Grainger pre-tax profits impacted by failed Clifden Holdings sale

The Newcastle property company saw £18.2m one off costs on its re-acquisition of the Equity Release Increments Limited subsidiary

george@georgebrooks.net Andrew Cunningham, chief executive of Grainger Plc
Andrew Cunningham, chief executive of Grainger Plc

Pre-tax profits at property firm Grainger plc have taken a tumble thanks to the failed sale of its £88m equity release portfolio, earlier this year.

The Newcastle-based firm saw pre-tax profits fall from £49.8m to £9.2m half-on-half, in the six months to March 31, 2015 — following the impact of an £18.2m impairment caused by the failed £88m sale of 1,203 properties to Clifden Holdings Limited in January.

Clifden failed to pay a deferred consideration of £35m on the sale by its January deadline, and Grainger appointed administrators to the firm in a bid to re-acquire the properties, bundled under the Equity Release Increments Limited (ERIL) name.

Grainger regained control of ERIL on April 2 with consent from the Financial Conduct Authority and recovered an estimated £19.3m

Pre-tax profit was also impacted by lower valuations gains — £11.5m from £24.2m in the same period in 2014 — and a £13.9m negative movement on derivatives.

Despite the setback, Grainger said strong underlying asset performance as underlying gross net asset value increased 3.7% since September 2014.

Profit from sales increased from £45.1m to £42.8m during the period and the firm pointed to an “encouraging sales pipeline” of £151m at May 8, 2015, up from £131m at March 31, 2015.

Grainger chief executive Andrew Cunningham, who is set to retire from the firm next year, said: “The fundamental drivers supporting housing remain positive with labour market conditions set to continue to improve and mortgage interest rates remaining, at least in the short term, at current low levels.

“After two years of very strong valuation increases, we are pleased to report that the value of our UK portfolios continue to rise steadily and has again performed better than the general housing market, demonstrating the strength of our assets and quality of our management.

“Our focus, over the last few years, has been on growing our market rented residential business, where we can draw on our proven track record to manage properties and generate good shareholder returns.

“We have been successful in doing so, having acquired over 400 properties in the period and with around 1,070 new market rented homes in our current pipeline expected to complete over the next two years. Our attention going forward will remain on growing this part of the business and continuing to seek out attractive investment opportunities in regulated tenancy portfolios.”

Grainger’s interim dividend increased by 5% to 0.64 per ordinary share, up from 0.61p in March, 2014.

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