income (Note 5) GBP37.0m GBP34.7m (6)%
Adjusted earnings (Note 2) GBP33.7m GBP37.5m +11%
Profit before tax (Note 2) GBP49.6m GBP50.3m +1%
Earnings per share (diluted, after
tax) (Note 9) 6.4p 6.0p (6)%
Dividend per share (Note 10) 1.83p 1.83p +0%
------------------------------------ --------- --------- ----------
Capital returns FY20 HY21 Change
----------------------------- ---------- ---------- ---------
EPRA NTA per share (Note 3) 285p 286p +0%
Net debt GBP1,032m GBP1,098m +6%
Group LTV 33.4% 34.5% +111 bps
Cost of debt (average) 3.1% 3.1% +3 bps
Reversionary surplus GBP301m GBP286m (5)%
----------------------------- ---------- ---------- ---------
Secured pipeline
---------------------------- ----------
Total investment value GBP1,078m
Total homes 4,293
Targeted net rental income c.GBP52m
---------------------------- ----------
(1) Dividend - The dividend of 1.83p per share (gross) amounting
to GBP12.3m will be paid on 2 July 2021 to shareholders on the
register at the close of business on 28 May 2021. Shareholders will
again be offered the option to participate in a dividend
re-investment plan and the last day for election is 11 June 2021 -
refer also to Note 10.
(2) Refer to Note 2 for profit before tax and adjusted earnings
reconciliation.
(3) Refer to Note 5 for net rental income calculation.
(4) Rental growth is the average increase in rent charged across
our portfolio on a like-for-like basis.
Future reporting dates
-- Trading update - September 2021
-- Full year results - 18 November 2021
Half year results presentation
Grainger plc will be holding a virtual presentation of the
results at 9:30am (UK time) today, 13 May 2021, via webcast and a
telephone dial-in facility (details below), which will be followed
by a live Q&A session for sell side analysts and
shareholders.
Webcast details:
To view the webcast, please go to the following URL link.
Registration is required.
https://webcasting.brrmedia.co.uk/broadcast/606edb6b0386285386cc6056
The webcast will be available for six months from the date of
the presentation.
Conference call details:
Call: +44 (0)330 336 9434
Confirmation Code: 2203372
A copy of the presentation slides will also be available to
download on Grainger's website (
http://corporate.graingerplc.co.uk/ ) from 09:00am (UK time).
For further information, please contact:
Investor relations
Kurt Mueller, Grainger plc: +44 (0) 20 7940 9500
Media
Ginny Pulbrook / Geoffrey Pelham-Lane, Camarco: +44 (0) 20 3757 4992 / 4985
Forward-looking statements disclaimer
This publication contains certain forward-looking statements.
Any statement in this publication that is not a statement of
historical fact including, without limitation, those regarding
Grainger plc's future financial condition, business, operations,
financial performance and other future events or developments
involving Grainger, is a forward-looking statement. Such statements
may, but not always, be identified by words such as 'expect',
'estimate', 'project', 'anticipate', 'believe', 'should', 'intend',
'plan', 'could', 'probability', 'risk', 'target', 'goal',
'objective', 'may', 'endeavour', 'outlook', 'optimistic',
'prospects' and similar expressions or variations on these
expressions. By their nature, forward-looking statements involve
inherent risks, assumptions and uncertainties as they relate to
events which occur in the future and depend on circumstances which
may or may not occur and go beyond Grainger's ability to control.
Actual outcomes or results may differ materially from the outcomes
or results expressed or implied by these forward-looking
statements. Factors which may give rise to such differences include
(but are not limited to) changing economic, financial, business,
regulatory, legal, political, industry and market trends, house
prices, competition, natural disasters, terrorism or other social,
political or market conditions.
Grainger's principal risks are described in more detail in its
Annual Report and Accounts, set out in the Risk Management report
on pages 47-50 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.
In line with our risk management approach detailed on pages
44-46 of the 2020 Annual Report and Accounts, the key risks to the
business are under regular review by the Board and management,
applying Grainger's risk management framework. The Covid-19
pandemic has had a substantial impact on many aspects of society,
including business, with the duration and depth of the impact being
uncertain. Specifically in relation to Grainger, it is currently
considered that the principal risks previously reported remain our
principal risks. However, it is recognised that a pandemic, and
consequently Government restrictions and societal behavioural
changes flowing therefrom increase the likelihood of such risks
being accelerated or becoming more acute. This would include, but
is not limited to market, regulatory and supplier risks. The risks
to Grainger will continue to be monitored closely as well as the
potential controls and mitigants that may be applied during this
unprecedented period.
These risks and other factors could adversely affect the outcome
and financial effects of the events specified in this publication.
The forward-looking statements reflect knowledge and information
available at the date they are made and Grainger plc does not
intend to update on the forward-looking statements contained in
this publication.
This publication is for information purposes only and no
reliance may be placed upon it. No representative or warranty,
either expressed or implied, is provided in relation to the
accuracy, completeness or reliability of the information contained
in this publication. Past performance of securities in Grainger plc
cannot be relied upon as a guide to the future performance of such
securities.
This publication does not constitute an offer for sale or
subscription of, or solicitation of any offer to buy or subscribe
for, any securities of Grainger plc.
Chief Executive's review
Overview - well positioned for continued growth and reopening of
UK
Our PRS growth strategy, focused on the mid-market and supported
by our active asset recycling, has enabled us to maintain high
levels of performance during challenging times, but also to invest
and grow further at the same time.
The success of our strategy and the hard work of the Grainger
team has delivered a strong performance for the period. We
leveraged our regulated tenancy portfolio and asset recycling
activity to capitalise on the buoyant sales market, more than
compensating for the short-term, Covid-19-driven reduction in
occupancy in our PRS portfolio.
Overall, we delivered a strong financial performance with
Adjusted Earnings up 11%, driven primarily by a 30% increase in
sales profits, while our leading operating platform continues to
prove its value, delivering 1.7% like-for-like rental growth and
98% rent collection.
We are beginning to see a number of positive signs pointing to
increasing momentum in the lettings market over the coming months.
To prepare for this, the past six months has been a period of
intense operational activity for us to enable us to capitalise on
the summer rental momentum; and we are beginning to see the early
results of this with enquiries up +86% since January and a steady
rise in lettings activity.
If the UK remains on track with its vaccination programme and
the reopening of the economy continues as planned, we anticipate a
strong rental market over the second half of the year, backed by
strong consumer confidence. We are well-positioned to benefit, with
over 1,000 new homes being delivered this year.
We remain highly convictional on the fundamental drivers for our
market, with the pandemic accelerating trends in renting and a
flight to quality which we will benefit from.
Key highlights and actions
Investment highlights
The investment market for new, high quality rental buildings
(build-to-rent) is strong, with CBRE reporting record high
investment of GBP3.5bn in 2020.
Our in-house research and cities strategy enable us to allocate
shareholder capital effectively by anticipating longer term trends
that will affect the rental market and taking first mover advantage
in target locations. Our asset allocation between London and the
regions (35:65) is by design, and is in part the reason for our
strong performance during the pandemic, as does our mid-market
positioning, which provides good value for money to our customers,
leading to less pricing volatility.
Despite the short-term market challenges in London of the past
year, our portfolio performed well and our conviction in London's
rental market remains. As a leading city, London will continue to
be an attractive location to live in and it will experience
population and economic growth in both the near term as
restrictions are lifted, and in the longer term, which will
underpin rental growth and support valuations.
At the same time, regional cities are seeing a revival, which
began with the Conservative Government's Levelling Up agenda and
this has been accelerated in part by the pandemic. Our early moves
into key target regional cities (e.g. Sheffield, Manchester,
Bristol) has enabled us to outcompete, grow swiftly, acquire
attractively, and see the early benefits of this regional revival.
In the period we secured another great scheme in Bristol,
Millwrights Place, which is adjacent to our existing asset, Hawkins
& George, and our first investment in Derby for 259 new rental
homes.
Covid-19 has led to an acceleration of rental trends which we
identified five years ago and play to our core strengths. After
more than a year of lockdowns and 'stay at home' orders, we are
seeing a flight to quality and a greater emphasis placed on
professional management, building amenities including home-working
spaces and connectivity, and health & safety assurances, all of
which play to Grainger's strengths.
Development & pipeline highlights
We successfully completed two schemes just at the end of this
six-month period, The Filaments in Manchester and Gatehouse
Apartments in Southampton, totalling 508 homes, both of which are
letting up well. Over the second half of the year, we plan to
deliver a further 513 homes across a further three schemes.
We continued with our development activity successfully during
the period with only a few minor delays on site. Where we
experienced delays that were not Covid-related, we were compensated
in part by the contractor, partly making up for lost rent.
We are very pleased with the success we've had in our joint
venture with Transport for London, Connected Living London. The JV
was established a little over 18 months ago and set out to deliver
3,000 homes. To date, I am pleased to announce that we have already
secured planning consent to deliver a third of that pipeline. Last
year we successfully secured consent to build 460 homes at our
scheme in Southall. So far this year, we've gained planning
approval for our scheme at Montford Place for 139 homes and most
recently for our scheme at Nine Elms, above the new tube station,
for 479 homes.
The development team are overseeing a total of 13 live
development projects which are on site, and are responsible for the
delivery of 8,851 new rental homes across our total pipeline.
Operational highlights
Our leading operating platform has again proven its value over
the past year, delivering consistently strong performance with
continued like-for-like rental growth, high rent collection and
high occupancy on a relative basis. Over the period, there has been
a significant level of activity within the operations team to
continually improve and enhance our service and offering to our
customers.
The lockdown restrictions meant the team had to work extra hard
and think creatively to successfully hold occupancy steady at 89%,
focusing on customer retention while also attracting new customers.
Over the period in our PRS portfolio, the operations team renewed
tenancies for 1,244 customers (GBP15m of gross rent) and generated
c.5,000 enquiries which led to 1,086 new lets (GBP12m of gross
rent), a tremendous effort and a significant volume of activity
considering the circumstances.
To prepare for the economy to reopen and the subsequent boost to
the lettings market, we have undertaken a number of initiatives to
capitalise in the short term and to enable long term growth.
We restructured our operations team, creating a central customer
service team, based in our Newcastle office, enabling us to improve
customer service, thereby increase customer retention rates, and
also increasing our scalability further as we grow over the coming
years. We increased our direct lettings capacity, which led to
higher conversion rates and increased lettings performance. We
enhanced our marketing activity, using new and innovative ways to
reach new customers, driving higher levels of enquiries.
As part of our CONNECT technology programme we rolled out our
Digital Leasing platform across our entire portfolio, having
successfully trialled it and refined it over 2020 on our newly
launched schemes. This enables new customers to go through the full
leasing process entirely online, including referencing, contract
signing and payments, speeding up lettings, reducing the number of
customers who drop out through the process and creating a fully
scalable leasing process to support our growth.
We are seeing the benefits of these actions with increased
enquiry levels, improved conversion rates and increased retention
rates.
Dividend
As a result of our successful strategy and the hard work of the
Grainger team to deliver a strong performance over the period, we
are pleased to confirm that we will maintain our interim dividend
at 1.83p per share.
ESG
Our integrated ESG strategy remains at the top of our agenda.
The whole Grainger team recognises the importance of the positive
social impact we have on creating good quality, mid-market rental
homes and in addition, we are progressing well against our
long-term commitments:
1. Net zero carbon in the operations of our buildings (Scope 1 & 2) by 2030
2. Integrated ESG investment decisions
3. Diverse and inclusive workforce
4. Make a positive social impact
Alleviating homelessness and addressing housing
affordability
Highlights over the period include a series of pro bono work our
team provided to homelessness charities introduced to us by our
charity partner, LandAid; and our commitment to be a foundation
partner for a new capital project by LandAid to create new
accommodation to young vulnerable people in North Tyneside near our
Newcastle office. In addition to the charitable work we do, we are
also directly delivering affordable homes across our pipeline
programme, which amount to more than 3,000 affordable homes for low
income households.
Encouraging a diverse pool of talent for future generations
In partnership with Transport for London, we helped launch a new
Schools Engagement Programme for the Built Environment, aimed at
reaching a wide spectrum of young Londoners, providing career
development support and virtual work experience opportunities. Our
apprenticeship and graduate programmes continue to enhance their
outreach to more and more diverse backgrounds. Going one step
further, we have decided to support a leading bursary programme
which will support young people from disadvantaged backgrounds
through their studies in the built environment, property field.
Encouraging greater diversity and awareness within our
workforce
On diversity and inclusion, our employee-led D&I Network
continues to energetically promote diversity initiatives across the
business. To mark International Women's Day, we held a week-long
campaign, "Celebrating women at Grainger", sharing insights,
thoughts and opinions on the challenges and opportunities for women
in business. To support awareness on topics of gender and
sexuality, we held a session for employees with the Mermaids
Charity to discuss gender pronouns, terminology and workplace best
practice. We are proud that one of our employees has been selected
to be a delegate for UN Women UK to attend the "Commission of the
Status of Women".
Supporting local communities and encouraging healthy living
To support our local communities and residents, we rolled out a
community events programme across our build-to-rent schemes. We
expanded our mental health first training programme, including
suicide prevention support, to include all our resident services
teams to ensure they are equipped to support their customers and
each other. We run a series of wellness events across our portfolio
for residents, including Wellness Wednesdays, which include free
virtual yoga classes.
Reducing our carbon footprint and helping lead the way toward
net zero carbon for the industry
On our journey to net zero carbon, we completed the roll-out of
renewable energy to all landlord supplies, and we contributed to a
review by HM Treasury on net zero carbon and UK Green Building
Council's whole life carbon roadmap project. We are proud
signatories to the World Green Building Council's Net Zero Carbon
Buildings Commitment.
Providing help to our stakeholders during the Covid-19
pandemic
We are aware that in this this challenging time, being in a good
home, supported by a good landlord, can make all the difference as
to how people feel. Through the pandemic we have been determined to
do what we can to help support our customers, employees and
suppliers as best we can, putting a wide range of support in place,
including caring responsibilities, loneliness, elderly
vulnerability, mental health & suicide prevention training, and
financial support.
We are pleased that our ESG efforts are recognised across a
series of external third-party benchmarks:
-- FTSE4Good
-- EPRA's Sustainability Best Practice Reporting - Gold Award
-- CDP - 'B' rating (outperformance v. peers)
-- ISS ESG - Prime rating
-- MSCI ESG - 'AA' rating
-- Sustainalytics - 'Low risk' rating
Awards
Grainger's market leading position was recognised over the
period with three prestigious awards at the RESI Awards, the
leading awards within the UK residential sector: Residential
Landlord of the Year, Asset Manager of the Year, and PRS Deal of
the Year for our partnership with TfL, Connected Living London.
Political engagement update
As a market leader we hope to leverage our expertise and
experience to help improve the rental housing market and the
Government deliver on its housing supply ambitions. To this end,
Grainger continues to work closely with the UK Government on issues
impacting and relating to private rented housing. Over the period,
we had numerous meetings with Ministers and officials to discuss
matters ranging from net zero carbon, fire safety, housing supply
and delivery, planning and viability for build-to-rent.
It was a pleasure to accept an invitation from the Secretary of
State to join the Government's Urban Centre Recovery Taskforce, a
small group of industry and local government experts who have been
tasked with identifying short term interventions to help revive
urban centres in the wake of the pandemic.
The Government remains supportive of the UK build-to-rent sector
and the benefits it can bring.
Outlook
We have spent considerable time analysing the market and key
drivers, considering the impact the pandemic may have on it. Our
conclusion is that Covid-19 does not change the long-term market
fundamentals nor does it change the highly compelling investment
case for the professional, large-scale private rented sector and
build-to-rent. More and more people will continue to choose to rent
for longer periods of their lives and they will become increasingly
discerning, looking for quality and service, which plays to
Grainger's core strengths. If anything, Covid-19 is accelerating
these rental trends.
In the shorter term, we have been closely monitoring live
economic data to fully understand the shape and velocity of the
UK's newly emerging economic recovery, and how this will flow
through to the rental market and, in particular, lettings activity.
Comparing this to international examples where vaccine programmes
and economic reopening's are more advanced than ours, gives us
confidence that the chances of the UK keeping to its roadmap of
easing restrictions is looking increasingly likely. Green shoots
seem to be appearing, with increased city centre footfall,
increased leisure spending and a gradual return to more normal
levels of economic activity. This analysis has led us to our
positive market outlook.
The many actions we have taken from the outset of our strategy
in 2016, rotating the business to what it is today and setting us
up for significant future growth and earnings potential, but also
the actions we took in the past six months such as our digital
leasing platform, gives us a high level of assurance that we are
ready to capitalise on the UK's reopening over the coming months,
and pursue our longer term growth plans.
We remain excited for our future growth and look forward to
leading the evolution of the UK's rental housing market over the
years to come.
Helen Gordon
Chief Executive
13 May 2021
Financial review
The past six months have seen the business continue to deliver
on our PRS growth strategy. Whilst the challenges of Covid-19
related restrictions and the related economic disruption have been
numerous we have continued to invest in our buildings, technology
and people as well as continue to deliver strong earnings
growth.
Our rental income stream yet again proved its resilience with
very high levels of rent collection at 98% and continued rental
growth at 1.7%. Whilst our occupancy was impacted by a temporary
demand reduction as a result of lockdown restrictions, we
significantly outperformed the wider market as our high-quality
mid-market offering and inhouse operating platform proved a
significant differentiator. We had a strong sales performance with
profits up 30% on the prior year, more than offsetting the
temporary occupancy reduction in our PRS portfolio.
Our balance sheet remains strong with significant headroom of
GBP587m and an LTV of 34.5% ensuring our committed pipeline is
fully funded and we are well positioned for further growth. The
robust nature of our business model and capital structure is
gaining wider recognition with Fitch initiating coverage with an
investment grade rating for both our corporate and bond rating.
With the easing of lockdown restrictions underway, we are seeing
positive trends in enquiries and lettings and are well placed to
capitalise on this continued momentum. With a strong half year
performance and a positive outlook for the remainder of the year we
are maintaining our interim dividend at 1.83p per share.
Highlights
Income returns HY20 HY21 Change
------------------------------------ --------- --------- ----------
Rental growth (like-for-like) 3.4% 1.7% (170) bps
- PRS 3.0% 1.0% (200) bps
- Regulated tenancies (annualised) 4.5% 4.0% (50) bps
Net rental income (Note 5) GBP37.0m GBP34.7m (6)%
Adjusted earnings (Note 2) GBP33.7m GBP37.5m +11%
Adjusted EPRA earnings (Note 3) GBP16.0m GBP9.4m (41)%
Profit before tax (Note 2) GBP49.6m GBP50.3m +1%
Earnings per share (diluted, after
tax) (Note 9) 6.4p 6.0p (6)%
Dividend per share (Note 10) 1.83p 1.83p +0%
------------------------------------ --------- --------- ----------
Capital returns FY20 HY21 Change
----------------------------- ---------- ---------- ---------
EPRA NTA per share (Note 3) 285p 286p +0%
Net debt GBP1,032m GBP1,098m +6%
Group LTV 33.4% 34.5% +111 bps
Cost of debt (average) 3.1% 3.1% +3 bps
Reversionary surplus GBP301m GBP286m (5)%
----------------------------- ---------- ---------- ---------
Income statement
Adjusted earnings increased by 11% to GBP37.5m (HY20: GBP33.7m)
as a result of a strong sales performance more than offsetting the
temporary decline in net rental income. Overheads remained flat
demonstrating our inherent operational leverage as we continue to
grow our pipeline and invest in our operating platform.
Income statement (GBPm) HY20 HY21 Change
------------------------------- ------- ------- -------
Net rental income 37.0 34.7 (6)%
Profit from sales 22.8 29.6 +30%
Mortgage income (CHARM) (Note
15) 2.6 2.4 (8)%
Management fees 1.6 2.3 +44%
Overheads (13.8) (13.9) +1%
Pre-contract costs (0.2) (0.3) +50%
Joint ventures and associates 0.1 (0.2) (300)%
Net finance costs (16.4) (17.1) +4%
------- ------- -------
Adjusted earnings 33.7 37.5 +11%
Valuation movements 14.6 12.8
Other adjustments 1.3 -
------- ------- -------
Profit before tax 49.6 50.3 +1%
------------------------------- ------- ------- -------
Rental income
Net rental income decreased by 6% to GBP34.7m (HY20: 37.0m) as a
result of the continuation of our planned asset recycling
programme, along with delays in delivery of new developments, as
well as lower occupancy at 89% in our stabilised portfolio (HY20:
97%). We continued to deliver like-for-like rental growth across
the portfolio at +1.7%, with +1.0% like-for-like rental growth from
our PRS portfolio. The regulated tenancy portfolio also continued
to deliver strong annualised growth of +4.0%. Our rental growth
performance is well above the market average of +0.1% (average
based on ONS and Hometrack) as our in-house operational platform
and mid-market offering continues to drive performance.
Our focus on cost control ensured that we continue to deliver
strong rental margins with stabilised gross to net leakage
(excluding voids) down to 24.7% compared to the prior period (HY20:
24.9%). Including voids, stabilised gross to net stood at 27.0%, a
reflection of the temporary occupancy reduction caused by
Covid-19.
GBPm
------------------------ ------
HY20 Net rental income 37.0
Disposals (2.0)
PRS investment 2.1
Rental growth 1.0
Voids (3.4)
HY21 Net rental income 34.7
------
YoY movement (6)%
------------------------ ------
Sales
We had a strong sales performance in the period with an 30%
increase in profits to GBP29.6m (HY20: GBP22.8m). Vacant sales
profit was 10% ahead of the prior year, with a significant increase
in tenanted and other sales the primary driver of the overall sales
performance. Development profits from legacy schemes are now
largely realised as we move our focus away from build-for-sale
activity.
Residential sales
Vacant property sales in the period delivered GBP14.8m of profit
(HY20: GBP13.5m) from GBP26.7m of revenue (FY20: GBP21.6m). This
increase was supported by strong momentum in the UK residential
property market, combined with a higher regulated tenancy vacancy
rate in the period of 7.3% (HY20: 6.6%). We continued to
demonstrate strong sales values with prices achieving 0.6% ahead of
the previous vacant possession valuations. With the high volume of
transactions in the market causing some delays in completions, our
sales transaction velocity slowed slightly with our keys to cash
metric at 120 days compared to 113 days in the prior year. We have
good visibility on our sales pipeline for the second half and would
envisage a similar 40%:60% H1:H2 split as we have experienced in
previous years.
Sales of tenanted and other properties delivered GBP14.6m of
profit (HY20: GBP5.2m) from GBP55.0m of revenue (HY20: GBP16.0m) as
we continued to execute on our asset recycling programme.
Sales
HY20 HY21
------------------------- -------------------------
Revenue Profit Revenue Profit
------ ------
Units Units
sold GBPm GBPm sold GBPm GBPm
---------------------- ------ -------- ------- ------ -------- -------
Residential sales
on vacancy 54 21.6 13.5 73 26.7 14.8
Tenanted and other
sales 42 16.0 5.2 360 55.0 14.6
------ -------- ------- ------ -------- -------
Residential sales
total 96 37.6 18.7 433 81.7 29.4
Development activity - 5.3 4.1 0.2 0.2
---------------------- ------ -------- ------- ------ -------- -------
Overall sales 96 42.9 22.8 433 81.9 29.6
---------------------- ------ -------- ------- ------ -------- -------
Overheads
Overheads remained flat in the period at GBP13.9m (HY20:
GBP13.8m) illustrating the inherent leverage in our operating
platform and the potential to enhance earnings substantially
through our growth plans.
Financing costs
Finance costs increased by 4% on the prior year to GBP17.1m
(HY20: GBP16.4m), reflecting an increase in net debt as a result of
the continued investment in our PRS pipeline. Our average cost of
debt remained consistent with the full year at 3.1% (FY20 3.1%),
with our marginal cost of debt at 1.7%.
Balance sheet
Ensuring our growth strategy is underpinned by a strong balance
sheet has always been a key focus for the business. With a
conservative LTV at 34.5% and a very strong liquidity position with
GBP587m of cash and available facilities, we are in a position of
real strength to continue the disciplined growth of the
business.
Market value balance sheet (GBPm) FY20 HY21
---------------------------------------------- ------- -------
Residential - PRS 1,624 1,749
Residential - regulated tenancies 968 943
Residential - mortgages (CHARM) 73 74
Forward Funded - PRS work in progress 231 193
Development work in progress 147 176
Investment in JVs/associates 42 43
------- -------
Total investments 3,085 3,178
Net debt (1,032) (1.098)
Other liabilities - (16)
------- -------
EPRA NRV 2,053 2,064
Deferred and contingent tax - trading assets (109) (108)
Exclude: intangible assets (23) (28)
------- -------
EPRA NTA 1,921 1,928
Add back: intangible assets 23 28
Deferred and contingent tax - investment
assets (24) (25)
Fair value of fixed rate debt and derivatives (57) (51)
-------
EPRA NDV 1,863 1,880
---------------------------------------------- ------- -------
EPRA NRV pence per share 304 306
EPRA NTA pence per share 285 286
EPRA NDV pence per share 276 279
Reversionary surplus (excluded from NAV -
GBPm) 301 286
Reversionary surplus (pence per share) 45 42
---------------------------------------------- ------- -------
EPRA NTA increased by 1p from the year end to 286p per share
(FY20: 285p per share), we consider this to be the most appropriate
NAV metric for the business. Other NAV measures showed larger
uplifts with EPRA NRV increasing by 1% during the period to 306p
per share (FY20: 304p per share) whilst EPRA NDV increased by 1% to
279p per share (FY20: 276p per share). Excluded from all these EPRA
NAV measures is the reversionary surplus of GBP286m or 42p per
share (FY20: GBP301m).
The following table shows the movement in EPRA NTA in the period
with the largest positive contributors being adjusted earnings and
valuation uplifts.
EPRA NTA movement
----------------------------------------------------------------------
GBPm Pence per share
------ ----------------
EPRA NTA at 30 September 2020 1,921 285
Adjusted earnings 38 6
Valuations (trading & investment property) 35 5
Disposals (trading assets) (28) (4)
Tax (current, deferred & contingent) (8) (1)
Dividends (25) (4)
Intangible assets (5) (1)
EPRA NTA at 31 March 2021 1,928 286
-------------------------------------------- ------ ----------------
Property portfolio valuations
The market value of our property portfolio increased by +1.3%
over the six month period (HY20: +1.6%). Both our PRS and Regulated
portfolios saw positive valuation performances with the PRS
portfolio seeing a 0.9% uplift (HY20: +1.5%), and the regulated
portfolio delivering a 2.0% uplift (HY20: +1.8%). Different
valuation methods are applied across our portfolio, with the
majority of our PRS valuations based on a net rent and yield basis,
while the regulated portfolio is largely based on a discount to
vacant possession value.
Financing and capital structure
With GBP587m of cash and available committed undrawn facilities,
we are a very well capitalised business with enough liquidity to
fund all of the committed capex in our investment pipeline. We have
an average debt maturity of 6.1 years, the next debt maturity being
GBP50m due in November 2022.
FY20 HY21
--------------------------- ---------- ----------
Net debt GBP1,032m GBP1,098m
Loan to value 33.4% 34.5%
Cost of debt (average) 3.1% 3.1%
Incremental cost of debt 1.6% 1.7%
Fully drawn cost of debt 2.8% 2.8%
Interest cover 3.4x 3.5x
Headroom GBP650m GBP587m
Weighted average facility
maturity (years) 6.6 6.1
Hedging 100% 100%
--------------------------- ---------- ----------
Cashflow and investment
Net debt increased to GBP1,098m (FY20: GBP1,032m) as we invested
GBP119m into our pipeline during the period and paid our final
dividend of GBP25m. This was offset by positive operating cashflow
of GBP39m and asset recycling of GBP52m.
Dividend
We are maintaining our interim dividend at 1.83p on a per share
basis (HY20: 1.83p) reflecting our strong performance and positive
outlook for the remainder of the year. Our policy is to distribute
the equivalent of 50% of annual net rental income as a dividend,
with a one-third payment at the interim stage. And while our net
rental income has reduced as a result of planned asset recycling
activity, reduced occupancy and development delays, we receive
compensation in respect of lost rent due to development delays
unrelated to Covid-19, enabling us to maintain the dividend.
Summary and outlook
The first half of the year has seen us deliver a strong set of
results as we continue to invest for the future. Our operating
platform has been key to outperforming the market during the
Covid-19 lockdowns and will continue to be a key focus of
investment from a process, people and technology perspective.
It is our efficient, scalable operating platform that will
enable a large proportion of our future growth in net rents to flow
through to earnings. Our balance sheet is in good shape and we are
in a position to continue our growth strategy and take advantage of
acquisition opportunities as they arise.
With the easing of lockdown restrictions looking set to continue
into the summer, the actions we have taken position us well to
capitalise on the short term lettings market momentum and our
longer-term growth plans. The attractiveness of the
professionalised rental market in the UK is coming to the fore
following the challenges of the last year and we will continue to
leverage our market leadership from a position of strength.
Toby Austin
Interim Group Finance Director
13 May 2021
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union ;
-- the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
Helen Gordon
Chief Executive Officer
13 May 2021
Independent Review Report to Grainger plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2021 which comprises the Condensed
Consolidated Income Statement, the Condensed Consolidated Statement
of Other Comprehensive Income, the Condensed Consolidated Statement
of Financial Position, the Condensed Consolidated Statement of
Changes in Equity, the Condensed Consolidated Statement of Cash
Flows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and the Disclosure Guidance and Transparency Rules ("the DTR") of
the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the latest annual financial statements
of the group were prepared in accordance with International
Financial Reporting Standards as adopted by the EU and the next
annual financial statements will be prepared in accordance with
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. The
directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Richard Kelly
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E145GL
13 May 2021
Consolidated income statement
Unaudited
2021 2020
For the 6 months ended 31 March Notes GBPm GBPm
----------------------------------------------------------------- ------ --------- --------
Group revenue 4 101.3 86.9
----------------------------------------------------------------- ------ --------- --------
Net rental income 5 34.7 37.0
Profit on disposal of trading property 6 29.8 22.1
(Loss)/profit on disposal of investment property 7 (0.1) 0.7
Income from financial interest in property assets 15 4.7 2.0
Fees and other income 8 2.3 3.2
Administrative expenses (13.9) (13.8)
Other expenses (0.3) (0.2)
Reversal of impairment of inventories to net realisable value 12 0.1 0.1
Operating profit 57.3 51.1
Net valuation gains on investment property 11 10.3 15.6
Finance costs (17.2) (16.8)
Finance income 0.1 0.1
Share of loss of associates after tax 13 - (0.5)
Share of (loss)/profit of joint ventures after tax 14 (0.2) 0.1
----------------------------------------------------------------- ------ --------- --------
Profit before tax 2 50.3 49.6
Tax charge for the period 20 (10.2) (9.5)
----------------------------------------------------------------- ------ --------- --------
Profit for the period attributable to the owners of the Company 40.1 40.1
----------------------------------------------------------------- ------ --------- --------
Basic earnings per share 9 6.0p 6.4p
Diluted earnings per share 9 5.9p 6.4p
----------------------------------------------------------------- ------ --------- --------
Consolidated statement of comprehensive income
Unaudited
2021 2020
For the 6 months ended 31 March Notes GBPm GBPm
---------------------------------------------------------------------------------------- ------ --------- ---------
Profit for the period 2 40.1 40.1
---------------------------------------------------------------------------------------- ------ --------- ---------
Items that will not be transferred to the consolidated income statement:
Actuarial gain on BPT Limited defined benefit pension scheme 21 3.7 0.1
Items that may be or are reclassified to the consolidated income statement:
Changes in fair value of cash flow hedges 7.4 (0.1)
---------------------------------------------------------------------------------------- ------ --------- ---------
Other comprehensive income and expense for the period before tax 11.1 -
---------------------------------------------------------------------------------------- ------ --------- ---------
Tax relating to components of other comprehensive income:
Tax relating to items that will not be transferred to the consolidated income statement 20 (0.7) 0.1
Tax relating to items that may be or are reclassified to the consolidated income
statement 20 (1.4) 0.3
Total tax relating to components of other comprehensive income (2.1) 0.4
---------------------------------------------------------------------------------------- ------ --------- ---------
Other comprehensive income and expense for the period after tax 9.0 0.4
---------------------------------------------------------------------------------------- ------ --------- ---------
Total comprehensive income and expense for the period attributable to the owners of the
Company 49.1 40.5
---------------------------------------------------------------------------------------- ------ --------- ---------
Consolidated statement of financial position
Audited
Unaudited 31 March 2021 30 Sept 2020
As at Notes GBPm GBPm
---------------------------------------------- ------ ------------------------ --------------
ASSETS
Non-current assets
Investment property 11 1,891.3 1,778.9
Property, plant and equipment 2.1 2.0
Investment in associates 13 14.7 14.7
Investment in joint ventures 14 28.3 27.3
Financial interest in property assets 15 73.7 73.3
Deferred tax assets 20 5.4 7.8
Intangible assets 16 28.3 22.5
----------------------------------------------- ------ ------------------------ --------------
2,043.8 1,926.5
---------------------------------------------- ------ ------------------------ --------------
Current assets
Inventories - trading property 12 642.1 657.4
Trade and other receivables 17 25.5 31.3
Retirement benefits 21 1.5 -
Current tax assets 4.6 6.4
Cash and cash equivalents 257.6 369.1
931.3 1,064.2
---------------------------------------------- ------ ------------------------ --------------
Total assets 2,975.1 2,990.7
----------------------------------------------- ------ ------------------------ --------------
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 19 1,346.2 1,391.9
Trade and other payables 18 1.0 1.3
Retirement benefits 21 - 2.4
Provisions for other liabilities and charges 1.2 1.2
Deferred tax liabilities 20 36.7 36.7
----------------------------------------------- ------ ------------------------ --------------
1,385.1 1,433.5
---------------------------------------------- ------ ------------------------ --------------
Current liabilities
Trade and other payables 18 88.5 73.3
Provisions for other liabilities and charges - 0.3
Derivative financial instruments 19 13.2 20.6
----------------------------------------------- ------ ------------------------ --------------
101.7 94.2
---------------------------------------------- ------ ------------------------ --------------
Total liabilities 1,486.8 1,527.7
----------------------------------------------- ------ ------------------------ --------------
NET ASSETS 1,488.3 1,463.0
----------------------------------------------- ------ ------------------------ --------------
EQUITY
Issued share capital 33.8 33.8
Share premium account 616.3 616.3
Merger reserve 20.1 20.1
Capital redemption reserve 0.3 0.3
Cash flow hedge reserve (10.6) (16.6)
Retained earnings 828.4 809.1
----------------------------------------------- ------ ------------------------ --------------
TOTAL EQUITY 1,488.3 1,463.0
----------------------------------------------- ------ ------------------------ --------------
Consolidated statement of changes in equity
Cash
Issued Share Capital flow
share premium Merger redemption hedge Retained Total
capital account reserve reserve reserve earnings equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Balance as at 1
October 2019 30.7 436.5 20.1 0.3 (14.3) 750.2 1,223.5
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Profit for the period 2 - - - - - 40.1 40.1
Other comprehensive
income for the period - - - - 0.2 0.2 0.4
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive
income - - - - 0.2 40.3 40.5
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Issue of share capital 24 3.1 179.4 - - - - 182.5
Award of SAYE shares - 0.2 - - - - 0.2
Purchase of own
shares - - - - - (0.2) (0.2)
Share-based payments
charge 22 - - - - - 1.0 1.0
Dividends paid 10 - - - - - (21.2) (21.2)
IFRS 16 transition
adjustment - - - - - (0.5) (0.5)
Total transactions
with owners recorded
directly in equity 3.1 179.6 - - - (20.9) 161.8
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Balance as at 31
March 2020 33.8 616.1 20.1 0.3 (14.1) 769.6 1,425.8
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Profit for the period - - - - - 52.7 52.7
Other comprehensive
loss for the period - - - - (2.5) (1.1) (3.6)
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive
income - - - - (2.5) 51.6 49.1
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Award of SAYE shares - 0.2 - - - - 0.2
Purchase of own
shares - - - - - 0.1 0.1
Share-based payments
charge - - - - - 0.1 0.1
Dividends paid - - - - - (12.3) (12.3)
Total transactions
with owners recorded
directly in equity - 0.2 - - - (12.1) (11.9)
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Balance as at 30
September 2020 33.8 616.3 20.1 0.3 (16.6) 809.1 1,463.0
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Profit for the period 2 - - - - - 40.1 40.1
Other comprehensive
income for the period - - - - 6.0 3.0 9.0
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Total comprehensive
income - - - - 6.0 43.1 49.1
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Purchase of own
shares - - - - - (0.2) (0.2)
Share-based payments
charge 22 - - - - - 0.9 0.9
Dividends paid 10 - - - - - (24.5) (24.5)
Total transactions
with owners recorded
directly in equity - - - - - (23.8) (23.8)
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Balance as at 31
March 2021 33.8 616.3 20.1 0.3 (10.6) 828.4 1,488.3
------------------------- ------ --------- --------- --------- ------------ --------- ---------- --------
Consolidated statement of cash flows
Unaudited
2021 2020
For the 6 months ended 31 March Notes GBPm GBPm
------------------------------------------------------ ------ -------- --------
Cash flow from operating activities
Profit for the period 2 40.1 40.1
Depreciation and amortisation 0.4 0.8
Net valuation gains on investment property 11 (10.3) (15.6)
Net finance costs 17.1 16.7
Share of loss of associates and joint ventures 13,14 0.2 0.4
Loss/(profit) on disposal of investment property 7 0.1 (0.7)
Share-based payment charge 22 0.9 1.0
Income from financial interest in property assets 15 (4.7) (2.0)
Tax 20 10.2 9.5
Cash generated from operating activities before
changes in working capital 54.0 50.2
Decrease in trade and other receivables 5.8 14.1
Increase/(decrease) in trade and other payables 20.3 (5.8)
Decrease in provisions for liabilities and charges (0.3) (0.2)
Decrease/(increase) in inventories 15.3 (2.1)
------------------------------------------------------ ------ -------- --------
Cash generated from operating activities 95.1 56.2
Interest paid (21.2) (17.6)
Tax paid (8.1) (20.5)
Payments to defined benefit pension scheme 21 (0.2) (0.3)
------------------------------------------------------ ------ -------- --------
Net cash inflow from operating activities 65.6 17.8
------------------------------------------------------ ------ -------- --------
Cash flow from investing activities
Proceeds from sale of investment property 7 30.3 8.9
Proceeds from financial interest in property
assets 15 4.3 4.9
Investment in joint ventures 14 (0.9) (4.7)
Loans advanced to associates and joint ventures 13,14 (0.3) (3.4)
Acquisition of investment property 11 (132.5) (79.6)
Acquisition of property, plant and equipment
and intangible assets (6.3) (6.3)
------------------------------------------------------ ------ -------- --------
Net cash outflow from investing activities (105.4) (80.2)
------------------------------------------------------ ------ -------- --------
Cash flow from financing activities
Net proceeds from issue of share capital 24 - 182.5
Awards of SAYE options - 0.2
Purchase of own shares (0.2) (0.2)
Proceeds from new borrowings - 299.4
Payment of loan costs - (0.6)
Repayment of borrowings (47.0) (330.0)
Dividends paid 10 (24.5) (21.2)
------------------------------------------------------ ------ -------- --------
Net cash (outflow)/inflow from financing activities (71.7) 130.1
------------------------------------------------------ ------ -------- --------
Net (decrease)/increase in cash and cash equivalents (111.5) 67.7
Cash and cash equivalents at the beginning of
the period 369.1 189.3
Cash and cash equivalents at the end of the
period 257.6 257.0
------------------------------------------------------ ------ -------- --------
Notes to the unaudited interim financial results
1. Accounting policies
1a Basis of preparation
These condensed interim financial statements are unaudited and
do not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006. This condensed set of financial
statements has been prepared in accordance with IAS 34 Interim
Financial Reporting adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. The annual financial
statements of the group for the year ended 30 September 2021 will
be prepared in accordance with International Financial Reporting
Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union and in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. As required by the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority, the condensed set of financial statements has been
prepared applying the accounting policies and presentation that
were applied in the preparation of the company's published
consolidated financial statements for the year ended 30 September
2020 which were prepared in accordance with IFRSs as adopted by the
EU.
The accounting policies used are consistent with those contained
in the Group's last annual report and accounts for the year ended
30 September 2020 which is available on the Group's website (
www.graingerplc.co.uk ). The Grainger business is not judged to be
highly seasonal, therefore comparatives used for the six month
period ended 31 March 2021 Consolidated Income Statement are the
six month period ended 31 March 2020 Consolidated Income Statement.
It is therefore not necessary to disclose the Consolidated Income
Statement for the full year ended 30 September 20 (available in the
last annual report).
The comparative figures for the financial year ended 30
September 2020 are not the Company's statutory accounts for that
financial year. Those accounts have been reported on by the
Company's auditor and delivered to the registrar of companies. The
report of the auditor was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498(2) or (3) of the Companies
Act 2006.
The financial information included in this announcement has been
prepared in accordance with EU endorsed IFRS, IFRS IC
interpretations and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
All property assets are subject to a Directors' valuation at the
half year end, supported by an independent external valuation.
External valuations at the half year are conducted by the Group's
valuers, Allsop LLP and CBRE Limited, as well as Avison Young (UK)
Limited in respect of property held by Vesta LP. The valuation
process is in line with the approach set out on pages 111-113 of
the 2020 Annual Report and Accounts, with the exception being the
Group's Residential portfolio valued by Allsop LLP. At the half
year, Allsop LLP inspected 10.0% of the Residential portfolio, with
the movement extrapolated over the non-sampled assets to form 50%
of the valuation movement for these portfolios. The remaining 50%
is based on a blended rate arrived at by taking Halifax, Nationwide
and Acadata indices (16.6% weighting each), applied on a regional
IPD basis.
The Group's financial derivatives were valued as at 31 March
2021 in-house by a specialised treasury management system, using a
discounted cash flow model and market information. The fair value
is derived from the present value of future cash flows discounted
at rates obtained by means of the current yield curve appropriate
for those instruments.
1b Adoption of new and revised International Financial Reporting Standards
New standards and interpretations in the year
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 Group risk factors
The principal risks and uncertainties facing the Group are set
out in the Risk Management report on pages 47-50 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.
In line with our risk management approach detailed on pages
44-46 of the 2020 Annual Report and Accounts, the key risks to the
business are under regular review by the Board and management,
applying Grainger's risk management framework.
1d Forward-looking statements
Certain statements in this interim announcement are
forward-looking. Although the Group believes that the expectations
reflected in these forward-looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. We undertake no obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise.
1e Significant judgements and estimates
Full details of critical accounting estimates are given on pages
111-114 of the 2020 Annual Report and Accounts. This includes
detail of the Groups approach to valuation of property assets and
the use of external valuers in the process.
The valuations exercise is an extensive process which includes
the use of historical experience, estimates and judgements. The
Directors are satisfied that the valuations agreed with our
external valuers are a reasonable representation of property values
in the circumstances known and evidence available at the reporting
date. Actual results may differ from these estimates. Estimates and
assumptions are reviewed on an on-going basis with revisions
recognised in the period in which the estimates are revised and in
any future periods affected.
1f 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 interim financial
statements for the period ended 3 1 March 202 1 .
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 18 months of
the Group's viability model, covering the period from 1 April 2021
to 30 September 2022, and is based on a severe downside scenario
including an extreme impact of Covid-19, reflecting the following
key assumptions:
-- Reducing PRS occupancy to 80% by 30 September 2021, to 75% by
31 March 2022 and to 70% by 30 September 2022
-- Reducing property valuations over the 18 months to 30
September 2022, driven by either yield expansion or house price
deflation
-- 10% development cost inflation
-- Operating cost inflation of 10% per annum
-- An increase in finance costs by 1.25% from 1 April 2021
No new financing is assumed in the assessment period, but
existing facilities are assumed to remain available. Even in this
severe downside scenario, the Group has sufficient cash reserves,
with the loan-to-value covenant remaining no higher than 48%
(facility maximum covenant ranges between 70% - 75%) and interest
cover above 2. 48x (facility minimum covenant ranges between 1.35x
- 1.75x) for the 18 months to September 2022, which covers the
required period of at least 12 months from the date of
authorisation of the interim 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 continue to adopt the going
concern basis in preparing the interim financial statements for the
period ended 31 March 2021 .
2. Analysis of profit before tax
The table below provides adjusted earnings, which is one of
Grainger's key performance indicators. The metric is utilised as a
key measure to aid understanding of the performance of the
continuing business and excludes valuation movements and other
adjustments that are one-off in nature, which do not form part of
the normal ongoing revenue or costs of the business and, either
individually or in aggregate, are material to the reported Group
results.
For the 6
months ended
31 March
(Unaudited) 2021 2020
------------------------------------------------- -------------------------------------------------
Other Adjusted Other Adjusted
GBPm Statutory Valuation adjustments earnings Statutory Valuation adjustments earnings
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Group revenue 101.3 - 101.3 86.9 - (1.6) 85.3
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Net rental
income 34.7 - - 34.7 37.0 - - 37.0
Profit on
disposal
of trading
property 29.8 (0.1) - 29.7 22.1 - - 22.1
(Loss)/profit
on disposal
of investment
property (0.1) - - (0.1) 0.7 - - 0.7
Income from
financial
interest in
property
assets 4.7 (2.3) - 2.4 2.0 0.6 - 2.6
Fees and other
income 2.3 - - 2.3 3.2 - (1.6) 1.6
Administrative
expenses (13.9) - - (13.9) (13.8) - - (13.8)
Other expenses (0.3) - - (0.3) (0.2) - - (0.2)
Reversal of
impairment
of inventories
to
net realisable
value 0.1 (0.1) - - 0.1 (0.1) - -
Operating
profit 57.3 (2.5) - 54.8 51.1 0.5 (1.6) 50.0
Net valuation
gains
on investment
property 10.3 (10.3) - - 15.6 (15.6) - -
Finance costs (17.2) - - (17.2) (16.8) - 0.3 (16.5)
Finance income 0.1 - - 0.1 0.1 - - 0.1
Share of loss
of associates
after tax - - - - (0.5) 0.5 - -
Share of
(loss)/profit
of joint
ventures
after tax (0.2) - - (0.2) 0.1 - - 0.1
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Profit before
tax 50.3 (12.8) - 37.5 49.6 (14.6) (1.3) 33.7
Tax charge for
the
period (10.2) (9.5)
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Profit for the
period
attributable
to the
owners of the
Company 40.1 40.1
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Diluted
earnings per
share -
adjusted 4.5p 4.3p
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Adjusted earnings 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. The classification of
amounts as other adjustments is a significant judgement made by
management and is a matter referred to the Audit Committee for
approval.
Profit before tax in the adjusted columns above of GBP37.5m
(2020: GBP33.7m) is the adjusted earnings of the Group. Adjusted
earnings per share assumes tax of GBP7.1m (2020: GBP6.4m) in line
with the current standard UK corporation tax rate of 19.0% (2020:
19.0%), divided by the weighted average number of diluted shares as
shown in Note 9.
Other adjustments in 2020 of GBP1.3m were comprised of GBP1.6m
relating to the write-back of provisions relating to historic
non-core businesses, offset by GBP0.3m refinancing costs.
3. Segmental Information
IFRS 8, Operating Segments requires operating segments to be
identified based upon the Group's internal reporting to the Chief
Operating Decision Maker ('CODM') so that the CODM can make
decisions about resources to be allocated to segments and assess
their performance. The Group's CODM is the Chief Executive
Officer.
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. 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.
March 2021 Income statement (unaudited)
For the 6 months ended 31 March
2021
GBPm PRS Reversionary Other Total
---------------------------------------- ------- ------------- ------- -------
Group revenue 37.8 62.8 0.7 101.3
Segment revenue - external
---------------------------------------- ------- ------------- ------- -------
Net rental income 25.3 9.3 0.1 34.7
Profit on disposal of trading property (0.1) 29.6 0.2 29.7
Loss on disposal of investment
property (0.1) - - (0.1)
Income from financial interest
in property assets - 2.4 - 2.4
Fees and other income 1.7 - 0.6 2.3
Administrative expenses - - (13.9) (13.9)
Other expenses (0.3) - - (0.3)
Net finance costs (11.2) (5.5) (0.4) (17.1)
Share of trading loss of joint
ventures and associates after tax (0.2) - - (0.2)
---------------------------------------- ------- ------------- ------- -------
Adjusted earnings 15.1 35.8 (13.4) 37.5
Valuation movements 12.8
Other adjustments -
---------------------------------------- ------- ------------- ------- -------
Profit before tax 50.3
---------------------------------------- ------- ------------- ------- -------
A reconciliation from adjusted earnings to adjusted EPRA
earnings is detailed in the table below, with further details shown
in the EPRA performance measures section at the end of this
document:
For the 6 months ended 31 March
2021
GBPm PRS Reversionary Other Total
-------------------------------------- ----- ------------- ------- -------
Adjusted earnings 15.1 35.8 (13.4) 37.5
Loss on disposal of investment
property 0.1 - - 0.1
Previously recognised profit through
EPRA market value measures - (28.2) - (28.2)
-------------------------------------- ----- ------------- ------- -------
Adjusted EPRA earnings 15.2 7.6 (13.4) 9.4
-------------------------------------- ----- ------------- ------- -------
March 2020 Income statement (unaudited)
For the 6 months ended 31 March
2020
GBPm PRS Reversionary Other Total
---------------------------------------- ------- ------------- ------- -------
Group revenue 37.4 42.0 5.9 85.3
Segment revenue - external
---------------------------------------- ------- ------------- ------- -------
Net rental income 27.1 9.8 0.1 37.0
Profit on disposal of trading property - 18.0 4.1 22.1
Profit on disposal of investment
property 0.7 - - 0.7
Income from financial interest
in property assets - 2.6 - 2.6
Fees and other income 0.9 - 0.7 1.6
Administrative expenses - - (13.8) (13.8)
Other expenses (0.2) - - (0.2)
Net finance costs (10.2) (5.9) (0.3) (16.4)
Share of trading (loss)/profit
of joint ventures and associates
after tax (0.1) - 0.2 0.1
---------------------------------------- ------- ------------- ------- -------
Adjusted earnings 18.2 24.5 (9.0) 33.7
Valuation movements 14.6
Other adjustments 1.3
---------------------------------------- ------- ------------- ------- -------
Profit before tax 49.6
---------------------------------------- ------- ------------- ------- -------
A reconciliation from adjusted earnings to adjusted EPRA
earnings is detailed in the table below:
For the 6 months ended 31 March
2020
GBPm PRS Reversionary Other Total
-------------------------------------- ------ ------------- ------- -------
Adjusted earnings 18.2 24.5 (9.0) 33.7
Profit on disposal of investment
property (0.7) - - (0.7)
Previously recognised profit through
EPRA market value measures - (15.5) (1.5) (17.0)
-------------------------------------- ------ ------------- ------- -------
Adjusted EPRA earnings 17.5 9.0 (10.5) 16.0
-------------------------------------- ------ ------------- ------- -------
Segmental assets
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.
These measures are set out below by segment along with a
reconciliation to the consolidated statement of financial
position:
March 2021 Segment net assets (unaudited)
PRS Reversionary Other Total Pence
per
GBPm share
-------------------------- -------- ------------- ------ -------- -------
Total segment net assets
(statutory) 1,200.6 232.4 55.3 1,488.3 220
-------------------------- -------- ------------- ------ -------- -------
Total segment net assets
(EPRA NRV) 1,323.6 669.3 71.2 2,064.1 306
-------------------------- -------- ------------- ------ -------- -------
Total segment net assets
(EPRA NTA) 1,299.1 586.4 42.8 1,928.3 286
-------------------------- -------- ------------- ------ -------- -------
Total segment net assets
(EPRA NDV) 1,274.1 586.0 20.2 1,880.3 279
-------------------------- -------- ------------- ------ -------- -------
March 2021 Reconciliation of EPRA NAV measures (unaudited)
Adjustments Adjustments Adjustments
to market to deferred to
value, EPRA and contingent derivatives, EPRA
Statutory deferred NRV tax and EPRA fixed rate NDV
balance tax and balance intangibles NTA balance debt and balance
GBPm sheet derivatives sheet sheet intangibles sheet
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Investment
property 1,891.3 - 1,891.3 - 1,891.3 - 1,891.3
Investment in
joint ventures
and associates 43.0 - 43.0 - 43.0 - 43.0
Financial
interest
in property
assets 73.7 - 73.7 - 73.7 - 73.7
Inventories -
trading property 642.1 527.3 1,169.4 - 1,169.4 - 1,169.4
Cash and cash
equivalents 257.6 - 257.6 - 257.6 - 257.6
Other assets 67.4 2.8 70.2 (28.3) 41.9 39.7 81.6
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total assets 2,975.1 530.1 3,505.2 (28.3) 3,476.9 39.7 3,516.6
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Interest-bearing
loans and
borrowings (1,346.2) - (1,346.2) - (1,346.2) (49.3) (1,395.5)
Deferred and
contingent tax
liabilities (36.7) 32.6 (4.1) (107.5) (111.6) (25.3) (136.9)
Other liabilities (103.9) 13.1 (90.8) - (90.8) (13.1) (103.9)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total liabilities (1,486.8) 45.7 (1,441.1) (107.5) (1,548.6) (87.7) (1,636.3)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Net assets 1,488.3 575.8 2,064.1 (135.8) 1,928.3 (48.0) 1,880.3
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
September 2020 Segment net assets (audited)
PRS Reversionary Other Total Pence
per
GBPm 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
-------------------------- -------- ------------- ------ -------- -------
September 2020 Reconciliation of EPRA NAV measures (audited)
Adjustments Adjustments
to market to deferred Adjustments
value, EPRA and contingent EPRA to derivatives, EPRA
Statutory deferred NRV tax and NTA fixed NDV
balance tax and balance intangibles balance rate debt balance
GBPm sheet derivatives sheet sheet and 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
------------------ ---------- ------------- ---------- ---------------- ---------- ----------------- ----------
4. Group revenue
Unaudited
2021 2020
GBPm GBPm
----------------------------------------------------------- --------- --------
Gross rental income (Note 5) 48.3 50.0
Gross proceeds from disposal of trading property (Note 6) 50.7 33.7
Fees and other income (Note 8) 2.3 3.2
----------------------------------------------------------- --------- --------
101.3 86.9
----------------------------------------------------------- --------- --------
5. Net rental income
Unaudited
2021 2020
GBPm GBPm
----------------------------- -------- --------
Gross rental income 48.3 50.0
Property operating expenses (13.6) (13.0)
----------------------------- -------- --------
34.7 37.0
----------------------------- -------- --------
6. Profit on disposal of trading property
Unaudited
2021 2020
GBPm GBPm
------------------------------------------------ --------- -------
Proceeds from disposal of trading property 50.7 33.7
Selling costs (1. 0 ) (0.6)
------------------------------------------------ --------- -------
Net proceeds from disposal of trading property 49.7 33.1
Carrying value of trading property sold (19.9) (11.0)
29.8 22.1
------------------------------------------------ --------- -------
7. (Loss)/profit on disposal of investment property
Unaudited
2021 2020
GBPm GBPm
----------------------------------------------------- --------- -------
Gross proceeds from disposal of investment property 31.2 9.2
Selling costs (0.9) (0.3)
----------------------------------------------------- --------- -------
Net proceeds from disposal of investment property 30.3 8.9
Carrying value of investment property sold (30.4) (8.2)
----------------------------------------------------- --------- -------
(0.1) 0.7
----------------------------------------------------- --------- -------
8. Fees and other income
Unaudited
2021 2020
GBPm GBPm
------------------------------------------ --------- --------
Property and asset management fee income 0.8 1.3
Other sundry income 1.5 1.9
------------------------------------------ --------- --------
2.3 3.2
------------------------------------------ --------- --------
Included within other sundry income is GBP0.8m (2020: GBP0.2m)
liquidated and ascertained damages (LADs) recorded to compensate
the Group for lost rental income resulting from the delayed
completion of construction contracts. In the prior period, GBP1.6m
was recorded in other sundry income in relation to the settlement
of historic legal matters with respect to the Group's interest in
the Czech Republic.
9. Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit or
loss attributable to the owners of the Company by the weighted
average number of ordinary shares in issue during the period,
excluding ordinary shares purchased by the Group and held both in
Trust and as treasury shares to meet its obligations under the
Long-Term Incentive Plan ('LTIP'), Deferred Bonus Plan ('DBP') and
Save As You Earn ('SAYE') schemes, on which the dividends are being
waived.
Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of shares in issue by the dilutive effect
of ordinary shares that the Company may potentially issue relating
to its share option schemes and contingent share awards under the
LTIP and DBP, based upon the number of shares that would be issued
if 31 March 2021 was the end of the contingency period. Where the
effect of the above adjustments is antidilutive, they are excluded
from the calculation of diluted earnings per share.
Unaudited
31 March 2021 31 March 2020
------------------------------ --------------------------------- ---------------------------------
Profit Weighted Profit Weighted
for average Earnings for average Earnings
the number per the number per
period of shares share period of shares share
GBPm (millions) (pence) GBPm (millions) (pence)
------------------------------ -------- ------------ --------- -------- ------------ ---------
Basic earnings per share
Profit attributable to
equity holders 40.1 673.1 6.0 40.1 625.6 6.4
Effect of potentially
dilutive securities
Share options and contingent
shares - 2.6 (0.1) - 2.4 -
------------------------------ -------- ------------ --------- -------- ------------ ---------
Diluted earnings per share
Profit attributable to
equity holders 40.1 675.7 5.9 40.1 628.0 6.4
------------------------------ -------- ------------ --------- -------- ------------ ---------
10. Dividends
The Company has announced an interim dividend of 1.83p (March
2020: 1.83p) per share which will return GBP12.3m (March 2020:
GBP12.3m) of cash to shareholders. In the six months ended 31 March
2021, the final dividend for the year ended 30 September 2020 which
amounted to GBP24.5m has been paid.
11. Investment property
Audited
Unaudited 31 March 30 Sept
2021 2020
GBPm GBPm
------------------------------------------------- ------------------- ---------
Opening balance 1,778.9 1,574.6
------------------------------------------------- ------------------- ---------
Acquisitions 14.5 37.7
Capital expenditure - completed assets 5.1 11.4
Capital expenditure - assets under construction 112.9 146.2
------------------------------------------------- ------------------- ---------
Total additions 132.5 195.3
Transfer from inventories (Note 12) - 13.1
Disposals (30.4) (33.9)
Net valuation gains 10.3 29.8
Closing balance 1,891.3 1,778.9
------------------------------------------------- ------------------- ---------
12. Inventories
Unaudited 31 March Audited 30 Sept
2021 2020
GBPm GBPm
---------------------------------------------------------------------------- ------------------- ----------------
Opening balance 657.4 700.0
Additions 4.4 14.5
Transfer to investment property (Note 11) - (13.1)
Disposals (19.8) (43.3)
Reversal of impairment/(impairment) of inventories to net realisable value 0.1 (0.7)
---------------------------------------------------------------------------- ------------------- ----------------
Closing balance 642.1 657.4
---------------------------------------------------------------------------- ------------------- ----------------
13. Investment in associates
Audited
Unaudited 31 March 30 Sept
2021 2020
GBPm GBPm
-------------------------------- ------------------- ---------
Opening balance 14.7 11.7
Share of profit for the period - 0.1
Loans advanced to associates - 2.9
Closing balance 14.7 14.7
-------------------------------- ------------------- ---------
The closing balance comprises share of net assets of GBP0.1m
(September 2020: GBP0.1m) and net loans due from associates of
GBP14.6m (September 2020: GBP14.6m). At the balance sheet date,
there is no expectation of credit losses on loans due.
As at 31 March 2021, the Group's interest in associates was as
follows:
% of ordinary Country of Accounting
share capital incorporation period end
held
--------- --------------- --------------- -------------
Vesta LP 20.0 United Kingdom 30 September
--------- --------------- --------------- -------------
14. Investment in joint ventures
Unaudited 31 March Audited 30 Sept
2021 2020
GBPm GBPm
---------------------------------- ------------------- ----------------
Opening balance 27.3 21.6
Share of loss for the period (0.2) (1.6)
Further investment(1) 0.9 5.5
Loans advanced to joint ventures 0.3 1.8
Closing balance 28.3 27.3
---------------------------------- ------------------- ----------------
(1) Grainger invested GBP0.9m into Connected Living London (BTR)
Limited in the period (September 2020: GBP5.5m).
The closing balance comprises share of net assets of GBP8.7m
(September 2020: GBP8.0m) and net loans due from joint ventures of
GBP19.6m (September 2020: GBP19.3m).
At 31 March 2021, the Group's interest in joint ventures was as
follows:
% of ordinary
share capital Country of Accounting
held incorporation period end
---------------------------- --------------- --------------- -------------
Connected Living London 30 September
(BTR) Limited 51 United Kingdom
Curzon Park Limited 50 United Kingdom 31 March
Helical Grainger (Holdings) 31 March
Limited 50 United Kingdom
Lewisham Grainger Holdings 30 September
LLP 50 United Kingdom
---------------------------- --------------- --------------- -------------
15. Financial interest in property assets ('CHARM'
portfolio)
Unaudited
31 March Audited 30 Sept
2021 2020
GBPm GBPm
----------------------------------- ---------- ----------------
Opening balance 73.3 76.4
Cash received from the instrument (4.3) (8.3)
Amounts taken to income statement 4.7 5.2
Closing balance 73.7 73.3
----------------------------------- ---------- ----------------
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
Unaudited Audited
31 March 30 Sept
2021 2020
GBPm GBPm
----------------- ---------- ---------
Opening balance 22.5 11.2
Additions 5.8 12.0
Amortisation - (0.7)
Closing balance 28.3 22.5
----------------- ---------- ---------
17. Trade and other receivables
Unaudited
31 March Audited 30 Sept
2021 2020
GBPm GBPm
----------------------------------------- ---------- ----------------
Rent and other tenant receivables 7.1 4.8
Deduct: Provision for impairment (2.9) (2.4)
----------------------------------------- ---------- ----------------
Rent and other tenant receivables - net 4.2 2.4
Contract assets - 3.3
Other receivables 19.4 23.0
Prepayments 1.9 2.6
----------------------------------------- ---------- ----------------
Closing balance 25.5 31.3
----------------------------------------- ---------- ----------------
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 GBP7.0m
(2020: GBP4.8m). Assumptions used in the forward-looking assessment
are continually reviewed in respect of Covid-19 to take into
account likely rent deferrals.
Other receivables include GBP3.7m (2020: GBP9.3m) 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
Unaudited 31 March Audited 30 Sept
2021 2020
GBPm GBPm
-------------------------------- ------------------- ----------------
Current liabilities
Deposits received 7.3 7.2
Trade payables 16.8 16.4
Lease liabilities 0.9 0.9
Tax and social security costs 0.5 0.5
Accruals 59.1 44.2
Deferred income 3.9 4.1
-------------------------------- ------------------- ----------------
88.5 73.3
-------------------------------- ------------------- ----------------
Non-current liabilities
Lease liabilities 1.0 1.3
-------------------------------- ------------------- ----------------
1.0 1.3
-------------------------------- ------------------- ----------------
Total trade and other payables 89.5 74.6
-------------------------------- ------------------- ----------------
Within accruals, GBP44.2m comprises accrued expenditure in
respect of ongoing construction activities (September 2020:
GBP28.4m).
19. Interest-bearing loans and borrowings and financial risk
management
Unaudited Audited
31 March 30 Sept
2021 2020
GBPm GBPm
--------------------------------------------- ---------- ---------
Non-current liabilities
Bank loans - Pounds Sterling 306.0 352.2
Bank loans - Euro 0.9 0.9
Non-bank financial institution 346.2 346.2
Corporate bond 693.1 692.6
1,346.2 1,391.9
--------------------------------------------- ---------- ---------
Total interest-bearing loans and borrowings 1,346.2 1,391.9
--------------------------------------------- ---------- ---------
During the prior 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 costs and the discount on issuance of the corporate
bonds. As at 31 March 2021, unamortised cost totalled GBP11.9m
(September 2020: GBP13.1m) and the outstanding discount was GBP2.7m
(September 2020: GBP2.9m).
Categories of financial instrument
The Group holds financial instruments such as financial interest
in property assets, trade and other receivables (excluding
prepayments), derivatives, cash and cash equivalents. For all
assets and liabilities excluding interest-bearing loans the book
value was the same as the fair value as at 31 March 2021 and as at
30 September 2020.
As at 31 March 2021, the fair value of interest-bearing loans is
greater than the book value by GBP49.3m (September 2020: GBP48.7m
), but there is no requirement under IFRS 9 to adjust the carrying
value of loans, all of which are stated at amortised cost in the
consolidated statement of financial position.
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:
Unaudited Audited
31 March 2021 30 September 2020
---------------------- ----------------------
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
------------------------------------------------------------------- -------- ------------ -------- ------------
Level 3
------------------------------------------------------------------- -------- ------------ -------- ------------
CHARM 73.7 - 73.3 -
Investment property 1,891.3 - 1,778.9 -
------------------------------------------------------------------- -------- ------------ -------- ------------
1,965.0 - 1,852.2 -
------------------------------------------------------------------- -------- ------------ -------- ------------
Level 2
------------------------------------------------------------------- -------- ------------ -------- ------------
Interest rate swaps - in cash flow hedge accounting relationships - 13.2 - 20.6
- 13.2 - 20.6
------------------------------------------------------------------- -------- ------------ -------- ------------
The significant unobservable inputs affecting the carrying value
of the CHARM portfolio are house price inflation and the effective
interest rate. A reconciliation of movements and amounts recognised
in the 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:
Audited
Unaudited 31 March 2021 30 Sept 2020
Assets - Level 3 GBPm GBPm
----------------------------------- ------------------------ --------------
Opening balance 1,852.2 1,651.0
Amounts taken to income statement 15.0 34.6
Other movements 97.8 166.6
----------------------------------- ------------------------ --------------
Closing balance 1,965.0 1,852.2
----------------------------------- ------------------------ --------------
20. Tax
The tax charge for the period of GBP10.2m (2020: GBP9.5m)
recognised in the consolidated income statement comprises:
Unaudited
2021 2020
GBPm GBPm
---------------------------------------------------------------------- -------- --------
Current tax
Corporation tax on profit 9.9 9.4
9.9 9.4
---------------------------------------------------------------------- -------- --------
Deferred tax
Origination and reversal of temporary differences 0.3 0.1
0.3 0.1
---------------------------------------------------------------------- -------- --------
Total tax charge for the period in the consolidated income statement 10.2 9.5
---------------------------------------------------------------------- -------- --------
T he Group works in an open and transparent manner and maintains
a regular dialogue with HM Revenue & Customs. This approach is
consistent with the 'low risk' rating we have been awarded by HM
Revenue & Customs, and to which the Group is committed.
In addition to the above, a deferred tax charge of GBP2.1m
(2020: deferred tax credit of GBP0.4m) was recognised within other
comprehensive income comprising:
Unaudited
2021 2020
GBPm GBPm
------------------------------------------------------------------ -------- --------
Deferred tax
Actuarial gain/(loss) on BPT Limited pension scheme 0.7 (0.1)
Fair value movement in cash flow hedges and exchange adjustments 1.4 (0.3)
------------------------------------------------------------------ -------- --------
Amounts recognised in other comprehensive income 2.1 (0.4)
------------------------------------------------------------------ -------- --------
Deferred tax balances comprise temporary differences
attributable to:
Unaudited 31 March 2021 Audited 30 Sept 2020
GBPm GBPm
---------------------------------------------------------------- ------------------------ ---------------------
Deferred tax assets
Short-term temporary differences 1.1 1.1
Losses carried forward 1.2 1.5
Actuarial deficit on BPT Limited pension scheme 0.5 1.2
Fair value movement in derivative financial instruments
and cumulative exchange adjustments 2.6 4.0
---------------------------------------------------------------- ------------------------ ---------------------
5.4 7.8
---------------------------------------------------------------- ------------------------ ---------------------
Deferred tax liabilities
Trading property uplift to fair value on business combinations (7.2) (7.9)
Investment property revaluation (25.5) (25.0)
Short-term temporary differences (2.9) (2.6)
Fair value movement in financial interest in property assets (1.1) (1.2)
(36.7) (36.7)
---------------------------------------------------------------- ------------------------ ---------------------
Total deferred tax (31.3) (28.9)
---------------------------------------------------------------- ------------------------ ---------------------
Deferred tax has been predominantly calculated at a rate of 19%
(September 2020: 19%) in line with the enacted main rate of
corporation tax.
At the date of approval of these interim financial statements,
the government has announced that it intends to increase the UK
corporation tax rate from 19% to 25% (effective 1 April 2023), but
has not yet legislated for this change. Any changes in corporation
tax rates, once enacted, will impact the company's future current
tax charge and deferred tax balances will be remeasured accordingly
at the higher rate of 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 GBP100.2m,
calculated at 19% (2020: GBP101.3m, calculated at 19%) and will be
realised as the properties are sold.
21. Retirement benefits
The Group retirement benefit liability decreased by GBP3.9m to
an asset of GBP1.5m in the six months ended 31 March 2021. The
movement has arisen from changes in assumptions of GBP2.6m
(primarily market observable discount rates), GBP1.1m gain on plan
assets, and GBP0.2m company contributions. The principal actuarial
assumptions used to reflect market conditions as at 31 March 2021
are as follows:
Unaudited Audited
31 March 2021 30 Sept 2020
% %
------------------------------------------ --------------- --------------
Discount rate 2.10 1.50
Retail Price Index (RPI) inflation 3.45 3.05
Consumer Price Index (CPI) inflation 2.65 2.25
Salary increases 3.95 3.55
Rate of increase of pensions in payment 5.00 5.00
Rate of increase for deferred pensioners 2.65 2.25
------------------------------------------ --------------- --------------
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 income statement for
the period is GBP0.9m (2020: GBP1.0m ).
23. Related party transactions
During the period ended 31 March 2021, 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 administration,
development, property and asset management services for which the
Group receives fee income. The related party transactions
recognised in the income statement and statement of financial
position are as follows:
Unaudited
31 March 2021 31 March 2020
----------------------- -----------------------
Period Period
Fees end Fees end
recognised balance recognised balance
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- ------------ ---------
Vesta Limited Partnership 213 219 67 21
Connected Living London
(BTR) Limited 335 835 384 384
Lewisham Grainger Holdings
LLP 159 770 186 341
707 1,824 637 746
---------------------------- ------------ --------- ------------ ---------
Unaudited Audited
------------------------------------------------- ----------------------------------------------
31 March 2021 31 March 2021 31 March 2021 30 Sept 2020 30 Sept 2020 30 Sept 2020
Interest Period end loan Interest Interest Period end loan Interest
recognised balance rate recognised balance rate
GBP'000 GBPm % GBP'000 GBPm %
------------------- --------------- ---------------- -------------- ------------- ---------------- -------------
Vesta Limited
Partnership - 14.6 Nil - 14.6 Nil
Lewisham Grainger
Holdings LLP - 2.6 Nil - 2.3 Nil
Curzon Park
Limited - 17.0 Nil - 17.0 Nil
- 34.2 - 33.9
----------------------------------- ---------------- -------------- ------------- ---------------- -------------
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.
25. Post balance sheet events
On 13 May 2021, the Group agreed to forward fund and acquire a
PRS, build-to-rent development in Becketwell, Derby, comprising 259
private rental homes for GBP38m.
EPRA Performance Measures - Unaudited
EPRA Earnings
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.
31 March 2021 31 March 2020
---------------------------- ---------------------------
Pence Pence
Earnings Shares per Earnings Shares per
GBPm millions share GBPm millions share
--------------------------------------- --------- --------- ------ -------- --------- ------
Earnings per IFRS income statement 50.3 675.7 7.4 49.6 628.0 7.9
Adjustments to calculate adjusted
EPRA Earnings, exclude:
i) Changes in value of investment
properties, development properties
held for investment and other
interests (12.6) - (1.8) (15.0) - (2.4)
ii) Profits or losses on disposal
of investment properties, development
properties held for investment
and other interests 0.1 - - (0.7) - (0.1)
iii) Profits or losses on sales
of trading properties including
impairment charges in respect
of trading properties (28.4) - (4.2) (17.1) - (2.7)
iv) Tax on profits or losses on
disposals - - - - - -
v) Negative goodwill/goodwill
impairment - - - - - -
vi) Changes in fair value of financial
instruments and associated close-out
costs - - - 0.3 - -
vii) Acquisition costs on share
deals and non-controlling joint
venture interests - - - - - -
viii) Deferred tax in respect
of EPRA adjustments - - - - - -
ix) Adjustments i) to viii) in
respect of joint ventures - - - (1.1) - (0.2)
x) Non-controlling interests in
respect of the above - - - - - -
xi) Other adjustments in respect
of adjusted earnings - - - - - -
--------------------------------------- --------- --------- ------ -------- --------- ------
Adjusted EPRA Earnings/Earnings
per share 9.4 675.7 1.4 16.0 628.0 2.5
--------------------------------------- --------- --------- ------ -------- --------- ------
Adjusted EPRA Earnings per share
after tax 1.1 2.0
--------------------------------------- --------- --------- ------ -------- --------- ------
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
31 March 2021 30 Sept 2020
------------------------- -------------------------
EPRA EPRA EPRA EPRA EPRA EPRA
NRV NTA NDV NRV NTA NDV
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ------- ------- ------- ------- ------- -------
IFRS Equity attributable to shareholders 1,488.3 1,488.3 1,488.3 1,463.0 1,463.0 1,463.0
Include/Exclude:
i) Hybrid Instruments - - - - - -
----------------------------------------- ------- ------- ------- ------- ------- -------
Diluted NAV 1,488.3 1,488.3 1,488.3 1,463.0 1,463.0 1,463.0
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 5.3 5.3 5.3 7.4 7.4 7.4
iii) Revaluation of tenant leases
held as finance leases - - - - - -
iv) Revaluation of trading properties 534.6 427.1 427.1 541.3 432.1 432.1
----------------------------------------- ------- ------- ------- ------- ------- -------
Diluted NAV at Fair Value 2,028.2 1,920.7 1,920.7 2,011.7 1,902.5 1,902.5
Exclude:
v) Deferred tax in relation to
fair value gains of IP 25.3 25.3 - 24.4 24.4 -
vi) Fair value of financial instruments 10.6 10.6 - 16.7 16.7 -
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 - (27.8) - - (22.0) -
Include:
ix) Fair value of fixed interest
rate debt - - (39.9) - - (39.5)
x) Revalue of intangibles to fair
value - - - - - -
xi) Real estate transfer tax - - - - - -
----------------------------------------- ------- ------- ------- ------- ------- -------
NAV 2,064.1 1,928.3 1,880.3 2,052.8 1,921.1 1,862.5
----------------------------------------- ------- ------- ------- ------- ------- -------
Fully diluted number of shares
NAV 675.3 675.3 675.3 675.3 675.3 675.3
NAV pence per share 306 286 279 304 285 276
----------------------------------------- ------- ------- ------- ------- ------- -------
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