Grainger raises cash as housing market revives

Nov 6 2009 by Iain Laing, The Journal

BRITAIN’S largest landlord Grainger plc has revealed plans to raise £250m as it starts to look to buy more property as the housing market begins to revive.

The Newcastle-based company has seen sales rise and demand grow over last year but the market downturn still dragged its bottom line £3m into the red from an annual profit of £12m a year ago, partly because of writedowns of its property portfolio.

Grainger saw sales up 21.5% over the year to £220m and said there were signs of a recovery with reservations of properties coming in quickly.

After a tough couple of years the company is now preparing itself to take advantage of a stronger rise in property sales when in the next 12 months.

It is raising £250m with a rights issue of which £104.5m will be used to cancel debt and £68.5m will be used to reduce debt until opportunities arise for acquisitions.

And the business has cut more than 30 of its 270-strong workforce over the year, including a few at its headquarters in St James’ Boulevard.

Chief executive Andrew Cunningham yesterday said an efficiency drive and the further strengthening of its financial base with the rights issue meant it was “firmly on the front foot” when it came to rebuilding business.

The company has just agreed new terms with its bankers for credit facilities totalling £615m as it repays loans of more than £900m so it now has another 18 months to settle its debts.

It has cut its spending on new properties to £12m from £123m last year and £403m in 2007 before the credit crunch began.

But Grainger, which owns around 14,000 properties ranging from former pitmen’s houses to upmarket London streets and homes in Germany, Estonia and the Czech Republic, remains cautious.

Chairman Robin Broadhurst said: “Although the residential trading market has shown some sign of recovery over the late summer we remain cautious in our near term outlook and will not remove our focus from prudent financial husbandry.

“Nevertheless, on the successful conclusion of the rights issue we would anticipate being in a position to recommence property acquisitions as the market recovers provided pricing levels are appropriate and we see the ability to generate or enhance shareholder value.

“Indeed we already are beginning to see potential opportunities to build on our existing portfolio. Whilst economic conditions may remain challenging for some time to come we believe we are well positioned to capitalise on future upturns and are excited by the prospect.”

The company has tried to cut costs and debt as the housing slump deepened and brought down the value of its 13,259 homes in the UK and 7,180 homes in Germany by £200m to £2.1bn in the last year.