REG - Grainger PLC - Half year financial results
16/05/2024 07:00
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RNS Number : 6246O Grainger PLC 16 May 2024
16 May 2024
Grainger plc
Half year financial results
for the six months ended 31 March 2024
A platform delivering compounding growth
§ Net rental income +11%
§ Dividend per share +11%
§ Like-for-like PRS rental growth +8.1%
§ Occupancy 97.7%
§ Underlying property values stable
§ EPRA NTA robust at 294pps
Grainger plc, the UK's largest listed residential landlord and leader in the
build-to-rent sector, today announces a strong performance for the six months
ended 31 March 2024. Grainger's £3.4bn operational residential portfolio
totals c.11,000 homes with a further c.5,000 homes in our £1.5bn
build-to-rent investment pipeline.
Helen Gordon, Chief Executive, said:
"Grainger has delivered another strong operating performance over the past six
months. Strong like-for-like rental growth and expansion from our successful
pipeline delivery have driven further growth in net rental income and earnings
and enable us to increase our dividend for the 17(th) consecutive time since
our strategy reset began in 2016. Our portfolio occupancy remains high at
97.7% with customer affordability healthy, customer satisfaction and retention
high, and rent arrears low.
"Despite some further yield expansion, strong rental growth has offset this
with underlying property values broadly flat, demonstrating the performance of
our platform and resilience of our asset class.
"Our sector's positive market fundamentals and our strategic positioning mean
that we expect rental growth to remain above the historical long-term average
for the remainder of this year with scope for it to continue at elevated
levels into 2025.
"Our strategic transformation to become the leading PRS build-to-rent player
in the UK continues unabated with 80% of our portfolio now PRS assets and will
culminate in our conversion to a REIT in October next year, enhancing returns
for shareholders further.
"As we deliver our secured pipeline, benefitting from significant operational
leverage as our portfolio grows and our cost base remains stable, we expect to
deliver a sustainable Total Accounting Return of 8%, which we believe is a
very attractive return on a risk-adjusted basis."
Key strategic highlights
§ We have delivered c.11% growth in net rental income (NRI) over the last 12
months, the 5(th) consecutive reporting period that we have announced
double-digit growth
§ Our £0.5bn committed pipeline along with our recently completed schemes
when stabilised will deliver a further £41m of additional NRI growth, with
opportunities from our c.£1.0bn secured and planning and legals pipeline
delivering further NRI growth
§ Delivering significant EBITDA margin accretion, from 53% in FY23 to over
60% over the next 5 years, through the delivery of our pipeline and leveraging
our efficient, scalable and market-leading platform
§ EPRA Earnings to grow to £55m by FY26
§ Strong track record of transacting successfully, supporting growth, with
£1.7bn of disposals and £2.5bn of new investment since 2016 when we set out
our strategy
§ We remain on track for REIT conversion for October 2025 (FY26)
Key financial highlights
§ 11% growth in Net Rental Income(1) to £53.2m (HY23: £48.0m), up from
£18.0m at HY16 at the beginning of our strategic restart
§ Strong Adjusted Earnings(2) of £44.4m reflecting the strategic divestment
of our regulated tenancy portfolio, realising significant capital to re-invest
into Build to Rent, PRS assets (HY23: £47.1m)
§ Interim dividend(3) increased 11% to 2.54p per share (HY23: 2.28pps)
§ 12% growth in EPRA Earnings to £24.5m (HY23: £21.9m)
§ 8.1% like-for-like rental growth(4) in H1 across our PRS portfolio (FY23:
8.0%), with new lets at 7.7% and renewals at 8.3%
o Regulated Tenancy Portfolio: 7.1% like-for-like rental growth (FY23: 5.9%)
o Total Portfolio: 8.0% like-for-like rental growth (FY23: 7.7%)
§ High occupancy at 97.7% in our PRS portfolio (FY23: 98.6%)(5)
§ Stable underlying valuations of (0.3)%; down (1.9)% taking account of
changes in tax treatment assumptions (multiple dwellings relief or 'MDR')(6)
which is due to be enacted in the Finance Bill on 1 June
§ EPRA Net Tangible Assets (EPRA NTA) of 294pps (FY23: 305pps; HY23: 310pps),
reflecting an (8)p impact from tax treatment changes (MDR)
§ IFRS loss before tax of £31.2m reflecting the £58.8m impact from MDR tax
treatment changes (HY23: IFRS profit before tax of £5.7m)
§ Accelerated disposals programme delivering strong sales proceeds of £71m
(HY23: £74.6m) providing significant capital to recycle and support our
continued growth
§ Delivering c.1,000 new, purpose-built, energy-efficient, mid-market rental
homes this year in our existing cluster locations of Birmingham, Bristol and
North London, including the successful delivery and launch of 307 new homes at
The Copper Works in Cardiff in the first half of this year
Key financial metrics
Income returns HY23 HY24 Change
PRS rental growth (like-for-like) 6.9% 8.1% +120 bps
- New lets 8.2% 7.7% (45) bps
- Renewals 6.1% 8.3% +219 bps
Regulated tenancies (annualised) 5.8% 7.1% +125 bps
Total Rental growth (like-for-like) 6.8% 8.0% +122 bps
Net rental income (Note 5) £48.0m £53.2m +11%
Adjusted earnings (Note 2) £47.1m £44.4m (6)%
IFRS profit/(loss) before tax (Note 2) £5.7m £(31.2)m (647)%
Earnings/(loss) per share (diluted, after tax) (Note 10) 0.6p (3.0)p (600)%
Dividend per share (Note 11) 2.28p 2.54p +11%
Capital returns HY23 HY24 Change
Total Property Return(7) 0.1% (0.4)% (48) bps
Total Accounting Return (Note 3) (1.6)% (2.9)% (130) bps
FY23 HY24 Change
EPRA NTA per share (Note 3) 305p 294p (4)%
Net debt £1,416m £1,497m +6%
Group LTV 36.8% 39.1% +223 bps
Cost of debt (average) 3.3% 3.1% (14) bps
Our £1.5bn Build-to-Rent Pipeline
Committed pipeline
Investment value £523m
Homes 1,546
Secured pipeline
Investment value £541m
Homes 2,009
Planning & legal pipeline
Investment value £423m
Homes 1,513
Total pipeline
Investment value £1,487m
Homes 5,068
Excellent outlook
The outlook for Grainger is excellent. Our market leadership in the growing
build-to-rent sector with the UK's largest portfolio, largest pipeline and
best-in-class operating platform, powered by our proprietary CONNECT
technology platform, is delivering compounding growth for shareholders over
the near term, whilst providing a brilliant service and rental experience to
our growing number of customers.
In light of the upcoming General Election later this year, our extensive
dialogue with all main political parties provides us significant comfort that
the risk of regulation to our responsible business model is minimal.
Our strong balance sheet with long-term fixed debt costs, our successful
accelerated disposals programme to fund our continued growth, and a fragmented
but maturing BTR market is resulting in an exciting time in the market with a
growing number of potential opportunities that we are seeing.
( )
( )
(1) Refer to Note 5 for net rental income calculation.
(2) Refer to Note 2 for IFRS profit before tax and adjusted earnings
reconciliation.
(3) Dividend - The dividend of 2.54p per share (gross) amounting to £18.8m
will be paid on 5 July 2024 to shareholders on the register at the close of
business on 24 May 2024. Shareholders will again be offered the option to
participate in a dividend re-investment plan and the last day for election is
14 June 2024 - refer also to Note 11.
(4) Rental growth is the average increase in rent charged across our portfolio
on a like-for-like basis.
(5) 95% Occupancy is considered 'stabilised', whilst Grainger considers 97%
'fully occupied', taking account of natural churn.
(6) In the Spring Budget, the Government announced the abolition of Multiple
Dwellings Relief (MDR), which provides Stamp Duty Land Tax relief when buying
multiple properties. The impact of increased purchaser costs have been
reflected in our HY24 valuations, resulting in a £58.8m (1.6%) reduction in
value of investment properties.
(7) Total Property Return (TPR) represents the change in gross asset value,
net of capital expenditure incurred, plus net income, expressed as a
percentage of gross asset value.
Future reporting dates
§ Trading Update - September 2024
§ Full year results - 21 November 2024
Half year results presentation
Grainger plc will be holding a presentation of the results at 9:00am (UK time)
today, 16 May 2024, which can be accessed 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://brrmedia.news/GRI_HY24 (https://brrmedia.news/GRI_HY24)
The webcast will be available for six months from the date of the
presentation.
Conference call details:
Call: +44 (0) 33 0551 0200
Quote "Grainger Half Year Results" when prompted by the operator
*Please note that Live Questions can be submitted by analysts and investors
via the webcast, but not via the conference call facility.
Presentation material:
A copy of the presentation slides will also be available to download on
Grainger's website (http://corporate.graingerplc.co.uk/
(http://corporate.graingerplc.co.uk/) ) from 08:30am (UK time).
For further information, please contact:
Investor relations
Kurt Mueller, Grainger plc:
+44 (0) 20 7940 9500
Media
Ginny Pulbrook / Geoffrey Pelham-Lane, Camarco:
+44 (0) 20 3757 4992 /
4985
Forward-looking statements disclaimer
This publication contains certain forward-looking statements. Any statement in
this publication that is not a statement of historical fact including, without
limitation, those regarding Grainger plc's future financial condition,
business, operations, financial performance and other future events or
developments involving Grainger, is a forward-looking statement. Such
statements may, but not always, be identified by words such as 'expect',
'estimate', 'project', 'anticipate', 'believe', 'should', 'intend', 'plan',
'could', 'probability', 'risk', 'target', 'goal', 'objective', 'may',
'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or
variations on these expressions. By their nature, forward-looking statements
involve inherent risks, assumptions and uncertainties as they relate to events
which occur in the future and depend on circumstances which may or may not
occur and go beyond Grainger's ability to control. Actual outcomes or results
may differ materially from the outcomes or results expressed or implied by
these forward-looking statements. Factors which may give rise to such
differences include (but are not limited to) changing economic, financial,
business, regulatory, legal, political, industry and market trends, house
prices, competition, natural disasters, terrorism or other social, political
or market conditions.
Grainger's principal risks are described in more detail in its Annual Report
and Accounts, set out in the Risk Management report on pages 62-67 of the 2023
Annual Report and Accounts, and there has been no change.
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 in our 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. It is
currently considered that the principal risks previously reported remain our
principal risks. The risks to Grainger will continue to be monitored closely
as well as the potential controls and mitigants that may be applied.
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 representation 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
A platform delivering compounding growth
Key strategic highlights
§ We have delivered c.11% growth in net rental income (NRI) over the last 12
months, the 5(th) consecutive reporting period that we have announced
double-digit growth
§ Our £0.5bn committed pipeline along with recently completed schemes when
stabilised will deliver a further £41m of additional NRI growth, with
opportunities from our c.£1.0bn secured and planning and legals pipeline
delivering further NRI growth
§ Delivering significant EBITDA margin accretion, from 53% in FY23 to over
60% over the next 5 years through the successful delivery of our pipeline and
leveraging our efficient, scalable and market-leading platform
§ EPRA Earnings to grow to £55m by FY26
§ Strong track record of transacting successfully, supporting growth, with
£1.7bn of disposals and £2.5bn of new investment since 2016 when we set out
our strategy
§ We remain on track for REIT conversion for October 2025 (FY26)
§ Sustainable total accounting return target of 8%, underpinned by a positive
rental growth outlook and before any yield movement, an attractive total
return on a risk-adjusted basis due to the low volatility and low risk nature
of our asset class
Strong Operational Performance
Our market-leading, scalable and efficient platform is delivering compounding
growth, in both earnings and dividend, for years to come.
Net rental income has increased once again in the period, up 11%, as we
continue to deliver our pipeline of brilliant new homes in our target
locations across England and Wales.
Our leading operating platform, designed for growth to drive efficiencies and
provide great customer service, continues to deliver value for both
shareholders and our growing number of customers. The benefits of our
clustering strategy continue to drive operational efficiencies with gross to
net improving to 25.3%.
Continuing from last year's exceptionally strong rental growth, like-for-like
rental growth in our PRS portfolio continues to remain at elevated levels at
8.1%, ahead of our prior expectations. Despite this, customer affordability
remains healthy at 28% demonstrating both the important alignment to wage
growth amongst our customer base but also the sustainability of elevated
rental growth going forward that we can generate from our portfolio.
Demand for our high quality, mid-market homes remains extremely strong, with
the portfolio fully occupied at 97.7% and lease up of our new schemes well
ahead of underwriting.
Our accelerated disposals programme is performing well, delivering £71m of
proceeds over the period as we divest from our regulated tenancy portfolio,
providing a reliable source of funding for us to deliver our pipeline and
continue to grow.
Satisfaction amongst our customers remains high, as does customer retention at
62.9%.
Our strong growth in net rental income and earnings ensures that we can once
again increase our dividend, which is up 11% to 2.54p per share.
Resilience
The resilience of our asset class continues to prove true, with underlying
property values broadly stable over the period.
Following the UK Government's announcement to change the tax treatment of
multiple dwellings ('MDR') which comes into effect on 1 June, our independent
valuers at CBRE have applied the impact to our March valuations, resulting in
a one-off valuation reduction of £59m. Reflecting this impact, EPRA NTA is
down 4% to 294p per share.
We are a highly cash generative business. Each year, we expect to deliver
c.£200m of operating cashflow supported by our disposals programme of
non-core assets, underpinning our continued growth. In total we have over
c.£1.1bn of non-core assets, including our regulated tenancy portfolio. Our
market is highly liquid with a wide, diverse range of purchasers. Each year
some 1 million transactions occur in the UK residential market, representing
c.£260bn transacted.
Our balance sheet is strong. Our debt costs are fixed in the mid-3% over the
next five years.
Compounding Growth
Our scalable platform continues to deliver compounding growth in both earnings
and dividend from our pipeline as our portfolio grows, and as we continue to
generate strong like-for-like rental growth. As we grow, we continue to
improve operational efficiencies both in operating margins and EBITDA margins
as we leverage off of our scalable cost base.
Net rental income is set to increase by £41m from the delivery of our
committed pipeline and remaining lease up of recently completed schemes.
In the near term, we expect EPRA Earnings to grow to £55m by FY26.
Strategically Repositioned as a Build-to-Rent Market Leader
Since 2016, we have completely repositioned the business. We have disposed of
£1.7bn of assets and invested £2.5bn in new Build-to-Rent (BTR) assets,
moving from c.23% of our portfolio as PRS/BTR assets to 80% today.
A significant milestone of this strategic transition will be our conversion to
a REIT in October 2025 for our FY26 financial year, further enhancing total
returns.
The great progress we are making as a business, and the quality of our
products and services, is reinforced in the recognition we receive, with
Grainger and our schemes announced as finalists for 27 industry awards so far
this year.
Leading operating platform
We remain steadfast in our commitment to delivering a leading customer
experience and to that end we have appointed a new repairs and maintenance
partner for a large part of our portfolio, a move that will drive further
improvement in what is a key component of our customer journey.
Data and AI opportunities
Our market leading platform provides us significant opportunities to harness
our data and utilise AI. This will deliver further value enhancement, greater
efficiencies and improved customer service.
We are in the early stages of exploring the application of AI, including
machine learning, Generative AI, predictive modelling and natural language
processing, across the business. Early examples include being able to predict
leasing behaviours amongst customers allowing us to direct resource
appropriately, modelling new technologies to support our Net Zero transition
and enhancing our customers' experience with regard to Repairs and Maintenance
bookings.
Exciting market opportunities and excellent outlook
The BTR market continues to grow and mature with a growing number of existing,
stabilised BTR assets coming to market, presenting an expanding route for
growth for Grainger. There are a large number of BTR investors, but many have
sub-scale portfolios, with the average BTR portfolio only 525 homes, likely
leading to consolidation opportunities, which we are tracking closely.
In the meantime, we will continue to deliver and expand our already
significant £1.5bn pipeline of BTR developments, driving significant earnings
growth.
The market fundamentals that underpin our investment case remain as strong as
ever. Our growth trajectory remains on track with a high degree of certainty.
In particular we see the regulatory outlook for our business as low risk
despite the upcoming General Election.
We remain wholly committed to providing great customer service and delivering
high quality homes across England and Wales.
Helen Gordon
Chief Executive
15 May 2024
Financial review
The first six months of FY24 saw a continuation of our excellent performance
as a business. Our homes continue to be in high demand with strong occupancy
levels at 97.7% and PRS like-for-like rental growth continuing to be very
strong at 8.1%. The strong occupational market combined with continuing
delivery of new pipeline schemes has resulted in a significant increase in net
rents of 11%. The operating leverage in our business model, which is built for
scale, means this revenue growth results in even higher earnings growth with
EPRA earnings up 12%.
Valuations have once again proved resilient in the period down 0.3% before the
impact of MDR removal. There was a continuation of the theme of rental growth
(ERV growth 3.7%) offsetting outward yield shift (18bps). The cumulative yield
shift over the last 18 months has been 60bps but this has only resulted in a
valuation decline of 2.9% given the offset from strong rental growth. It is
this index linked nature of our income that underpins the resilience of our
portfolio.
Our balance sheet remains in good shape with strong liquidity. Our committed
pipeline is fully funded and fully hedged, giving us minimal exposure to
interest rate rises for five years. We increased our interim dividend to 2.54p
on a per share basis (HY23: 2.28p), up 11% as we continue to deliver strong,
sustainable dividend growth.
With great visibility on net rental income growth to be delivered from our
committed pipeline, we see strong near-term earnings growth with an upgraded
EPRA earnings target of £55m by FY26. Beyond this, we will continue to
deliver strong compounding earnings growth for years to come.
Highlights
Income returns HY23 HY24 Change
Rental growth (like-for-like) 6.8% 8.0% +122 bps
- PRS 6.9% 8.1% +120 bps
- Regulated tenancies (annualised) 5.8% 7.1% +125 bps
Net rental income (Note 5) £48.0m £53.2m +11%
Adjusted earnings (Note 2) £47.1m £44.4m (6)%
EPRA earnings (Note 3) £21.9m £24.5m +12%
IFRS profit/(loss) before tax (Note 2) £5.7m £(31.2)m (647)%
Earnings/(loss) per share (diluted, after tax) (Note 10) 0.6p (3.0)p (600)%
Dividend per share (Note 11) 2.28p 2.54p +11%
Capital returns HY23 HY24 Change
Total Property Return 0.1% (0.4)% (48) bps
Total Accounting Return (1.6)% (2.9)% (130) bps
FY23 HY24 Change
EPRA NTA per share (Note 3) 305p 294p (4)%
Net debt £1,416m £1,497m +6%
Group LTV 36.8% 39.1% +223 bps
Cost of debt (average) 3.3% 3.1% (14) bps
Reversionary surplus £213m £177m (17)%
Income statement
Adjusted earnings decreased by 6% to £44.4m (HY23: £47.1m) with the strong
£5.2m increase in net rental income offset by lower profits from sales as we
continue to divest from our regulated tenancy portfolio and focus on growing
recurring net rental income. EPRA earnings, which is an increasingly important
metric for our business, continued to deliver strong growth and was up 12% to
£24.5m (HY23: £21.9m).
Income statement (£m) HY23 HY24 Change
Net rental income 48.0 53.2 +11%
Profit from sales 25.2 19.9 (21)%
Mortgage income (CHARM) (Note 16) 2.4 2.3 (4)%
Management fees 2.8 3.5 +25%
Overheads (15.4) (16.2) +5%
Pre-contract costs (0.7) (0.7) -
Net finance costs (15.2) (17.7) +16%
Joint ventures and associates - 0.1 -
Adjusted earnings 47.1 44.4 (6)%
Underlying valuation movements (41.4) (16.8) (59)%
MDR valuation movement - (58.8) -
IFRS profit/(loss) before tax 5.7 (31.2) (647)%
Rental income
Net rental income increased by 11% to £53.2m (HY23: £48.0m), a continuation
of the elevated growth levels of recent years. The £5.2m increase was driven
by continued high occupational demand for our homes resulting in both strong
lettings of new launches and excellent rental growth.
Overall like-for-like rental growth accelerated to +8.0%, with rental growth
in our PRS portfolio continuing to deliver healthy growth at +8.1% (HY23:
+6.9%), with rental growth on renewals of +8.3%, and +7.7% on new lets. Our
regulated tenancy portfolio also delivered strong rental growth at +7.1%
(HY23: +5.8%). Gross to net for our stabilised portfolio improved to 25.3%
(FY23: 25.5%) as we start to deliver the efficiency benefits of our scale and
clustering model.
£m
HY23 Net rental income 48.0
Disposals (1.4)
PRS investment 3.2
Rental growth 3.4
HY24 Net rental income 53.2
YoY growth +11%
Sales
Our accelerated disposals programme continued to be resilient throughout the
period with overall sales revenue of £71.1m in line with the prior period
(HY23: £74.6m). Sales profits were lower at £19.9m (HY23: £25.2m) as
expected, reflecting a smaller regulated tenancy portfolio from which sales
profits are generated with higher levels of PRS recycling which have
significantly lower profit margins.
Residential sales
Vacant sales delivered £10.6m of profit (HY23: £13.2m). The 20% reduction in
vacant property sales profit in the period reflects the reducing portfolio
size of our regulated tenancy portfolio as part of our strategic divestment
and recycling capital into higher yielding build-to-rent PRS assets. Vacancy
rates within our regulated tenancy portfolio, driving sales, were 6.8% (HY23:
8.5%) with margins higher than in the prior year. Pricing achieved remained
robust with sales values -0.2% of previous vacant possession values
demonstrating the resilience of these assets and their ability to generate
reliable cashflow.
Sales of tenanted and other properties delivered £8.4m of profit (HY23:
£8.5m) from £49.2m of revenue (HY23: £29.1m) as we sold a higher proportion
of PRS assets which have significantly lower margins than tenanted regulated
tenancy sales.
Development profits in the period were £0.9m as we continue to work through
sales of our remaining legacy land portfolio.
Sales
HY23 HY24
Units sold Revenue Profit Units sold Revenue Profit
£m £m £m £m
Residential sales on vacancy 57 30.0 13.2 53 21.0 10.6
Tenanted and other sales 165 29.1 8.5 146 49.2 8.4
Residential sales total 222 59.1 21.7 199 70.2 19.0
Development activity 15.5 3.5 0.9 0.9
Overall sales 222 74.6 25.2 199 71.1 19.9
Overheads
We continue to drive operational leverage, with overheads increasing by only
5% in the period to £16.2m (HY23: £15.4m) driven by wage inflation, compared
to 11% growth in recurring net rental income. Our best-in-class operating
platform is set to deliver significant earnings accretion through continued
operational leverage in the coming years.
Balance sheet
Maintaining a strong balance sheet from which to execute our growth strategy
remains an absolute priority, and we are in good shape. Our LTV is 39.1%
(FY23: 36.8%) and liquidity is strong with cash and available facilities of
£433m. Our committed pipeline is fully funded and our debt costs are fully
hedged, meaning we have minimal exposure to potential interest rate rises.
Market value balance sheet (£m) FY23 HY24
Residential - PRS 2,423 2,601
Residential - regulated tenancies 693 666
Residential - mortgages (CHARM) 67 64
Forward Funded - PRS work in progress 441 288
Development work in progress 126 119
Investment in JVs/associates 91 91
Total investments 3,841 3,829
Net debt (1,416) (1,497)
Other liabilities (66) (62)
EPRA NRV 2,359 2,270
Deferred and contingent tax - trading assets (91) (86)
Exclude: intangible assets (1) (1)
EPRA NTA 2,267 2,183
Add back: intangible assets 1 1
Deferred and contingent tax - investment assets (106) (87)
Fair value of fixed rate debt and derivatives 171 108
EPRA NDV 2,333 2,205
EPRA NRV pence per share 318 306
EPRA NTA pence per share 305 294
EPRA NDV pence per share 314 297
EPRA NTA remained robust, decreasing by 4% from the year end to 294p per share
(FY23: 305p per share) reflecting the impact of the removal of multiple
dwellings relief (MDR) equating to 8p per share. Excluding this one-off
impact, NTA was only down 1%. The 4p contribution from EPRA earnings was
offset by the payment of our final dividend (4)p. EPRA NTA excludes the value
of our reversionary surplus of £177m or 24p per share (FY23: £213m).
EPRA NTA movement
£m Pence per share
EPRA NTA at 30 September 2023 2,267 305
Net rents, fees & income 59 8
Overheads (16) (2)
Finance costs (18) (2)
EPRA earnings 25 4
Valuations (trading & investment property) (13) (2)
Sales profit (1) -
Tax & other (4) (1)
Dividends (32) (4)
EPRA NTA at 31 March 2024 (pre-MDR) 2,242 302
MDR (59) (8)
EPRA NTA at 31 March 2024 2,183 294
Property portfolio valuations
Our portfolio values proved resilient with a decline of only 0.3% (HY23:
(1.3)%) over the six-month period prior to the (8)p impact from the withdrawal
of multiple dwellings relief.
Our PRS portfolio saw strong ERV growth of 3.7% which offset c.18bps outward
yield movement in the period. Our regional PRS portfolio outperformed London
marginally with c.15bps outward yield movement compared with c.25bps in
London. The regulated portfolio again proved its resilience with a 0.8%
increase in the six month period.
During the period the removal of multiple dwellings relief in the UK
Government's Budget resulted in an increase in the average stamp duty assumed
in our valuation from 2.8% to 5.0% which had a one-off impact of £59m on
valuation.
Portfolio Region Capital Value Total Valuation movement Total Valuation movement
(pre-MDR) (post-MDR)
(£m) £m % £m
PRS London & SE 1,285 (26) (2.0%) (40) (3.1%)
Regions 1,316 10 0.8% (23) (1.7%)
PRS Total 2,601 (16) (0.6%) (63) (2.4%)
Regulated Tenancies London & SE 565 4 0.8% 4 0.8%
Regions 101 1 0.8% 1 0.8%
Regulated Total 666 5 0.8% 5 0.8%
Operational Portfolio 3,267 (11) (0.3%) (58) (1.7%)
Development 407 (0) (0.1%) (12) (3.0%)
Total Portfolio(1) 3,674 (11) (0.3%) (70) (1.9%)
(1) Excluding CHARM and Vesta.
Financing and capital structure
Net debt increased to £1,497m (FY23: £1,416m) in line with plan as we
invested £122m into our pipeline which was partly offset by £71m of sales in
the period. Going forward we expect net debt to be broadly flat with sales
offsetting our pipeline capex.
LTV now stands at 39.1% (FY23: 36.8%) with our average cost of debt remaining
relatively flat compared to the full year at 3.1% (FY23: 3.3%). We have an
average debt maturity of over five years including extension options and
refinancing risk is minimal with no material refinancing required until 2028.
With our debt costs fixed in the mid 3% for the next five years, our balance
sheet is in good shape.
FY23 HY24
Net debt £1,416m £1,497m
Loan to value 36.8% 39.1%
Cost of debt (average) 3.3% 3.1%
Headroom £519m £433m
Weighted average facility maturity 5.5 5.0
Hedging 95% 100%
Summary and outlook
The resilient growth that our business delivers was once again evident in the
period. Strong demand for our product combined with the delivery of new
pipeline schemes drove growth in our net rental income. With the strong
operational leverage in our business model this drives even larger growth in
our EPRA earnings which are set to grow strongly delivering compounding growth
for many years to come. With our balance sheet in good shape and the strong
operational cashflow that our business creates we are well placed to take
advantage of any opportunities to accelerate growth further.
Rob Hudson
Chief Financial Officer
15 May 2024
Responsibility statement of the directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
§ the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the UK;
§ 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
Rob Hudson
Chief Executive
Officer
Chief Financial Officer
15 May
2024
15 May 2024
Independent Review Report to Grainger plc
Conclusion
We have been engaged by Grainger plc ("the Group") to review the condensed set
of financial statements in the half-yearly financial report for the six months
ended 31 March 2024 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 2024 is not prepared, in
all material respects, in accordance with IAS 34 Interim Financial Reporting
as adopted for use in the UK and the Disclosure Guidance and Transparency
Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK
FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
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 annual financial statements of the Group are
prepared in accordance with UK-adopted international accounting standards.
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the Group a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Group in accordance with the terms of our
engagement to assist the Group in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Group
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 Group for our review work, for this
report, or for the conclusions we have reached.
Craig Steven-Jennings
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E145GL
15 May 2024
Consolidated income statement
Unaudited
For the 6 months ended 31 March Notes 2024 2023
£m
£m
Group revenue 4 113.7 110.5
Net rental income 5 53.2 48.0
Profit on disposal of trading property 6 19.9 21.5
Profit on disposal of investment property 7 - 4.0
Income from financial interest in property assets 16 0.8 1.5
Fees and other income 8 3.5 2.8
Administrative expenses (16.2) (15.4)
Other expenses (0.7) (0.7)
Goodwill impairment - (0.1)
Reversal of impairment/(impairment) of inventories to net realisable value 13 0.4 (0.5)
Operating profit 60.9 61.1
Net valuation loss on investment property 12 (73.8) (40.2)
Finance costs 9 (19.2) (16.0)
Finance income 9 1.5 0.8
Share of (loss)/profit of associates after tax 14 (0.5) 0.1
Share of loss of joint ventures after tax 15 (0.1) (0.1)
(Loss)/profit before tax 2 (31.2) 5.7
Tax credit/(charge) for the period 21 9.2 (1.0)
(Loss)/profit for the period attributable to the owners of the Company (22.0) 4.7
Basic (loss)/earnings per share 10 (3.0)p 0.6p
Diluted (loss)/earnings per share 10 (3.0)p 0.6p
Consolidated statement of comprehensive income
Unaudited
For the 6 months ended 31 March Notes 2024 2023
£m
£m
(Loss)/profit for the period 2 (22.0) 4.7
Items that will not be transferred to the consolidated income statement:
Actuarial loss on BPT Limited defined benefit pension scheme 22 (0.2) (1.1)
Items that may be or are reclassified to the consolidated income statement:
Changes in fair value of cash flow hedges (17.3) (25.7)
Other comprehensive income and expense for the period before tax (17.5) (26.8)
Tax relating to components of other comprehensive income:
Tax relating to items that will not be transferred to the consolidated income 21 0.1 0.3
statement
Tax relating to items that may be or are reclassified to the consolidated 21 4.3 6.4
income statement
Total tax relating to components of other comprehensive income 4.4 6.7
Other comprehensive income and expense for the period after tax (13.1) (20.1)
Total comprehensive income and expense for the period attributable to the (35.1) (15.4)
owners of the Company
Consolidated statement of financial position
Unaudited Audited
31 March 2024 30 Sept
2023
As at Notes £m £m
ASSETS
Non-current assets
Investment property 12 2,962.7 2,948.9
Property, plant and equipment 10.8 8.6
Investment in associates 14 15.3 15.8
Investment in joint ventures 15 75.7 75.2
Financial interest in property assets 16 63.9 67.0
Retirement benefits 22 9.4 9.6
Deferred tax assets 21 3.7 3.7
Intangible assets 1.5 1.0
3,143.0 3,129.8
Current assets
Inventories - trading property 13 386.0 392.2
Trade and other receivables 17 49.1 34.0
Derivative financial instruments 20 28.1 45.3
Cash and cash equivalents 65.8 121.0
529.0 592.5
Total assets 3,672.0 3,722.3
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 20 1,563.8 1,533.5
Trade and other payables 18 6.7 6.9
Provisions for other liabilities and charges 19 1.0 1.1
Deferred tax liabilities 21 99.4 122.3
1,670.9 1,663.8
Current liabilities
Trade and other payables 18 127.0 120.7
Provisions for other liabilities and charges 19 8.7 8.6
Current tax liabilities 3.0 0.6
138.7 129.9
Total liabilities 1,809.6 1,793.7
NET ASSETS 1,862.4 1,928.6
EQUITY
Issued share capital 37.2 37.2
Share premium account 817.8 817.8
Merger reserve 20.1 20.1
Capital redemption reserve 0.3 0.3
Cash flow hedge reserve 7.0 20.0
Retained earnings 980.0 1,033.2
TOTAL EQUITY 1,862.4 1,928.6
Consolidated statement of changes in equity
Notes Issued Share Merger Capital Cash flow Retained Total
share
premium account
reserve
redemption
hedge
earnings
equity
capital
£m
£m
reserve
reserve
£m
£m
£m
£m
£m
Balance as at 1 October 2022 37.1 817.6 20.1 0.3 32.1 1,059.6 1,966.8
Profit for the period 2 - - - - - 4.7 4.7
Other comprehensive expense for the period - - - - (19.3) (0.8) (20.1)
Total comprehensive expense - - - - (19.3) 3.9 (15.4)
Award of SAYE shares - 0.2 - - - - 0.2
Purchase of own shares - - - - - (0.1) (0.1)
Share-based payments charge 23 - - - - - 1.1 1.1
Total comprehensive expense - - - - - (28.8) (28.8)
Total transactions with owners recorded directly in equity - 0.2 - - - (27.8) (27.6)
Balance as at 31 March 2023 37.1 817.8 20.1 0.3 12.8 1,035.7 1,923.8
Profit for the period - - - - - 20.9 20.9
Other comprehensive income for the period - - - - 7.2 - 7.2
Total comprehensive income - - - - 7.2 20.9 28.1
Award of SAYE shares 0.1 - - - - - 0.1
Purchase of own shares - - - - - (7.8) (7.8)
Share-based payments charge - - - - - 1.3 1.3
Dividends paid - - - - - (16.9) (16.9)
Total transactions with owners recorded directly in equity 0.1 - - - - (23.4) (23.3)
Balance as at 30 September 2023 37.2 817.8 20.1 0.3 20.0 1,033.2 1,928.6
Loss for the period 2 - - - - - (22.0) (22.0)
Other comprehensive expense for the period - - - - (13.0) (0.1) (13.1)
Total comprehensive expense - - - - (13.0) (22.1) (35.1)
Purchase of own shares - - - - - (0.1) (0.1)
Share-based payments charge 23 - - - - - 1.2 1.2
Dividends paid 11 - - - - - (32.2) (32.2)
Total transactions with owners recorded directly in equity - - - - - (31.1) (31.1)
Balance as at 31 March 2024 37.2 817.8 20.1 0.3 7.0 980.0 1,862.4
Consolidated statement of cash flows
Unaudited
For the 6 months ended 31 March Notes 2024 2023
£m
£m
Cash flow from operating activities
(Loss)/profit for the period 2 (22.0) 4.7
Depreciation and amortisation 0.7 0.5
Goodwill impairment - 0.1
Net valuation loss on investment property 12 73.8 40.2
Net finance costs 9 17.7 15.2
Share of loss of associates and joint ventures 14, 15 0.6 -
Profit on disposal of investment property 7 - (4.0)
Share-based payment charge 23 1.2 1.1
Income from financial interest in property assets 16 (0.8) (1.5)
Tax (credit)/charge 21 (9.2) 1.0
Cash generated from operating activities before changes in working capital 62.0 57.3
Increase in trade and other receivables (15.1) (9.2)
Increase in trade and other payables 14.6 13.6
Decrease in inventories 6.2 13.2
Cash generated from operating activities 67.7 74.9
Interest paid (24.8) (22.6)
Tax (paid)/credit (6.9) 3.7
Payments to defined benefit pension scheme 22 - (0.3)
Net cash inflow from operating activities 36.0 55.7
Cash flow from investing activities
Proceeds from sale of investment property 7 34.3 32.0
Proceeds from financial interest in property assets 16 3.9 2.9
Dividends received from associates 14 - 0.5
Investment in joint ventures 15 - (32.9)
Loans advanced to joint ventures 15 (0.6) (1.8)
Acquisition of investment property 12 (121.9) (167.0)
Acquisition of property, plant and equipment and intangible assets (3.4) (0.3)
Net cash outflow from investing activities (87.7) (166.6)
Cash flow from financing activities
Award of SAYE shares - 0.2
Purchase of own shares (0.1) (0.1)
Proceeds from new borrowings 164.0 145.0
Payment of loan costs (0.2) (0.8)
Repayment of borrowings (135.0) (30.0)
Dividends paid 11 (32.2) (28.8)
Net cash (outflow)/inflow from financing activities (3.5) 85.5
Net decrease in cash and cash equivalents (55.2) (25.4)
Cash and cash equivalents at the beginning of the period 121.0 95.9
Cash and cash equivalents at the end of the period 65.8 70.5
Notes to the unaudited interim financial results
1. Accounting policies
1a Basis of preparation
These condensed interim financial statements are unaudited and do not comprise
statutory accounts within the meaning of Section 434 of the Companies Act
2006. This condensed set of financial statements has been prepared using
accounting policies consistent with UK-adopted international accounting
standards, in accordance with IAS 34 Interim Financial Reporting, and in
accordance with the Disclosure Guidance and Transparent Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The current period financial information presented in this document has been
reviewed, not audited.
The accounting policies used are consistent with those contained in the
Group's last annual report and accounts for the year ended 30 September 2023
which is available on the Group's website (www.graingerplc.co.uk
(http://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 2024 Consolidated Income Statement are the six month period ended 31
March 2023 Consolidated Income Statement. It is therefore not necessary to
disclose the Consolidated Income Statement for the full year ended 30
September 2023 (available in the last annual report).
The comparative figures for the financial year ended 30 September 2023 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.
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. The valuation process is consistent with the approach set out on
pages 133-135 of the 2023 Annual Report and Accounts, with the exception being
the Group's Residential portfolio valued by Allsop LLP. At the half year,
Allsop LLP inspected 15.7% 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 (16.67% weighting each),
applied on a regional IPD basis.
The Group's financial derivatives were valued as at 31 March 2024 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
and interpretations
New standards, amendments and interpretations in the period
The following new standards, amendments to standards and interpretations were
effective for the Group in the period and have no material impact on the
financial statements:
· IFRS 17 insurance contracts;
· Accounting policies, changes in accounting estimates and errors:
definition (amendments to IAS 8);
· Presentation of financial statements and making materiality
judgements (amendments to IAS 1, IFRS Practice Statement 2);
· Deferred tax related to assets and liabilities arising from a
single transaction (amendments to IAS 12).
Notes to the unaudited interim financial results continued
A number of new standards and amendments to standards have been issued but are
not yet effective for the Group and have not been early adopted. The
application of these new standards and amendments are not expected to have a
material impact on the Group's financial statements.
1c Significant judgements and estimates
Full details of critical accounting estimates are given on pages 133-136 of
the 2023 Annual Report and Accounts. This includes detail of the Group's
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.
During the period, the Government announced in its Spring budget the abolition
of MDR. The impact of this has been reflected in the valuations in the period
ended 31 March 2024. Within the net valuation loss on investment properties of
£73.8m recognised in the consolidated income statement, £58.5m relates to
the removal of MDR, with a further £0.3m attributable to the removal of MDR
in our share of valuation losses from associates.
1d Group risk factors
The principal risks and uncertainties facing the Group are set out in the Risk
Management report on pages 62-67 of the 2023 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 62-64 of the 2023
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. There have been no significant
updates to risk, or failures of control, within the reporting period.
1e Going concern assessment
The Directors are required to make an assessment of the Group's ability to
continue to trade as a going concern for the foreseeable future. Given market
volatility and the impact 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 31 March 2024.
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, which exceeds the required period of assessment of at least
12 months to align with the Group's financial year end, covering the period
from 1 April 2024 to 30 September 2025.
Notes to the unaudited interim financial results continued
The assessment considers a severe downside scenario, reflecting the following
key assumptions:
· Reducing property valuations by 10% per annum, driven by either
yield expansion or house price deflation
· Reducing PRS occupancy to 80% by 30 September 2024, to 75% by 31
March 2025 and to 70% by 30 September 2025
· 20% development cost inflation
· Operating cost inflation of 20% per annum
· An increase in SONIA rate of 200bps from 1 April 2024
· Credit rating downgrade to increase coupon rates on corporate
bonds by 1.25% from 1 April 2024
The Directors consider these assumptions appropriate given the majority of
costs are incurred under fixed price contracts, development agreements, or are
under the company's control.
All facilities in place as at the date of authorising the interim financial
statements 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 53.8% (facility maximum covenant of 70%) and
interest cover above 2.26x (facility minimum covenant of 1.35x) for the 18
months to September 2025, 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 2024.
1f Forward-looking statement
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.
2. Analysis of profit before tax
The table below details adjusted earnings, which is one of Grainger's key
performance indicators. The metric is utilised as a key measure to aid
understanding of the performance of the continuing business and excludes
valuation movements and other adjustments that are one-off in nature, which do
not form part of the normal ongoing revenue or costs of the business and,
either individually or in aggregate, are material to the reported Group
results.
Notes to the unaudited interim financial results continued
For the 6 months ended 2024 2023
31 March (unaudited)
£m Statutory Valuation Other adjustments Adjusted earnings Statutory Valuation Other adjustments Adjusted earnings
Group revenue 113.7 - - 113.7 110.5 - - 110.5
Net rental income 53.2 - - 53.2 48.0 - - 48.0
Profit on disposal of trading property 19.9 - - 19.9 21.5 (0.3) - 21.2
Profit on disposal of investment property - - - - 4.0 - - 4.0
Income from financial interest in property assets 0.8 1.5 - 2.3 1.5 0.9 - 2.4
Fees and other income 3.5 - - 3.5 2.8 - - 2.8
Administrative expenses (16.2) - - (16.2) (15.4) - - (15.4)
Other expenses (0.7) - - (0.7) (0.7) - - (0.7)
Goodwill impairment - - - - (0.1) 0.1 - -
Reversal of impairment/(impairment) of inventories to net realisable value 0.4 (0.4) - - (0.5) 0.5 - -
Operating profit 60.9 1.1 - 62.0 61.1 1.2 - 62.3
Net valuation loss on investment property (73.8) 73.8 - - (40.2) 40.2 - -
Finance costs (19.2) - - (19.2) (16.0) - - (16.0)
Finance income 1.5 - - 1.5 0.8 - - 0.8
Share of (loss)/profit of associates after tax (0.5) 0.7 - 0.2 0.1 - - 0.1
Share of loss of joint ventures after tax (0.1) - - (0.1) (0.1) - - (0.1)
(Loss)/profit before tax (31.2) 75.6 - 44.4 5.7 41.4 - 47.1
Tax credit/(charge) for the period 9.2 (1.0)
(Loss)/profit for the period attributable to the owners of the Company (22.0) 4.7
Basic adjusted earnings per share 4.5p 5.0p
Diluted adjusted earnings per share 4.5p 4.9p
Profit before tax in the adjusted columns above of £44.4m (2023: £47.1m) is
the adjusted earnings of the Group. Adjusted earnings per share assumes tax of
£11.1m (2023: £10.4m) in line with the standard rate of UK Corporation Tax
of 25.0% (2023: 22.0%), divided by the weighted average number of shares as
shown in Note 10. The Group's IFRS statutory earnings per share is also
detailed in Note 10.
The classification of amounts as other adjustments is a judgement made by
management and is a matter referred to the Audit Committee for approval prior
to issuing the financial statements. Any transaction classified as other
adjustments do not form part of the Group's ongoing activities and, as such,
have been classified as other adjustments. There have been no other
adjustments in the period (2023: £nil).
Notes to the unaudited interim financial results continued
3. Segmental Information
IFRS 8, Operating Segments requires operating segments to be identified based
upon the Group's internal reporting to the Chief Operating Decision Maker
('CODM') so that the CODM can make decisions about resources to be allocated
to segments and assess their performance. The Group's CODM are the Executive
Directors.
The two significant segments for the Group are PRS and Reversionary. The PRS
segment includes stabilised PRS assets as well as PRS under construction due
to direct development and forward funding arrangements, both for wholly-owned
assets and the Group's interest in joint ventures and associates as relevant.
The Reversionary segment includes regulated tenancies, as well as CHARM. The
Other segment includes legacy strategic land and development arrangements,
along with administrative expenses.
The key operating performance measure of profit or loss used by the CODM is
adjusted earnings before tax, valuation and other adjustments.
The principal net asset value (NAV) measure reviewed by the CODM is EPRA NTA
which is considered to be the most relevant, and therefore the primary NAV
measure for the Group. EPRA NTA reflects the tax that will crystallise in
relation to the trading portfolio, whilst excluding the volatility of mark to
market movements on fixed rate debt and derivatives which are unlikely to be
realised. Other NAV measures include EPRA NRV and EPRA NDV which we report
alongside EPRA NTA.
Information relating to the Group's operating segments is set out in the
tables below. The tables distinguish between adjusted earnings, valuation
movements and other adjustments and should be read in conjunction with Note 2.
March 2024 Income statement (unaudited)
For the 6 months ended 31 March 2024 PRS Reversionary Other Total
£m
Group revenue 70.1 41.9 1.7 113.7
Segment revenue - external
Net rental income 46.8 5.8 0.6 53.2
Profit on disposal of trading property 0.1 18.9 0.9 19.9
Income from financial interest in property assets - 2.3 - 2.3
Fees and other income 3.5 - - 3.5
Administrative expenses - - (16.2) (16.2)
Other expenses (0.7) - - (0.7)
Net finance costs (14.0) (3.4) (0.3) (17.7)
Share of trading profit of joint ventures and associates 0.1 - - 0.1
after tax
Adjusted earnings 35.8 23.6 (15.0) 44.4
Valuation movements (75.0) (0.6) - (75.6)
Other adjustments - - - -
(Loss)/profit before tax (39.2) 23.0 (15.0) (31.2)
A reconciliation from adjusted earnings to 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 2024 PRS Reversionary Other Total
£m
Adjusted earnings 35.8 23.6 (15.0) 44.4
Profit on disposal of trading property (0.1) (18.9) (0.9) (19.9)
EPRA earnings 35.7 4.7 (15.9) 24.5
Notes to the unaudited interim financial results continued
March 2023 Income statement (unaudited)
For the 6 months ended 31 March 2023 PRS Reversionary Other Total
£m
Group revenue 59.0 50.8 0.7 110.5
Segment revenue - external
Net rental income 40.7 6.9 0.4 48.0
Profit on disposal of trading property (0.4) 21.6 - 21.2
Profit on disposal of investment property 4.1 (0.1) - 4.0
Income from financial interest in property assets - 2.4 - 2.4
Fees and other income 2.7 - 0.1 2.8
Administrative expenses - - (15.4) (15.4)
Other expenses (0.7) - - (0.7)
Net finance costs (11.5) (3.3) (0.4) (15.2)
Adjusted earnings 34.9 27.5 (15.3) 47.1
Valuation movements (41.3) (0.1) - (41.4)
Other adjustments - - - -
(Loss)/profit before tax (6.4) 27.4 (15.3) 5.7
A reconciliation from adjusted earnings to EPRA earnings is detailed in the
table below:
For the 6 months ended 31 March 2023 PRS Reversionary Other Total
£m
Adjusted earnings 34.9 27.5 (15.3) 47.1
Profit on disposal of trading property 0.4 (21.6) - (21.2)
Profit on disposal of investment property (4.1) 0.1 - (4.0)
EPRA earnings 31.2 6.0 (15.3) 21.9
Segmental assets
The principal net asset value measures reviewed by the CODM are EPRA NRV, EPRA
NTA and EPRA NDV. These measures reflect the current market value of trading
property owned by the Group rather than the lower of historical cost and net
realisable value. These measures are considered to be a more relevant
reflection of the value of the assets owned by the Group.
EPRA NRV is the Group's statutory net assets plus the adjustment required to
increase the value of trading stock from its statutory accounts value of the
lower of cost and net realisable value to its market value. In addition, the
statutory statement of financial position amounts for both deferred tax on
property revaluations and derivative financial instruments net of deferred
tax, including those in joint ventures and associates, are added back to
statutory net assets. Finally, the market value of Grainger plc shares owned
by the Group are added back to statutory net assets.
EPRA NTA assumes that entities buy and sell assets, thereby crystallising
certain levels of deferred tax liabilities. For the Group, deferred tax in
relation to revaluations of its trading portfolio is taken into account by
applying the expected rate of tax to the adjustment that increases the value
of trading stock from its statutory accounts value of the lower of cost and
net realisable value, to its market value. The measure also excludes all
intangible assets on the statutory balance sheet, including goodwill.
Notes to the unaudited interim financial results continued
EPRA NDV reverses some of the adjustments made between statutory net assets,
EPRA NRV and EPRA NTA. All of the adjustments for the value of derivative
financial instruments net of deferred tax, including those in joint ventures
and associates, are reversed. The adjustment for the deferred tax on
investment property revaluations excluded from EPRA NRV and EPRA NTA are also
reversed, as is the intangible adjustment in respect of EPRA NTA, except for
goodwill which remains excluded. In addition, adjustments are made to net
assets to reflect the fair value, net of deferred tax, of the Group's fixed
rate debt.
Total Accounting Return of -2.9% is calculated from the closing EPRA NTA of
294p per share plus the dividend of 2.54p per share for the half year, divided
by the opening EPRA NTA of 305p per share.
These measures are set out below by segment along with a reconciliation to the
summarised statutory statement of financial position:
March 2024 Segment net assets (unaudited)
£m PRS Reversionary Other Total Pence per share
Total segment net assets (statutory) 1,702.2 126.7 33.5 1,862.4 251
Total segment net assets (EPRA NRV) 1,792.5 436.8 41.2 2,270.5 306
Total segment net assets (EPRA NTA) 1,788.7 358.8 35.6 2,183.1 294
Total segment net assets (EPRA NDV) 1,701.7 358.8 144.1 2,204.6 297
March 2024 Reconciliation of EPRA NAV measures (unaudited)
£m Statutory balance sheet Adjustments EPRA NRV Adjustments to deferred and contingent tax and intangibles EPRA NTA balance sheet Adjustments to derivatives, fixed rate debt and intangibles EPRA NDV
to market
balance
balance
value, deferred
sheet
sheet
tax and
derivatives
Investment property 2,962.7 - 2,962.7 - 2,962.7 - 2,962.7
Investment in joint ventures and associates 91.0 - 91.0 - 91.0 - 91.0
Financial interest in property assets 63.9 - 63.9 - 63.9 - 63.9
Inventories - trading property 386.0 325.2 - 711.2 - 711.2
711.2
Cash and cash equivalents 65.8 - 65.8 - 65.8 - 65.8
Other assets 102.6 (15.7) 86.9 (1.5) 85.4 29.2 114.6
Total assets 3,672.0 309.5 3,981.5 (1.5) 3,980.0 29.2 4,009.2
Interest-bearing loans and borrowings (1,563.8) - (1,563.8) - (1,563.8) 115.1 (1,448.7)
Deferred and contingent tax liabilities (99.4) 98.6 (0.8) (85.9) (86.7) (122.8) (209.5)
Other liabilities (146.4) - (146.4) - (146.4) - (146.4)
Total liabilities (1,809.6) 98.6 (1,711.0) (85.9) (1,796.9) (7.7) (1,804.6)
Net assets 1,862.4 408.1 2,270.5 (87.4) 2,183.1 21.5 2,204.6
Notes to the unaudited interim financial results continued
September 2023 Segment net assets (audited)
£m PRS Reversionary Other Total Pence per share
Total segment net assets (statutory) 1,729.8 151.7 47.1 1,928.6 260
Total segment net assets (EPRA NRV) 1,839.3 476.9 43.1 2,359.3 318
Total segment net assets (EPRA NTA) 1,835.1 395.0 37.4 2,267.5 305
Total segment net assets (EPRA NDV) 1,729.2 395.0 208.7 2,332.9 314
September 2023 Reconciliation of EPRA NAV measures (audited)
£m Statutory balance sheet Adjustments EPRA NRV Adjustments to deferred and contingent tax and intangibles EPRA NTA balance sheet Adjustments to derivatives, fixed rate debt and intangibles EPRA NDV
to market
balance
balance
value, deferred
sheet
sheet
tax and
derivatives
Investment property 2,948.9 - 2,948.9 - 2,948.9 - 2,948.9
Investment in joint ventures and associates 91.0 - 91.0 - 91.0 - 91.0
Financial interest in property assets 67.0 - 67.0 - 67.0 - 67.0
Inventories - trading property 392.2 342.1 734.3 - 734.3 - 734.3
Cash and cash equivalents 121.0 - 121.0 - 121.0 - 121.0
Other assets 102.2 (33.7) 68.5 (1.0) 67.5 45.9 113.4
Total assets 3,722.3 308.4 4,030.7 (1.0) 4,029.7 45.9 4,075.6
Interest-bearing loans and borrowings (1,533.5) - (1,533.5) - (1,533.5) 182.1 (1,351.4)
Deferred and contingent tax liabilities (122.3) 122.3 - (90.8) (90.8) (162.6) (253.4)
Other liabilities (137.9) - (137.9) - (137.9) - (137.9)
Total liabilities (1,793.7) 122.3 (1,671.4) (90.8) (1,762.2) 19.5 (1,742.7)
Net assets 1,928.6 430.7 2,359.3 (91.8) 2,267.5 65.4 2,332.9
4. Group revenue
Unaudited
2024 2023
£m
£m
Gross rental income (Note 5) 74.7 65.4
Gross proceeds from disposal of trading property (Note 6) 35.5 42.3
Fees and other income (Note 8) 3.5 2.8
113.7 110.5
5. Net rental income
Unaudited
2024 2023
£m
£m
Gross rental income 74.7 65.4
Property operating expenses (21.5) (17.4)
53.2 48.0
Notes to the unaudited interim financial results continued
6. Profit on disposal of trading property
Unaudited
2024 2023
£m
£m
Gross proceeds from disposal of trading property 35.5 42.3
Selling costs (0.9) (1.2)
Net proceeds from disposal of trading property 34.6 41.1
Carrying value of trading property sold (Note 13) (14.7) (19.6)
19.9 21.5
7. Profit on disposal of investment property
Unaudited
2024 2023
£m
£m
Gross proceeds from disposal of investment property 35.6 32.3
Selling costs (1.3) (0.3)
Net proceeds from disposal of investment property 34.3 32.0
Carrying value of investment property sold (Note 12) (34.3) (28.0)
- 4.0
8. Fees and other income
Unaudited
2024 2023
£m
£m
Property and asset management fee income 1.2 1.9
Other sundry income 2.3 0.9
3.5 2.8
Included within other sundry income in the current period is £2.2m (2023:
£0.9m) liquidated and ascertained damages (LADs) recorded to compensate the
Group for lost rental income resulting from the delayed completion of
construction contracts.
9. Finance costs and income
Unaudited
2024 2023
£m £m
Finance costs
Bank loans and mortgages 8.6 7.5
Non-bank financial institution 4.2 4.2
Corporate bond 11.3 11.3
Interest capitalised under IAS 23 (6.6) (8.4)
Other finance costs 1.7 1.4
19.2 16.0
Finance income
Interest receivable from joint ventures (Note 24) (0.6) (0.4)
Other interest receivable (0.9) (0.4)
(1.5) (0.8)
Net finance costs 17.7 15.2
Notes to the unaudited interim financial results continued
10. 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') and Deferred Bonus
Plan ('DBP'), on which the dividends are being waived.
Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of shares in issue by the dilutive effect of ordinary shares that the
Company may potentially issue relating to its share option schemes and
contingent share awards under the LTIP and DBP, based upon the number of
shares that would be issued if 31 March 2024 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 2024 31 March 2023
Loss for Weighted average number of shares (millions) Loss Profit for Weighted average number of shares (millions) Earnings
the period per share (pence) the period per share (pence)
£m £m
Basic (loss)/earnings per share
(Loss)/profit attributable to equity holders (22.0) 738.2 (3.0) 4.7 740.8 0.6
Effect of potentially dilutive securities
Share options and contingent shares - 3.3 - - 3.0 -
Diluted (loss)/earnings per share
(Loss)/profit attributable to equity holders (22.0) 741.5 (3.0) 4.7 743.8 0.6
11. Dividends
The Company has announced an interim dividend of 2.54p (March 2023: 2.28p) per
share which will return £18.8m (March 2023: £16.9m) of cash to shareholders.
In the six months ended 31 March 2024, the final dividend for the year ended
30 September 2023 which amounted to £32.2m has been paid.
12. Investment property
Unaudited Audited
30 Sept
31 March
2024 2023
£m
£m
Opening balance 2,948.9 2,775.9
Acquisitions 12.7 9.8
Capital expenditure - completed assets 7.1 20.4
Capital expenditure - assets under construction 102.1 271.8
Total additions 121.9 302.0
Disposals (Note 7) (34.3) (60.2)
Net valuation loss on investment properties (73.8) (68.8)
Closing balance 2,962.7 2,948.9
Notes to the unaudited interim financial results continued
The net valuation loss on investment properties of £73.8m for the period
ended 31 March 2024 includes the one-off impact of £58.5m following the
Government's Spring budget announcement that MDR will be abolished.
13. Inventories - trading property
Unaudited 31 March Audited
30 Sept
2024 2023
£m
£m
Opening balance 392.2 453.8
Additions 8.1 10.2
Disposals (Note 6) (14.7) (70.8)
Reversal of impairment/(impairment) of inventories to net realisable value 0.4 (1.0)
Closing balance 386.0 392.2
14. Investment in associates
Unaudited 31 March Audited
30 Sept
2024 2023
£m
£m
Opening balance 15.8 16.7
Share of loss for the period (0.5) (0.1)
Dividends received - (0.8)
Closing balance 15.3 15.8
The closing balance comprises share of net assets of £0.7m (September 2023:
£1.2m) and net loans due from associates of £14.6m (September 2023:
£14.6m). At the balance sheet date, there is no expectation of any material
credit losses on loans due.
As at 31 March 2024, the Group's interest in active associates was as follows:
% of ordinary Country of incorporation Accounting period end
share capital held
Vesta LP 20.0 UK 30 September
15. Investment in joint ventures
Unaudited Audited
30 Sept
31 March
2024 2023
£m
£m
Opening balance 75.2 38.5
Share of loss for the period (0.1) (0.3)
Further investment(1) - 34.0
Loans advanced to joint ventures 0.6 3.0
Closing balance 75.7 75.2
(1) Grainger invested £nil into Connected Living London (BTR) Limited in the
period (September 2023: £34.0m).
The closing balance comprises share of net assets of £46.8m (September 2023:
£46.9m) and net loans due from joint ventures of £28.9m (September 2023:
£28.3m). At the balance date, there is no expectation of any material credit
losses on loans due.
Notes to the unaudited interim financial results continued
At 31 March 2024, the Group's interest in active joint ventures was as
follows:
% of ordinary share capital held Country of incorporation Accounting
period end
Connected Living London (BTR) Limited 51 UK 30 September
Curzon Park Limited 50 UK 31 March
Lewisham Grainger Holdings LLP 50 UK 30 September
16. Financial interest in property assets ('CHARM' portfolio)
Unaudited Audited
30 Sept
31 March
2024 2023
£m
£m
Opening balance 67.0 69.1
Cash received from the instrument (3.9) (6.7)
Amounts taken to income statement 0.8 4.6
Closing balance 63.9 67.0
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 20.
17. Trade and other receivables
Unaudited Audited
30 Sept
31 March
2024 2023
£m
£m
Rent and other tenant receivables 3.9 3.0
Deduct: Provision for impairment (1.6) (1.5)
Rent and other tenant receivables - net 2.3 1.5
Restricted deposits 15.9 10.2
Other receivables 27.6 17.9
Prepayments 3.3 4.4
Closing balance 49.1 34.0
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
judgement or estimation due to the balance of gross rent and other tenant
receivables of £3.9m (2023: £3.0m). Assumptions used in the forward-looking
assessment are continually reviewed to take into account likely rent
deferrals.
At the balance date, there is no expectation of any material credit losses on
contract assets.
Restricted deposits arise from contracts with third parties that place
restrictions on use of funds and cannot be accessed. These deposits are held
in connection with facility arrangements and are released by the lender on a
quarterly basis once covenant compliance has been met.
Other receivables include amounts owed to the Group such as development
management fees, forward commitment payments and VAT.
The fair values of trade and other receivables are considered to be equal to
their carrying amounts.
Notes to the unaudited interim financial results continued
18. Trade and other payables
Unaudited Audited
30 Sept
31 March
2024 2023
£m
£m
Current liabilities
Deposits received 11.4 10.7
Trade payables 25.2 15.9
Lease liabilities 0.5 0.2
Tax and social security costs 2.8 3.0
Accruals 78.4 81.9
Deferred income 8.7 9.0
127.0 120.7
Non-current liabilities
Lease liabilities 6.7 6.9
6.7 6.9
Total trade and other payables 133.7 127.6
Within accruals, £60.7m comprises accrued expenditure in respect of ongoing
construction activities (September 2023: £60.2m).
19. Provisions for other liabilities and charges
Unaudited Audited
30 Sept
31 March
2023
2024
£m
£m
Current provisions for other liabilities and charges
Opening balance 8.6 8.6
Additions 0.3 0.3
Utilisation (0.2) (0.3)
8.7 8.6
Non-current provisions for other liabilities and charges
Opening balance 1.1 1.1
Utilisation (0.1) -
1.0 1.1
Total provisions for other liabilities and charges 9.7 9.7
Within current provisions, £8.7m (2023: £8.6m) has been provided for
potential fire safety remediation costs relating to a small number of legacy
properties that Grainger historically had an involvement in developing and may
require fire safety related remediation works. Where appropriate, the Group is
seeking recoveries from contractors and insurers which may reduce the overall
liability over time.
Notes to the unaudited interim financial results continued
20. Interest-bearing loans and borrowings and financial risk management
Unaudited Audited
30 Sept
31 March
2024 2023
£m
£m
Non-current liabilities
Bank loans - Pounds sterling 519.8 490.1
Bank loans - Euro 0.9 0.9
Non-bank financial institution 347.5 347.3
Corporate bond 695.6 695.2
Closing balance 1,563.8 1,533.5
The above analyses of loans and borrowings are net of unamortised loan issue
costs and the discount on issuance of the corporate bonds. As at 31 March
2024, unamortised costs totalled £12.6m (September 2023: £13.8m) and the
outstanding discount was £1.8m (September 2023:
£1.9m).
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 2024 and as at 30 September 2023.
As at 31 March 2024, the fair value of interest-bearing loans is lower than
the book value by £115.1m (September 2023: £182.1m lower than book value),
but there is no requirement under IFRS 9 to adjust the carrying value of
loans, all of which are stated at unamortised cost in the consolidated
statement of financial position.
Market risk
The Group is exposed to market risk through interest rates, the availability
of credit and house price movements relating to the Tricomm Housing portfolio
and the CHARM portfolio. The Group is not significantly exposed to equity
price risk or to commodity price risk.
Fair values
IFRS 13 sets out a three-tier hierarchy for financial assets and liabilities
valued at fair value. These are as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets
and liabilities;
Level 2 - inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly or indirectly; and
Level 3 - unobservable inputs for the asset or liability.
Notes to the unaudited interim financial results continued
The following table presents the Group's assets and liabilities that are
measured at fair value:
Unaudited Audited
31 March 2024 30 September 2023
Assets Liabilities Assets Liabilities
£m
£m
£m
£m
Level 3
CHARM 63.9 - 67.0 -
Investment property 2,962.7 - 2,948.9 -
3,026.6 - 3,015.9 -
Level 2
Interest rate swaps - in cash flow hedge accounting relationships 28.1 - 45.3 -
28.1 - 45.3 -
The significant unobservable inputs affecting the carrying value of the CHARM
portfolio are house price inflation and discount rates. A reconciliation of
movements and amounts recognised in the consolidated income statement are
detailed in Note 16.
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 fair value
movements on derivative financial instruments qualifying for hedge accounting
under IFRS 9 are taken to the cashflow hedge reserve net of tax. The closing
balance of the reserve is £7.0m (September 2023: £20.0m).
The reconciliation between opening and closing balances for Level 3 is
detailed in the table below:
Unaudited Audited
30 Sept
31 March
Assets - Level 3 2024 2023
£m
£m
Opening balance 3,015.9 2,845.0
Amounts taken to income statement (73.0) (64.2)
Other movements 83.7 235.1
Closing balance 3,026.6 3,015.9
Notes to the unaudited interim financial results continued
21. Tax
The tax credit for the period of £9.2m (2023: £1.0m charge) recognised in
the consolidated income statement comprises:
Unaudited
2024 2023
£m
£m
Current tax
Corporation tax on (loss)/profit 9.5 9.4
Adjustments relating to prior periods (0.1) -
9.4 9.4
Deferred tax
Origination and reversal of temporary differences (16.9) (8.2)
Adjustments relating to prior periods (1.7) (0.2)
(18.6) (8.4)
Total tax (credit)/charge for the period (9.2) 1.0
The Group works in an open and transparent manner and maintains a regular
dialogue with HM Revenue & Customs. This approach is consistent with the
'low risk' rating that has been reconfirmed by HM Revenue & Customs during
the period and to which the Group is committed.
The Group's results for this period are taxed at the standard rate of 25.0%
(September 2023: 22.0%).
In addition to the above, a deferred tax credit of £4.4m (2023: £6.7m) was
recognised within other comprehensive income comprising:
Unaudited
2024 2023
£m
£m
Remeasurement of BPT Limited defined benefit pension scheme (0.1) (0.3)
Fair value movement in cash flow hedges (4.3) (6.4)
Amounts recognised in other comprehensive income (4.4) (6.7)
Deferred tax balances comprise temporary differences attributable to:
Unaudited 31 March 2024 Audited
£m
30 Sept
2023
£m
Deferred tax assets
Short-term temporary differences 3.7 3.7
3.7 3.7
Deferred tax liabilities
Trading property uplift to fair value on business combinations (4.6) (5.2)
Investment property revaluation (77.6) (95.2)
Short-term temporary differences (13.0) (13.2)
Fair value movement in financial interest in property assets (1.0) (1.1)
Actuarial gain on BPT Limited defined benefit pension scheme (0.8) (0.9)
Fair value movement in derivative financial instruments (2.4) (6.7)
(99.4) (122.3)
Total deferred tax (95.7) (118.6)
Deferred tax has been calculated at a rate of 25.0% (September 2023: 25.0%) in
line with the enacted main rate of corporation tax.
Notes to the unaudited interim financial results continued
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 £81.3m, calculated at 25.0% (September 2023: £85.5m, calculated
at 25.0%) and will be realised as the properties are sold.
22. Retirement benefits
The Group retirement benefit asset decreased by £0.2m to £9.4m in the six
months ended 31 March 2024. This movement has arisen from a £1.6m gains on
plan assets offset by losses due to changes in assumptions of £1.8m
(primarily market observable discount rates and inflationary expectations).
The principal actuarial assumptions used to reflect market conditions as at 31
March 2024 are as follows:
Unaudited Audited
31 March 2024 30 Sept 2023
% %
Discount rate 4.7 5.6
Retail Price Index (RPI) inflation 3.5 3.5
Consumer Price Index (CPI) inflation 2.8 2.8
Salary increases 4.0 4.0
Rate of increase of pensions in payment 5.0 5.0
Rate of increase for deferred pensioners 2.8 2.8
23. Share-based payments
The Group operates a number of equity-settled, share-based compensation plans
comprising awards under a Long-Term Incentive Plan ('LTIP'), a Deferred Bonus
Plan ('DBP'), a Share Incentive Plan ('SIP') and a Save As You Earn Scheme
('SAYE'). The share-based payments charge recognised in the consolidated
income statement for the period is £1.2m (2023: £1.1m).
24. Related party transactions
During the period ended 31 March 2024, the Group transacted with its
associates and joint ventures (details of which are set out in Notes 14 and
15). The Group provides a number of services to its associates and joint
ventures. These include property and asset management services for which the
Group receives fee income. The related party transactions recognised in the
consolidated income statement and consolidated statement of financial position
are as follows:
Unaudited
31 March 2024 31 March 2023
Fees Period end Fees Period end
recognised
balance
recognised
balance
£'000
£'000
£'000
£'000
Connected Living London (BTR) Limited 390 648 974 1,237
Lewisham Grainger Holdings LLP 144 431 144 169
Vesta Limited Partnership 399 190 416 191
933 1,269 1,534 1,597
Notes to the unaudited interim financial results continued
Unaudited Audited
31 March 2024 30 Sept 2023
Interest Period end loan Interest Interest Period end loan Interest
recognised
balance
rate
recognised
balance
rate
£'000
£m
%
£'000
£m
%
Curzon Park Limited - 18.1 Nil - 18.1 Nil
Lewisham Grainger Holdings LLP 582 10.8 11.2 871 10.2 11.2
Vesta LP - 14.6 Nil - 14.6 Nil
582 43.5 871 42.9
EPRA Performance Measures - Unaudited
The European Public Real Estate Association (EPRA) is the body that represents
Europe's listed property companies. The association sets out guidelines and
recommendations to facilitate consistency in listed real estate reporting, in
turn allowing stakeholders to compare companies on a like-for-like basis. As a
member of EPRA, the Group is supportive of EPRA's initiatives and discloses
measures in relation to the EPRA Best Practices Recommendations ('EPRA BPR')
guidelines. The most recent guidelines, updated in February 2022, have been
adopted by the Group.
EPRA Earnings
31 March 2024 31 March 2023
Earnings Shares Pence per Earnings Shares Pence per share
£m millions share £m millions
Earnings per IFRS income statement (31.2) 741.5 (4.2) 5.7 743.8 0.8
Adjustments to calculate EPRA Earnings, exclude:
i) Changes in value of investment properties, development properties held for 75.3 - 10.1 41.1 - 5.5
investment and other interests
ii) Profits or losses on disposal of investment properties, development - - - (4.0) - (0.5)
properties held for investment and other interests
iii) Profits or losses on sales of trading properties including impairment (20.3) - (2.7) (21.0) - (2.8)
charges in respect of trading properties
iv) Tax on profits or losses on disposals - - - - - -
v) Negative goodwill/goodwill impairment - - - 0.1 - -
vi) Changes in fair value of financial instruments and associated close-out - - - - - -
costs
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 0.7 - 0.1 - - -
x) Non-controlling interests in respect of the above - - - - - -
xi) Other adjustments in respect of adjusted earnings - - - - - -
EPRA Earnings/Earnings per share 24.5 741.5 3.3 21.9 743.8 3.0
EPRA Earnings per share after tax 2.5 2.3
EPRA Earnings have been divided by the average number of shares shown in Note
10 to these financial statements to calculate earnings per share. EPRA
Earnings per share after tax is calculated using the standard rate of UK
Corporation Tax of 25.0% (2023: 22.0%).
EPRA Performance Measures - Unaudited (continued)
EPRA NRV, EPRA NTA and EPRA NDV
31 March 2024 30 Sept 2023
EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV
£m £m £m £m £m £m
IFRS Equity attributable to shareholders 1,862.4 1,862.4 1,862.4 1,928.6 1,928.6 1,928.6
Include/Exclude:
i) Hybrid Instruments - - - - - -
Diluted NAV 1,862.4 1,862.4 1,862.4 1,928.6 1,928.6 1,928.6
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 12.4 12.4 12.4 11.6 11.6 11.6
iii) Revaluation of tenant leases held as finance leases - - - - - -
iv) Revaluation of trading properties 329.8 243.9 243.9 347.3 256.5 256.5
Diluted NAV at Fair Value 2,204.6 2,118.7 2,118.7 2,287.5 2,196.7 2,196.7
Exclude:
v) Deferred tax in relation to fair value gains of IP 87.0 87.0 - 105.8 105.8 -
vi) Fair value of financial instruments (21.1) (21.1) - (34.0) (34.0) -
vii) Goodwill as a result of deferred tax - - - - - -
viii.a) Goodwill as per the IFRS balance sheet - (0.4) (0.4) - (0.4) (0.4)
viii.b) Intangible as per the IFRS balance sheet - (1.1) - - (0.6) -
Include:
ix) Fair value of fixed interest rate debt - - 86.3 - - 136.6
x) Revalue of intangibles to fair value - - - - - -
xi) Real estate transfer tax - - - - - -
NAV 2,270.5 2,183.1 2,204.6 2,359.3 2,267.5 2,332.9
Fully diluted number of shares 743.1 743.1 743.1 743.0 743.0 743.0
NAV
NAV pence per share 306 294 297 318 305 314
EPRA Performance Measures - Unaudited (continued)
EPRA NIY
31 March 30 Sept
2024 2023
£m
£m
Investment property - wholly-owned 2,962.7 2,948.9
Investment property - share of JVs/Funds 65.7 65.6
Trading property (including share of JVs) 711.2 734.3
Less: developments (458.2) (617.1)
Completed property portfolio 3,281.4 3,131.7
Allowance for estimated purchaser's costs 176.8 125.2
Gross up completed property portfolio valuation B 3,458.2 3,256.9
Annualised cash passing rental income 151.7 140.1
Property outgoings (44.9) (39.1)
Annualised net rents A 106.8 101.0
Add: rent incentives 0.7 0.3
'Topped up' net annualised rents C 107.5 101.3
EPRA NIY A/B 3.1% 3.1%
EPRA 'topped up' NIY C/B 3.1% 3.1%
Gross up completed property portfolio valuation 3,458.2 3,256.9
Adjustments to completed property portfolio in respect of regulated tenancies (712.3) (740.9)
Adjusted gross up completed property portfolio valuation b 2,745.9 2,516.0
Annualised net rents 106.8 101.0
Adjustments to annualised cash passing rental income in respect of newly 17.2
completed developments and refurbishment activity
11.2
Adjustments to property outgoings in respect of newly completed developments (5.0)
and refurbishment activity
(3.2)
Adjustments to annualised cash passing rental income in respect of regulated (16.4)
tenancies
(17.0)
Adjustments to property outgoings in respect of regulated tenancies 5.2 4.7
Adjusted annualised net rents a 107.8 96.7
Add: rent incentives 0.7 0.3
EPRA 'topped up' NIY c 108.5 97.0
Adjusted EPRA NIY a/b 3.9% 3.8%
Adjusted EPRA 'topped up' NIY c/b 4.0% 3.9%
EPRA Vacancy Rate
31 March 30 Sept
2024 2023
£m
£m
Estimated rental value of vacant space A 2.6 1.8
Estimated rental value of the whole portfolio B 115.2 112.7
EPRA Vacancy Rate A/B 2.3% 1.6%
The vacancy rate reflects estimated rental values of the Group's stabilised
habitable PRS units as at the reporting date.
EPRA Performance Measures - Unaudited (continued)
EPRA Cost Ratio
For the 6 months ended 31 March 2024 2023
£m
£m
Administrative expenses 16.2 15.4
Property operating expenses 21.5 17.4
Share of joint ventures expenses (0.1) 0.2
Management fees (1.2) (1.9)
Other operating income/recharges intended to cover overhead expenses (2.3) (0.9)
Exclude:
Investment property depreciation - -
Ground rent costs (0.1) (0.1)
Costs (including direct vacancy costs) A 34.0 30.1
Direct vacancy costs (1.3) (1.0)
Costs (excluding direct vacancy costs) B 32.7 29.1
Gross rental income 74.7 65.4
Less: ground rent income (0.3) (0.3)
Add: share of joint ventures (gross rental income less ground rents) 0.4 0.4
Add: adjustment in respect of profits or losses on sales of properties 19.9 25.5
Gross Rental Income and Trading Profits C 94.7 91.0
Adjusted EPRA Cost Ratio (including direct vacancy costs) A/C 36.0% 33.1%
Adjusted EPRA Cost Ratio (excluding direct vacancy costs) B/C 34.5% 32.0%
EPRA LTV
31 March 2024
£m Group Share of Joint Ventures Share of Associates Combined
Borrowings from Financial Institutions 878.2 - - 878.2
Bond loans 700.0 - - 700.0
Net payables 84.6 6.9 14.6 106.1
Exclude:
Cash and cash equivalents (67.0) (2.7) (0.6) (70.3)
Net debt A 1,595.8 4.2 14.0 1,614.0
Investment properties at fair value 2,610.6 - 14.7 2,625.3
Investment properties under development 352.1 51.0 - 403.1
Properties held for sale 711.2 - - 711.2
Financial assets 107.4 - - 107.4
Total property value B 3,781.3 51.0 14.7 3,847.0
EPRA LTV % A/B 42.2% 8.2% 95.2% 42.0%
EPRA Performance Measures - Unaudited (continued)
30 Sept 2023
£m Group Share of Joint Ventures Share of Associates Combined
Borrowings from Financial Institutions 849.2 - - 849.2
Bond loans 700.0 - - 700.0
Net payables 93.6 6.7 14.6 114.9
Exclude:
Cash and cash equivalents (117.8) (3.5) (0.5) (121.8)
Net debt A 1,525.0 3.2 14.1 1,542.3
Investment properties at fair value 2,433.4 - 15.4 2,448.8
Investment properties under development 515.5 50.3 - 565.8
Properties held for sale 734.3 - - 734.3
Financial assets 109.9 - - 109.9
Total property value B 3,793.1 50.3 15.4 3,858.8
EPRA LTV % A/B 40.2% 6.4% 91.6% 40.0%
EPRA Capital Expenditure
31 March 2024
£m Trading Properties Investment Properties Group (excl Joint Ventures) Share of Joint Ventures Combined
Acquisitions 0.2 12.7 12.9 - 12.9
Development 4.7 96.3 101.0 0.5 101.5
Completed assets
- Incremental letting space - - - - -
- No incremental letting space 2.4 7.1 9.5 - 9.5
- Tenant incentives - - - - -
- Other material non-allocated types of expenditure
- - - - -
Capitalised interest 0.8 5.8 6.6 0.3 6.9
Total capital expenditure 8.1 121.9 130.0 0.8 130.8
30 Sept 2023
£m Trading Properties Investment Properties Group (excl Joint Ventures) Share of Joint Ventures Combined
Acquisitions - 9.8 9.8 - 9.8
Development 5.9 255.9 261.8 33.3 295.1
Completed assets
- Incremental letting space - - - - -
- No incremental letting space 2.7 20.4 23.1 - 23.1
- Tenant incentives - - - - -
- Other material non-allocated types of expenditure
- - - - -
Capitalised interest 1.6 15.9 17.5 0.4 17.9
Total capital expenditure 10.2 302.0 312.2 33.7 345.9
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