Grainger profits rise 26% on the back of focus on London housing market

Residential property owner and manager says it is well positioned for another successful year as the economy continues to improve

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

Grainger plc, the UK’s largest listed residential property owner and manager, has seen profit before tax rise 26% on the back of a continued focus on the London housing market.

Preliminary results for the year ended September 30, 2014, show the figure rose from £64.3m in the previous financial year to £81.1m.

The company also saw strong value growth, with gross net asset value per share increasing 20% to 291p, while triple net asset value rose 24% to 242p.

Established in 1912, Grainger now employs around 280 people, 100 of whom are based at the firm’s head office in Newcastle.

During the year, the business saw continued out-performance from its UK residential assets, with a 14.6% increase in the market value of its portfolio - significantly higher than the average of 9.5% for the Nationwide and Halifax house price indices.

Chief executive Andrew Cunningham said Grainger was a “long-term business” that had to stay “two or three steps ahead” to maintain its strong position.

Having decided in 2008 to invest heavily in the London market, the firm was now reaping the benefits.

A new partnership with regeneration specialist Sigma Capital Group would now allow it to shift its attention to the regions through development opportunities of 100 units or more sourced by the partner business.

Mr Cunningham said: “Grainger has had another period of strong financial performance and we have continued to significantly grow the asset value of the company.

“Our net asset value and profits are up substantially, margins on sales have increased, our leverage is down and we have again seen the value of our portfolio rise faster than the general market.”

During the year, much of Grainger’s success was driven by an £11m increase in profit from sales.

Gross rents fell from £71.1m to £57.4m, the reduction being due to assets sold or transferred in co-investment ventures in the previous year.

The company has since enjoyed an encouraging start to the new financial year, with the group sales pipeline at October 31 sitting at £77m. This should deliver around £35m profit.

Mr Cunningham added: “Conditions in the regions and some areas of the capital remain positive and, notwithstanding some evidence of moderating of house price inflation and transaction volumes, our own assets are continuing to command good prices due to their defensive qualities, notably their price points, location and nature.

“For the first time in recent years, we have seen growth in the values of our assets across every region of the UK over the period.

“We continue to believe that the supply-demand dynamics of the housing market, and the gradual improvement in the economy and employment market will ensure we remain in a positive house price environment, which will include improvement in those regions with strong economic prospects outside of London and the South East.

“We are confident that we are in a good position for the forthcoming year, and our focus is set on growing the business through purchases of revisionary assets and investment in market rented assets and build to rent opportunities.”

Grainger’s outgoing chairman Robin Broadhurst said: “In my final statement as chairman of Grainger, I am pleased to announce that the group has once again had a strong period of performance and is on solid ground for continued growth.

“We have set out a clear strategy for the business which will continue to trade reversionary assets, which provide attractive returns. In addition, Grainger will increasingly allocate capital to market rented assets and opportunities in the growing build to rent market, often through Grainger-managed co-investment vehicles.

“There is significant value in the business for shareholders and I am excited by the prospects for the future of Grainger.”

A final dividend of 1.89p per share will be paid, compared to 1.46p the previous year.

This will result in a total dividend for the year of 2.5p, an increase of 22.6%.

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