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Grainger PLC (GRI)

  Print      Mail a friend       Annual reports

Friday 19 May, 2017

Grainger PLC

Half Year Results

RNS Number : 6011F
Grainger PLC
19 May 2017
 

19 May 2017

 

Grainger plc

 

Half year results for the six months ended 31 March 2017

 

Grainger's strategy delivers 39% growth in adjusted earnings

 

 

Helen Gordon, CEO of Grainger, the UK's largest listed residential landlord, comments:

 

"I am pleased to report that the pursuit of our strategy is delivering strong results. In the first six months of the year we have increased adjusted earnings by 39% and net rental income by 11%.

 

"We expect this momentum to continue now that we have secured £439m of private rented sector ("PRS") investment, over half of our £850m target, and have good visibility on additional investment opportunities to meet our overall target. We are making good progress delivering our pipeline, and on average we are completing a new PRS building every two months over the next two years.

 

"Grainger is a focused, simpler and more efficient business. We have made changes to the way we operate in order to enhance returns, through reducing costs, simplifying processes and improving the scalability of our operating platform.

 

"The private rented sector growth opportunity is compelling with strong investment fundamentals. Our strategy to grow rents and simplify and focus the business puts Grainger in a strong position to deliver further sustainable income led growth."

 

 

Financial highlights - six months ended 31 March 2017

 

§ Net rental income up 11% to £20.0m (HY16: £18.0m)

§ Adjusted earnings* up 39% to £34.1m (HY16: £24.5m)

§ Profit before tax up 13% to £41.2m (HY16: £36.6m)

§ Dividend per share up 10% to 1.60p^ (HY16: 1.45p)

§ EPRA NNNAV up 8 pence per share or 3% since the year end to 295p (FY16: 287p)

§ Net debt of £791m and LTV 36.0% (FY16: £764m and 35.9%)

§ Cost of debt at period end reduced to 3.6% (FY16: 3.9%)

 

Strategic progress

 

Growing rents - increased investment and returns

 

§ We have grown net rental income by 11% to £20.0m (HY16: £18.0m), with gains through acquisitions, improved operational efficiency and rental growth. More than half of Grainger's net rental income is derived from our PRS assets.

 

§ We have made good progress on our PRS pipeline with £439m of our £850m investment target secured, and a further £425m in the planning or legal process.

 

§ We have materially reduced property operating expenses ("gross to net") to 25.8% for HY17 from 29.2% for HY16 and 28.0% for FY16, through improving our processes and supply chain to increase efficiency and strengthen cost discipline.

 

§ Like-for-like rental growth across our entire portfolio of 3.5% in the first six months, comprised 2.9% on our PRS homes and 4.3% annualised on regulated tenancy reviews.

 

§ Our trading performance has been robust relative to the market. We have seen good overall valuation growth rates across our portfolio with our assets in the regions and outer London performing well, more than offsetting central and inner London which has been broadly flat.

 

§ Interim dividend increased by 10% to 1.60 pence per share (HY16: 1.45p), in line with our policy to distribute 50% of annual net rental income, with one third distributed at the interim stage.

 

Simplifying and focusing the business

 

§ We have reduced overheads to £13.4m, a 17% reduction from the prior year (HY16: £16.2m), and we are on track to deliver our £27.5m overhead target for FY17.

 

§ We refinanced a £100m debt facility which reduced the average cost of debt by 23 bps.

 

§ We have agreed a two year extension to 2022 for £450m of our syndicated bank facility, at unchanged margins, with extension options for a further two years.

 

§ We have been actively reviewing and upgrading our systems, processes and technology to achieve greater operating efficiencies and prepare the business to service an increasing number of customers.

 

Good financial performance

 

§ Adjusted earnings up 39% to £34.1m (HY16: £24.5m) through higher net rental income, lower overhead costs and lower finance costs, despite a strong prior period result (HY16) which benefited from high levels of sales ahead of the changes to stamp duty land tax.

 

§ EPRA NNNAV and EPRA NAV up 3% and 2% respectively in the six month period to 295p and 338p (FY16: 287p and 330p), supported by a strong trading performance and robust valuation growth of 2.1% on the market value of our assets.

 

§ Vacant residential property sales averaged 2.0% above September 2016 valuations (HY16: 6.8%), delivering £49.5m of revenue and £24.7m of profit (HY16: £62.7m and £29.6m).

 

Outlook

We expect a further strong trading performance in the second half of the year and lead indicators point to a robust performance for the year as a whole. We remain confident in our ability to continue to source compelling PRS investments, and we will retain our selective and disciplined approach and remain focused on returns as we move towards securing our £850m PRS investment target by 2020.

 

The demand for the rental market in the UK remains strong with 20% of all homes in England privately rented, the highest levels since records began in 1980. In addition, for the first time we have seen an increase in the number of households renting across the broadest age range of 25-64. Coupled with an undersupply of housing, the PRS offers good growth prospects, which Grainger is in a strong position to capture, having focused on developing a scalable, efficient operating platform. 

 

Grainger's business model is increasingly focused on driving sustainable income led shareholder returns and with our established strategy, operational platform and pipeline, we are confident in the future.

 

*Adjusted earnings (previously called recurring profit) is profit before tax, less valuation movements, and non-recurring items.

^The dividend will be paid on 30 June 2017 to shareholders on the register at the close of business on 2 June 2017.

English Housing Survey 2017. 

 

FY17 reporting dates

 

§ Trading update and Capital Markets Day - Wednesday 27 September 2017

 

§ Full year results - Thursday 30 November 2017

 

Interim results presentation

 

Grainger will be holding a presentation for analysts and investors at 9.00am (UK time) on Friday 19th May 2017.

 

The presentation will also be available live via webcast and a telephone dial-in facility. In addition, a copy of the presentation slide will be available on Grainger's website, www.graingerplc.co.uk.

 

Webcast details

 

To view the webcast, please go to the following URL link. Registration is required.

Webcast URL link: http://webcasting.brrmedia.co.uk/broadcast/58b04dbe2ad960ba5fff008f

 

The webcast will be available for six months from the date of the presentation.

 

Conference call details

 

UK dial-in number:                              +44 (0) 330 336 9411 or 0800 279 7204

US dial-in number:                              +1 (719) 457 1036

Netherlands dial-in number:                +31 (0) 20 703 8261 or 0800 023 1436

Access code:                                      8587577 

 

For further information, please contact:

 

Grainger                                                                    Carmarco

 

Helen Gordon / Vanessa Simms /                              Ginny Pulbrook / Geoffrey Pelham-Lane

Kurt Mueller

 

Telephone: +44 (0) 20 7940 9500                              Telephone: +44 (0) 20 3757 4992 / 4985

 

Chief Executive's review

 

Overview

 

The pursuit of our strategy is delivering good results. We are growing rents, reducing costs and restructuring the business so that we are ready for the exciting opportunity presented by the growth in demand for homes to rent.

 

We have made good progress on developing our PRS investment pipeline; and we have prepared the business for the future through improving scalability and efficiency which will enhance returns.

 

Our market leading position provides us with opportunities for growth and we were recently recognised as Property Company of the Year, Landlord of the Year, Asset Manager of the Year and PRS Developer of the Year by industry peers.

 

Grow rents - investment

 

We have secured £439m of investment, over half of our £850m target. The best investment opportunities have come via forward funding and direct development schemes. These provide higher quality assets and more attractive returns, relative to the tenanted, stabilised acquisition opportunities that we have been appraising. A further £425m is in the planning or legal process, with several compelling schemes at advanced stages.

 

The main increase in the period came from securing a c.£42m, 242 unit build to rent scheme on the Yorkshire Post site in Leeds city centre. Construction is expected to begin in Autumn this year and we are targeting a c.7% gross yield post completion in late 2019.

 

We are making good headway in construction on our secured PRS schemes, where we are targeting gross yields of c.7-8% once fully let. These include:

 

§ Clippers Quay, our £99m, 614 unit PRS scheme in Salford is approaching half way through construction, with first completions expected in late FY18.

 

§ Our PRS phase at Berewood in Hampshire to deliver 104 homes is on track to complete this Summer.

 

§ Construction of Argo Apartments is expected to complete in Autumn this year, which will deliver 134 PRS units in Canning Town, London. It is being acquired by our PRS REIT, GRIP, for which Grainger is the property and asset manager (supplementing co-investment returns).

 

§ Construction has started at Finzels Reach, our 194 unit, £46m PRS build-to-rent development in Bristol, where completion is expected in FY19.

 

Our PRS REIT, GRIP, which is focused on investments in London and the South East, has also completed on two freehold residential tenanted acquisitions in London and Brighton, for total consideration of £24m (Grainger share £6m).

 

Our PRS partnership with the Royal Borough of Kensington and Chelsea (RBKC) is progressing well. We have recently completed our first units in this partnership at Hortensia Road which comprises 31 homes, and construction and pre-sales are progressing well at the Young Street site. Grainger generates development and asset management fees from this relationship and a share of the future rental income.

 

Simplify and focus

2016 was a transformational year for Grainger. We profitably sold our Equity Release and German businesses, improved the capital structure of the company, embarked on our PRS growth strategy and restructured our operations to focus the business, reduce costs and improve efficiency.

 

The benefits we have seen coming through in the first six months of the year is a testament to the strength, quality and responsiveness of our team.

 

Adjusted earnings have increased by 39%, with reduced finance and overhead costs the key drivers of the growth. This has been achieved alongside initiatives to prepare the business for the future through enhancing our systems, processes and supplier relationships that will underpin the scalability and efficiency of our property and asset management platform as the business grows. It is pleasing to see the sizeable reductions in property operating expenses and operational changes being made whilst maintaining our focus on financial performance.

 

We are pleased to report that our new Chief Operating Officer, John Kenny, started earlier this month (formerly COO of Liberty Living, a leading student housing provider). John will help drive forward further operational improvements and efficiencies in the business, building on the great work we have achieved over the past 18 months.

 

Build on our heritage

 

Grainger has a 105 year history of renting homes. We have a competitive advantage as a PRS business through being able to originate, invest in and operate PRS homes across the UK. In addition to the skills, knowledge, asset management and operational platform our heritage provides, our resilient and highly cash generative regulated tenancy portfolio supports our investment into higher-yielding PRS assets.

 

Residential sales in the period generated £57m of income, which was in line with our expectations and demonstrated the resilience of our assets. Our regulated tenancies had an average vacancy rate of c.6.5% for the period. Prices on the sale of vacant properties were achieved on average at 2.0% above September 2016 valuations.

 

Market

 

Demand for renting is growing and this trend is set to continue. One in five households rent today, from one in ten, ten years ago.

 

The UK is seeing a structural change in housing, underpinned by greater demand for flexibility and service.

 

This developing market and our ability to increase housing supply continues to benefit from increased Government support, most recently evidenced in the recent Housing White Paper. This paper recognised the need for a high quality rental sector to help solve the housing crisis and showed a positive shift in Government housing policy, away from policies primarily focused on home ownership. We welcome this policy shift.

 

Increased regulation and cost for smaller buy-to-let landlords will help support the development of a larger scale professional rental sector, where we operate.

 

The PRS and build to rent sector benefit from cross party political support for increasing housing supply, increasing investment in good quality homes and professionalising the rental market.

 

The recent Housing White Paper set out a number of changes that have the potential to support development of the private rented sector, including changes to the planning system, greater flexibility in affordable housing requirements and initiatives to ensure local authorities support and release land for housing.

 

The drive for longer tenancies for renters was discussed in the Conservative Government's Housing White Paper and the Labour Party Manifesto, as was a ban on letting fees to stop the practice of double charging. Grainger already provides longer term tenancies across a number of our sites and are supportive of this move. We also welcome the ban on letting fees and the protection it provides to our customers.

 

Outlook

 

Our portfolio remains resilient and continues to perform well. We expect a further strong trading performance in the second half of the year and lead indicators point to a robust valuation performance for the year as a whole. We remain confident in our ability to continue to source compelling PRS investments, and we will retain our selective and disciplined approach and remain focused on returns as we move towards securing our £850m PRS investment target by 2020.

 

The undersupply of housing and the growing demand for rental housing presents an exciting growth opportunity. Grainger is in a strong position to capture this opportunity, having developed a scalable, efficient operating platform. 

 

Grainger's business model is increasingly focused on driving sustainable income led shareholder returns, and our strategy, operational infrastructure and pipeline provide us with confidence for the future.

 

 

Helen Gordon

Chief Executive

19 May 2017
 

Financial review

 

We have delivered a good set of financial results for the six month period ended 31 March 2017 through a combination of growth initiatives and decisive actions taken to reduce costs and improve operational efficiency.

 

These actions have significantly enhanced our income returns. We have increased adjusted earnings by 39% (£9.6m) to £34.1m (HY16: £24.5m), driven by rental growth and improving operating and finance costs. EPRA NNNAV increased by 3% to 295p (FY16: 287p), supported by the strong trading performance and valuation growth.

 

The Board has declared an interim dividend per share of 1.60p (+10% YoY, HY16: 1.45p) in line with our policy to distribute 50% of annual net rental income, with one third to be paid at the interim stage.

 

Income

HY16

HY17

Change

Rental growth (like for like)

4.0%

3.5%

-50 bps

Net rental income

£18.0m

£20.0m

+11%

Adjusted earnings* (note 2)

£24.5m

£34.1m

+39%

Adjusted earnings per share (after tax) (note 2)

4.9p

6.6p

+35%

Profit before tax (note 2)

£36.6m

£41.2m

+13%

Dividend per share (note 10)

1.45p

1.60p

+10%

Earnings per share (diluted) (note 9)

7.3p

8.0p

+10%

 

 

 

 

Capital

FY16

HY17

Change

EPRA NAV per share

330p 

338p 

+2%

EPRA NNNAV per share

287p 

295p 

+3%

Net debt

£764m 

£791m 

+4%

Group LTV

35.9% 

36.0% 

+10 bps

Cost of debt (average)

4.4% 

3.7% 

-70 bps

Cost of debt (period end)

3.9% 

3.6% 

-30 bps

Reversionary surplus

£327m 

£314m 

-4%

 

Income financials and reversionary surplus on a continuing operations basis.

*Adjusted earnings (previously called recurring profit) is profit before tax, less valuation movements, and non-recurring items.

Income statement

 

We have successfully continued to grow our income return. Through new acquisitions, active asset management and operational improvements we have increased net rental income. Our sales performance remains resilient and we have made great strides in reducing costs across the business.

 

The table below summarises adjusted earnings and profit before tax (from continuing operations) for the 6 months ended 31 March 2017.

 

Income statement £'m

HY16

HY17

Change

Net rental income

18.0

20.0

+11%

Profit on sale of assets

36.4

35.0

-4%

Mortgage income (CHARM)

3.2

3.1

-3%

Management fees

3.3

2.3

-30%

Overheads

(16.2)

(13.4)

-17%

Other expenses

(0.4)

(0.4)

0%

Joint ventures

0.8

1.2

+50%

Net finance costs

(20.6)

(13.7)

-34%

Adjusted earnings*

24.5

34.1

+39%

Valuation movements

15.9

7.0

-56%

Derivative movements

(4.1)

0.4

+110%

Non-recurring items

0.3

(0.3)

-200%

Profit before tax

36.6

41.2

+13%

See note 2 to these results for the reconciliation from statutory measures.

* Adjusted earnings (previously called recurring profit) is profit before tax, less valuation movements, and non-recurring items.

 

Rental income

 

We have grown net rental income by 11% to £20.0m for the period (HY16: £18.0m), through new investments, active asset management within our existing portfolio and increased operational efficiencies. More than half of Grainger's net rental income is now derived from our PRS assets.

 

Like-for-like rental growth across our entire portfolio of 3.5% in the first six months, comprised 2.9% on our PRS assets and 4.3% annualised on regulated tenancy reviews.

 

 

 

£'m

HY16 Net rental income

18.0

Disposals

(0.7)

Acquisitions

1.0

Rental growth

0.8

Propex efficiencies

0.9

HY17 Net rental income

20.0

YoY growth

11%

 

Sales

 

Our sales performance continues to be resilient where we see sustained healthy levels of trading and robust pricing. On average we have been selling assets at 2% above their previous valuation, with sustained transactional levels and robust demand.

 

 

HY16

 

 

HY17

 

 

Units sold

 

Sales

Profit

 

Units sold

 

Sales

Profit

 

£'m

£'m

 

£'m

£'m

Residential sales on vacancy

174

62.7

29.6

 

148

49.5

24.7

Tenanted and other sales

38

5.1

2.8

 

55

7.3

4.0

Residential sales total

212

67.8

32.4

 

203

56.8

28.7

Development activity

-

13.0

4.0

 

-

34.6

6.3

Overall sales

212

80.8

36.4

 

203

91.4

35.0

 

Residential sales represent the majority of our overall sales and relate primarily to regulated tenancy assets sold on vacant possession. Annual reductions in sales are expected due to the natural wind down of this portfolio. Our regulated tenancy vacancy rate averaged c.6.5% over the period.

 

Sales over the period have performed well, in line with expectations. The reduction on last year is a reflection of an exceptionally buoyant period in 2016 ahead of the changes to stamp duty land tax.

 

Our development activity over the period includes our PRS partnership with the Royal Borough of Kensington and Chelsea (RBKC), where we are shortly completing the first of seven sites, Hortensia Road, along with other sales of development assets.

 

 

Operating costs

 

Our income return has been enhanced by the significant improvements the management team has made to the operating costs of the business. Three key areas of focus over the period have been: property operating expenses ("gross to net"), overheads and finance costs.

 

Property operating expenses

 

Through improving systems, processes and our supply chain to increase efficiency and improve cost controls, we have significantly reduced property operating expenditure as a percentage of gross rental income ("gross to net") by 340 bps year-on-year to 25.8%. Our medium term target remains a gross to net range of 25 - 26%.

 

Property expenditure evolution

FY15

HY16

FY16

HY17

Property operating expenditure percentage of gross rents

30.7%

29.2%

28.0%

25.8%

 

 

Overheads

 

We have reduced overheads by 17% to £13.4m over the period (HY16: £16.2m), leaving the business on track to deliver our £27.5m overheads target, an overall reduction of 24%. Management believe that this is a sustainable level for its medium term growth plans.

 

It is worth noting that £2.3m of overheads were recovered over the period from management fees, resulting in an overall net overhead of £11.1m (HY16: £12.9m).

 

Finance costs

 

We have reduced net finance costs by 34% to £13.7m (HY16: £20.6m). At the period end, cost of debt was 3.6%, which we view as being a sustainable medium term level. This is significantly reduced from 4.5% at the end of HY16 and 3.9% at the end of FY16.

 

 

 

Balance sheet

 

We continue to secure attractive investment opportunities aligned to our PRS investment strategy, and have seen robust growth in the net asset value of the business over the period.

 

 

Market value balance sheet (£'m)

FY16

HY17

 

 

 

Residential - PRS

461 

470

Residential - regulated tenancy

1,342 

1,340

Development work in progress

105 

125

Investment in JVs/associates

193 

191

Total investments

2,101 

2,126

 

 

 

Net debt

(764) 

(791)

Other assets/liabilities

32 

66

Discontinued (excluding loans)

11 

11

EPRA NAV

1,380 

1,412

EPRA NAV (pence per share)

330 

338

 

 

 

Deferred and contingent tax

(146) 

(147)

Fair value of fixed rate debt and derivatives

(34) 

(30)

EPRA NNNAV

1,200 

1,235

EPRA NNNAV (pence per share)

287 

295

Reversionary surplus

£327m

£314m

LTV

35.9% 

36.0%

A reconciliation between the statutory balance sheet and the market value balance sheets for both EPRA NAV and EPRA NNNAV is set out in note 3 of these results.

 

EPRA NNNAV increased by 3% in the six month period to 295p (FY16: 287p), driven by robust trading performance and valuation growth.

 

EPRA NNNAV does not include the reversionary surplus of £314m or 75 pence per share. £247m (59 pence per share) relates to our regulated tenancies which will be realised as they become vacant and are sold.

 

EPRA NNNAV is the most relevant metric for Grainger due to the contingent tax liability, 75% of which relates to our trading portfolio, predominantly our regulated tenancies, and will crystallise as our regulated tenancies are vacated and sold.

 

EPRA NNNAV movement

 

£'m

Pence per share

EPRA NNNAV at 30 September 2016

1,200

287

Profit after tax (before derivatives)

33

8

Revaluation gains on trading stock

33

8

Disposals (trading assets)

(24)

(6)

Contingent tax

(1)

-

Dividends and other

(9)

(2)

Mark to market on fixed rate debt

3

-

EPRA NNNAV at 31 March 2017

1,235

295

 

 

Property portfolio

 

Our portfolio continues to perform well. The market value increased by 2.1% over the six month period. Our confidence in the valuation of our assets is supported by the 148 units that were sold over the period, achieving on average 2% above previous valuations.

 

This compares to 2.1% for the combined average of the Nationwide and Halifax House price indices, 1.5% according to the Office of National Statistics and 2.8% for the LSL Acadata House Price Index.

 

We have seen good growth in our wholly owned portfolio in the South East, Outer London and the regions, while Inner London values were broadly flat, as shown in the table below:

 

 

Regional performance

 

Units

 

Investment value HY17 (£m)

Change since FY16

 

Central & Inner London

 

1,570

 

926

0.7%

 

Outer London

 

488

 

175

4.6%

 

South East

 

544

 

130

6.3%

 

South West

 

621

 

166

2.0%

 

East and Midlands

 

822

 

135

2.9%

 

North West

 

1,133

 

126

2.1%

 

Other regions

 

555

 

63

5.2%

 

 

 

 

 

 

 

 

Total

 

5,733

 

1,720

2.1%

 

 

 

 

Portfolio summary

The following table shows the breakdown of Grainger's portfolio, and includes the market value and vacant possession value by portfolio type (reflecting the type of tenancy).

 

 

 

 

 

 

No. units

Market value

£'m

Vacant possession value

£'m

Reversionary surplus

£'m

Residential - PRS

2,079

470

508

38

Residential - regulated tenancies

3,654

1,250

1,497

247

Residential - mortgages

667

90

88

(2)

Development work in progress

-

125

125

-

Wholly-owned assets

6,400

1,935

2,218

283

Investment in JVs/associates (Grainger share)

688

259

290

31

Total investments

7,088

2,194

2,508

314

 

 

 

 

 

Assets held-for-sale

3

3

3

-

HY17 total

7,091

2,197

2,511

314

 

 

 

 

 

Assets under management

1,482

590

664

 

Total assets under management

8,573

2,787

3,175

 

 

 

Capital structure

 

Significant improvements have been made to strengthen the capital structure of the business. Grainger is a simpler and more focused business with a much lower quantum and cost of debt.

 

In line with our strategy, we are investing in PRS assets (£78m in the period), resulting in a 4% increase in net debt to £791m (FY16: £764m), and a marginal increase in loan to value to 36.0% (FY16: 35.9%).

 

Our strong cash generation, low level of gearing and incremental cost of debt of below 2%, provide us with the capacity to successfully deliver our £850m PRS investment target. Loan to value is expected to increase to between 40% and 45% as we invest.

 

 

 

£'m

FY16 Net debt

764

            Gross rent, sales and fees

(111)

            Propex, overheads, tax and dividends

44

            Finance costs

16

            Investment

78

Movement

27

HY17 Net debt

791

 

Over the period, a £100m debt facility was refinanced and a two year extension to 2022 for £450m of Grainger's syndicated bank facility has been secured at the same margins (with options for a further two year extension).

 

Further work on our financing structure is underway, and we have made good progress in appraising new funding options for our PRS portfolio, which will provide us with longer term financing suitable for these investment assets.

 

 

FY16

HY17

Net debt

£764m 

£791m 

Consolidated LTV

 35.9%

36.0%

Headroom

 £321m

 £283m

Cost of debt (average)

 4.4%

 3.7%

Cost of debt (period end)

 3.9%

 3.6%

Hedging

87%

85%

 

Summary

 

We continue to make positive progress in growing net rental income, which is enhanced through actions we are taking to reduce costs and improve efficiencies. In particular, we are pleased with the significant improvements made to property operating expenses, overheads and finance costs.

 

We remain confident in both the ability of Grainger to continue to deliver value to shareholders, alongside a resilient property portfolio that continues to both rent and sell well.

 

 

Vanessa Simms

Chief Financial Officer

19 May 2017

 

 

 

 

Statement of Directors' responsibilities

 

The directors confirm that to the best of our knowledge:

 

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU

 

• the interim management report includes a fair review of the information required by:

 

(a)     DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

(b)     DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

The directors of Grainger plc are listed in the Grainger plc Annual Report and Accounts for the year ended 30 September 2016 and on the Grainger website: www.graingerplc.co.uk.

 

The following changes have been made since 30 September 2016: Mark Clare and Justin Read were appointed as non-executive Chairman and non-executive director respectively on 13 February 2017. Margaret Ford retired from the board on 8 February 2017.

 

 

 

Helen Gordon                                                                                   Vanessa Simms

Chief Executive Officer                                                                       Chief Finance Officer

19 May 2017                                                                                        19 May 2017

 

 

 

 

 

 

 

Independent Review Report to Grainger plc 

 

Introduction 

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Other Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the related explanatory notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

 

Directors' responsibilities 

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

 

As disclosed in note 1a, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 

 

Our responsibility 

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

 

Scope of review 

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

 

 

Conclusion 

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2017 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA. 

 

 

Bill Holland

for and on behalf of KPMG LLP 

 

Chartered Accountants 

15 Canada Square

Canary Wharf

London

E14 5GL

 

19 May 2017 

 

 

 

Condensed Consolidated Income Statement

 

 

 

Unaudited

 

 

2017

2016

For the 6 months ended 31 March

Notes

£m

£m

Group Revenue

4

117.2

109.0

Net rental income

5

20.0

18.0

Profit on disposal of trading property

6

34.1

36.1

Profit on disposal of investment property

7

0.9

0.3

Income from financial interest in property assets

15

3.4

4.5

Fees and other income

8

2.3

4.1

Administrative expenses

 

(13.4)

(16.2)

Other expenses

 

(0.7)

(0.8)

Impairment of inventories to net realisable value

 

(1.8)

(0.2)

(Impairment)/reversal of impairment of joint venture

14

(2.2)

0.4

Operating profit before net valuation gains on investment property

 

42.6

46.2

Net valuation gains on investment property

11

9.6

7.9

Operating profit after net valuation gains on investment property

 

52.2

54.1

Change in fair value of derivatives

23

0.4

(4.1)

Finance costs

 

(14.8)

(21.7)

Finance income

 

1.1

1.0

Share of profit of associates after tax

13

2.3

5.5

Share of profit of joint ventures after tax

14

-

1.8

Profit before tax - continuing operations

2

41.2

36.6

Tax charge for the period - continuing operations

18

(7.5)

(6.2)

Profit for the period - continuing operations

 

33.7

30.4

 

 

 

 

Discontinued operations

 

 

 

Loss after tax for the period for discontinued operations

 

(0.2)

(2.8)

Profit for the period attributable to the owners of the company

 

33.5

27.6

 

 

 

 

Basic Earnings per share

9

8.1p

6.7p

Diluted Earnings per share

9

8.0p

6.6p

Basic Earnings per share - continuing operations only

9

8.1p

7.3p

Diluted Earnings per share - continuing operations only

9

8.1p

7.3p

 

 

 

 

Condensed Consolidated Statement of Other Comprehensive Income

 

 

 

Unaudited

 

 

2017

2016

For the 6 months ended 31 March

Notes

£m

£m

Profit for the period - continuing operations

 

33.7

30.4

Items that will not be transferred to the consolidated income statement:

 

 

 

Actuarial gain/(loss) on BPT defined benefit pension scheme

20

4.7

(1.3)

 

 

 

 

Items that may be or are reclassified to the consolidated income statement:

 

 

 

Fair value movement on financial interest in property assets

15

(0.4)

0.6

Exchange differences on translating foreign operations

 

-

(0.8)

Exchange adjustments recycled on disposal of foreign operations

 

-

(1.7)

Changes in fair value of cash flow hedges

 

7.2

(2.6)

Other comprehensive income and expense for the period before tax

 

11.5

(5.8)

Tax relating to components of other comprehensive income:

 

 

 

Tax related to items that will not be reclassified to the consolidated income statement

18

(2.0)

0.2

Other comprehensive income and expense for the period after tax - continuing operations

 

9.5

(5.6)

Loss after tax - discontinued operations

 

(0.2)

(2.8)

Total other comprehensive income and expense for the period attributable to the owners of the Company

 

43.0

22.0

 

 

 

 

Included within the Condensed Consolidated Statement of Other Comprehensive Income is a credit of £0.2m (2016: a charge of £0.3m) in respect of associates and joint ventures.

 

 

Condensed Consolidated Statement of Financial Position

 

 

 

Unaudited

Audited

 

 

 March 2017

Sept 2016

As at 31 March 2017

Notes

£m

£m

Non-current assets

 

 

 

Investment property

11

308.9

261.3

Property, plant and equipment

 

0.9

1.1

Investment in associates

13

114.3

105.1

Investment in joint ventures

14

68.8

78.9

Financial interest in property assets

15

89.8

93.1

Deferred tax assets

18

5.3

8.6

Intangible assets

 

2.3

2.1

 

 

590.3

550.2

Current assets

 

 

 

Inventories - trading property

12

878.5

904.3

Trade and other receivables

16

99.5

64.0

Derivative financial instruments

23

1.8

0.3

Cash and cash equivalents

 

81.2

90.7

Assets classified as held-for-sale

 

3.3

3.4

 

 

1,064.3

1,062.7

Total assets

 

1,654.3

1,612.9

Non-current liabilities

 

 

 

Interest-bearing loans and borrowings

17

863.5

744.7

Retirement benefits

20

0.4

5.2

Provisions for other liabilities and charges

 

1.4

1.4

Deferred tax liabilities

18

30.1

30.2

 

 

895.4

781.5

Current liabilities

 

 

 

Interest-bearing loans and borrowings

17

(1.2)

99.0

Trade and other payables

19

39.3

38.4

Provisions for other liabilities and charges

 

0.7

0.9

Current tax liabilities

18

6.6

4.8

Derivative financial instruments

23

7.3

13.1

 

 

52.7

156.2

Total liabilities

 

948.1

937.7

Net assets

 

706.5

675.2

Capital and reserves attributable to the owners of the Company

 

 

 

Issued share capital

21

20.9

20.9

Share premium

 

110.9

110.8

Merger reserve

 

20.1

20.1

Capital redemption reserve

 

0.3

0.3

Cash flow hedge reserve

 

(6.1)

(12.0)

Available-for-sale reserve

 

6.9

7.3

Retained earnings

 

553.4

527.7

Equity attributable to the owners of the Company

 

706.4

675.1

Non-controlling interests

 

0.1

0.1

Total equity

 

706.5

675.2

 

 

 

Consolidated Statement of Changes in Equity

 

 

 

Issued share capital

Share premium

Merger reserve

Capital redemption reserve

Cash flow hedge reserve

Available for sale reserve

Retained earnings

Non-controlling interest

Total equity

For the 6 months ended 31 March 2017

Notes

£m

£m

£m

£m

£m

£m

£m

£m

£m

Balance as at 1 October 2016 (audited)

 

20.9

110.8

20.1

0.3

(12.0)

7.3

527.7

0.1

675.2

Profit for the period

 

-

-

-

-

-

-

33.5

-

33.5

Actuarial gain on BPT defined benefit pension scheme

20

-

-

-

-

-

-

4.7

-

4.7

Fair value movement on financial interest in property assets

15

-

-

-

-

-

(0.4)

-

-

(0.4)

Changes in fair value of cash flow hedges

23

-

-

-

-

7.2

-

-

-

7.2

Tax relating to components of other comprehensive income

18

-

-

-

-

(1.3)

-

(0.7)

-

(2.0)

Total comprehensive income for the period

 

-

-

-

-

5.9

(0.4)

37.5

-

43.0

Award of SAYE shares

 

-

0.1

-

-

-

-

-

-

0.1

Share-based payments charge

 

-

-

-

-

-

-

0.9

-

0.9

Dividends paid

       10

-

-

-

-

-

-

(12.7)

-

(12.7)

Balance as at 31 March 2017 (unaudited)

 

20.9

110.9

20.1

0.3

(6.1)

6.9

553.4

0.1

706.5

 

 

 

Consolidated Statement of Changes in Equity

 

 

 

Issued share capital

Share premium

Merger reserve

Capital redemption reserve

Cash flow hedge reserve

Available for sale reserve

Retained earnings

Non-controlling interest

Total equity

For the 6 months ended 31 March 2016 and 30 September 2016

Notes

£m

£m

£m

£m

£m

£m

£m

£m

£m

Balance as at 1 October 2015 (audited)

 

20.9

110.7

20.1

0.3

(3.5)

4.6

411.7

0.1

564.9

Profit for the period

 

-

-

-

-

-

-

27.6

-

27.6

Actuarial loss on BPT defined benefit pension scheme

 

-

-

-

-

-

-

(1.3)

-

(1.3)

Fair value movement on financial interest in property assets

 

-

-

-

-

-

0.6

-

-

0.6

Exchange adjustments on retranslation of foreign operations

 

-

-

-

-

-

-

(0.8)

-

(0.8)

Exchange differences recycled on disposal of foreign operations

 

-

-

-

-

-

-

(1.7)

-

(1.7)

Changes in fair value of cash flow hedges

 

-

-

-

-

(2.6)

-

-

-

(2.6)

Tax relating to components of other comprehensive income

 

-

-

-

-

-

-

0.2

-

0.2

Total comprehensive income for the period

 

-

-

-

-

(2.6)

0.6

24.0

-

22.0

Purchase of own shares

 

-

-

-

-

-

-

(0.5)

-

(0.5)

Share-based payments charge

 

-

-

-

-

-

-

1.0

-

1.0

Dividends paid

 

-

-

-

-

-

-

(8.7)

-

(8.7)

Balance as at 31 March 2016 (unaudited)

 

20.9

110.7

20.1

0.3

(6.1)

5.2

427.5

0.1

578.7

Profit for the period

 

-

-

-

-

-

-

107.7

-

107.7

Actuarial loss on BPT Limited defined benefit pension scheme

 

-

-

-

-

-

-

(2.8)

-

(2.8)

Fair value movement on financial interest in property assets

 

-

-

-

-

-

2.3

-

-

2.3

Exchange adjustments offset in reserves

 

-

-

-

-

-

-

1.9

-

1.9

Exchange differences recycled on disposal of foreign operations

 

-

-

-

-

-

-

(2.6)

-

(2.6)

Changes in fair value of cash flow hedges

 

-

-

-

-

(6.9)

-

-

-

(6.9)

Tax relating to components of other comprehensive income

 

-

-

-

-

1.0

(0.2)

1.2

-

2.0

Total comprehensive income for the period

 

-

-

-

-

(5.9)

2.1

105.4

-

101.6

Purchase of own shares

 

-

-

-

-

-

-

(0.1)

-

(0.1)

Award of SAYE shares

 

-

0.1

-

-

-

-

-

-

0.1

Share-based payments charge

 

-

-

-

-

-

-

0.9

-

0.9

Dividends paid

 

-

-

-

-

-

-

(6.0)

-

(6.0)

Balance as at 1 October 2016 (audited)

 

20.9

110.8

20.1

0.3

(12.0)

7.3

527.7

0.1

675.2

 

 

Condensed Consolidated Statement of Cash Flows

 

 

Unaudited

 

 

2017

2016

For the 6 months ended 31 March

Notes

£m

£m

Cash flow from operating activities

 

 

 

Profit for the period

 

33.5

27.6

Depreciation and amortisation

 

0.4

0.3

Net valuation gains on investment property

11

(9.6)

(3.3)

Net finance costs

 

13.7

40.3

Profit on disposal of discontinued operation

 

-

(8.6)

Share of profit of associates and joint ventures

13,14

(2.3)

(7.3)

Share-based payment charge

22

0.9

1.0

Change in fair value of derivatives

23

(0.4)

4.1

Profit on disposal of investment properties

7

(0.9)

(0.3)

Interest income from financial interest in property assets

15

(3.4)

(4.5)

Impairment/(reversal of impairment) of joint venture

14

2.2

(0.4)

Tax

18

7.6

7.1

Operating profit before changes in working capital

 

41.7

56.0

Increase in trade and other receivables

 

(8.0)

(6.7)

Decrease in trade and other payables

 

(1.8)

(3.1)

Decrease in provisions for liabilities and charges

 

(0.2)

(0.1)

Decrease in inventories

 

2.9

6.1

Cash generated from operations

 

34.6

52.2

Interest paid

 

(15.0)

(22.7)

Tax (paid)/received

18

(4.6)

0.9

Payments to defined benefit pension scheme

20

(0.3)

(0.3)

Net cash inflow from operating activities

 

14.7

30.1

Cash flow from investing activities

 

 

 

Proceeds from sale of investment property

 

3.4

6.0

Proceeds from financial interest in property assets

15

6.3

4.7

Net proceeds from disposal of discontinued operations

 

-

69.8

Interest received

 

0.1

0.4

Distributions received

13,14

2.5

0.7

Investment in associates and joint ventures

13,14

(1.6)

(16.5)

Acquisition of investment property

11

(40.4)

(33.6)

Acquisition of property, plant and equipment and intangible assets

 

(0.5)

(1.0)

Net cash (outflow)/inflow from investing activities

 

(30.2)

30.5

Cash flows from financing activities

 

 

 

Award of SAYE options

 

0.1

-

Purchase of own shares

 

-

(0.5)

Proceeds from new borrowings

 

220.0

136.6

Purchase of interest rate caps

 

-

(1.0)

Payment of loan settlement costs

 

-

(11.7)

Repayment of borrowings

 

(201.4)

(185.4)

Dividends paid

10

(12.7)

(8.7)

Net cash inflow/(outflow) from financing activities

 

6.0

(70.7)

 

 

 

Condensed Consolidated Statement of Cash Flows continued

 

 

 

Unaudited

 

 

2017

2016

For the 6 months ended 31 March

Notes

£m

£m

Net decrease in cash and cash equivalents

 

(9.5)

(10.1)

Cash and cash equivalents at the beginning of the period

 

90.7

88.8

Net exchange movements on cash and cash equivalents

 

-

0.2

Cash and cash equivalents at the end of the period

 

81.2

78.9

 

 

 

 

Cash and cash equivalents are shown as:

 

 

 

Cash and cash equivalents - Consolidated statement of financial position

 

81.2

65.7

Cash and cash equivalents - Disposal group-assets classified as held-for-sale

 

-

13.2

Cash and cash equivalents at the end of the period

 

81.2

78.9

 

The Condensed Consolidated Statement of Cash flows above includes cash flows from both continuing and discontinued operations.

 

 

Notes to the unaudited condensed interim financial results

 

1.         Accounting policies

 

1a.       Basis of preparation

 

These condensed interim financial statements are unaudited and do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.  This condensed consolidated interim financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Finance Conduct Authority and International Accounting Standard 34 (IAS 34) 'Interim Financial Reporting' as adopted by the European Union.  The interim condensed financial statements should be read in conjunction with the annual financial statements for the year ended 30 September 2016 which have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union.

 

The accounting policies used are consistent with those contained in the Group's last annual report and accounts for the year ended 30 September 2016 which is available on the Group's website (www.graingerplc.co.uk). The Grainger business is not judged to be highly seasonal, therefore comparatives used for the six month period ended 31 March 2017 Consolidated Income Statement are the six month period ended 31 March 2016 Consolidated Income Statement. It is therefore not necessary to disclose the Consolidated Income Statement for the full year ended 30 September 2016 (available in the last annual report).

 

The comparative figures for the financial year ended 30 September 2016 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

The financial information included in this preliminary announcement has been prepared in accordance with EU endorsed IFRS, IFRS IC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

All property assets are subject to a Directors' valuation at the half year end, supported by an independent external valuation on a sample basis. The Group's financial derivatives were valued as at 31 March 2017 by external consultants, using a discounted cash flow model and quoted market information.

 

Taxation is calculated based upon the best estimate of the weighted average corporation tax rate expected for the full year.

 

1b.       Adoption of new and revised International Financial Reporting Standards

 

New standards and interpretations in the year

 

New standards, amendments and interpretations that have been published and are therefore mandatory for the Group's accounting periods beginning on or after 1 October 2016 and later periods are disclosed on page 102 of the Annual Report and Accounts for the year ended 30 September 2016.  There is no material impact from the adoption of these IFRS's, IFRIC interpretations and amendments in this condensed consolidated interim financial information.

 

1c.       Group risk factors

 

The principal risks and uncertainties facing the Group are set out in the Risk Management report on pages 30 - 33 of the 2016 Annual Report and Accounts.

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

A number of risks faced by the Group are not directly within our control such as the wider economic and political environment.

 

Risks are outlined on pages 28 - 29 of the Annual Report for September 2016. There have been no significant updates to risk, or failures of control, within the reporting period.

 

1d.       Forward-looking statements

 

Certain statements in this interim announcement are forward-looking.  Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct.

 

Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.  We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

 

1e.       Significant judgements and estimates

 

Full details of critical accounting estimates are given on pages 103 - 108 of the Annual Report for the year ended 30 September 2016.  There has been no significant change made in the period ended 31 March 2017.

Notes to the unaudited condensed interim finance results (continued)

 

2.         Analysis of profit before tax-continuing operations

 

The results for the six months ended 31 March 2017 and 2016 respectively have been affected by valuation movements and non-recurring items.  The table below provides further analysis of the Condensed Consolidated Income Statement showing the results of trading activities separately from these other items.

 

For the 6 months ended 31 March

2017

 

2016

£m

Statutory

Valuation

Non-recurring

Adjusted earnings

 

Statutory

Valuation

Non - recurring

Adjusted earnings

Group revenue

117.2

-

-

117.2

 

109.0

-

-

109.0

Net rental income

20.0

-

-

20.0

 

18.0

-

-

18.0

Profit on disposal of trading property

34.1

-

-

34.1

 

36.1

-

-

36.1

Profit on disposal of investment property

0.9

-

-

0.9

 

0.3

-

-

0.3

Income from financial interest in property assets

3.4

(0.3)

-

3.1

 

4.5

(1.3)

-

3.2

Fees and other income

2.3

-

-

2.3

 

4.1

-

(0.8)

3.3

Administrative expenses

(13.4)

-

-

(13.4)

 

(16.2)

-

-

(16.2)

Other expenses

(0.7)

-

0.3

(0.4)

 

(0.8)

-

0.4

(0.4)

Impairment of inventories to net realisable value

(1.8)

1.8

-

-

 

(0.2)

0.2

-

-

(Impairment)/reversal of impairment of joint venture

(2.2)

2.2

-

-

 

0.4

(0.4)

-

-

Operating profit before net valuation gains on investment property

42.6

3.7

0.3

46.6

 

46.2

(1.5)

(0.4)

44.3

Net valuation gains on investment property

9.6

(9.6)

-

-

 

7.9

(7.9)

-

-

Operating profit after net valuation gains on

investment property

52.2

(5.9)

0.3

46.6

 

54.1

(9.4)

(0.4)

44.3

Change in fair value of derivatives

0.4

(0.4)

-

-

 

(4.1)

4.1

-

-

Finance costs

(14.8)

-

-

(14.8)

 

(21.7)

-

0.1

(21.6)

Finance income

1.1

-

-

1.1

 

1.0

-

-

1.0

Share of profit of associates after tax

2.3

(1.1)

-

1.2

 

5.5

(4.8)

-

0.7

Share of profit of joint ventures after tax

-

-

-

-

 

1.8

(1.7)

-

0.1

Profit before tax - continuing operations

41.2

(7.4)

0.3

34.1

 

36.6

(11.8)

(0.3)

24.5

Tax charge for the year - continuing operations

(7.5)

 

 

 

 

(6.2)

 

 

 

Profit after tax - continuing operations

33.7

 

 

 

 

30.4

 

 

 

Loss before tax - discontinued operations

(0.1)

 

 

 

 

(1.9)

 

 

 

Tax charge - discontinued operations

(0.1)

 

 

 

 

(0.9)

 

 

 

Profit for the year attributable to the owners of the company

33.5

 

 

 

 

27.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share - adjusted

 

 

 

6.6p

 

 

 

 

4.7p

 

Notes to the unaudited condensed interim finance results (continued)

 

Non-Recurring

 

Non-recurring items comprise restructuring costs of £0.3m (2016 £0.4m). Non-recurring items in 2016 also included £0.1m related to accelerated write off of loan costs after refinancing the bank syndicate and income of £0.8m from a claim against a contractor.

 

3.         Segmental information

 

IFRS 8 'Operating Segments' (IFRS 8) requires operating segments to be identified based upon the Group's internal reporting to the Chief Operating Decision Maker (CODM) so that the CODM can make decisions about resources to be allocated to segments and assess their performance.  The Group's CODM is the Chief Executive Officer.  The significant segments for continuing operations are outlined below. The title 'Other' has been included in the tables below to reconcile the segments to the figures reviewed by the CODM. The key operating performance measure of profit or loss used by the CODM is on adjusted earnings, being profit before tax, valuation and non-recurring items. The CODM reviews by segment two key statement of financial position measures of net asset value.  These are EPRA Net Asset Value and EPRA Triple Net Asset Value.

 

2017 Income Statement - Continuing Operations (unaudited)

 

 

£m

Residential

Development

Funds

Other

Total

Group revenue

 

 

 

 

 

Segment revenue - external

80.3

34.9

2.0

-

117.2

Net rental income

19.9

0.1

-

-

20.0

Profit on disposal of trading property

27.8

6.3

-

-

34.1

Profit on disposal of investment property

0.9

-

-

-

0.9

Income from financial interest in property assets

-

-

-

3.1

3.1

Fees and other income

0.1

0.2

2.0

-

2.3

Administrative expenses

(2.8)

(0.9)

(0.3)

(9.4)

(13.4)

Other expenses

(0.3)

-

-

(0.1)

(0.4)

Operating profit/(loss) before interest and trading from joint ventures and associates

45.6

5.7

1.7

(6.4)

46.6

Net finance costs

(14.1)

1.1

(0.7)

-

(13.7)

Share of trading profit from joint ventures and associates after tax

-

-

1.2

-

1.2

Adjusted earnings

31.5

6.8

2.2

(6.4)

34.1

Valuation movements

 

 

 

 

7.4

Net non-recurring items

 

 

 

 

(0.3)

Profit before tax - continuing operations

 

 

 

 

41.2

 

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

2016 Income Statement - Continuing Operations (unaudited)

 

£m

Residential

Development

Funds

Other

Total

Group revenue

 

 

 

 

 

Segment revenue - external

92.3

13.2

2.7

0.8

109.0

Net rental income

17.9

0.1

-

-

18.0

Profit on disposal of trading property

32.1

4.0

-

-

36.1

Profit on disposal of investment property

0.3

-

-

-

0.3

Income from financial interest in property assets

-

-

-

3.2

3.2

Fees and other income

0.4

0.2

2.7

-

3.3

Administrative expenses

(4.3)

(0.9)

(1.4)

(9.6)

(16.2)

Other expenses

(0.2)

(0.1)

-

(0.1)

(0.4)

Operating profit/(loss) before interest and trading from joint ventures and associates

46.2

3.3

1.3

(6.5)

44.3

Net finance costs

(18.6)

(0.6)

(0.7)

(0.7)

(20.6)

Share of trading profit from joint ventures and associates after tax

-

-

0.8

-

0.8

Adjusted earnings

27.6

2.7

1.4

(7.2)

24.5

Valuation movements

 

 

 

 

11.8

Net non-recurring items

 

 

 

 

0.3

Profit before tax - continuing operations

 

 

 

 

36.6

 

Segmental assets

 

The majority of the Group's properties are classified as trading stock and are therefore shown in the statutory statement of financial position at the lower of cost and net realisable value.  This does not reflect the market value of the assets and, accordingly, the Group's key statement of financial position measures of net asset value include trading stock at market value.  The two principal net asset value measures reviewed by the CODM are EPRA NAV and EPRA NNNAV.

 

EPRA NAV is the statutory net assets plus the adjustment required to increase the value of trading stock from its statutory accounts value of the lower of cost and net realisable value, to its market value. In addition, the statutory statement of financial position amounts for both deferred tax on property revaluations and derivative financial instruments net of deferred tax, including those in joint ventures and associates, are added back to statutory net assets.  Finally, the market value of Grainger plc shares owned by the Group is added back to statutory net assets.

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

EPRA NNNAV reverses some of the adjustments made between statutory net assets and EPRA NAV.  All of the adjustments for the value of derivative financial instruments net of deferred tax, including those in joint ventures and associates, are reversed.  The adjustment for the deferred tax on property revaluations is also reversed.  In addition, adjustments are made to net assets to reflect the fair value, net of deferred tax, of the Group's fixed rate debt and to deduct from net assets the contingent tax calculated by applying the expected rate of tax to the adjustment to increase the value of trading stock from its statutory accounts value of the lower of cost and net realisable value, to its market value.

 

These measures are set out below by segment along with a reconciliation to the summarised statutory statement of financial position. 

 

March 2017 Reconciliation of NAV measures (Unaudited)

 

£m

Statutory balance sheet

Adjustments to market value, deferred tax and derivatives

Deferred and contingent tax

Derivatives

EPRA NNNAV balance sheet

Investment property

308.9

-

308.9

-

-

308.9

Property, plant and equipment

0.9

-

0.9

-

-

0.9

Investment in associates

114.3

1.0

115.3

-

(1.0)

114.3

Investment in joint ventures

68.8

7.3

76.1

(6.9)

(0.4)

68.8

Financial interest in property assets

89.8

-

89.8

-

-

89.8

Deferred tax asset

5.3

(1.2)

4.1

-

6.2

10.3

Intangible assets

2.3

-

2.3

-

-

2.3

Inventories - trading property

878.5

658.5

1,537.0

-

-

1,537.0

Trade and other receivables

99.5

-

99.5

-

-

99.5

Derivative financial instruments

1.8

(1.8)

-

-

1.8

1.8

Cash and cash equivalents

81.2

-

81.2

-

-

81.2

Assets classified as held-for-sale

3.3

-

3.3

-

-

3.3

Value of own shares held

-

6.8

6.8

-

-

6.8

Total assets

1,654.6

670.6

2,325.2

(6.9)

6.6

2,324.9

Interest-bearing loans and borrowings

(862.3)

-

(862.3)

-

(29.5)

(891.8)

Retirement benefits

(0.4)

-

(0.4)

-

-

(0.4)

Provisions for other liabilities and charges

(2.1)

-

(2.1)

-

-

(2.1)

Deferred and contingent tax liabilities

(30.1)

28.3

(1.8)

(140.2)

-

(142.0)

Trade and other payables

(39.3)

-

(39.3)

-

-

(39.3)

Current tax liabilities

(6.6)

-

(6.6)

-

-

(6.6)

Derivative financial instruments

(7.3)

7.3

-

-

(7.3)

(7.3)

Total liabilities

(948.1)

35.6

(912.5)

(140.2)

(36.8)

(1,089.5)

Net assets

706.5

706.2

1,412.7

(147.1)

(30.2)

1,235.4

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

March 2017 Segment net assets (Unaudited)

 

 

Continuing

 

 

 

£m

Residential

Development

Funds

Other

 

Total

Pence per share

Total segment net asset (statutory)

361.0

132.8

105.9

106.8

 

706.5

-

Total segment net assets (EPRA NAV)

1,055.3

125.3

114.0

118.1

 

1,412.7

338

Total segment net assets (EPRA NNNAV)

913.7

126.6

106.0

89.1

 

1,235.4

295

 

'Other' includes CHARM assets.

 

September 2016 Reconciliation of NAV measure (audited)

 

£m

Statutory balance sheet

Adjustments to market value, deferred tax and derivatives

Deferred and contingent tax

Derivatives

Investment property

261.3

-

261.3

-

-

261.3

Property, plant and equipment

1.1

-

1.1

-

-

1.1

Investment in associates

105.1

1.4

106.5

-

(1.4)

105.1

Investment in joint ventures

78.9

7.2

86.1

(6.9)

(0.3)

78.9

Financial interest in property assets

93.1

-

93.1

-

-

93.1

Deferred tax asset

8.6

(2.5)

6.1

-

7.0

13.1

Intangible assets

2.1

-

2.1

-

-

2.1

Inventories - trading property

904.3

649.4

1,553.7

-

-

1,553.7

Trade and other receivables

64.0

-

64.0

-

-

64.0

Derivative financial instruments

0.3

(0.3)

-

-

0.3

0.3

Cash and cash equivalents

90.7

-

90.7

-

-

90.7

Assets classified as held-for-sale

3.4

-

3.4

-

-

3.4

Value of own shares held

-

7.5

7.5

-

-

7.5

Total assets

1,612.9

662.7

2,275.6

(6.9)

5.6

2,274.3

Interest-bearing loans and borrowings

(843.7)

-

(843.7)

-

(26.8)

(870.5)

Retirement benefits

(5.2)

-

(5.2)

-

-

(5.2)

Provisions for other liabilities and charges

(2.3)

-

(2.3)

-

-

(2.3)

Deferred and contingent tax liabilities

(30.2)

28.5

(1.7)

(138.8)

-

(140.5)

Trade and other payables

(38.4)

-

(38.4)

-

-

(38.4)

Current tax liabilities

(4.8)

-

(4.8)

-

-

(4.8)

Derivative financial instruments

(13.1)

13.1

-

-

(13.1)

(13.1)

Total liabilities

(937.7)

41.6

(896.1)

(138.8)

(39.9)

(1,074.8)

Net assets

675.2

704.3

1,379.5

(145.7)

(34.3)

1,199.5

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

September 2016 Segment net assets (audited)

 

 

Continuing

 

 

 

£m

Residential

Development

Funds

Other

 

Total

Pence per share

Total segment net asset (statutory)

363.4

96.9

116.6

98.3

 

675.2

-

Total segment net assets (EPRA NAV)

1,048.7

89.5

124.9

116.4

 

1,379.5

330

Total segment net assets (EPRA NNNAV)

908.5

90.8

116.6

83.6

 

1,199.5

287

 

'Other' includes CHARM assets.

 

4.         Group revenue

 

Unaudited

 

2017

2016

 

£m

£m

Gross rental income

26.9

25.5

Gross proceeds from disposal of trading property

88.0

79.4

Fees and other income

2.3

4.1

 

117.2

109.0

 

5.         Net rental income

 

Unaudited

 

2017

2016

 

£m

£m

Gross rental income

26.9

25.5

Property repair and maintenance costs

(6.9)

(7.5)

 

20.0

18.0

 

6.         Profit on disposal of trading property

 

Unaudited

 

2017

2016

 

£m

£m

Proceeds from disposal of trading property

72.6

79.4

Revenue from construction contract

15.4

-

Gross proceeds from disposal of trading property

88.0

79.4

Selling costs

(1.5)

(1.7)

Net proceeds from disposal of trading property

86.5

77.7

Carrying value of trading property sold

(42.9)

(41.6)

Carrying value of construction contract expenses

(9.5)

-

 

34.1

36.1

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

7.         Profit on disposal of investment property

 

Unaudited

 

2017

2016

 

£m

£m

Gross proceeds from disposal of investment property

3.4

1.4

Selling costs

(0.1)

-

Net proceeds from disposal of investment property

3.3

1.4

Carrying value of investment property sold

(2.4)

(1.1)

 

0.9

0.3

 

 

8.         Fees and other income

 

Unaudited

 

2017

2016

 

£m

£m

Property and asset management fee income

2.3

3.3

Other income

-

0.8

 

2.3

4.1

 

Prior year other income includes £0.8m of non-recurring income which relates to the recovery of a claim made against a contractor.

 

9.         Earnings per share

 

Basic

 

Basic earnings per share is calculated by dividing the profit or loss attributable to the owners of the Company by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Group and held both in Trust and as treasury shares to meet its obligations under the Long Term Incentive Scheme ('LTIS'), Deferred Bonus Plan ('DBP') and SAYE schemes.

 

Diluted

 

Diluted earnings per share is calculated by adjusting the weighted average number of shares in issue by the dilutive effect of ordinary shares that the Company may potentially issue relating to its share option schemes and contingent share awards under the LTIS and DBP, based upon the number of shares that would be issued if 31 March 2017 was the end of the contingency period.  Where the effect of the above adjustments is antidilutive, they are excluded from the calculation of diluted earnings per share.

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

 

Unaudited

 

31 March 2017

 

31 March 2016

 

Profit for the year £m

Weighted average number of shares (thousands)

Earnings per share pence

 

Profit for the year £m

Weighted average number of shares (thousands)

Earnings per share pence

Basic earnings per share - continuing and discontinued operations

 

 

 

 

 

 

 

Profit attributable to equity holders

33.5

415.4

8.1

 

27.6

413.9

6.7

Effect of potentially dilutive securities

 

 

 

 

 

 

 

Share options and contingent shares

-

2.2

(0.1)

 

-

3.5

(0.1)

Diluted earnings per share - continuing and discontinued operations

 

 

 

 

 

 

 

Profit attributable to equity holders

33.5

417.6

8.0

 

27.6

417.4

6.6

Basic earnings per share - continuing operations only

 

 

 

 

 

 

 

Profit attributable to equity holders

33.7

415.4

8.1

 

30.4

413.9

7.3

Effect of potentially dilutive securities

 

 

 

 

 

 

 

Share options and contingent shares

-

2.2

-

 

-

3.5

-

Diluted earnings per share - continuing operations only

 

 

 

 

 

 

 

Profit attributable to equity holders

33.7

417.6

8.1

 

30.4

417.4

7.3

 

10.       Dividends

 

The Company has announced an interim dividend of 1.60p (March 2016: 1.45p) per share which will return £6.7m (March 2016: £6.0m) of cash to shareholders.  In the six months ended 31 March 2017, the final proposed dividend for the year ended 30 September 2016 which amounted to £12.7m has been paid.

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

11.       Investment property

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

 

£m

£m

Opening balance at 1 October

261.3

357.8

Additions

40.4

79.5

Disposals - continuing operations

(2.4)

(2.4)

Disposals - discontinued operations

-

(9.2)

Business disposal

-

(188.3)

Net transfer to assets classified as held-for-sale

-

(3.1)

Net valuation gains - continuing operations

9.6

20.3

Net valuation gains - discontinued operations

-

(0.9)

Exchange adjustments

-

7.6

Closing balance

308.9

261.3

 

 

12.       Inventories

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

 

£m

£m

Residential trading property

802.8

818.8

Development trading property

75.7

85.5

 

878.5

904.3

 

 

13.       Investment in associates

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

 

£m

£m

Opening balance at 1 October

105.1

108.4

Share of profit for the period - continuing

2.3

9.8

Share of profit for the period - discontinued

-

0.2

Dividends received

-

(7.5)

Loans advanced to associates

6.6

10.5

Exchange adjustments

-

0.6

Share of change in fair value of cash flow hedges taken through other comprehensive income

0.3

(0.8)

Disposal

-

(16.1)

Closing balance

114.3

105.1

 

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

13.       Investment in associates (continued)

 

As at 31 March 2017, the Group's interest in associates was as follows:

 

 

% of ordinary share capital/ equity held

Country of incorporation

GRIP REIT PLC

24.9

UK

Vesta LP

15.0

UK

 

14.       Investment in joint ventures

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

 

£m

£m

Opening balance at 1 October

78.9

70.8

Share of profit for the period - continuing

-

5.1

Dividends received

(2.5)

-

(Impairment)/reversal of impairment

(2.2)

14.1

Loan interest (received)/paid

(0.3)

0.1

Loans advanced to joint ventures

1.0

5.5

Loans repaid by joint ventures

(6.0)

(16.7)

Share of change in fair value of cash flow hedges taken through other comprehensive income

(0.1)

-

Closing balance

68.8

78.9

 

The closing balance comprises share of net assets of £52.4m (2016: £55.0m) and net loans due from joint ventures of £16.4m (2016: £23.9m).

 

As at 31 March 2017, the Group's interest in joint ventures was as follows:

 

 

% of ordinary share capital held

Country of incorporation

Curzon Park Limited

50

United Kingdom

King Street Developments (Hammersmith) Limited

50

United Kingdom

Walworth Investment Properties Limited

50

United Kingdom

CCZ a.s.

50

Czech Republic

CCY a.s.

50

Czech Republic

Prazsky Projekt a.s.

50

Czech Republic

 

 

Notes to the unaudited condensed interim finance results (continued)

 

15.       Financial interest in property assets

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

 

£m

£m

Opening balance at 1 October

93.1

93.7

Cash received from the instrument

(6.3)

(9.3)

Amounts taken to income statement

3.4

5.8

Amounts taken to other comprehensive income before tax

(0.4)

2.9

Closing balance

89.8

93.1

 

Amounts taken to the income statement in respect of the six months ended 31 March 2017 was £3.4m (31 March 2016: £4.5m).

 

Financial interest in property assets relates to the CHARM portfolio, which is a financial interest in equity mortgages held by the Church of England Pensions Board as mortgagee. It is accounted for under IAS 39 in accordance with the designation available-for-sale financial assets and is valued at fair value. The fair value of the Group's interest has decreased and this decrease of £0.4m since September 2016 has been recognised in the statement of other comprehensive income available for sale reserve. £2.9m was taken to other comprehensive income in the year ended September 2016.

 

16.       Trade and other receivables

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

 

£m

£m

Rent and other tenant receivables

3.1

3.1

Deduct: Provision for impairment of trade receivables

(0.5)

(0.5)

Rent and other tenant receivables - net

2.6

2.6

Amounts recoverable on contracts

70.9

50.5

Other receivables

16.8

4.2

Prepayments

9.2

6.7

 

99.5

64.0

 

 

 

Notes to the unaudited condensed interim finance results (continued)

 

17.       Interest-bearing loans and borrowings and financial risk management

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

 

£m

£m

Current liabilities

 

 

Bank loans

(1.7)

(1.5)

Non-bank financial institution

1.1

101.1

Corporate bond

(0.6)

(0.6)

 

(1.2)

99.0

Non-current liabilities

 

 

Bank loans

582.5

447.7

Non-bank financial institution

7.6

23.9

Corporate bond

273.4

273.1

 

863.5

744.7

Total interest-bearing loans and borrowings

862.3

843.7

 

 

17.       Interest-bearing loans and borrowings and financial risk management - continued

 

Categories of financial instrument

 

The Group holds financial instruments such as financial interest in property assets, trade and other receivables (excluding prepayments), derivatives cash and cash equivalents.  For all assets and liabilities, excluding interest bearing loans, the book value was the same as the fair value as at 31 March 2017 and as at 30 September 2016.

 

As at 31 March 2017, the fair value of interest bearing loans is greater by £29.5m (September 2016: £26.8m) than the book value, but there is no requirement under IAS 39 to adjust the carrying value of loans, all of which are stated at unamortised cost in the consolidated statement of financial position.

 

Market risk

 

The Group is exposed to market risk through interest rates, foreign exchange fluctuations, the availability of credit and house price movements relating to the Tricomm Housing portfolio and the CHARM portfolio.  The Group internally measures its market risk exposure by running sensitivity analyses using a 1% per cent movement in interest rates as a reasonable possible change.

 

As at 31 March 2017, 85% (September 2016: 87%) of the group's borrowings were economically hedged to fixed or capped rate.  Based on the Group's interest profile on the date of 31 March 2017, a +/- 1% change in interest rates would decrease/increase profits by £2.0m (September 2016: £1.8m). Based on a 19.5% effective tax rate the effect on equity of a 1% change would be £11.3m (September 2016: £14.5m).  Interest rate swaps protect against interest rate movements.  Where the Group's swaps qualify as effective hedges under IAS 39, movements on these swaps are recognised directly in other comprehensive income.

 

 

Notes to the unaudited condensed interim finance results (continued)

 

Fair value

 

IFRS 13 sets out a three tier hierarchy for financial assets and liabilities valued at fair value.  These are as follows:

 

Level 1 -          quoted prices (unadjusted) in active markets for identical assets and liabilities,

Level 2 -          inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 -          unobservable inputs for the asset or liability.

 

See pages 142 - 143 of the Annual Report and Accounts for September 2016 for details about definitions used for specific Grainger assets and liabilities.  Fair value for swaps and other liabilities fall within Level 2.  The CHARM portfolio (note 15) the Tricomm Housing portfolio, and investment property fall within Level 3.  See note 15 for movement in financial interest in property assets and note 11 for movement in investment property.

 

 

31 March 2017 (unaudited)

 

30 Sept 2016

(audited)

 

Assets

Liabilities

 

Assets

Liabilities

 

£m

£m

 

£m

£m

Level 3

 

 

 

 

 

Financial interest in property assets

89.8

-

 

93.1

-

Investment property

308.9

-

 

261.3

-

 

398.7

-

 

354.4

-

Level 2

 

 

 

 

 

Interest rate swaps - in cash flow hedge accounting relationships

1.2

7.3

 

-

13.1

Interest rate caps - not in cash flow hedge accounting relationships

0.6

-

 

0.3

-

Assets classified as held-for-sale

3.3

-

 

3.4

-

 

5.1

7.3

 

3.7

13.1

 

 

 

Notes to the unaudited condensed interim finance results (continued)

18.       Tax

 

 

 

 

                                                          Unaudited

£m

 

 

As at 30 Sept 2016

(audited)

Payments in the period

Movements recognised in income

Movements recognised in other comprehensive income

As at 31 March 2017

Current tax

 

 

4.8

(4.6)

6.4

-

6.6

Deferred tax

 

 

 

 

 

 

 

Trading property uplift to fair value on business combinations

 

11.4

-

(0.4)

-

11.0

Investment property revaluation

 

17.0

-

0.3

-

17.3

Accelerated capital allowances

 

(0.2)

-

-

-

(0.2)

Short-term timing differences

 

(4.5)

-

1.3

-

(3.2)

Actuarial deficit on BPT Limited pension scheme

 

(1.0)

-

-

0.7

(0.3)

Equity component of available-for-sale financial asset

 

1.4

-

-

-

1.4

Fair value movement in cash flow hedges and exchange

 

(2.5)

-

-

1.3

(1.2)

 

 

 

21.6

-

1.2

2.0

24.8

Total tax - movement

 

 

26.4

(4.6)

7.6

2.0

31.4

 

The total tax charge for the period of £7.6m (2016: £7.1m) comprises:

 

 

 

Unaudited

 

2017

2016

 

£m

£m

UK Tax

7.5

7.3

Overseas Tax (discontinued)

0.1

(0.2)

 

7.6

7.1

 

The main rate of Corporation tax in the UK fell from 20% to 19% from 1 April 2017 and will fall to 17% from 1 April 2020. Accordingly the Group's results for this accounting period are taxed at an effective rate of 19.5%. Deferred tax has been predominantly calculated at a rate of 17% (September 2016: 17%).

 

Deferred tax balances are disclosed as follows:

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

 

£m

£m

Deferred tax assets: non-current assets

5.3

8.6

Deferred tax liabilities: non-current liabilities

(30.1)

(30.2)

Deferred tax

(24.8)

(21.6)

 

 

Notes to the unaudited condensed interim finance results (continued)

19.       Trade and other payables

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

 

£m

£m

Deposits received

3.0

2.6

Trade payables

13.1

16.0

Tax and social security costs

4.0

0.2

Accruals

17.1

18.2

Deferred income

2.1

1.4

 

39.3

38.4

 

Deferred income includes £2.1m (2016: £1.4m) of rent received in advance.

 

20.       Retirement benefits

 

The Group retirement benefit liability decreased by £4.8m to £0.4m in the six months ended 31 March 2017.  The Group obtained an updated valuation of the assets and liabilities of the pension scheme for the purposes of the interim financial statements.  The brought forward deficit of £5.2m was reduced by £0.2m of contributions and by £4.7m of actuarial gains and increased by £0.1m interest charged to the income statement.  The assumptions used by the actuary reflect the market conditions as at 31 March 2017. Demographic and life expectancy assumptions are unchanged from the previous year end.

 

Assumptions

 

 

31 March 2017 (unaudited)

30 Sept 2016 (audited)

Discount rate

2.50%

2.25%

Retail Price Index (RPI) Inflation

2.85%

3.10%

Consumer Price Index (CPI) Inflation

1.85%

2.10%

Salary increases

3.35%

3.60%

Rate of increase of pension payment

5.00%

5.00%

Rate of increase for deferred pensioners

1.85%

2.10%

 

21.       Capital

 

As at 31 March 2017 there were 416,944,132 ordinary shares and 1,506,300 treasury shares in issue.  The increase since September 2016 of 75,897 relate to the exercise of SAYE options.

 

22.       Share based payment arrangements

 

The Group operates an equity-settled, share-based compensation plan comprising awards under a long term incentive plan ('LTIP'), a deferred bonus plan ('DBP'), a share incentive plan ('SIP') and a save as you earn scheme ('SAYE').  Accounting for these schemes is consistent with the accounting described in the full year annual report in the year to 30 September 2016.  The share based payments charge recognised in the income statement for the period is £0.9m (2016: £1.0m).

Notes to the unaudited condensed interim finance results (continued)

 

23.       Derivative financial instruments

 

 

31 March 2017 (unaudited)

 

30 Sept 2016
(audited)

 

Assets

Liabilities

 

Assets

Liabilities

 

£m

£m

 

£m

£m

Interest rate derivatives - in cash flow hedge accounting relationships

1.2

7.3

 

-

13.1

Interest rate derivatives - not in cash flow hedge accounting relationships

0.6

-

 

0.3

-

 

1.8

7.3

 

0.3

13.1

                   

 

In accordance with IAS 39, the Group has reviewed its interest rate hedges.  In the absence of hedge accounting, movements in fair value have been taken directly to the income statement.  However, where derivatives qualify for cash flow hedge accounting, the movement in fair value is taken to other comprehensive income through the cash flow hedge reserve. During the 6 months ended 31 March 2017 there was a credit to the cash flow hedge reserve of £7.2m net of tax (six months to 31 March 2016 a debit of £2.6m) in respect of derivatives.

 

The fair value movement relating to cash flow hedges not in hedge accounting relationships amounted to a credit through the income statement of £0.4m (March 2016: charge of £4.1m).

 

24.       Related party transactions

 

During the period ended 31 March 2017 the Group transacted with its joint ventures and associates (details of which are set out in notes 13 and 14).  The related party transactions recognised in the Income Statement and Statement of Financial Position are as follows:

 

The Group provides a number of services to its joint ventures and associates including property and asset management services.  The fees earned and outstanding in respect of these services are set out below:

 

 

Unaudited

 

 

31 March 2017

 

31 March 2016

 

 

Fees recognised

Period end balance

 

Fees recognised

Period end balance

 

£'000

£'000

 

£'000

£'000

GRIP REIT PLC

1,897

1,727

 

1,805

1,687

Grainger Stuttgart Portfolios

-

-

 

288

-

Walworth Investment Properties Limited

20

20

 

20

20

 

1,917

1,747

 

2,113

1,707

             

 

 

 

Notes to the unaudited condensed interim finance results (continued)

The interest earned on loans and balances outstanding are set out below:

 

 

                                   Unaudited

 

31 March 2017

Interest recognised

31 March 2017

Period end loan balance

31 March 2017

Interest Rate

31 March 2016

Interest recognised

30 Sept 2016

Period end loan balance (audited)

30 Sept 2016 Interest Rate (audited)

 

£'000

£m

%

£'000

£m

%

GRIP REIT PLC

375

22.7

Nil and 4.75

423

19.9

Nil and 4.75

Czech Republic combined

58

(3.4)

4.00

-

(3.6)

4.00

Curzon Park Limited*

-

21.9

Nil

-

19.5

Nil

King Street Development (Hammersmith) Limited *

-

8.2

Nil

-

6.8

Nil

Walworth Investment Properties Limited

156

-

7.00

226

6.7

7.00

Vesta LP

-

0.1

Nil

-

0.1

Nil

 

589

49.5

 

649

49.4

 

 

* The amount disclosed above is the gross loan amount. Some provisions have been made against the loans.

 

 

 

 

 


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