PROPERTY group Grainger said yesterday it is aiming to reduce its debt to £1bn by the end of next year.
The Newcastle firm, which is the UK’s biggest residential landlord and has properties both domestically and abroad, cut it debts by £260m to stand at £1.19bn at the end of September.
Chief executive Andrew Cunningham admitted that the firm, one of the region’s largest plcs, had stretched itself too far at the height of the property boom.
“We have made big strides in getting our debt down and we are planning to get it down to £1bn by getting the business structure right,” he said.
“We have been reducing debt for the last couple of years. Like a lot of companies we probably borrowed too much in the mid-2000s.”
He said the company would not be doing anything different to reduce its debts but was simply being “crisper” about announcing its intentions.
Grainger revealed the figure as part of its full-year results, which showed turnover rose to £311m from £296m last year and with operating profit flat at £126.4m. However, the group made a pre-tax loss of £1.7m, compared to a £26.1m profit a year ago. Cunningham said derivative movements of £31.2m were to blame, due to a charge related to long-term borrowing.
“It is not a cash cost, it is an accounting cost,” he said, adding that without another such charge next year, the group would make a profit.
Grainger is focusing on geographic areas where the economy is more robust. A total of 62% of the company’s UK portfolio is in London and the South East, up from 54% a year earlier.
Cunningham said: “One of the big opportunities is in rental opportunities. The bulk of our rental properties are in London. About half of Londoners are renting as opposed to owning and an estimated 25% are in private rental properties. Some people don’t want the responsibility of a mortgage or a house. The rate of growth of rents has slowed a little but that’s not surprising as it was in double digits last year.”
In Germany, 82% of Grainger’s properties are located in four of the more affluent areas of the country – Baden-Württemberg, Hesse, Northrhine-Westphalia and Bavaria.
The group recently announced a joint venture in Germany with global asset manager, Heitman, which is taking a major stake in around 3,000 rental properties that the Newcastle plc owns. Grainger will receive fees for managing the properties.
Cunningham said: “We’re pretty happy with the German portfolio. It has good yield and its a good strong economy. We’ve allocated our capital to Germany and we want to build on that business and hopefully take some more cash out. The total scale out there is unchanged.”
Mark Fleetwood from analysts N+1 Singer in Newcastle said: “We retain our positive view on Grainger. The core business is performing well and property sales at attractive levels underpin our confidence in the balance sheet and the cash generation which is driving down debt.”