Profits soar at Grainger
Nov 30 2007 by Iain Laing, The Journal
BRITAIN’S largest residential landlord Grainger has posted a 62% rise in annual pre-tax profit and said it had little to fear from short-term price fluctuations in Britain’s housing market.
The Newcastle company’s shares, which had slumped to a three-year low, climbed 1.7% to 356p yesterday after it reported pre-tax profit of £77.5m in the year to September 30 against a backdrop of financial market turmoil triggered by US sub-prime mortgage woes.
Its price had fallen down to 332.75p on Wednesday, its lowest since late 2004, but a leap in the value of joint ventures from £400,000 to £40.6m boosted earnings and yesterday clearly buoyed investor confidence. This is despite spending £252m on acquisitions and sales of around £18m over the year.
While UK homeowners are bracing for a fall in house prices after a decade of growth, Grainger said the market value of its assets rose 25% to £2.5bn, boosting gross net asset value by 22.3% to 828p per share.
The company, which owns more than 14,000 homes in the UK, said it expected new-build apartments in city centres would be hit hardest by the market correction, but its low exposure to such assets would cushion it from the brunt of the slowdown.
Chairman Robin Broadhurst said: “This will not be the first period of more challenging market conditions that the company has weathered in its long history.
“Recent evidence suggests that properties in our portfolio are continuing to sell at, or slightly above, current valuation levels. We are relatively well-protected from the slowdown.”
Grainger said efforts to broaden revenue streams by launching a fund management division and expanding into Europe continued to enhance performance and protect shareholders from the vagaries of the UK housing market. It said its fund management arm contributed £40m to group revenue and its £242m German portfolio had grown to 4,520 properties.
Mr Broadhurst said: “We continue to see good opportunities to apply our own variety and blend of skills to different residential asset classes, while continuing our longstanding prudent approach towards acquisitions and liquidity.
“We believe that our spread of activities will give us resilience and increase our long-term growth prospects to create shareholder value.”
In a further departure from its traditional residential property landlord heritage, the firm said the value of its fledgling residential equity release business had more than doubled to £542m, as greater numbers of British retirees sought to unlock equity in their homes by selling stakes to Grainger.
“Our experience combined with the more diversified business model we have in place, gives us confidence in our positioning and prospects,” he said.
Earnings per share rose 82% to 47.2p and the final dividend will be raised 10% to 4.12p a share, giving a total payout of 6.18p in its 13th year of increased dividends.
HIGHLIGHTS
Year to Sep 30
Profits up 62% to £77.5m
Market value of assets up 25% to £2.5bn
Earnings per share up 82% to 47.3p
