Grainger remains ‘confident’ over long-term future

May 23 2008 by Iain Laing, The Journal

RESIDENTIAL property giant Grainger is confident in the longer term health of the housing market despite its current difficulties – though the Newcastle business admits it is cutting back on acquisitions.

Grainger boasts a property portfolio worth £2.4bn, and the company acknowledges times are tough for anyone in the housing market.

It posted a rise in operating profit for the six months to March 31, but a fall in the bottom line. However Grainger said the UK’s shortage of homes would ensure its business continues to prosper. Its portfolio is well diversified both geographically and in terms of the sectors represented, which the company says make it ideally placed as a defensive stock in tough economic times. Grainger said yesterday it had generated a 26% rise in operating profits up to £48.2m, but interest costs – allied with some tough comparative figures, had left its pre-tax profits looking distinctly lean at just £200,000.

Chairman Robin Broadhurst said: “We remain confident in the group’s medium and long-term prospects. The current market is showing volatility but as noted previously we believe that our unique portfolio, assembled over many years, is well positioned to withstand these conditions. Whilst the general residential market has tightened considerably, principally through a lack of readily available finance, the long term imbalance in the UK between supply and demand remains.”

Mr Broadhurst said recent announcements from housebuilders indicated that supply would remain low for some considerable period of time. “Inevitably this will act as a support for long term house prices,” he added.

Grainger also revealed yesterday that it has secured an improved finance package which leaves the business with “headroom” of £440m to allow for economic circumstances, and making acquisitions as necessary.

However, deputy chief executive and finance director Andrew Cunningham said the company was currently being cautious in the marketplace.

He said: “We are being quite prudent at the moment. We are cutting back on acquisitions – not wasting the headroom we have got.”