TIDMGRI
RNS Number : 7440S
Grainger PLC
18 November 2021
18 November 2021
Grainger plc
Full year financial results
for the twelve months ended 30 September 2021
Robust performance; a period of momentum and growth
-- Adjusted Earnings up +2%
-- Profit before tax up +53%
-- Like-for-like rental growth of +1.0%
-- Occupancy of 94% in PRS portfolio by September, now 95%
-- Passing net rental income 15% ahead of reported FY21 reported NRI
-- PRS rent collection of 98%
-- 6 new operational PRS assets added during FY21, totalling
over 1,300 new homes, a record year of delivery and already 91.5%
let
-- 4 acquisitions for GBP299m during FY21
-- PRS now represents 69% of Grainger's total portfolio
Helen Gordon, Chief Executive of Grainger, the UK's largest
listed residential landlord, said:
"We have delivered a robust performance for the year, and with
our strong strategic momentum we are entering our next phase of
dynamic growth.
"Our success has delivered 53% growth in profit before tax, 2%
growth in adjusted earnings and passing net rental income(1) 15%
ahead of FY21 reported NRI, with our resilient regulated tenancy
portfolio providing strong rental income growth and strong sales
performance, which more than offset the slight reduction in
occupancy in our PRS portfolio caused by the pandemic earlier in
the year. We are proposing a final dividend of 3.32p per share(2)
.
"Our well-established growth strategy has continued unabated
with our delivery of more than 1,300 new operational PRS homes and
four new acquisitions totalling GBP299m of investment.
"The UK private rented sector, particularly build-to-rent,
remains a highly attractive sector to invest in. It proved
resilient during the pandemic. Our strategy of investing in high
quality, mid-market private rental homes in target cities across
the UK, identified by our in-house research and aligned to sound
responsible business and ESG values, remains the right strategy for
Grainger.
"Looking to Grainger's future, we plan to increase our growth
momentum and build upon our GBP3.1bn operational portfolio of 9,727
rental homes. Our GBP1.9bn PRS pipeline will more than double our
net rental income. This growth will enable us to further enhance
shareholder returns. The scalable platform we have developed
delivers a compounding effect on earnings growth as we increase our
top line rental income, which we expect to increase 2.5 times from
our pipeline.
"Grainger is at an exciting point in its continued growth
momentum, and with its compounding earnings growth potential,
scalable platform and PRS pipeline, remains well placed to deliver
continued growth in shareholder returns."
Highlights
-- +2% growth in Adjusted Earnings(3) to GBP83.5m
-- Profit before tax up +53% to GBP152.1m
-- Passing net rent was up +15% to GBP81m on FY21 reported net
rental income (NRI). This follows the successful lease up of our
newly launched schemes and a swift reduction in voids in our PRS
portfolio, demonstrating the improvement on our reported NRI for
the year which was GBP70.6m, which reflects our investment sales
programme and the slightly higher than typical void rate in our PRS
portfolio, a result of Covid-19 lockdowns
-- Occupancy further increased to 95% today, up from 89% at the
end of August and 94% at the end of September
-- EPRA Net Tangible Assets (NTA) rose 4% to 297p per share,
supported by the successful lease up of our five new PRS schemes in
the year
-- Proposed final dividend of 3.32p per share, with a total
dividend for the year of 5.15p per share, and a total dividend
distribution of GBP36.9m in line with last year (FY20:
GBP36.8m)
-- Total operational portfolio of 9,727 rental homes valued at
GBP3.1bn, more than two thirds of which is PRS, and a GBP1.9bn PRS
pipeline of a further 8,373 rental homes
Financial Highlights
Income return FY20 FY21 Change
---------------------------------------------------- -------- --------- ---------
Rental growth (like-for-like) 3.0% 1.0% (195) bps
PRS rental growth (like-for-like, after
incentives) 2.5% 0.3% (218) bps
Regulated tenancy rental growth (like-for-like) 4.6% 3.6% (99) bps
Net rental income (Note 5) GBP73.6m GBP70.6m (4)%
Passing net rental income GBP74.1m GBP80.9m +9%
Adjusted earnings (Note 2) GBP81.8m GBP83.5m +2%
Profit before tax (Note 2) (4) GBP99.1m GBP152.1m +53%
Earnings per share (diluted) (Note
9) (4) 12.7p 16.1p +27%
Dividend per share (Note 10) 5.47p 5.15p (6)%
---------------------------------------------------- -------- --------- ---------
Capital return FY20 FY21 Change
------------------------------------ --------- --------- ---------
EPRA NDV per share (Note 3) (4) 273p 284p +4%
EPRA NTA per share (Note 3) 285p 297p +4%
Net debt GBP1,032m GBP1,042m +1%
Group LTV 33.4% 30.4% (301) bps
Cost of debt (average) 3.1% 3.1% +3 bps
Reversionary surplus GBP301m GBP265m (12)%
Total Property Return(5) 5.4% 7.5% +209 bps
Total Accounting Return (NTA basis)
(Note 3) 3.6% 5.5% +188 bps
------------------------------------ --------- --------- ---------
Positive rental growth
-- +1.0% like-for-like rental growth(6) across our total
portfolio (FY20: 3.0%)
-- 0.3% like-for-like rental growth in our PRS portfolio after
incentives are taken into account, while we prioritised occupancy
over rental growth (FY20: 2.5%)
-- Excluding incentives, like for like rental growth in our PRS
portfolio would have been +1.6%
-- The difference in rental growth performance between our
London and regional portfolios has been relatively minor, with a
slightly earlier recovery in occupancy in the regions, and with
London demand coming back strongly in August and September
-- 3.6% like-for-like rental growth in our regulated tenancy
portfolio (FY20: 4.6%), which contributes 26% of our total net
rental income
-- Strong rent collection of 98%
Strong sales performance
-- Strong performance with residential sales profit up +14% to
GBP67.5m (FY20: GBP59.4m)
-- The natural wind down of our regulated tenancy portfolio led
to 7.3% of the portfolio being sold as they naturally became vacant
during the year, capturing the valuation uplift
-- In addition, we sold these vacant ex-regulated tenancy
properties at prices on average 2.6% above valuations
-- We also increased the speed of sales from 120 days to 108
days
-- In addition to vacant sales, we continue to actively manage
our portfolio through our asset recycling programme where we sell
tenanted properties including regulated tenancies as investment
assets without vacant possession, where we can capitalise on strong
market dynamics or we feel we can enhance the overall performance
of the portfolio. We accelerated our asset recycling this year to
take advantage of the strong market. These investment sales
totalled GBP81.7m, delivering GBP27.9m profit
-- Total sales proceeds from our regulated tenancies totalled
GBP117.9m, with GBP75.5m delivered from vacant sales and a further
GBP42.4m delivered from tenanted regulated sales
Positive valuation performance
-- Our portfolio valuation rose 4.5% by GBP142m, supported by
strong lease up performance of our new PRS assets
PRS portfolio growth, driving future NRI growth
-- 1,304 new PRS homes added to the portfolio this year, already
91.5% let at the end of October
-- In addition to launching five schemes from our pipeline and
acquiring a completed, stabilised asset in the period, we continued
to add to our pipeline which stands at GBP1.9bn, 8,373 PRS
homes:
o Acquired Millwrights Place, Bristol - GBP63m, 231 homes
o Acquired Becketwell, Derby - GBP38m, 259 homes
o Acquired Merrick Place, West London - GBP141m, 401 homes
-- Secured pipeline now totals GBP996m, 3,987 homes
Robust and flexible capital structure to support our growth
-- Successfully raised GBP209m gross proceeds in an equity
placing in September, with strong investor backing for accelerating
our growth, with the proceeds deployed into three acquisitions
-- We are in a strong liquidity position with GBP641m of total
available headroom, ensuring that we have enough funding capacity
to finance our entire committed investment pipeline
-- LTV at 30.4% (FY20: 33.4%); taking account of future
committed capital expenditure in our pipeline, LTV would be
40.1%
-- No debt maturities until November 2022, with a weighted
average debt maturity of 5.6 years (FY20: 6.6 years)
-- Average cost of debt maintained at 3.1% (FY20: 3.1%)
Operational highlights
Our leading operating platform and the actions we have taken to
enhance it enabled us to capitalise on the reopening of the UK and
the lettings market in late summer. We successfully returned our
PRS portfolio back to pre-pandemic occupancy of 95% as of today.
Looking forward, our platform also enables us to scale up and grow,
delivering compounding earnings growth as we leverage our platform
as we deliver our GBP1.9bn pipeline. Highlights over the year
include:
-- Continued investment in our CONNECT technology platform with
new capabilities introduced including enhanced digital leasing,
customer relationship management, supply chain management and
repairs and maintenance management, including a new digitised
repairs service for our customers
-- 82% of all PRS customer online reviews were 5 out of 5 stars
during the year
-- Reduced our cost to let as we increased our in-house direct
lettings capability
-- Improved conversion rates through an improved customer
journey experience
Outlook
Having delivered a robust performance for the year we are well
positioned for a strong year of rental growth in FY22. With
occupancy having now recovered to stabilised levels our focus will
return to delivering rental growth and the associated valuation
growth. As we grow over the medium term, delivering our pipeline
and leveraging our platform, we will see significant net rental
income growth translate into strong earnings and dividend growth.
With funding already in place to deliver this secured pipeline we
will continue to pursue further accretive growth opportunities and
maintain our leadership position in the PRS sector.
Responsible business and ESG leadership
We continue to build on Grainger's socially-responsible business
model of delivering good quality, mid-market rental homes with
support for our customers and local communities.
We appointed Carol Hui to the Board as a Non-Executive Director,
who will be the Chair of our new Responsible Business Board
Committee which will be established in FY22.
We continue to reduce our environmental impact and are making
good progress against our long-term commitments, including progress
against our 2030 net zero carbon commitment.
We retained our top ESG benchmark scores.
We publish our first TCFD summary report today within our Annual
Report and will be publishing our first ESG Summary Report in early
2022, expanding on the disclosure within our Annual Report.
Highlights for the year include:
Focus areas &
Long term commitments
Social impact
* Added over 1,300 mid-market rental homes to our
Measure and deliver operational portfolio
a positive social
value
* Delivered 183 new affordable homes during the year
and now have 878 affordable homes in operation,
representing 5% of net rental income
* Defined our social value priorities
* Embedded community engagement best practice blueprint
and delivered 552 events for residents and local
communities, including initiatives to support
wellbeing and green living
* Supported local people into employment (over 50% of
new joiners in FY21 live within 5 miles of their
workplace)
* Helped alleviate youth homelessness and became a
LandAid charity pro bono and First Steps partner with
YMCA North Tyneside to create new accommodation for
at-risk young people
* Provided subsidised accommodation to NHS workers
during the pandemic
* Helped young people into work, specifically in
property careers, with a particular focus on reaching
those from under-represented groups, including
o our graduate programme with four participants
o expanded our apprenticeship programme to
operations with three apprentices across the
Group during the year
o a partner of the TfL built environment educational
engagement programme, and partnered with three
different schools
o funding a bursary for a young person from
a disadvantaged background to attend university
though the Worshipful Company of Chartered
Surveyors
* Provided pro bono support to the East Cleveland Youth
Homelessness Charity, as part of LandAid's pro bono
charity programme
========================== =================================================================
Diversity & Inclusivity
* Developed our strategic framework for diversity &
Ensure Grainger's inclusion
workforce is reflective
of society
* E mployee-led D&I Network delivered programme of
activity for employees and residents
* Members of Real Estate Balance
* Updated our design specification to enhance
accessibility
========================== =================================================================
Progress toward
Net Zero Carbon * Despite growing our portfolio by over 1,300 homes,
our carbon footprint has remained the same. Emissions
Net zero carbon per GBPm value of assets under management have
for our operations reduced by 10%.
by 2030 (updated
in FY21 to cover
all Scope 1 & * Published Grainger's net zero carbon road map
2 emissions)
* Consolidating all purchased energy onto renewable or
low carbon energy contracts and in FY21 increased
renewable electricity purchased to 84%
* 85% of Grainger's PRS portfolio has EPC ratings C or
higher, ahead of the 2025 mandatory deadline
* Grainger properties emit 62% less CO2 on average than
a typical home
* COP26 Built Environment Virtual Pavilion Commercial
Partner
* Between 2020 and 2021 we undertook major
refurbishments on six properties achieving energy
consumption reductions of up to 23% year-on-year,
with total savings expected between 30-50%
========================== =================================================================
Sustainable investment
decisions * Issued our first TCFD summary report
Integrate ESG
into all investment * Developed Grainger's sustainable finance framework ,
decisions which we will publish shortly, to enable us to access
new sources of green and socially-responsible
financing
-----------------------------------------------------------------
ESG benchmark performance
---------------------------------- ------------------
FTSE4Good member since 2010
ISS ESG Prime Rating
MSCI ESG 'AA'
Sustainalytics ESG Risk Rating Low Risk
EPRA Sustainability Best Practice Gold Award
Reporting
GRESB Public Disclosure 'A' Rating
---------------------------------- ------------------
Future reporting dates
----------------------- ------------
2022
AGM & Trading update 9 February
Half year results 12 May
Trading update September
Full year results 17 November
----------------------- ------------
(1) Passing net rental income is the annual rental income
receivable on a property net of estimated property operating
expenditure as at the reporting date.
(2) Dividends - Subject to approval at the AGM, the final
dividend of 3.32p per share (gross) amounting to GBP24.6m
will be paid on 14 February 2022 to Shareholders on the register
at the close of business on 31 December 2021.
Shareholders will again be offered the option to participate in
a dividend reinvestment plan and the last day for
election is 24 January 2022. An interim dividend of 1.83p per
share amounting to a total of GBP12.3m was paid to
Shareholders on 2 July 2021.
(3) Refer to Note 2 for profit before tax and adjusted earnings
reconciliation.
(4) Restated following change in accounting policy as a result
of the IFRIC interpretation of IAS38 relating to development costs
on Software as a Service. See Note 25 for an explanation of prior
year restatements.
(5) 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.
(6) Rental growth is the average increase in rent charged across
our portfolio on a like-for-like basis.
Results presentation
Grainger plc will be holding a presentation of the results at
8:30am (UK time) today, 18 November 2021. The presentation can be
accessed remotely via webcast and a telephone dial-in facility
(details below).
Webcast details:
To view the webcast, please go to the following URL link.
Registration is required.
https://webcasting.brrmedia.co.uk/broadcast/61712bcb013c91413d5db66a
The webcast will be available for six months from the date of
the presentation.
Conference call details:
Call: +44 (0)330 336 9127
Confirmation Code: 7808264
A copy of the presentation slides will also be available to
download on Grainger's website (
http://corporate.graingerplc.co.uk/ ) from 08:00am (UK time).
For further information, please contact:
Investor relations
Kurt Mueller, Grainger plc: +44 (0) 20 7940 9500
Media
Ginny Pulbrook / Geoffrey Pelham-Lane, Camarco: +44 (0) 20 3757 4992 / 4985
Forward-looking statements disclaimer
This publication contains certain forward-looking statements.
Any statement in this publication that is not a statement of
historical fact including, without limitation, those regarding
Grainger plc's future financial condition, business, operations,
financial performance and other future events or developments
involving Grainger, is a forward-looking statement. Such statements
may, but not always, be identified by words such as 'expect',
'estimate', 'project', 'anticipate', 'believe', 'should', 'intend',
'plan', 'could', 'probability', 'risk', 'target', 'goal',
'objective', 'may', 'endeavour', 'outlook', 'optimistic',
'prospects' and similar expressions or variations on these
expressions. By their nature, forward-looking statements involve
inherent risks, assumptions and uncertainties as they relate to
events which occur in the future and depend on circumstances which
may or may not occur and go beyond Grainger's ability to control.
Actual outcomes or results may differ materially from the outcomes
or results expressed or implied by these forward-looking
statements. Factors which may give rise to such differences include
(but are not limited to) changing economic, financial, business,
regulatory, legal, political, industry and market trends, house
prices, competition, natural disasters, terrorism or other social,
political or market conditions.
Grainger's principal risks are described in more detail in its
Annual Report and Accounts, set out in the Risk Management report
on pages 48-51 of the 2021 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
46-47 of the 2021 Annual Report and Accounts, the key risks to the
business are under regular review by the Board and management,
applying Grainger's risk management framework. The Covid-19
pandemic has had a substantial impact on many aspects of society,
including business, with the duration and depth of the impact being
uncertain. Specifically in relation to Grainger, it is currently
considered that the principal risks previously reported remain our
principal risks. However, it is recognised that a pandemic, and
consequently Government restrictions and societal behavioural
changes flowing therefrom increase the likelihood of such risks
being accelerated or becoming more acute. This would include, but
is not limited to market, regulatory and supplier risks. The risks
to Grainger will continue to be monitored closely as well as the
potential controls and mitigants that may be applied during this
unprecedented period.
These risks and other factors could adversely affect the outcome
and financial effects of the events specified in this publication.
The forward-looking statements reflect knowledge and information
available at the date they are made and Grainger plc does not
intend to update on the forward-looking statements contained in
this publication.
This publication is for information purposes only and no
reliance may be placed upon it. No representative or warranty,
either expressed or implied, is provided in relation to the
accuracy, completeness or reliability of the information contained
in this publication. Past performance of securities in Grainger plc
cannot be relied upon as a guide to the future performance of such
securities.
This publication does not constitute an offer for sale or
subscription of, or solicitation of any offer to buy or subscribe
for, any securities of Grainger plc.
Chairman's statement
Continued growth from a position of strength demonstrating the
resilience of the business
Dear Shareholders
Grainger has once again delivered a robust financial performance
and has continued to successfully execute on its well-established
growth strategy, despite economic disruption and a challenging
market due to Covid-19 lockdowns.
The business demonstrated strong resilience throughout the
pandemic maintaining strong rental collection rates and driving
occupancy levels back up towards normalised levels by the year end
as lockdown restrictions were eased. The business also capitalised
on the strong sales market by increasing its rate of asset
recycling to support new investment. This, together with another
very successful equity raise of GBP209m gross proceeds, has allowed
the business to step up investment with a number of additional
acquisitions, added to its growing pipeline. Once again, the Board
is very grateful for the support our Shareholders have provided to
the Company's growth strategy.
Over the course of the year, Grainger has delivered over 1,300
new, high-quality rental homes. A record year for the business and,
importantly, each of these six new schemes are leasing up ahead of
expectations.
We spoke last year of the great responsibility being a landlord
brings with it and the importance we place on health and safety
through our own Live.Safe programme. Our focus, commitment and work
in this area remains a top priority. We continue to show our
leadership in our design specification and have been recognised for
our leading approach to health and safety and fire safety,
specifically, by the UK Government's Industry Safety Steering
Group.
We have continued to make good progress across all areas of ESG
including our four long-term ESG commitments. We set out the
details of this within the ESG section of our Annual Report. We
remain committed to improving diversity within the organisation and
are making positive headway through our Diversity and Inclusion
Programme. We are also encouraging greater diversity within our
sector by working with young people in educational settings, and we
continue to attract and support more diverse and inclusive
communities within our buildings. To provide additional focus at
Board level on these important topics we are establishing a new
committee of the Board, the Responsible Business Committee, which
will focus on all aspects of ESG.
During the year we have successfully rolled out key elements of
our technology platform and we have already seen real benefits
coming through, especially against a backdrop of having to operate
virtually at times during the year. Over the coming years we expect
to see further benefits including efficiencies and scalability, and
continued enhancements to the experience we deliver for our
customers.
During the year we saw Vanessa Simms leave the Company as
previously announced, and Rob Hudson replace her as Group CFO. Rob
joined the Board on 1 September and brings a wealth of experience
from the real estate sector. Carol Hui joined the Board on 1
October as Non-Executive Director and will be Chair of the new
Responsible Business Committee. Carol brings experience from a
number of sectors and has been responsible for delivering ESG
strategies elsewhere. At the AGM in February 2022, Andrew
Carr-Locke will be stepping down from the Board by rotation and we
are very grateful for his service as both Senior Independent
Director and the Chair of the Audit Committee. Andrew has made an
invaluable contribution over the last seven years and we wish him
every success in the future.
The proposed final dividend for the year is 3.32p per share,
reflecting our policy of distributing 50% of our net rental income,
taking the total dividend for the year to 5.15p per share. This
reflects the growth in net rental income from new schemes offset by
the acceleration of our asset recycling initiatives combined with
lower occupancy levels due to the Covid-19 restrictions affecting
the lettings market earlier in the year.
As we look ahead, Grainger's path is clear. The Board will
continue to focus on accelerating growth within the private rented
sector in the UK, building on its strong foundations, delivering
great homes, great places and great service to its customers.
Mark Clare
Chairman
17 November 2021
Chief Executive's review
Robust performance and a record year of delivery
I am pleased to report that your Company is in a strong position
and has continued to grow despite the challenges of the past year.
The demand for our homes and the delivery of new schemes means our
growth strategy has continued unabated. We delivered a record
number of new homes and leased these swiftly whilst also recovering
occupancy across our whole PRS portfolio. We are focussed on
continually improving the homes we provide by enhancing our offer
to our customers, achieving a collective purpose of 'Renting homes,
enriching lives'.
We added six further schemes, totalling 1,304 great rental
homes, to our portfolio.
Our successful equity placing in September, which was heavily
over-subscribed, has enabled us to continue our expansion and bring
forward and commit to new schemes.
For the year we delivered growth in Adjusted Earnings up 2% to
GBP83.5m, growth in the value of our portfolio with EPRA NTA up 4%
to 297p per share and passing net rental income was up to GBP81m at
the year end. Reported net rental income for the year was GBP70.6m,
reflecting the investment disposals we made and the reduced
occupancy we experienced during the year caused by the pandemic, at
the time of writing this has now been recovered. We are pleased to
maintain our total dividend distribution of GBP36.9m (FY20:
GBP36.8m) with a proposed final dividend of 3.32p per share.
We are set to accelerate our well-established growth trajectory,
with a GBP1.9bn pipeline which will see our net rental income grow
by 2.5 times and creating a high-quality portfolio for future
growth.
Our growth strategy continues to be the right one
Our strategy of investing in high-quality mid-market private
rental homes in target cities across the UK, remains the right
strategy for Grainger.
The UK rental market (or private rented sector) remains a highly
attractive sector to invest in. It proved resilient during the
pandemic. In fact, consumer rental trends we identified a few years
ago have accelerated during the pandemic in favour of our product
of high-quality homes and more professional customer service.
We allocate capital based on insights, data and research to
determine which cities to invest in. This has proven successful as
demonstrated by the resilience of our portfolio and the successful
lease up of our new buildings. Our business has benefited from this
strategy by having the right product in the right places.
Our three strategic focus areas that we set out in 2016: (1)
grow rents, (2) simplify and focus, and (3) build on our
experience, remain relevant today.
Establishing scale is important for us as a business. It enables
us to enhance both returns to Shareholders, and importantly it also
enables us to enhance our offer to our customers and all our
stakeholders. That is why we are focused on growth, driving net
rental income and dividend. Today, our net rental income is more
than double what it was when we set out our strategy, and our
growing pipeline, supported by our recent equity placing, will see
net rental income more than double again, supporting dividend
growth of the same magnitude.
During the year we took the opportunity to further simplify the
business by selling assets which we felt would not deliver for our
Shareholders and our customers in the longer term into a strong
market. Whilst this reduced net rental income in the short term, it
also will reduce capital expenditure and vacancy in the portfolio
over the long term and ensure a high-quality portfolio.
We are grateful to our Shareholders for their overwhelming
support for our equity placing in September, which enabled us to
bring forward our growth plans even further by securing new
acquisitions.
Building on our experience
Maintaining our position as market leader remains a strategic
focus for us. Our experience and heritage as a responsible,
residential landlord in the UK since 1912 provides us a strong
foundation for future growth. Our growth plans are coupled with a
continued focus on what makes a good experience of renting while
continually refining our business model and operating platform,
focusing on scalability and efficiencies. This enables us to
outperform and outcompete. And as we grow, our business model and
operating platform has been designed so that our central cost base
does not significantly increase, so that as our net rental income
grows over the coming years this will lead to compounding of
returns and significant growth to our earnings.
Our guiding values align to our strategy
Our values are our guiding principles for the business. They
have been developed by our employees so that they complement and
align with our strategy, taking account of our customers and
communities. By embedding these values, we believe we will be a
better, stronger business, delivering better service and homes to
more customers, support to our communities and drive better returns
for Shareholders and importantly being a business people want to
work in.
People at the heart
One of our core guiding values is 'People at the heart'. This
value guides how we think about our customers but also employees
which is wide-ranging from employee attraction and retention
through to mental health, wellbeing, professional development and
diversity. We are especially proud of the work of our employee-led
Diversity & Inclusion Network, and the foundations we continue
to lay to support gender and ethnicity diversity across the
business.
Once again, the Grainger team have demonstrated exceptional
commitment to our customers, our colleagues and the Grainger
business.
At the start of the financial year we were able to return to our
offices and the levels of staff engagement were high in all areas
of the business, but by the end of the first quarter we were in a
second lockdown. I was proud of the way the business swiftly
responded, showing no sign of complacency or resignation but rising
to the challenge of serving our customers well.
Our frontline Resident Services teams in our build-to-rent
properties stayed in place and supported our customers, many of
whom were working from home. The teams provided additional services
and enhanced health and safety regimes.
Our office-based teams returned over the summer and by the end
of September we saw between 75% and 95% of our colleagues return to
our offices, with high levels of engagement and enthusiasm to
create and support our next stage of growth.
Our 'People at the heart' value helps guide our customer service
strategy. Using data and insight, including direct,
independently-gathered customer feedback, we have in-depth
knowledge and understanding of our customers, their wants, needs
and preferences. And this insight and data informs our
decision-making, from capital allocation, through to design,
operations and marketing.
Securing a future for all
We strongly believe that Grainger is a force for good, providing
high-quality homes, with high service standards, to the mid-market,
in a country with a housing shortage and an inadequate rental
offering generally. But our ESG ambitions reach far beyond this,
with stretching commitments and targets relating to carbon
reductions, social impact and diversity.
Throughout the business, from the Board through to on-site
operational teams and supply chain partners, we are challenging
ourselves to do more, embedding ESG and responsible business
objectives in every team and in every process and decision.
Our leading ESG strategy and efforts will help secure Grainger's
future as a responsible business and will help secure a brighter
future for all our stakeholders. We were pleased to be a commercial
partner for the COP26 Built Environment Virtual Pavilion. This
year, our sustainability and ESG efforts were recognised again
through multiple awards and benchmarks, including achieving a Gold
Award for EPRA's Sustainability Best Practice Reporting for the
eighth consecutive year. We have also maintained our sector leading
Prime Rating on the ISS ESG assessment. We were awarded an A rating
on the GRESB Public Disclosure Assessment and were the highest
scoring UK residential organisation. Grainger contributed to the
development of the British Property Federation's Residential ESG
Guidance and the UK Apartment Association's ESG Best Practice
Guide, which seek to increase consistency of ESG performance and
reporting across the private rented sector.
Enhancing our platform to enable occupancy to outperform
The business proved exceptionally resilient during the course of
the pandemic with rent collections averaging between 97% and 99%.
The restrictions put in place due to the coronavirus pandemic did
lead to reduced lettings activity and we entered this financial
year at reduced occupancy levels.
We addressed this by building our own in-house leasing team,
refurbishing and enhancing our older rental properties when voids
occurred.
In February this year we launched our customer Service Desk
available to all residents but particularly those who have less
access to an on-site Resident Services team.
The in-house leasing team enabled us to respond quickly to the
surge of enquiries as the market opened up over the Summer. We
achieved record numbers of lettings across the country.
By the end of September, we were close to fully recovering
occupancy at 94% and shortly thereafter were back to a stabilised
occupancy of 95% on our PRS portfolio. In addition, we outperformed
against our expectations on the lease up of all our new assets,
totalling over 1,300 new rental homes, which were 91.5% let by the
end of October.
We continued to invest in our technology platform, CONNECT,
during the year. Our digital leasing capability has been expanded
to the entirety of our PRS portfolio, and we have introduced new,
market-leading technology supporting customer relationship
management, our repairs process and supply chain, asset management
and data reporting. In addition to enhancing our and boosting our
occupancy levels, this will support our future growth, and enable
us to deliver a better service, more efficiently.
Delivering Shareholder returns
Our strategy is delivering for Shareholders and our robust
results demonstrate resilient performance during the pandemic.
Rent collection was high, new lettings outperformed and voids
were successfully reduced. Our rental growth was lower than in
previous years reflecting our desire to retain customers and
encourage occupancy over rental growth. We expect our ability to
increase rents while maintaining high retention rates to return in
future years.
Our early investment sales timed to capitalise on a healthy
investment market reduced overall income, however as we go into our
next year our exceptional lease up of new schemes places us in a
great position to continue to grow rents substantially.
Through these actions, we saw an increase in Adjusted Earnings
and a notable increase in the value of our portfolio with EPRA NTA
up 4% to 297p. And as we deliver our pipeline of new schemes the
growth in net rental income will drive growth in our dividend and
will generate compounded growth in earnings as we leverage up on
our operating platform.
An exceptional year of new openings
During the year we launched five new schemes and acquired one
stabilised scheme, our largest delivery to date and our new homes
are performing ahead of expectations. Our scheme Gatehouse
Apartments in Southampton was let in four months at rents ahead of
expectations. Our schemes in London were launched in July and
August and are leasing well and our central Leeds project, The
Headline, has beaten leasing velocity records, reaching stabilised
levels within 3.5 months. These new developments are homes that the
Grainger team are very proud of, they represent years of hard work
and attention to detail and as our residents settle into these new
communities the feedback has been extremely positive.
Board visits and engagement
I am grateful for the commitment of the Grainger Board in
supporting the growth of the business by being responsive and
agile. Despite the restrictions of lockdown, the Board visited two
new Grainger schemes during the year in Southampton and London. The
interest, enthusiasm and engagement is a boost to the frontline
operational team.
The strength of the Grainger team
We have further strengthened our team with senior appointments
during the year.
John Blanshard, our Director of Operations joined us in March
from Unite, the student housing provider, and has a strong
operational and customer-focused background.
Our new CFO, Rob Hudson, joined in late August replacing Vanessa
Simms who left in late April. Vanessa worked with me on the
repositioning of Grainger over the past five years, and I thank her
for her friendship, contribution and support during this time.
Rob brings a wealth of real estate experience from his previous
roles at British Land and as CFO and Interim CEO of St Modwen. He
also has a strong technology and data background from his tenure at
Experian.
Concluding remarks
The Grainger team have worked exceptionally hard over the past
year to continue to deliver great homes and service to our
customers and drive returns for Shareholders. I would like to thank
them all for their hard work and resilience during the challenges
of the last year.
As the market leader, Grainger paves the way when it comes to
influencing and shaping the future of the rental homes market in
the UK. Our longer-term tenancies, inclusive super-fast WiFi and
pet- friendly policies are just some of the ways that we are
providing our customers with better value and a better rental
experience.
We are building a business our employees and shareholders can be
proud of. We have a clear strategy and commitment to quality and
service which guides us. We are building communities where we can
support people to have a better quality of life.
Helen Gordon
Chief Executive
17 November 2021
Financial review
Poised for growth
In a year that has seen numerous disruptions, Grainger's focus
on delivering our growth strategy has continued unabated,
delivering 1,304 homes across six schemes, securing further
pipeline opportunities amounting to 1,174 homes across four schemes
and continuing to invest in our best-in-class operating platform.
The opportunity in the build-to-rent sector is significant.
Grainger has the people, platform, and capital to maximise this
opportunity and it is certainly a very exciting time to join the
business.
Having proved robust during the lockdown, our leading operating
platform and the actions we have taken to enhance it enabled us to
capitalise on the reopening of the UK and the lettings market in
late Summer resulting in September year-end occupancy at 94%,
rising to 95% today. With demand for good quality mid-market
build-to-rent homes as strong as ever we are well positioned to see
a return to pre-pandemic rental growth levels.
A strong sales performance has ensured continued earnings growth
throughout the year with dividend payments flat for the year at
GBP36.9m (FY20 GBP36.8m). The proposed final dividend for the year
is 3.32p per share, reflecting our policy of distributing 50% of
our net rental income, taking the total dividend for the year to
5.15p per share.
Valuations are starting to reflect the strength of investment
markets with this reflected in 10bps yield compression in our prime
regional centres during the year.
Our ambitious growth agenda is always combined with a prudent
approach to balance sheet management, and with an LTV of 30.4% and
GBP641m of headroom we remain in good shape. The successful equity
raise in September, which was significantly oversubscribed, has
enabled us to continue to accelerate our growth strategy further,
exploiting the operating leverage in our business model and
continuing to improve our return profile over time.
Financial highlights
Income return FY20 FY21 Change
----------------------------------- -------- --------- ---------
Rental growth (like-for-like) 3.0% 1.0% (195) bps
Net rental income (Note 5) GBP73.6m GBP70.6m (4)%
Passing net rental income GBP74.1m GBP80.9m +9%
Adjusted earnings (Note 2) GBP81.8m GBP83.5m +2%
Profit before tax (Note 2) (1) GBP99.1m GBP152.1m +53%
Earnings per share (diluted) (Note
9) (1) 12.7p 16.1p +27%
Dividend per share (Note 10) 5.47p 5.15p (6)%
Capital return FY20 FY21 Change
------------------------------------ --------- --------- ---------
EPRA NTA per share (Note 3) 285p 297p +4%
Net debt GBP1,032m GBP1,042m +1%
Group LTV 33.4% 30.4% (301) bps
Cost of debt (average) 3.1% 3.1% +3 bps
Total Property Return 5.4% 7.5% +209bps
Total Accounting Return (NTA basis)
(Note 3) 3.6% 5.5% +188 bps
------------------------------------ --------- --------- ---------
(1) Restated following change in accounting policy as a result
of the IFRIC interpretation of IAS38 relating to development costs
on Software as a Service. See Note 25 for an explanation of prior
year restatements.
Income statement
Despite the challenging economic backdrop adjusted earnings
increased by 2% to GBP83.5m (FY20: GBP81.8m). Net rental income was
impacted by accelerated asset recycling in H1 and the temporary
reduction in occupancy but will return to significant growth in
FY22 and beyond as our sizable pipeline converts into rental
income. Residential sales profit increased by 14% to GBP67.5m
(FY20: GBP59.4m) as a strong underlying sales market supported both
volumes and pricing.
We continue to invest in our market leading operating platform
that enables us to scale our business without significant cost
increases and continue our transition to an income-focused PRS
business.
Income statement (GBPm) FY20 FY21 Change
------------------------------ ------ ------ --------
Net rental income 73.6 70.6 (4)%
Profit on sale of assets -
residential 59.4 67.5 +14%
Profit on sale of assets -
development 4.2 1.8 (57)%
CHARM income (Note 15) 5.1 4.9 (4)%
Management fees 3.5 5.1 +46%
Overheads (28.7) (30.2) +5%
Pre-contract costs (0.6) (0.6) +0%
Joint ventures and associates (0.7) (0.4) (43)%
Net finance costs (34.0) (35.2) +4%
------ ------ --------
Adjusted earnings 81.8 83.5 +2%
Valuation movements 29.7 80.7 +172%
Other adjustments (1) (12.4) (12.1) (2)%
------ ------ --------
Profit before tax(1) 99.1 152.1 +53%
------------------------------ ------ ------ --------
(1) Restated following change in accounting policy as a result
of the IFRIC interpretation of IAS38 relating to development costs
on Software as a Service. See Note 25 for an explanation of prior
year restatements.
Net rental income
Net rental income was down 4% during the year at GBP70.6m (FY20:
GBP73.6m) due to a combination of lower average occupancy (-
GBP5.3m) and disposals (- GBP4.4m) offset by GBP1.5m rental growth
and GBP5.2m from PRS investment. Of the 1,304 homes delivered
during the year, let up has been strong with 91.5% already let at
the end of October which will underpin a strong increase in net
rental income in the coming year.
With occupancy having recovered strongly in Q4 leaving year end
occupancy at 94%, and new schemes having let up well, the passing
rent at the year-end stands at GBP80.9m, up some 15% on the FY21
reported net rental income, delivering strong growth momentum into
the new financial year. This reflects GBP6.2m from void recovery
and GBP5.5m from lettings on FY21 launches less GBP1.4m disposal
impact. We expect a further GBP3m additional net rent from the
remaining lease up of FY21 launches and FY22 pipeline deliveries
which are largely H2 weighted with lease up primarily in FY23 . As
we continue our asset recycling, we would expect disposals to be in
line with prior years.
Despite the challenging market backdrop, our like-for-like
growth remained resilient at 1.0% (FY20: 3.0%) with 0.3% rental
growth in our PRS portfolio (FY20: 2.5%) and 3.6% in our regulated
tenancy portfolio (FY20: 4.6%). Having prioritised occupancy
through the pandemic impacted period through use of incentives, PRS
like-for-like growth was 1.6% excluding these, and we believe that
we are now well placed to return to pre pandemic rental growth
levels of c.3%.
The difference between the performance of our London and
regional portfolios has been relatively minor with a slightly
earlier recovery in occupancy in the regions, and with London
demand coming back strongly in August and September.
Our secured pipeline will see net rental income increase by
c.90% to c.GBP137m upon delivery and stabilisation over the coming
years.
GBPm
----------------------- -----
FY20 Net rental income 73.6
Voids (5.3)
Disposals (4.4)
PRS Investment 5.2
Rental growth 1.5
-----
FY21 Net rental income 70.6
-----
Annualised disposals (1.4)
Void recovery 6.2
Annualised lettings on
new launches 5.5
-----
FY21 Net passing rent 80.9
-----
Sales and development activity
Our residential sales business had a strong year delivering
GBP67.5m of profit (FY20: GBP59.4m) from revenues of GBP157.2m
(FY20: GBP138.7m) and continues to provide a key element of funding
for our PRS growth . Vacant property sales delivered GBP39.6m of
profit (FY20: GBP35.2m) from revenues of GBP75.5m (FY20:
GBP65.9m).
In line with our disciplined asset recycling strategy we have
taken the opportunity to sell into a strong market delivering
strong sales with both volumes and pricing at good levels. The
prices achieved were 2.6% ahead of previous valuations with a sales
transaction velocity (keys to cash) of 108 days (FY20: 120
days).
Sales of tenanted properties delivered GBP27.9m of profit (FY20:
GBP24.2m) from revenues of GBP81.7m (FY20: GBP72.8m). Development
for sale activity has largely stopped as we focus on developing our
PRS pipeline, however we did take the opportunity to maximise
potential from some strategic land sales. Profits for the year were
GBP1.8m (FY20: GBP4.2m).
FY20 FY21
------- -----------------------
Sales (GBPm) Revenue Profit Revenue Profit
Residential sales on
vacancy 65.9 35.2 75.5 39.6
Tenanted and other
sales 72.8 24.2 81.7 27.9
------- ------ ------- ------
Residential sales
total 138.7 59.4 157.2 67.5
Development activity 5.4 4.2 30.6 1.8
--------------------- ------- ------ ------- ------
Overall sales 144.1 63.6 187.8 69.3
--------------------- ------- ------ ------- ------
Balance sheet
Our operational PRS portfolio now makes up 69% (FY20: 63%) of
our overall asset base as we continue to deliver our pipeline and
recycle out of our regulated tenancy portfolio. With an LTV of
30.4% and available headroom of GBP641m we are balancing the wider
business growth strategy with prudent balance sheet management and
have the funding in place to deliver our committed pipeline in line
with our policy.
Intangible assets have been restated to align with the recently
issued IFRIC interpretation of IAS 38 which requires development
costs that relate to Software as a Service to be expensed rather
than capitalised.
Market value balance sheet (GBPm) FY20(1) FY21
---------------------------------------------- ------- -------
Residential - PRS 1,624 2,024
Residential - regulated tenancies 968 896
Residential - mortgages (CHARM) 73 72
Forward Funded - PRS work in progress 231 244
Development work in progress 147 146
Investment in JVs/associates 42 45
------- -------
Total investments 3,085 3,427
Net debt (1,032) (1,042)
Other liabilities (20) (35)
------- -------
EPRA NRV 2,033 2,350
Deferred and contingent tax - trading assets (109) (142)
Exclude: intangible assets (1) -
------- -------
EPRA NTA 1,923 2,208
Add back: intangible assets 1 -
Deferred and contingent tax - investment
assets (24) (59)
Fair value of fixed rate debt and derivatives (57) (38)
-------
EPRA NDV 1,843 2,111
---------------------------------------------- ------- -------
EPRA NRV pence per share 301 316
EPRA NTA pence per share 285 297
EPRA NDV pence per share 273 284
(1) Restated following change in accounting policy as a result
of the IFRIC interpretation of IAS38 relating to development costs
on Software as a Service. See Note 25 for an explanation of prior
year restatements.
EPRA NTA i ncreased by 4% during the year to 297p per share
(FY20: 285p per share). The primary driver of the growth was a
19pps valuation uplift, with earnings before tax adding 2pps, and
disposals of trading assets 2pps. This was offset by 5pps of
dividend payments and a one-off 5pps reduction resulting from the
increase in our deferred tax liabilities as a result of the
announced increase in corporation tax from 19% to 25% in 2023.
Growth before the impact of this one-off tax adjustment was 6%.
EPRA NTA movement
----------------------------------------------------------------------
GBPm Pence per share
------ ----------------
EPRA NTA at 30 September 2020 1,923 285
Adjusted earnings 84 11
Valuations (trading & investment property) 142 19
Disposals (trading assets) (56) (7)
Tax (current, deferred & contingent) (4) (1)
Dividends (37) (5)
Equity placing 204 2
Other adjustments (14) (2)
EPRA NTA before tax adjustment 2,242 302
Deferred Tax adjustment (34) (5)
------ ----------------
EPRA NTA at 30 September 2021 2,208 297
-------------------------------------------- ------ ----------------
Property portfolio performance
Our overall portfolio valuation growth was 4.5% (FY20: 2.4%)
with our operational PRS portfolio increasing by 3.4% (FY20: 3.1%)
and our regulated portfolio delivering 3.7% valuation growth (FY20:
4.0%). Our PRS portfolio is valued on a net rent and yield basis
reflecting the institutional nature of the investment market, with
the PRS valuation growth driven by completion and stabilisation of
developments together with a c.10bps inwards yield shift on our
regional PRS assets, and 1.4% ('ERV') rental growth. Our regulated
tenancy portfolio is valued on a discount to vacant possession
value, and with 81% of this portfolio in greater London the uplift
is largely in line with market price movements.
Portfolio Region Capital ERV / HPI Growth Yield & Other Total Valuation
Value movement
(GBPm) GBPm % GBPm % GBPm %
----------- ---------------- -------- ---------- ------ ------- ------ --------- ------
PRS London & SE 1,228 12 1.0 9 0.8 21 1.8
Regions 796 15 2.0 30 4.0 45 6.0
---------------------------- -------- ---------- ------ ------- ------ --------- ------
PRS Total 2,024 27 1.4 39 2.0 66 3.4
Regulated
Tenancies London & SE 726 8 1.1 11 1.6 19 2.7
-----------
Regions 170 12 7.7 1 0.5 13 8.2
---------------------------- -------- ---------- ------ ------- ------ --------- ------
Regulated Total 896 20 2.3 12 1.4 32 3.7
---------------------------- -------- ---------- ------ ------- ------ --------- ------
Operational Portfolio 2,920 47 1.7 51 1.8 98 3.5
----------------------------- -------- ---------- ------ ------- ------ --------- ------
Development 390 6 1.7 38 11.1 44 12.8
---------------------------- -------- ---------- ------ ------- ------ --------- ------
Total Portfolio 3,310 53 1.7 89 2.8 142 4.5
----------------------------- -------- ---------- ------ ------- ------ --------- ------
Financing and capital structure
Our capital structure remains in a strong position giving us a
solid foundation on which to build our ambitious growth strategy.
Our LTV now stands at 30.4% (FY20: 33.4%) with our headroom of
GBP641m (FY20: GBP650m) covering our committed pipeline capex of
GBP559m, ensuring our ability to deliver on our pipeline
independent of any funding requirements or operational cashflows.
Including this committed capex in our LTV calculation would see our
LTV rise to 40.1%, comfortably within our LTV range of 40-45%.
Net debt for the year was relatively flat at GBP1,042m (FY20:
GBP1,032m) with GBP128m of operational cashflows, GBP64m of
proceeds from asset recycling (excluding sales of regulated tenancy
properties) and the GBP204m proceeds of equity raise, offset by
GBP348m of investment in our PRS pipeline. The proceeds from our
equity raise have been deployed into 3 schemes amounting to
GBP236m.
The average cost of debt remained flat at 3.1% (FY20: 3.1%),
while finance costs for the year were up 5% to GBP30.2m (FY20:
GBP28.7m). This reflected investment activity with associated
higher average levels of net debt during the year, with debt
reducing in September as a result of our equity raise. For FY22 we
would expect to see finance cost increase by c.GBP2m as we continue
to invest in our pipeline.
FY20 FY21
------------------------------------ ---------- ----------
Net debt GBP1,032m GBP1,042m
Loan to value 33.4% 30.4%
Cost of debt 3.1% 3.1%
Headroom GBP650m GBP641m
Weighted average facility maturity
(years) 6.6 5.6
Hedging 100% 100%
------------------------------------- ---------- ----------
Summary and outlook
Having delivered a robust performance for the year we are well
positioned for a strong year of rental growth in FY22. With
occupancy having now recovered to stabilised levels our focus will
return to delivering rental growth and the associated valuation
growth. As we grow over the medium term, delivering our pipeline
and leveraging our platform, we will see significant net rental
income growth translate into strong earnings and dividend growth.
With funding already in place to deliver this secured pipeline we
will continue to pursue further accretive growth opportunities and
maintain our leadership position in the PRS sector.
Rob Hudson
Chief Financial Officer
17 November 2021
Consolidated income statement
2020
2021 (restated)(1)
For the year ended 30 September Notes GBPm GBPm
--------------------------------------------------------------- ------ ------- ---------------
Group revenue 4 248.9 214.0
--------------------------------------------------------------- ------ ------- ---------------
Net rental income 5 70.6 73.6
Profit on disposal of trading property 6 68.6 61.6
Profit on disposal of investment property 7 1.5 2.3
Income from financial interest in property assets 15 7.2 5.2
Fees and other income 8 5.1 7.5
Administrative expenses (38.5) (40.4)
Other expenses (0.6) (2.4)
Impairment of inventories to net realisable value 12 (0.1) (0.7)
Operating profit 113.8 106.7
Net valuation gains on investment property 11 76.8 29.8
Change in fair value of derivatives (3.8) (1.4)
Finance costs (35.4) (34.9)
Finance income 0.2 0.4
Share of profit of associates after tax 13 0.8 0.1
Share of loss of joint ventures after tax 14 (0.3) (1.6)
--------------------------------------------------------------- ------ ------- ---------------
Profit before tax 2 152.1 99.1
Tax charge 20 (42.6) (16.3)
--------------------------------------------------------------- ------ ------- ---------------
Profit for the year attributable to the owners of the Company 109.5 82.8
--------------------------------------------------------------- ------ ------- ---------------
Basic earnings per share 9 16.2p 12.8p
Diluted earnings per share 9 16.1p 12.7p
--------------------------------------------------------------- ------ ------- ---------------
(1) See Note 25 for an explanation of the prior year
restatement
Consolidated statement of comprehensive income
2020
2021 (restated)(1)
For the year ended 30 September Notes GBPm GBPm
-------------------------------------------------------------------------------------- ------ ------ --------------
Profit for the year 2 109.5 82.8
-------------------------------------------------------------------------------------- ------ ------ --------------
Items that will not be transferred to the consolidated income statement:
Actuarial gain/(loss) on BPT Limited defined benefit pension scheme 21 5.3 (1.2)
Items that may be or are reclassified to the consolidated income statement:
Changes in fair value of cash flow hedges 16.1 (3.3)
-------------------------------------------------------------------------------------- ------ ------ --------------
Other comprehensive income and expense for the year before tax 21.4 (4.5)
-------------------------------------------------------------------------------------- ------ ------ --------------
Tax relating to components of other comprehensive income:
Tax relating to items that will not be transferred to the consolidated income
statement 20 (1.0) 0.3
Tax relating to items that may be or are reclassified to the consolidated income
statement 20 (2.8) 1.0
-------------------------------------------------------------------------------------- ------ ------ --------------
Total tax relating to components of other comprehensive income (3.8) 1.3
-------------------------------------------------------------------------------------- ------ ------ --------------
Other comprehensive income and expense for the year after tax 17.6 (3.2)
-------------------------------------------------------------------------------------- ------ ------ --------------
Total comprehensive income and expense for the year attributable to the owners of the
Company 127.1 79.6
-------------------------------------------------------------------------------------- ------ ------ --------------
(1) See Note 25 for an explanation of the prior year
restatement
Consolidated statement of financial position
30 September 2021 30 September 2020 1 October 2019
(restated)(1) (restated)(1)
As at 30 September Notes GBPm GBPm GBPm
---------------------------------------------- ------ ------------------ ------------------ ---------------
ASSETS
Non-current assets
Investment property 11 2,179.2 1,778.9 1,574.6
Property, plant and equipment 1.4 2.0 0.3
Investment in associates 13 15.5 14.7 11.7
Investment in joint ventures 14 29.4 27.3 21.6
Financial interest in property assets 15 71.7 73.3 76.4
Retirement benefits 21 3.5 - -
Deferred tax assets 20 3.7 8.9 5.6
Intangible assets 16 0.5 0.8 1.2
---------------------------------------------- ------ ------------------ ------------------ ---------------
2,304.9 1,905.9 1,691.4
---------------------------------------------- ------ ------------------ ------------------ ---------------
Current assets
Inventories - trading property 12 595.2 657.4 700.0
Trade and other receivables 17 38.5 31.3 40.5
Current tax assets 16.0 6.4 -
Cash and cash equivalents 317.6 369.1 189.3
967.3 1,064.2 929.8
---------------------------------------------- ------ ------------------ ------------------ ---------------
Total assets 3,272.2 2,970.1 2,621.2
---------------------------------------------- ------ ------------------ ------------------ ---------------
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 19 1,347.5 1,391.9 1,176.8
Trade and other payables 18 0.6 1.3 -
Retirement benefits 21 - 2.4 1.7
Provisions for other liabilities and charges 1.1 1.2 1.2
Deferred tax liabilities 20 69.5 36.1 32.7
---------------------------------------------- ------ ------------------ ------------------ ---------------
1,418.7 1,432.9 1,212.4
---------------------------------------------- ------ ------------------ ------------------ ---------------
Current liabilities
Interest-bearing loans and borrowings - - 100.0
Trade and other payables 18 109.8 73.3 73.6
Provisions for other liabilities and charges 0.2 0.3 0.4
Current tax liabilities - - 4.0
Derivative financial instruments 19 4.5 20.6 17.3
---------------------------------------------- ------ ------------------ ------------------ ---------------
114.5 94.2 195.3
---------------------------------------------- ------ ------------------ ------------------ ---------------
Total liabilities 1,533.2 1,527.1 1,407.7
---------------------------------------------- ------ ------------------ ------------------ ---------------
NET ASSETS 1,739.0 1,443.0 1,213.5
---------------------------------------------- ------ ------------------ ------------------ ---------------
EQUITY
Issued share capital 37.1 33.8 30.7
Share premium account 817.3 616.3 436.5
Merger reserve 20.1 20.1 20.1
Capital redemption reserve 0.3 0.3 0.3
Cash flow hedge reserve (3.3) (16.6) (14.3)
Retained earnings 867.5 789.1 740.2
---------------------------------------------- ------ ------------------ ------------------ ---------------
TOTAL EQUITY 1,739.0 1,443.0 1,213.5
---------------------------------------------- ------ ------------------ ------------------ ---------------
(1) See Note 25 for an explanation of the prior year
restatement
Consolidated statement of changes in equity
Issued Capital Cash flow
share Share Merger redemption hedge Retained Total
capital premium account reserve reserve reserve earnings equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ------ --------- ----------------- --------- ------------ ---------- ---------- --------
Balance as at
1 October 2019, as
previously reported 30.7 436.5 20.1 0.3 (14.3) 750.2 1,223.5
--------------------- ------ --------- ----------------- --------- ------------ ---------- ---------- --------
Impact of change in
accounting policy 25 - - - - - (10.0) (10.0)
Restated balance at
1 October 2019 30.7 436.5 20.1 0.3 (14.3) 740.2 1,213.5
Profit for the year
as restated 2, 25 - - - - - 82.8 82.8
Other comprehensive
loss for the year - - - - (2.3) (0.9) (3.2)
--------------------- ------ --------- ----------------- --------- ------------ ---------- ---------- --------
Total comprehensive
income - - - - (2.3) 81.9 79.6
--------------------- ------ --------- ----------------- --------- ------------ ---------- ---------- --------
Issue of share
capital 24 3.1 179.4 - - - - 182.5
Award of SAYE shares - 0.4 - - - - 0.4
Purchase of own
shares - - - - - (0.1) (0.1)
Share-based payments
charge 22 - - - - - 1.1 1.1
Dividends paid - - - - - (33.5) (33.5)
IFRS 16 transition
adjustment - - - - - (0.5) (0.5)
Total transactions
with owners
recorded directly
in equity 3.1 179.8 - - - (33.0) 149.9
--------------------- ------ --------- ----------------- --------- ------------ ---------- ---------- --------
Balance as at
30 September 2020
as restated 33.8 616.3 20.1 0.3 (16.6) 789.1 1,443.0
--------------------- ------ --------- ----------------- --------- ------------ ---------- ----------
Profit for the year 2 - - - - - 109.5 109.5
Other comprehensive
income for the year - - - - 13.3 4.3 17.6
--------------------- ------ --------- ----------------- --------- ------------ ---------- ---------- --------
Total comprehensive
income - - - - 13.3 113.8 127.1
--------------------- ------ --------- ----------------- --------- ------------ ---------- ---------- --------
Issue of share
capital 24 3.3 200.8 - - - - 204.1
Award of SAYE shares - 0.2 - - - - 0.2
Purchase of own
shares - - - - - (0.3) (0.3)
Share-based payments
charge 22 - - - - - 1.7 1.7
Dividends paid - - - - - (36.8) (36.8)
Total transactions
with owners
recorded directly
in equity 3.3 201.0 - - - (35.4) 168.9
--------------------- ------ --------- ----------------- --------- ------------ ---------- ---------- --------
Balance as at
30 September 2021 37.1 817.3 20.1 0.3 (3.3) 867.5 1,739.0
--------------------- ------ --------- ----------------- --------- ------------ ---------- ---------- --------
Consolidated statement of cash flows
2020
2021 (restated)(1)
For the year ended 30 September Notes GBPm GBPm
------------------------------------------------------ ------- -------- --------------
Cash flow from operating activities
Profit for the year 2 109.5 82.8
Depreciation and amortisation 1.2 1.2
Net valuation gains on investment property 11 (76.8) (29.8)
Net finance costs 35.2 34.5
Share of (profit)/loss of associates and joint
ventures 13, 14 (0.5) 1.5
Profit on disposal of investment property 7 (1.5) (2.3)
Share-based payment charge 22 1.7 1.1
Change in fair value of derivatives 3.8 1.4
Income from financial interest in property
assets 15 (7.2) (5.2)
Tax 20 42.6 16.3
Cash generated from operating activities before
changes in working capital 108.0 101.5
(Increase)/decrease in trade and other receivables (6.9) 9.7
Increase in trade and other payables 48.0 3.8
Decrease in provisions for liabilities and
charges (0.2) (0.1)
Decrease in inventories 62.2 29.5
------------------------------------------------------ ------- -------- --------------
Cash generated from operating activities 211.1 144.4
Interest paid (45.6) (37.4)
Tax paid (16.9) (25.4)
Payments to defined benefit pension scheme 21 (0.6) (0.5)
------------------------------------------------------ ------- -------- --------------
Net cash inflow from operating activities 148.0 81.1
------------------------------------------------------ ------- -------- --------------
Cash flow from investing activities
Proceeds from sale of investment property 7 40.3 36.2
Proceeds from financial interest in property
assets 15 8.8 8.3
Investment in joint ventures 14 (0.8) (5.5)
Loans advanced to associates and joint ventures 13, 14 (1.6) (4.7)
Acquisition of investment property 11 (362.3) (195.3)
Acquisition of property, plant and equipment
and intangible assets (0.3) (0.3)
------------------------------------------------------ ------- -------- --------------
Net cash outflow from investing activities (315.9) (161.3)
------------------------------------------------------ ------- -------- --------------
Cash flow from financing activities
Net proceeds from issue of share capital 24 204.1 182.5
Award of SAYE shares 0.2 0.4
Purchase of own shares (0.3) (0.1)
Proceeds from new borrowings 30.0 697.0
Payment of loan costs - (4.9)
Settlement of derivative contracts (3.8) (1.4)
Repayment of borrowings (77.0) (580.0)
Dividends paid (36.8) (33.5)
------------------------------------------------------ ------- -------- --------------
Net cash inflow from financing activities 116.4 260.0
------------------------------------------------------ ------- -------- --------------
Net (decrease)/increase in cash and cash equivalents (51.5) 179.8
Cash and cash equivalents at the beginning
of the year 369.1 189.3
Cash and cash equivalents at the end of the
year 317.6 369.1
------------------------------------------------------ ------- -------- --------------
(1) See Note 25 for an explanation of the prior year
restatement
Notes to the preliminary financial results
1. Accounting policies
1a Basis of preparation
The board approved this preliminary announcement on 17 November
2021. The financial information included in this preliminary
announcement does not constitute the Group's statutory accounts for
the years ended 30 September 2020 or 30 September 2021. Statutory
accounts for the year ended 30 September 2020 have been delivered
to the Registrar of Companies. The statutory accounts for the year
ended 30 September 2021 will be delivered to the Registrar of
Companies following the Company's annual general meeting.
The auditors, KPMG LLP, have reported on the accounts for both
years. The reports were unqualified, did not include reference to
any matters by way of emphasis and did not contain statements under
section 498 (2) or (3) of the Companies Act 2006.
These financial statements for the year ended 30 September 2021
have been prepared under the historical cost convention except for
the following assets and liabilities, and corresponding income
statement accounts, which are stated at their fair value;
investment property; derivative financial instruments; and
financial interest in property assets.
The accounting policies used are consistent with those contained
in the Group's full annual report and accounts for the year ended
30 September 2021.
The financial information included in this preliminary
announcement has been prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 ('Adopted IFRS'), IFRIC interpretations and with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European
Union.
1b Adoption of new and revised International Financial Reporting Standards and interpretations
New standards, amendments and interpretations in the year
The following new standards, amendments to standards and
interpretations were issued in the year. The most significant of
these, and the impact on the Group's accounting, are set out
below:
IFRIC: Configuration or Customisation Costs in a Cloud Computing
Arrangement (IAS 38 Intangible Assets) - In April 2021, the IFRS
Interpretations Committee published accounting guidance for
configuration and customisation expenditure relating to cloud
computing arrangements, including Software as a Service (SaaS). The
guidance recognises differences in accounting treatment for SaaS
expenditure between functionality that is broadly available to the
software supplier's general customer base and functionality that is
restricted to a specific user. The Committee has clarified the
position that expenditure can only be capitalised to the extent a
SaaS customer has the power to obtain the future economic benefits
by restricting others access to those benefits, otherwise
expenditure in relation to developing SaaS for use should be
expensed.
Following the interpretation being published, the Group has
reviewed and revised its accounting policy in relation to
intangible assets (Note 21 in the 2021 Annual Reports and Accounts)
which includes accounting for computer software. This has resulted
in reclassifying relevant expenditure that was previously
capitalised as an intangible asset and expensing this to the income
statement as administrative expenses. Comparatives have been
restated as relevant, with the impact of the restatement set out in
Note 25.
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
Estimates
i. Valuation of property assets
Residential trading property is carried in the statement of
financial position at the lower of cost and net realisable value
and investment property is carried at fair value. The Group does,
however, in its principal non-GAAP net asset value measures, EPRA
NRV, EPRA NTA and EPRA NDV, include trading property at market
value. The adjustment in the value of trading property is the
difference between the statutory book value and its market value as
set out in Note 3. For investment property, market value is the
same as fair value. In respect of trading properties, market
valuation is the key assumption in determining the net realisable
value of those properties.
In all cases, forming these valuations inherently includes
elements of judgement and subjectivity with regards to the
selection of unobservable inputs. The valuation basis and key
unobservable inputs are outlined in Note 2 in the 2021 Annual
Report and Accounts.
The results and the basis of each valuation and their impact on
both the financial statements and market value for the Group's
non-GAAP net asset value measures are set out below:
% of properties
for which
external valuer
PRS Reversionary Other Total provides
GBPm GBPm GBPm GBPm Valuer valuation
---------------------------- -------- ------------- ------ -------- -------------- -----------------
Trading property 118.1 451.9 25.2 595.2
Investment property 2,156.2 23.0 - 2,179.2
Financial asset
(CHARM) - 71.7 - 71.7
---------------------------- -------- ------------- ------ -------- -------------- -----------------
Total statutory
book value 2,274.3 546.6 25.2 2,846.1
---------------------------- -------- ------------- ------ -------- -------------- -----------------
Trading property
Allsop
Residential 205.4 872.9 - 1,078.3 LLP 78%
Developments - - 52.4 52.4 CBRE Limited 85%
Total trading property 205.4 872.9 52.4 1,130.7
---------------------------- -------- ------------- ------ -------- -------------- -----------------
Investment property
Allsop
LLP / CBRE
Residential 730.6 23.0 - 753.6 Limited 100%
Developments 93.7 - - 93.7 CBRE Limited 100%
New build PRS 1,026.2 - - 1,026.2 CBRE Limited 97%
Allsop
Affordable housing 170.4 - - 170.4 LLP 100%
Allsop
Tricomm housing 135.3 - - 135.3 LLP 100%
Total investment
property 2,156.2 23.0 - 2,179.2
---------------------------- -------- ------------- ------ -------- -------------- -----------------
Financial asset Allsop
(CHARM)(1) - 71.7 - 71.7 LLP 100%
Total assets at
market value 2,361.6 967.6 52.4 3,381.6
---------------------------- -------- ------------- ------ -------- -------------- -----------------
Statutory book value 2,274.3 546.6 25.2 2,846.1
Market value adjustment(2) 87.3 421.0 27.2 535.5
---------------------------- -------- ------------- ------ -------- -------------- -----------------
Total assets at
market value 2,361.6 967.6 52.4 3,381.6
---------------------------- -------- ------------- ------ -------- -------------- -----------------
Net revaluation
gain recognised
in the income statement
for wholly-owned
properties 76.8 - - 76.8
Net revaluation
gain relating to
joint ventures and
associates(3) 0.9 - - 0.9
---------------------------- -------- ------------- ------ -------- -------------- -----------------
Net revaluation
gain recognised
in the year(3) 77.7 - - 77.7
---------------------------- -------- ------------- ------ -------- -------------- -----------------
(1) Allsop provides vacant possession values used by the Directors to value the financial asset.
(2) The market value adjustment is the difference between the
statutory book value and the market value of the Group's
properties. Refer to Note 3 for market value net asset
measures.
(3) Includes the Group's share of joint ventures and associates revaluation gain after tax.
Judgments
i. Distinction between investment and trading property
The Group considers the intention at the outset when each
property is acquired in order to classify the property as either an
investment or a trading property. Where the intention is either to
trade the property or where the property is held for immediate sale
upon receiving vacant possession within the ordinary course of
business, the property is classified as trading property. Where the
intention is to hold the property for its long-term rental yield
and/or capital appreciation, the property is classified as an
investment property. The classification of the Group's properties
is a significant judgement which directly impacts the statutory net
asset position, as trading properties are held at the lower of cost
and net realisable value, whilst investment properties are held at
fair value, with gains or losses taken through the consolidated
income statement.
1d Group risk factors
The principal risks and uncertainties facing the Group are set
out in the Risk Management report of the 2021 Annual Report and
Accounts.
A number of risks faced by the Group are not directly within our
control such as the wider economic and political environment.
Risks, including updates to principal risks, are outlined in the
2021 Annual Report and Accounts.
1e Going concern assessment
The Directors are required to make an assessment of the Group's
ability to continue to trade as a going concern for the foreseeable
future. Given the significant impact of Covid-19 on the
macro-economic conditions in which the Group continues to operate,
the Directors have placed a particular focus on the appropriateness
of adopting the going concern basis in preparing the financial
statements for the year ended 30 September 2021.
The financial position of the Group, including details of its
financing and capital structure, is set out in the financial review
on pages 32 to 37 in the 2021 Annual Report and Accounts. In making
the going concern assessment, the Directors have considered the
Group's principal risks (see pages 48 to 51 in the 2021 Annual
Report and Accounts) and their impact on financial performance. The
Directors have assessed the future funding commitments of the Group
and compared these to the level of committed loan facilities and
cash resources over the medium term. In making this assessment,
consideration has been given to compliance with borrowing covenants
along with the uncertainty inherent in future financial forecasts
and, where applicable, severe sensitivities have been applied to
the key factors affecting financial performance for the Group.
The going concern assessment is based on the Group's viability
model to the end of March 2023, which exceeds the required period
of assessment of at least 12 months, and considers a severe
downside scenario including a potential extreme longer-term impact
of Covid-19, reflecting the following key assumptions:
-- Reducing PRS occupancy to 80% by 31 March 2023
-- Contraction in rental levels of 5% p.a.
-- Reducing property valuations by 5% p.a., driven by either
yield expansion or house price deflation
-- 15% development cost inflation
-- Operating cost inflation of 15% p.a.
-- An increase in finance costs of between 1.25% and 3.0% from 1 October 2021
No new financing is assumed in the assessment period, but
existing facilities are assumed to remain available. Even in this
severe downside scenario, the Group has sufficient cash reserves,
with the loan-to-value covenant remaining no higher than 51%
(facility maximum covenant ranges between 70% - 75%) and interest
cover above 2.22x (facility minimum covenant ranges between 1.35x -
1.75x) for the period to March 2023, which covers the required
period of at least 12 months from the date of authorisation of
these 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 accounts for the year ended 30
September 2021.
1f Forward-looking statement
Certain statements in this preliminary announcement are
forward-looking. Although the Group believes that the expectations
reflected in these forward-looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. We undertake no obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise.
2. Analysis of profit before tax
The table below details adjusted earnings, which is one of
Grainger's key performance indicators. The metric is utilised as a
key measure to aid understanding of the performance of the
continuing business and excludes valuation movements and other
adjustments that are one-off in nature, which do not form part of
the normal ongoing revenue or costs of the business and, either
individually or in aggregate, are material to the reported Group
results.
2020
2021 (restated)(1)
Other Adjusted Other Adjusted
GBPm Statutory Valuation adjustments earnings Statutory Valuation adjustments earnings
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Group revenue 248.9 - - 248.9 214.0 - (4.0) 210.0
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Net rental
income 70.6 - - 70.6 73.6 - - 73.6
Profit on
disposal
of trading
property 68.6 (0.8) - 67.8 61.6 (0.3) - 61.3
Profit on
disposal
of investment
property 1.5 - - 1.5 2.3 - - 2.3
Income from
financial
interest in
property
assets 7.2 (2.3) - 4.9 5.2 (0.1) - 5.1
Fees and other
income 5.1 - - 5.1 7.5 - (4.0) 3.5
Administrative
expenses (38.5) - 8.3 (30.2) (40.4) - 11.7 (28.7)
Other expenses (0.6) - - (0.6) (2.4) - 1.8 (0.6)
Impairment of
inventories
to net
realisable
value (0.1) 0.1 - - (0.7) 0.7 - -
Operating
profit 113.8 (3.0) (8.3) 119.1 106.7 0.3 9.5 116.5
Net valuation
gains
on investment
property 76.8 (76.8) - - 29.8 (29.8) - -
Change in fair
value
of derivatives (3.8) - 3.8 - (1.4) - 1.4 -
Finance costs (35.4) - - (35.4) (34.9) - 0.5 (34.4)
Finance income 0.2 - - 0.2 0.4 - - 0.4
Share of profit
of
associates
after tax 0.8 (0.9) - (0.1) 0.1 (0.2) - (0.1)
Share of loss
of joint
ventures after
tax (0.3) - - (0.3) (1.6) - 1.0 (0.6)
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Profit before
tax 152.1 (80.7) 12.1 83.5 99.1 (29.7) 12.4 81.8
Tax charge (42.6) (16.3)
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Profit for the
year
attributable
to the
owners of the
Company 109.5 82.8
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
Diluted
adjusted
earnings
per share 9.9p 10.2p
---------------- ---------- ---------- ------------- ---------- ---------- ---------- ------------- ----------
(1) See Note 25 for an explanation of the prior year
restatement
Profit before tax in the adjusted columns above of GBP83.5m
(2020: GBP81.8m) is the adjusted earnings of the Group. Adjusted
earnings per share assumes tax of GBP15.9m (2020: GBP15.5m) in line
with the standard rate of UK Corporation Tax of 19.0% (2020:
19.0%), divided by the weighted average number of shares as shown
in Note 9. The Group's IFRS statutory earnings per share is also
detailed in Note 9.
The classification of amounts as other adjustments is a
judgement made by management and is a matter referred to the Audit
Committee for approval prior to issuing the financial statements.
The GBP12.1m cost within other adjustments in 2021 comprises
GBP8.3m software development costs following the change in
accounting policy and GBP3.8m refinancing costs. In 2020, the net
GBP12.4m cost within other adjustments comprised GBP2.7m income
relating to historic non-core business, offset by GBP11.7m
reclassification of software development costs following the change
in accounting policy, GBP2.4m costs related to refinancing activity
and GBP1.0m restructuring costs. These transactions do not form
part of the Group's ongoing activities and, as such, have been
classified as other adjustments.
3. Segmental Information
IFRS 8, Operating Segments requires operating segments to be
identified based upon the Group's internal reporting to the Chief
Operating Decision Maker ('CODM') so that the CODM can make
decisions about resources to be allocated to segments and assess
their performance. The Group's CODM are the Executive
Directors.
The two significant segments for the Group are PRS and
Reversionary. The PRS segment includes stabilised PRS assets as
well as PRS under construction due to direct development and
forward funding arrangements, both for wholly-owned assets and the
Group's interest in joint ventures and associates as relevant. The
Reversionary segment includes regulated tenancies, as well as
CHARM. The Other segment includes legacy strategic land and
development arrangements, along with administrative expenses.
The key operating performance measure of profit or loss used by
the CODM is adjusted earnings before tax, valuation and other
adjustments.
The principal net asset value (NAV) measure reviewed by the CODM
is EPRA NTA which is considered to become the most relevant, and
therefore the primary NAV measure for the Group. EPRA NTA reflects
the tax that will crystallise in relation to the trading portfolio,
whilst excluding the volatility of mark to market movements on
fixed rate debt and derivatives which are unlikely to be realised.
Other NAV measures include EPRA NRV and EPRA NDV which we report
alongside EPRA NTA.
Information relating to the Group's operating segments is set
out in the tables below. The tables distinguish between adjusted
earnings, valuation movements and other adjustments and should be
read in conjunction with Note 2.
2021 Income statement
GBPm PRS Reversionary Other Total
---------------------------------------- ------- ------------- ------- -------
Group revenue 78.8 138.7 31.4 248.9
Segment revenue - external
---------------------------------------- ------- ------------- ------- -------
Net rental income 51.9 18.4 0.3 70.6
Profit on disposal of trading property (0.1) 66.1 1.8 67.8
Profit on disposal of investment
property 1.3 0.2 - 1.5
Income from financial interest
in property assets - 4.9 - 4.9
Fees and other income 4.7 - 0.4 5.1
Administrative expenses - - (30.2) (30.2)
Other expenses (0.6) - - (0.6)
Net finance costs (24.5) (9.9) (0.8) (35.2)
Share of trading loss of joint
ventures and associates after tax (0.3) - (0.1) (0.4)
---------------------------------------- ------- ------------- ------- -------
Adjusted earnings 32.4 79.7 (28.6) 83.5
Valuation movements 80.7
Other adjustments (12.1)
---------------------------------------- ------- ------------- ------- -------
Profit before tax 152.1
---------------------------------------- ------- ------------- ------- -------
A reconciliation from adjusted earnings to adjusted EPRA
earnings is detailed in the table below, with further details shown
in the EPRA performance measures section at the end of this
document:
GBPm PRS Reversionary Other Total
-------------------------------------- ------ ------------- ------- -------
Adjusted earnings 32.4 79.7 (28.6) 83.5
Profit on disposal of investment
property (1.3) (0.2) - (1.5)
Previously recognised profit through
EPRA market value measures - (59.4) 3.4 (56.0)
-------------------------------------- ------ ------------- ------- -------
Adjusted EPRA earnings 31.1 20.1 (25.2) 26.0
-------------------------------------- ------ ------------- ------- -------
2020 Income statement (restated) (1)
GBPm PRS Reversionary Other Total
---------------------------------------- ------- ------------- ------- -------
Group revenue 77.9 128.4 3.7 210.0
Segment revenue - external
---------------------------------------- ------- ------------- ------- -------
Net rental income 53.8 19.6 0.2 73.6
Profit on disposal of trading property (0.1) 57.2 4.2 61.3
Profit on disposal of investment
property 2.0 0.3 - 2.3
Income from financial interest
in property assets - 5.1 - 5.1
Fees and other income 2.9 - 0.6 3.5
Administrative expenses - - (28.7) (28.7)
Other expenses (0.6) - - (0.6)
Net finance costs (21.9) (11.4) (0.7) (34.0)
Share of trading profit of joint
ventures and associates after tax (0.5) - (0.2) (0.7)
---------------------------------------- ------- ------------- ------- -------
Adjusted earnings 35.6 70.8 (24.6) 81.8
Valuation movements 29.7
Other adjustments (12.4)
---------------------------------------- ------- ------------- ------- -------
Profit before tax 99.1
---------------------------------------- ------- ------------- ------- -------
(1) See Note 25 for an explanation of the prior year
restatement
A reconciliation from adjusted earnings to adjusted EPRA
earnings is detailed in the table below:
GBPm PRS Reversionary Other Total
-------------------------------------- ------ ------------- ------- -------
Adjusted earnings 35.6 70.8 (24.6) 81.8
Profit on disposal of investment
property (2.0) (0.3) - (2.3)
Previously recognised profit through
EPRA market value measures - (53.4) - (53.4)
-------------------------------------- ------ ------------- ------- -------
Adjusted EPRA earnings 33.6 17.1 (24.6) 26.1
-------------------------------------- ------ ------------- ------- -------
Segmental assets
The net asset value measures reviewed by the CODM are EPRA NRV,
EPRA NTA and EPRA NDV. These measures reflect the current market
value of trading property owned by the Group rather than the lower
of historical cost and net realisable value. These measures are
considered to be a more relevant reflection of the value of the
assets owned by the Group.
EPRA NRV is the Group's statutory net assets plus the adjustment
required to increase the value of trading stock from its statutory
accounts value of the lower of cost and net realisable value to its
market value. In addition, the statutory statement of financial
position amounts for both deferred tax on property revaluations and
derivative financial instruments net of deferred tax, including
those in joint ventures and associates, are added back to statutory
net assets. Finally, the market value of Grainger plc shares owned
by the Group are added back to statutory net assets.
EPRA NTA assumes that entities buy and sell assets, thereby
crystallising certain levels of deferred tax liabilities. For the
Group, deferred tax in relation to revaluations of its trading
portfolio is taken into account by applying the expected rate of
tax to the adjustment that increases the value of trading stock
from its statutory accounts value of the lower of cost and net
realisable value, to its market value. The measure also excludes
all intangible assets on the statutory balance sheet, including
goodwill.
EPRA NDV reverses some of the adjustments made between statutory
net assets, EPRA NRV and EPRA NTA. All of the adjustments for the
value of derivative financial instruments net of deferred tax,
including those in joint ventures and associates, are reversed. The
adjustment for the deferred tax on investment property revaluations
excluded from EPRA NRV and EPRA NTA are also reversed, as is the
intangible adjustment in respect of EPRA NTA, except for goodwill
which remains excluded. In addition, adjustments are made to net
assets to reflect the fair value, net of deferred tax, of the
Group's fixed rate debt.
Total Accounting Return (NTA basis) of 5.5% is calculated from
the closing EPRA NTA of 297p per share plus the dividend of 5.15p
per share for the year, divided by the opening EPRA NTA of 286p per
share, which has been adjusted for the September 2021 equity
raise.
These measures are set out below by segment along with a
reconciliation to the summarised statutory statement of financial
position:
2021 Segment net assets
PRS Reversionary Other Total Pence
GBPm per share
-------------------------- -------- ------------- ------- -------- -----------
Total segment net assets
(statutory) 1,484.7 256.1 (1.8) 1,739.0 234p
-------------------------- -------- ------------- ------- -------- -----------
Total segment net assets
(EPRA NRV) 1,637.4 677.8 34.8 2,350.0 316p
-------------------------- -------- ------------- ------- -------- -----------
Total segment net assets
(EPRA NTA) 1,608.5 571.8 27.5 2,207.8 297p
-------------------------- -------- ------------- ------- -------- -----------
Total segment net assets
(EPRA NDV) 1,550.2 571.8 (10.9) 2,111.1 284p
-------------------------- -------- ------------- ------- -------- -----------
2021 Reconciliation of EPRA NAV measures
Adjustments Adjustments
Adjustments to deferred to
to market and contingent derivatives,
value, EPRA tax and fixed EPRA
Statutory deferred NRV intangibles EPRA rate debt NDV
balance tax and balance NTA balance and balance
GBPm sheet derivatives sheet sheet intangibles sheet
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Investment
property 2,179.2 - 2,179.2 - 2,179.2 - 2,179.2
Investment
in joint
ventures
and associates 44.9 - 44.9 - 44.9 - 44.9
Financial
interest
in property
assets 71.7 - 71.7 - 71.7 - 71.7
Inventories
- trading
property 595.2 535.5 1,130.7 - 1,130.7 - 1,130.7
Cash and cash
equivalents 317.6 - 317.6 - 317.6 - 317.6
Other assets 63.6 4.9 68.5 (0.5) 68.0 12.8 80.8
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total assets 3,272.2 540.4 3,812.6 (0.5) 3,812.1 12.8 3,824.9
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Interest-bearing
loans and
borrowings (1,347.5) - (1,347.5) - (1,347.5) (46.7) (1,394.2)
Deferred and
contingent
tax liabilities (69.5) 66.1 (3.4) (141.7) (145.1) (58.3) (203.4)
Other liabilities (116.2) 4.5 (111.7) - (111.7) (4.5) (116.2)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total liabilities (1,533.2) 70.6 (1,462.6) (141.7) (1,604.3) (109.5) (1,713.8)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Net assets 1,739.0 611.0 2,350.0 (142.2) 2,207.8 (96.7) 2,111.1
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
2020 Segment net assets (restated)(1)
PRS Reversionary Other Total Pence
GBPm per share
-------------------------- -------- ------------- ------- -------- -----------
Total segment net assets
(statutory) 1,169.6 252.0 21.4 1,443.0 214
-------------------------- -------- ------------- ------- -------- -----------
Total segment net assets
(EPRA NRV) 1,291.2 696.1 45.5 2,032.8 301
-------------------------- -------- ------------- ------- -------- -----------
Total segment net assets
(EPRA NTA) 1,266.8 611.4 44.6 1,922.8 285
-------------------------- -------- ------------- ------- -------- -----------
Total segment net assets
(EPRA NDV) 1,242.3 611.4 (11.2) 1,842.5 273
-------------------------- -------- ------------- ------- -------- -----------
(1) See Note 25 for an explanation of the prior year
restatement
2020 Reconciliation of EPRA NAV measures (restated)(1)
Adjustments
Adjustments to
to market Adjustments derivatives,
value, to deferred fixed
Statutory deferred EPRA NRV and contingent EPRA rate debt EPRA NDV
balance tax and balance tax and NTA balance and balance
GBPm sheet derivatives sheet intangibles sheet intangibles sheet
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Investment
property 1,778.9 - 1,778.9 - 1,778.9 - 1,778.9
Investment
in joint
ventures
and associates 42.0 - 42.0 - 42.0 - 42.0
Financial
interest
in property
assets 73.3 - 73.3 - 73.3 - 73.3
Inventories
- trading
property 657.4 533.4 1,190.8 - 1,190.8 - 1,190.8
Cash and
cash equivalents 369.1 - 369.1 - 369.1 - 369.1
Other assets 49.4 3.5 52.9 (0.8) 52.1 13.5 65.6
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total assets 2,970.1 536.9 3,507.0 (0.8) 3,506.2 13.5 3,519.7
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Interest-bearing
loans and
borrowings (1,391.9) - (1,391.9) - (1,391.9) (48.7) (1,440.6)
Deferred
and contingent
tax liabilities (36.1) 32.3 (3.8) (109.2) (113.0) (24.5) (137.5)
Other liabilities (99.1) 20.6 (78.5) - (78.5) (20.6) (99.1)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Total liabilities (1,527.1) 52.9 (1,474.2) (109.2) (1,583.4) (93.8) (1,677.2)
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
Net assets 1,443.0 589.8 2,032.8 (110.0) 1,922.8 (80.3) 1,842.5
------------------ ---------- ------------- ---------- --------------- ------------- --------------- ----------
(1) See Note 25 for an explanation of the prior year
restatement
4. Group revenue
2021 2020
GBPm GBPm
-------------------------------------------------- ------ ------
Gross rental income (Note 5) 97.4 99.3
Gross proceeds from disposal of trading property
(Note 6) 146.4 107.2
Fees and other income (Note 8) 5.1 7.5
-------------------------------------------------- ------ ------
248.9 214.0
-------------------------------------------------- ------ ------
5. Net rental income
2021 2020
GBPm GBPm
----------------------------- ------- -------
Gross rental income 97.4 99.3
Property operating expenses (26.8) (25.7)
----------------------------- ------- -------
70.6 73.6
----------------------------- ------- -------
6. Profit on disposal of trading property
2021 2020
GBPm GBPm
-------------------------------------------------- ------- -------
Gross proceeds from disposal of trading property 146.4 107.2
Selling costs (3.1) (2.3)
-------------------------------------------------- ------- -------
Net proceeds from disposal of trading property 143.3 104.9
Carrying value of trading property sold (Note
12) (74.7) (43.3)
68.6 61.6
-------------------------------------------------- ------- -------
7. Profit on disposal of investment property
2021 2020
GBPm GBPm
----------------------------------------------------- ------- -------
Gross proceeds from disposal of investment property 41.5 36.9
Selling costs (1.2) (0.7)
----------------------------------------------------- ------- -------
Net proceeds from disposal of investment property 40.3 36.2
Carrying value of investment property sold (Note
11) (38.8) (33.9)
----------------------------------------------------- ------- -------
1.5 2.3
----------------------------------------------------- ------- -------
8. Fees and other income
2021 2020
GBPm GBPm
------------------------------------------ ------ ------
Property and asset management fee income 2.6 2.2
Other sundry income 2.5 5.3
------------------------------------------ ------ ------
5.1 7.5
------------------------------------------ ------ ------
Included within other sundry income in the current year is
GBP1.6m (2020: GBP1.3m) liquidated and ascertained damages (LADs)
recorded to compensate the Group for lost rental income resulting
from the delayed completion of construction contracts. Included
within other sundry income in the prior year is GBP1.6m recorded in
relation to the settlement of historic legal matters with respect
to the Group's interest in the Czech Republic and GBP2.4m following
the resolution of a legal claim related to a previous corporate
transaction.
9. Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit or
loss attributable to the owners of the Company by the weighted
average number of ordinary shares in issue during the year,
excluding ordinary shares purchased by the Group and held both in
Trust and as treasury shares to meet its obligations under the
Long-Term Incentive Plan ('LTIP') and Deferred Bonus Plan ('DBP'),
on which the dividends are being waived.
Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of shares in issue by the dilutive effect
of ordinary shares that the Company may potentially issue relating
to its share option schemes and contingent share awards under the
LTIP and DBP, based upon the number of shares that would be issued
if 30 September 2021 was the end of the contingency period. Where
the effect of the above adjustments is antidilutive, they are
excluded from the calculation of diluted earnings per share.
30 September 2020
30 September 2021 (restated)(1)
-------------------------------- --------------------------------
Profit Weighted Profit Weighted
for average Earnings for average Earnings
the number per the number per
year of shares share year of shares share
GBPm (millions) (pence) GBPm (millions) (pence)
------------------------------ ------- ------------ --------- ------- ------------ ---------
Basic earnings per share
Profit attributable to
equity holders 109.5 677.7 16.2 82.8 649.1 12.8
Effect of potentially
dilutive securities
Share options and contingent
shares - 2.7 (0.1) - 2.6 (0.1)
------------------------------ ------- ------------ --------- ------- ------------ ---------
Diluted earnings per share
Profit attributable to
equity holders 109.5 680.4 16.1 82.8 651.7 12.7
------------------------------ ------- ------------ --------- ------- ------------ ---------
(1) See Note 25 for an explanation of the prior year
restatement
10. Dividends
Subject to approval at the AGM, the final dividend of 3.32p per
share (gross) amounting to GBP24.6m will be paid on 14 February
2022 to Shareholders on the register at the close of business on 31
December 2021. Shareholders will again be offered the option to
participate in a dividend reinvestment plan and the last day for
election is 24 January 2022. An interim dividend of 1.83p per share
amounting to a total of GBP12.3m was paid to Shareholders on 2 July
2021.
11. Investment property
2021 2020
GBPm GBPm
------------------------------------------------- -------- --------
Opening balance 1,778.9 1,574.6
------------------------------------------------- -------- --------
Acquisitions 78.0 37.7
Capital expenditure - completed assets 22.8 11.4
Capital expenditure - assets under construction 261.5 146.2
------------------------------------------------- -------- --------
Total additions 362.3 195.3
Transfer from inventories - 13.1
Disposals (Note 7) (38.8) (33.9)
Net valuation gains 76.8 29.8
------------------------------------------------- -------- --------
Closing balance 2,179.2 1,778.9
------------------------------------------------- -------- --------
12. Inventories - trading property
2021 2020
GBPm GBPm
--------------------------------------------------- ------- -------
Opening balance 657.4 700.0
Additions 12.6 14.5
Transfer to investment property - (13.1)
Disposals (Note 6) (74.7) (43.3)
Impairment of inventories to net realisable value (0.1) (0.7)
--------------------------------------------------- ------- -------
Closing balance 595.2 657.4
--------------------------------------------------- ------- -------
13. Investment in associates
2021 2020
GBPm GBPm
------------------------------ ------ ------
Opening balance 14.7 11.7
Share of profit for the year 0.8 0.1
Loans advanced to associates - 2.9
Closing balance 15.5 14.7
------------------------------ ------ ------
The closing balance comprises share of net assets of GBP0.9m
(2020: GBP0.1m) and net loans due from associates of GBP14.6m
(2020: GBP14.6m). At the balance sheet date, there is no
expectation of any material credit losses on loans due.
As at 30 September 2021, the Group's interest in active
associates was as follows:
% of ordinary Country of Accounting
share capital incorporation period end
held
--------- --------------- --------------- -------------
Vesta LP 20.0 UK 30 September
--------- --------------- --------------- -------------
14. Investment in joint ventures
2021 2020
GBPm GBPm
---------------------------------- ------ ------
Opening balance 27.3 21.6
Share of loss for the year (0.3) (1.6)
Further investment(1) 0.8 5.5
Loans advanced to joint ventures 1.6 1.8
Closing balance 29.4 27.3
---------------------------------- ------ ------
(1) Grainger invested GBP0.8m into Connected Living London (BTR)
Limited in the year (2020: GBP5.5m).
The closing balance comprises share of net assets of GBP8.5m
(2020: GBP8.0m) and net loans due from joint ventures of GBP20.9m
(2020: GBP19.3m). At the balance date, there is no expectation of
any material credit losses on loans due.
At 30 September 2021, the Group's interest in active joint
ventures was as follows:
% of ordinary Accounting
share capital Country period
held of incorporation end
------------------------------ --------------- ------------------ -------------
Connected Living London (BTR) 30 September
Limited 51 UK
Curzon Park Limited 50 UK 31 March
Helical Grainger (Holdings) 31 March
Limited 50 UK
Lewisham Grainger Holdings 30 September
LLP 50 UK
------------------------------ --------------- ------------------ -------------
Helical Grainger (Holdings) Limited is in liquidation as at 30
September 2021.
15. Financial interest in property assets ('CHARM'
portfolio)
2021 2020
GBPm GBPm
----------------------------------- ------ ------
Opening balance 73.3 76.4
Cash received from the instrument (8.8) (8.3)
Amounts taken to income statement 7.2 5.2
Closing balance 71.7 73.3
----------------------------------- ------ ------
The CHARM portfolio is a financial interest in equity mortgages
held by the Church of England Pensions Board as mortgagee. It is
accounted for under IFRS 9 and is measured at fair value through
profit and loss.
It is considered to be a Level 3 financial asset as defined by
IFRS 13. The financial asset is included in the fair value
hierarchy within Note 19.
16. Intangible assets
2020
(restated)
2021 (1)
GBPm GBPm
----------------- ------- ------------
Opening balance 0.8 1.2
Amortisation (0.3) (0.4)
Closing balance 0.5 0.8
----------------- ------- ------------
(1) See Note 25 for an explanation of the prior year
restatement
Following the IFRS Interpretations Committee publishing
accounting guidance for configuration and customisation expenditure
relating to cloud computing arrangements, the Group has reviewed
and revised its accounting policy in relation to intangible assets
which includes accounting for computer software. This has resulted
in reclassifying relevant expenditure that was previously
capitalised as an intangible asset and expensing this to the income
statement as administrative expenses.
The impact of this change is outlined in note 25.
17. Trade and other receivables
2021 2020
GBPm GBPm
----------------------------------------- ------ ------
Rent and other tenant receivables 5.7 4.8
Deduct: Provision for impairment (2.3) (2.4)
----------------------------------------- ------ ------
Rent and other tenant receivables - net 3.4 2.4
Contract assets 2.6 3.3
Other receivables 29.8 23.0
Prepayments 2.7 2.6
----------------------------------------- ------ ------
Closing balance 38.5 31.3
----------------------------------------- ------ ------
The Group's assessment of expected credit losses involves
estimation given its forward-looking nature. This is not considered
to be an area of significant judgement or estimation due to the
balance of gross rent and other tenant receivables of GBP5.7m
(2020: GBP4.8m). 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.
Other receivables include GBP10.4m (2020: GBP9.3m) due from land
sales, which is receivable no later than September 2022.
The fair values of trade and other receivables are considered to
be equal to their carrying amounts.
18. Trade and other payables
2021 2020
GBPm GBPm
-------------------------------- ------ ------
Current liabilities
Deposits received 9.1 7.2
Trade payables 16.3 16.4
Lease liabilities 0.7 0.9
Tax and social security costs 4.9 0.5
Accruals 72.6 44.2
Deferred income 6.2 4.1
-------------------------------- ------ ------
109.8 73.3
-------------------------------- ------ ------
Non-current liabilities
Lease liabilities 0.6 1.3
-------------------------------- ------ ------
0.6 1.3
-------------------------------- ------ ------
Total trade and other payables 110.4 74.6
-------------------------------- ------ ------
Within accruals, GBP43.7m comprises accrued expenditure in
respect of ongoing construction activities (2020: GBP28.4m).
19. Interest-bearing loans and borrowings and financial risk
management
2021 2020
GBPm GBPm
-------------------------------- -------- --------
Non-current liabilities
Bank loans - Pounds sterling 306.5 352.2
Bank loans - Euro 0.9 0.9
Non-bank financial institution 346.6 346.2
Corporate bond 693.5 692.6
-------------------------------- -------- --------
Closing balance 1,347.5 1,391.9
-------------------------------- -------- --------
During the prior year the Group issued a new ten-year GBP350.0m
corporate bond at 3.0% due July 2030.
The above analyses of loans and borrowings are net of
unamortised loan issue costs and the discount on issuance of the
corporate bond. As at 30 September 2021, unamortised costs totalled
GBP10.7m (2020: GBP13.1m) and the outstanding discount was GBP2.6m
(2020: GBP2.9m).
Categories of financial instrument
The Group holds financial instruments such as financial interest
in property assets, trade and other receivables (excluding
prepayments), derivatives, cash and cash equivalents. For all
assets and liabilities excluding interest-bearing loans the book
value was the same as the fair value as at 30 September 2021 and as
at 30 September 2020.
As at 30 September 2021, the fair value of interest-bearing
loans is greater than the book value by GBP46.7m (2020: GBP48.7m),
but there is no requirement under IFRS 9 to adjust the carrying
value of loans, all of which are stated at unamortised cost in the
consolidated statement of financial position.
Market risk
The Group is exposed to market risk through interest rates, the
availability of credit and house price movements relating to the
Tricomm Housing portfolio and the CHARM portfolio. The Group is not
significantly exposed to equity price risk or to commodity price
risk.
Fair values
IFRS 13 sets out a three-tier hierarchy for financial assets and
liabilities valued at fair value. These are as follows:
Level 1 - quoted prices (unadjusted) in active markets for
identical assets and liabilities;
Level 2 - inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly or
indirectly; and
Level 3 - unobservable inputs for the asset or liability.
The following table presents the Group's assets and liabilities
that are measured at fair value:
2021 2020
---------------------- ----------------------
Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm
------------------------------------------------------------------- -------- ------------ -------- ------------
Level 3
------------------------------------------------------------------- -------- ------------ -------- ------------
CHARM 71.7 - 73.3 -
Investment property 2,179.2 - 1,778.9 -
------------------------------------------------------------------- -------- ------------ -------- ------------
2,250.9 - 1,852.2 -
------------------------------------------------------------------- -------- ------------ -------- ------------
Level 2
------------------------------------------------------------------- -------- ------------ -------- ------------
Interest rate swaps - in cash flow hedge accounting relationships - 4.5 - 20.6
- 4.5 - 20.6
------------------------------------------------------------------- -------- ------------ -------- ------------
The significant unobservable inputs affecting the carrying value
of the CHARM portfolio are house price inflation and discount
rates. A reconciliation of movements and amounts recognised in the
consolidated income statement are detailed in Note 15.
The investment valuations provided by Allsop LLP and CBRE
Limited are based on RIC's Professional Valuation Standards, but
include a number of unobservable inputs and other valuation
assumptions.
The fair value of swaps and caps were valued in-house by a
specialised treasury management system, using first a discounted
cash flow model and market information. The fair value is derived
from the present value of future cash flows discounted at rates
obtained by means of the current yield curve appropriate for those
instruments. As all significant inputs required to value the swaps
and caps are observable, they fall within Level 2.
The reconciliation between opening and closing balances for
Level 3 is detailed in the table below:
2021 2020
Assets - Level 3 GBPm GBPm
----------------------------------- -------- --------
Opening balance 1,852.2 1,651.0
Amounts taken to income statement 84.0 34.6
Other movements 314.7 166.6
----------------------------------- -------- --------
Closing balance 2,250.9 1,852.2
----------------------------------- -------- --------
20. Tax
The tax charge for the year of GBP42.6m (2020 (restated):
GBP16.3m) recognised in the consolidated income statement
comprises:
2020
2021 (restated)(1)
GBPm GBPm
--------------------------------------------------- ------- ---------------
Current tax
Corporation tax on profit 11.4 20.3
Adjustments relating to prior years (3.7) (5.3)
--------------------------------------------------- ------- ---------------
7.7 15.0
--------------------------------------------------- ------- ---------------
Deferred tax
Origination and reversal of temporary differences 33.4 (0.3)
Adjustments relating to prior years 1.5 1.6
34.9 1.3
--------------------------------------------------- ------- ---------------
Total tax charge for the year 42.6 16.3
--------------------------------------------------- ------- ---------------
(1) See Note 25 for an explanation of the prior year
restatement
The 2021 current tax adjustments relating to prior years reflect
adjustments which have been included in submitted tax returns,
whilst deferred tax adjustments relate primarily to adjustments to
investment properties and capital allowances.
The Group works in an open and transparent manner and maintains
a regular dialogue with HM Revenue & Customs. This approach is
consistent with the 'low risk' rating we have been awarded by HM
Revenue & Customs and to which the Group is committed.
The Group's results for this year are taxed at an effective rate
of 19.0% (2020: 19.0%).
In addition to the above, a deferred tax charge of GBP3.8m
(2020: credit of GBP1.3m) was recognised within other comprehensive
income comprising:
2021 2020
GBPm GBPm
----------------------------------------------------- ------ ------
Actuarial gain/(loss) on BPT Limited pension scheme 1.0 (0.3)
Fair value movement in cash flow hedges 2.8 (1.0)
----------------------------------------------------- ------ ------
Amounts recognised in other comprehensive income 3.8 (1.3)
----------------------------------------------------- ------ ------
Deferred tax balances comprise temporary differences
attributable to:
2020
2021 (restated)(1)
GBPm GBPm
---------------------------------------------------------------- ------- ---------------
Deferred tax assets
Short-term temporary differences 2.1 2.2
Losses carried forward 0.2 1.5
Actuarial deficit on BPT Limited pension scheme 0.2 1.2
Fair value movement in derivative financial instruments 1.2 4.0
---------------------------------------------------------------- ------- ---------------
3.7 8.9
---------------------------------------------------------------- ------- ---------------
Deferred tax liabilities
Trading property uplift to fair value on business combinations (7.8) (7.9)
Investment property revaluation (55.7) (25.0)
Short-term temporary differences (4.6) (2.0)
Fair value movement in financial interest in property assets (1.4) (1.2)
(69.5) (36.1)
---------------------------------------------------------------- ------- ---------------
Total deferred tax (65.8) (27.2)
---------------------------------------------------------------- ------- ---------------
(1) See Note 25 for an explanation of the prior year
restatement
Deferred tax has been calculated at a rate of 25.0% (2020:
19.0%) in line with the enacted main rate of corporation tax
applicable from 1 April 2023.
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 GBP133.9m,
calculated at 25.0% (2020: GBP101.3m, calculated at 19.0%) and will
be realised as the properties are sold.
21. Retirement benefits
The Group retirement benefit liability decreased by GBP5.9m to
an asset of GBP3.5m in the year ended 30 September 2021. This
movement has arisen from changes in assumptions of GBP2.9m
(primarily market observable discount rates), gain on plan assets
of GBP2.4m, and GBP0.6m company contributions. The principal
actuarial assumptions used to reflect market conditions as at 30
September 2021 are as follows:
2021 2020
% %
------------------------------------------ ----- -----
Discount rate 2.10 1.50
Retail Price Index (RPI) inflation 3.70 3.05
Consumer Price Index (CPI) inflation 2.90 2.25
Salary increases 4.20 3.55
Rate of increase of pensions in payment 5.00 5.00
Rate of increase for deferred pensioners 2.90 2.25
------------------------------------------ ----- -----
22. Share-based payments
The Group operates a number of equity-settled, share-based
compensation plan comprising awards under a Long-Term Incentive
Plan ('LTIP'), a Deferred Bonus Plan ('DBP'), a Share Incentive
Plan ('SIP') and a Save As You Earn Scheme ('SAYE'). The
share-based payments charge recognised in the consolidated income
statement for the period is GBP1.7m (2020: GBP1.1m).
23. Related party transactions
During the year ended 30 September 2021, the Group transacted
with its associates and joint ventures (details of which are set
out in Notes 13 and 14). The Group provides a number of services to
its associates and joint ventures. These include 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:
2021 2020
----------------------- -----------------------
Fees Year end Fees Year end
recognised balance recognised balance
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- ------------ ---------
Connected Living London
(BTR) Limited 1,211 1,588 736 557
Lewisham Grainger Holdings
LLP 319 930 270 611
Vesta Limited Partnership 559 275 184 139
---------------------------- ------------ --------- ------------ ---------
2,089 2,793 1,190 1,307
---------------------------- ------------ --------- ------------ ---------
2021 2020
---------------------------------------- ---------------------------------------
Interest Year end loan Interest Interest Year end loan Interest
recognised balance rate recognised balance rate
GBP'000 GBPm % GBP'000 GBPm %
-------------------------------- ------------- -------------- --------- ------------ -------------- ---------
Curzon Park Limited - 18.1 Nil - 17.0 Nil
Lewisham Grainger Holdings LLP - 2.8 Nil - 2.3 Nil
Vesta LP - 14.6 Nil - 14.6 Nil
-------------------------------- ------------- -------------- --------- ------------ -------------- ---------
- 35.5 - 33.9
---------------------------------------------- -------------- --------- ------------ -------------- ---------
24. Issue of share capital
In September 2021, the Group issued 67,379,369 new shares at an
issue price of 310.0p raising a total amount of GBP204.1m net of
costs. The shares were issued with a nominal value of GBP0.05p per
share. This increased share capital by GBP3.3m and the share
premium account by GBP200.8m.
In February 2020, the Group issued 61,200,000 new shares at an
issue price of 305.0p raising a total amount of GBP182.5m net of
costs. The shares were issued with a nominal value of GBP0.05p per
share. This increased share capital by GBP3.1m and the share
premium account by GBP179.4m.
25. Prior year restatement
In April 2021, the IFRS Interpretations Committee published
accounting guidance for configuration and customisation expenditure
relating to cloud computing arrangements, including Software as a
Service (SaaS). The guidance recognises differences in accounting
treatment for SaaS expenditure between functionality that is
broadly available to the software supplier's general customer base
and functionality that is restricted to a specific user. The
Committee has clarified the position that expenditure can only be
capitalised to the extent a SaaS customer has the power to obtain
the future economic benefits by restricting others access to those
benefits, otherwise expenditure in relation to developing SaaS for
use should be expensed.
Following the interpretation being published, the Group has
reviewed and revised its accounting policy in relation to
intangible assets which includes accounting for computer software.
This has resulted in reclassifying relevant expenditure that was
previously capitalised as an intangible asset and expensing this to
the income statement as administrative expenses.
The impact of this change is outlined in the following
table:
Notes to the preliminary financial results continued
2020 Restated
2020 (previously reported) GBPm Restatement GBPm GBPm
------------------------------------------------- -------------------------------- ----------------- --------------
Consolidated income statement impact
Administration expenses (28.7) (11.7) (40.4)
Profit before tax 110.8 (11.7) 99.1
Tax charge (18.0) 1.7 (16.3)
Profit for the year attributable to the owners
of the Company 92.8 (10.0) 82.8
Basic earnings per share 14.3p (1.5p) 12.8p
Diluted earnings per share 14.2p (1.5p) 12.7p
Consolidated statement of financial position
impact
Expense SaaS configuration and customisation
costs - (22.0) (22.0)
Reversal of amortisation on SaaS configuration
and customisation costs - 0.3 0.3
Intangible assets 22.5 (21.7) 0.8
Deferred tax assets 7.8 1.1 8.9
Total non-current assets 1,926.5 (20.6) 1,905.9
Deferred tax liabilities 36.7 (0.6) 36.1
Total non-current liabilities 1,433.5 (0.6) 1,432.9
Net assets 1,463.0 (20.0) 1,443.0
Retained earnings 809.1 (20.0) 789.1
Total equity 1,463.0 (20.0) 1,443.0
------------------------------------------------- -------------------------------- ----------------- --------------
EPRA Performance Measures - Unaudited
The European Public Real Estate Association (EPRA) is the body
that represents Europe's listed property companies. The association
sets out guidelines and recommendations to facilitate consistency
in listed real estate reporting, in turn allowing stakeholders to
compare companies on a like-for-like basis. As a member of EPRA,
the Group is supportive of EPRA's initiatives and discloses
measures in relation to the EPRA Best Practices Recommendations
('EPRA BPR') guidelines. The most recent guidelines, updated in
October 2019, have been adopted by the Group.
EPRA Earnings
2020
2021 (restated)(1)
---------------------------- ---------------------------
Pence Pence
Earnings Shares per Earnings Shares per
GBPm millions share GBPm millions share
--------------------------------------- --------- --------- ------ -------- --------- ------
Earnings per IFRS income statement 152.1 680.4 22.3 99.1 651.7 15.2
Adjustments to calculate adjusted
EPRA Earnings, exclude:
i) Changes in value of investment
properties, development properties
held for investment and other
interests (79.1) - (11.6) (29.9) - (4.6)
ii) Profits or losses on disposal
of investment properties, development
properties held for investment
and other interests (1.5) - (0.2) (2.3) - (0.4)
iii) Profits or losses on sales
of trading properties including
impairment charges in respect
of trading properties (56.7) - (8.3) (53.0) - (8.1)
iv) Tax on profits or losses on
disposals - - - - - -
v) Negative goodwill/goodwill
impairment - - - - - -
vi) Changes in fair value of financial
instruments and associated close-out
costs 3.8 - 0.5 1.9 - 0.3
vii) Acquisition costs on share
deals and non-controlling joint
venture interests - - - - - -
viii) Deferred tax in respect
of EPRA adjustments - - - - - -
ix) Adjustments i) to viii) in
respect of joint ventures (0.9) - (0.1) (0.2) - -
x) Non-controlling interests in
respect of the above - - - - - -
xi) Other adjustments in respect
of adjusted earnings 8.3 - 1.2 10.5 - 1.6
Adjusted EPRA Earnings/Earnings
per share 26.0 680.4 3.8 26.1 651.7 4.0
Adjusted EPRA Earnings per share
after tax 3.1 3.2
(1) See Note 25 for an explanation of the prior year
restatement
EPRA NRV, EPRA NTA and EPRA NDV
2020
2021 (restated) (1)
EPRA EPRA EPRA EPRA EPRA EPRA
NRV NTA NDV NRV NTA NDV
GBPm GBPm GBPm GBPm GBPm GBPm
IFRS Equity attributable to shareholders 1,739.0 1,739.0 1,739.0 1,443.0 1,443.0 1,443.0
Include/Exclude:
i) Hybrid Instruments - - - - - -
Diluted NAV 1,739.0 1,739.0 1,739.0 1,443.0 1,443.0 1,443.0
Include:
ii.a) Revaluation of IP (if IAS
40 cost option is used) - - - - - -
ii.b) Revaluation of IPUC (if IAS
40 cost option is used) - - - - - -
ii.c) Revaluation of other non-current
investments 6.0 6.0 6.0 7.4 7.4 7.4
iii) Revaluation of tenant leases
held as finance leases - - - - - -
iv) Revaluation of trading properties 543.3 401.6 401.6 541.3 432.1 432.1
Diluted NAV at Fair Value 2,288.3 2,146.6 2,146.6 1,991.7 1,882.5 1,882.5
Exclude:
v) Deferred tax in relation to
fair value gains of IP 58.3 58.3 - 24.4 24.4 -
vi) Fair value of financial instruments 3.4 3.4 - 16.7 16.7 -
vii) Goodwill as a result of deferred
tax - - - - - -
viii.a) Goodwill as per the IFRS
balance sheet - (0.5) (0.5) - (0.5) (0.5)
viii.b) Intangible as per the IFRS
balance sheet - - - - (0.3) -
Include:
ix) Fair value of fixed interest
rate debt - - (35.0) - - (39.5)
x) Revalue of intangibles to fair
value - - - - - -
xi) Real estate transfer tax - - - - - -
NAV 2,350.0 2,207.8 2,111.1 2,032.8 1,922.8 1,842.5
Fully diluted number of shares
NAV 742.8 742.8 742.8 675.3 675.3 675.3
NAV pence per share 316.4 297.2 284.2 301.0 284.7 272.8
(1) See Note 25 for an explanation of the prior year
restatement
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END
FR BRBRTMTABBPB
(END) Dow Jones Newswires
November 18, 2021 02:00 ET (07:00 GMT)
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