Headline figures tell anything but the true story for residential landlord Grainger (GRI). Interim numbers were affected by one-off costs and lower valuation gains, but stripping these out meant pre-tax profits rose from £49.8m to £53.9m.
Exceptional items included £18.2m relating to the re-acquisition of home reversions group Equity Release. This was sold in January last year, but the buyer failed to pay a £35m deferred consideration, and Grainger exercised an option to buy it back. A further cost of £9.2m was incurred with the maturity of a swap agreement, although a new agreement has been secured on better terms.
Crucially, Grainger is soon to start feeling the benefit of recent investments, notably a build-to-rent scheme in Barking. Furthermore, there is a secured pipeline of over 1,000 rented units, which will add nearly 40 per cent to the UK rented portfolio in the next two years. Beyond the secured pipeline, there are a number of projects at an advanced stage that could add a further 950 rented units. Added together, these could double the number of UK rented units.
A slight triple net asset value decline reflected the effect of one-off costs, but doesn't factor in Grainger's reversionary surplus - the uplift from market value of its properties to vacant possession value, which will be realised as its tenants pass away. Grainger reckons the uplift could be £500m, or 120p a share.
Analysts at Numis are forecasting net asset value per share of 251p by the September year-end.
GRAINGER (GRI) | ||||
---|---|---|---|---|
ORD PRICE: | 214p | MARKET VALUE: | £890m | |
TOUCH: | 213.5-214p | 12-MONTH HIGH: | 227p | LOW: 168p |
DIVIDEND YIELD: | 1.2% | TRADING PROPERTIES: | £1bn | |
DISCOUNT TO NAV**: | 12% | |||
INVESTMENT PROPERTIES: | £603m* | NET DEBT: | 103% |
Half-year to 31 Mar | Net asset value (p**) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2014 | 242 | 49.8 | 11.0 | 0.61 |
2015 | 240 | 9.1 | 1.60 | 0.64 |
% change | -1 | -82 | -85 | +5 |
Ex-div: 4 Jun Payment: 3 Jul *Includes investments in joint ventures and associates **Triple net asset value |