Final Results
Grainger Trust PLC
6 December 2001
GRAINGER TRUST PLC:
PRELIMINARY RESULTS FOR 12 MONTHS TO 30TH SEPTEMBER 2001
HIGHLIGHTS
* Pre-tax profits, before exceptional item and share of joint venture
rise to £22.2m + 38%
* Net Asset Value per share increases to £12.22 + 24%
* NNNAV per share advances to £9.00 + 21%
* Final dividend of 9.68p per share recommended - making 12.33p
per share for year + 15%
* Earnings per share - post exceptional item and share of joint venture
- remain constant at 43.4p
* Like for like earnings per share 61p + 42%
* Market value of all properties now stands at £428m against book
cost of £257m comprising:
- Tenanted Residential - £288m
- Development + Trading - £113m
- Investment Properties - £ 27m
* Gearing is down from 73% to conservative 67%
* Major events of year under review include:
- Joint venture acquisition of BPT - owner of 11,000 residential units
- Vacant Possession value of tenanted residential rose to £389m
despite fewer units
- Development trading profits up 66% to £9.6m
- Disposal of investment properties continued - sales of £40m
Stephen Dickinson, Managing Director said:-
* 'This has been an excellent year for the Group. Not only has the
underlying business performed strongly with profits up by more than a
third but the Group has made a substantial advance with the joint venture
acquisition of BPT. We are making progress with our development and
trading activities and the successful programme of disposal of our
investment properties materially funded our share of the BPT JV. Gearing
remains at conservative levels and we are confident of our ability to
generate future cashflow and profits.'
- more -
Grainger Trust plc
Preliminary Results For The Year
Ended 30th September 2001
Results and Dividend
The results for the year show an increase of 38% in pre tax profit to £22.2m
(2000: £16.1m). Two deductions have to be made to this figure this year: an
exceptional item of £3.5m relating to costs incurred on the part redemption of
the Quoted Debentures; and £3.3m being our 50% share of the pre tax loss of
the Bromley Property Holdings Limited (BPHL) Joint Venture which owns BPT
Limited. These two adjustments reduce the pre tax profit to £15.4m. The
increase in Group profitability before these items comes from tenanted
residential, residential land and the successful implementation of the
investment property rationalisation programme.
Basic earnings per share remain constant at 43p (2000: 43p) after the two
deductions mentioned above. On a like for like basis earnings per share would
have increased by 42% to 61p.
Year end Net Assets per share (NAV), prior to contingent taxation on
revaluation surpluses and the FRS13 cost of debt adjustment, have increased by
24% to £12.22 (2000: £9.85). NNNAV per share has increased by 21% to £9.00
(2000: £7.41); deductions from NAV are £2.93 (2000: £2.18) for contingent
taxation and 29p (2000: 26p) for FRS 13.
Your Directors are recommending a final dividend of 9.68p per share (2000:
8.42p), payable on the 6th March 2002 to shareholders on the register at the
close of business on 15th February 2002. This, together with the interim
dividend of 2.65p per share paid in July will amount to 12.33p per share, an
increase of 15% (2000: 10.72p) for the third successive year.
The dominant event of the year has been the investment of £54m in a 50%
interest in BPT via the Joint Venture with Deutsche Bank Real Estate Private
Equity Group. BPT was the largest quoted company in the Tenanted Residential
sector, owning some 11,000 residential units and was double the size of
Grainger.
BPT
As expected, the BPHL Joint Venture recorded a loss after tax in the period
since the acquisition of BPT on 26th May this year, our share being £2.0m. We
are making good progress with our initial programme of rationalising the
property portfolio, mainly through the sale of non-regulated assets. We have
sold a number of portfolios of tenanted property and are increasing cashflow
by selling Assured Shortholds (AST) on vacancy where appropriate. By the end
of November we had completed £97m of sales, including £23m for BPT's 22%
interest in Mountview Estates plc. Currently a further £83m of property is
under offer. We are also considering whether there is an opportunity to
introduce institutional funding into the new build AST Portfolio. The
disposal programme is resulting in the degearing of the Joint Venture, whose
debt is non recourse to ourselves.
We are very grateful to Rupert Dickinson, our Deputy Managing Director, for
the effort he has put into the BPHL's Joint Venture acquisition of BPT, for
his leadership role during the takeover period and for driving through the
disposal programme. We are encouraged by the general quality of the BPT
properties, and would express our gratitude to the BPT staff for their
co-operation during this period.
Grainger Group Operational Structure
This has been simplified by separating the Group's activities into two
divisions: the long term core business of Tenanted Residential; and
Development and Trading.
Review of Operations
Tenanted Residential
The operating contribution has increased by 8% to £22.2m (2000: £20.5m)
Trading profits increased to £16.5m (2000: £13.6m) but net rents decreased to
£7.7m (2000: £8.7m) because of heavy planned repair expenditure. The
contribution to operating cashflow in the year was £42m. During the financial
year house price growth continued in London and the South East, although at a
lower level than in 2000 (2001: 8%, 2000: 20%). Price increases were to a
greater extent a feature in the South/South West (2001: 21%, 2000: 15%), and
for the first time for some years we have seen noticeable price increases in
certain areas in the Midlands and the North (2001:5%,
2000: 0%). The tragic events at the World Trade Centre have had a visible
effect on higher priced properties, otherwise the market continues as normal.
The average vacant possession value of our properties at the end of the
financial year was £75,000 (2000: £65,000). We have continued to sell lower
priced tenanted residential units typically built in the past by major
industries, where the purchasers are prepared to pay well in excess of vacant
possession value, basing their approach on income yield. The Government was
successful in the House of Lords on the rent capping issue, and two yearly
registered rent re-registrations are now restricted to inflation over the
period plus 5%.
Our stock of residential units fell over the year from 5,250 to 4,946, mainly
as the result of the lower value disposal programme referred to above. Vacant
possession value however has increased to £389m (2000: £352m). Since the year
end we have bought and made arrangements to acquire 479 units, the major
purchase being the Ideal Benefit Society high quality portfolio in Birmingham.
Residential unit numbers reflecting these transactions as at 30th November
this year totalled 5,261. The investment value of the tenanted residential
portfolio was £288m (2000: £259m) at the year end.
Development and Trading
Development
The operating contribution, which includes the net rentals from the investment
portfolio, has risen 39% to £15.1m (2000: £10.9m). Net rents have decreased
to £5.5m (2000: £7.0m), because of sales of investment properties, whilst
trading profits have increased to £9.6m (2000: £5.8m). The contribution to
operating cashflow was £43m, excluding the sale of investment properties
referred to below.
We are very pleased that our four unit 157,000 sq.ft. warehouse scheme at
Thurrock, undertaken with our partners Astral, has received the Industrial
Agents' Society 2001 Award as the Best Speculative Warehouse Scheme in the
United Kingdom. One unit of 30,000sq.ft. was sold in the financial year.
Since the year end a further unit of 21,000 sq.ft. has been sold and we are in
detailed negotiations concerning the sale of the third 65,000 sq.ft. unit.
Construction has started on our 190,000 sq.ft. Landmark Place project in the
centre of Slough, undertaken with our partners Frontier Estates Limited. To
date the hotel element has been sold; the leisure unit is pre-let; we are in
discussions with a number of potential operators for the restaurant unit, and
there is early interest in the 67,000sq.ft. office premises. The offices
feature 18,000 sq.ft. divisible floorplates, a favourable car parking
allocation of 188 spaces and a two minute walk to the railway station.
Completion is expected in mid 2003.
Detailed planning permission has been obtained for two schemes which are part
of the overall Kennel Farm development at Basingstoke. We intend to start
construction of the Local Centre at an early date. It will serve the
residential development which is likely to consist of retail premises, a
surgery, a creche and 24 flats. Construction of the 100,000 sq.ft. B1 office
park is being deferred for the time being because of current economic
uncertainties, although its proximity to junction 7 on the M3 is a particular
advantage.
The 5 acre West Waterlooville site, currently allocated for leisure, may well
be delayed until the detail of the proposed Major Development Area (MDA) is
considerably further advanced. The Townsend House office and mixed used
scheme in Victoria was the subject of a public inquiry held in November and we
await the result. The property is rent producing, and if not redeveloped
would remain a satisfactory reversionary investment currently valued well in
excess of cost.
Construction is expected to start in early 2002 on the Pimlico bus station
residential and retail scheme, where we have worked closely with Network
Housing Association in the design and forward financing of the 79 private flat
element. The 21 flats at Redcliffe Backs, Bristol, were sold and the Eaton
Square and Uxbridge Street, Kensington properties were disposed of prior to
development. These were all realised on satisfactory terms, with proceeds
totalling £14m. Since the year end we have purchased a mixed residential and
warehouse property with an option to buy an adjoining site in Macaulay Road,
Clapham. We would intend to develop this £27m scheme between 2003 and 2005.
We have arranged to purchase 31 flats now under construction from house
builders in Altrincham and Newcastle upon Tyne, which we intend to sell
individually on completion.
Investment Properties
We have continued the programme of divestment of our investment properties.
During the year we have sold £40m of our commercial portfolio at a profit of £
1.7m over the September 2000 valuation, leaving a balance of £27m at current
values. Further sales are planned.
Residential Land
Fifteen acres of land were sold at Kennel Farm during the year.
Infrastructure work on the main distributor road to base course level should
complete during the first half of 2002. This will allow the sale of the next
two sites totalling fourteen acres to a major house builder, leaving a balance
of fifteen acres. The nine developable acres purchased last year at the south
east corner of Kennel Farm, which are allocated as residential in the
Basingstoke and Deane Local Plan, are the subject of a detailed planning
application and an option to a national house builder. We expect this
application to be referred to the Government Office for the South East as it
is a greenfield site planned to accommodate slightly more than 150 dwellings.
We continue with the consultation and preliminary planning studies required
for the West Waterlooville MDA. The first draft Local Plans for Winchester
and Havant have now been published and these include the initial 2,000
residential unit MDA allocation. Public inquiries are expected to be held in
early 2003, with the Inspectors' reports being available in 2004.
We are about to start construction of 27 houses on our first East
Northumberland Coastal Plain site,which is within easy commuting distance of
Newcastle. We have an existing permission to build 60 houses, and an
application for a further 78 houses is to be the subject of a public inquiry
to be held later this month.
The development and trading portfolios, including the remainder of the
investment properties, have a total investment value of £140m (2000: £178m)
and a rentroll of £5m at the year end.
Personnel
This has been a year of great endeavour and achievement by your Executive
Directors in the acquisition of the BPT JV 50% interest. Since 26th May this
year they have had the additional tasks of involvement in the running of the
business and its disposal programme. All our staff have performed well in
producing these excellent results for the year and your Board are very
grateful to them. The movement to new offices in Newcastle has materially
improved the working conditions and efficiency of our staff.
Prospects
The Group has taken a very major step forward through its acquisition of the
50% interest in the BPT Joint Venture. We continue to acquire tenanted
residential stock to maintain and strengthen the profitability and cashflow
generation of our core business. This enables us to develop our trading
activities, where the mixture of the right expertise and opportunities can be
particularly rewarding. Your Board has given priority to the recruitment of
capable and qualified entrepreneurial managers to carry the Group's activities
forward. Gearing continues to be at a conservative level for our type of
business at 67% (2000: 73%). It is possible that recent world events and
general economic uncertainties may affect some areas of the property industry
in which the Group operates. A degree of caution is therefore required. Your
Directors remain confident of the strengths of the Group's businesses, and its
ability to produce satisfactory results and real growth in the future.
Registered Office:-
Robert Dickinson
Times Square CHAIRMAN
Newcastle upon Tyne
NE1 4EP 6th December 2001
GRAINGER TRUST plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 2001
Year Ended Year Ended
30.09.2001 30.09.2000
Normal Exceptional Total
£'000 £'000 £'000 £'000
Turnover (including share of
joint venture)
Continuing Operations 99,303 - 99,303 68,218
Acquisition 25,415 - 25,415 -
124,718 - 124,718 68,218
Less: Share of turnover of (25,415) - (25,415) -
joint venture - acquisition
Group Turnover 99,303 - 99,303 68,218
Gross rentals 23,177 - 23,177 24,705
Trading profits 26,142 - 26,142 19,441
Other income 330 - 330 346
49,649 - 49,649 44,492
Less: -
Property expenses (10,009) - (10,009) (9,054)
Administration expenses (4,015) - (4,015) (3,391)
Group operating profit - 35,625 - 35,625 32,047
continuing operations
Share of operating profit in -
joint venture - acquisition
(after £18,000 (2000 : £nil) 6,185 - 6,185 -
amortisation of goodwill)
Total operating profit : 41,810 - 41,810 32,047
group and share of joint
venture
Net profit/(loss) on
disposal of & provisions
against fixed assets
- Group 1,726 - 1,726 (699)
- Joint venture 219 - 219 -
1,945 - 1,945 (699)
Profit on ordinary 43,755 - 43,755 31,348
activities before interest
Net interest payable and
similar charges
- Group (15,137) (3,487) (18,624) (15,252)
- Joint venture (9,715) - (9,715) -
(24,852) (3,487) (28,339) (15,252)
Profit on ordinary 18,903 (3,487) 15,416 16,096
activities before taxation
Tax on profit on ordinary (5,761) 1,046 (4,715) (5,150)
activities
Profit on ordinary 13,142 (2,441) 10,701 10,946
activities after taxation
Dividends (3,042) - (3,042) (2,666)
Retained profit for the 10,100 (2,441) 7,659 8,280
period
Basic earnings per share 53.3 (9.9) 43.4 43.3
Diluted earnings per share 53.0 (9.8) 43.2 43.1
GRAINGER TRUST plc
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30TH SEPTEMBER 2001
Year Year
Ended Ended
30.09.2001 30.09.2000
Profit for the financial year 10,701 10,946
Taxation on realisation of property revaluation (2,020) (950)
gains of previous years
Surplus on investment properties transferred to - (7,931)
stock
Unrealised surplus / (deficit) on revaluation of 107 (269)
properties
Diminution transferred from revaluation reserve 400 -
to profit and loss account
Total gains and losses recognised - group 9,188 1,796
Share of joint venture tax on realisation of (179) -
revaluation surpluses
Unrealised surplus on revaluation of joint 3,045 -
venture properties
Total gains and losses recognised since the last 12,054 1,796
annual report - group and joint venture
GRAINGER TRUST plc
CONSOLIDATED BALANCE SHEET
AT 30 SEPTEMBER 2001
30.09.01 30.09.00
£'000 £'000
Fixed assets
Intangible assets 41 80
Tangible assets 27,567 64,886
Investments:
Investment in joint venture: Share of 453,011
gross assets
Share of gross(438,373)
liabilities
14,638
Goodwill
arising on 423
acquisition
15,061
Loan to Joint Venture 40,000
55,061 -
Other investments 834 866
55,895
83,503 65,832
Current assets
Stocks 234,359 220,157
Debtors 5,197 7,276
Cash at bank and in hand 23,090 7,549
262,646 234,982
Creditors: amounts falling due within one
year
Short term borrowings 31,312 26,092
Other creditors 19,618 20,287
Net current assets 211,716 188,603
Total assets less current liabilities 295,219 254,435
Creditors: amounts falling due after more
than one year 192,652 159,461
Provision for liabilities and charges
Deferred taxation 4,089 5,576
Net assets 98,478 89,398
Capital and reserves
Called-up share capital 6,170 6,164
Share premium account 20,800 20,738
Revaluation reserve 10,112 11,258
Capital redemption reserve 185 185
Profit and loss account 61,207 51,049
Equity shareholders' funds 98,474 89,394
Minority interests 4 4
Total capital employed 98,478 89,398
GRAINGER TRUST GROUP
CASHFLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2001
2001 2000
£'000 £'000
Net cash inflow / (outflow) from operating 25,174 (19,929)
activities
Returns on investments and servicing of finance
Interest received 380 282
Interest paid (22,463) (15,571)
Dividends received 23 7
(22,060) (15,282)
Taxation
UK corporation tax paid (8,509) (7,312)
Capital expenditure and financial investment
Purchase of fixed asset investments - (828)
Purchase of tangible fixed assets (639) (1,477)
Sale of fixed asset investments 32 -
Sale of tangible fixed assets 39,994 19,905
39,387 17,600
Acquisitions and disposals
Purchase of subsidiaries - (5,859)
Costs on purchase of subsidiaries - (125)
Net cash acquired with subsidiaries - 271
Investment in Joint Venture (54,201) -
(54,201) (5,713)
Equity dividends paid (2,729) (2,438)
Cash (outflow) before financing (22,938) (33,074)
Financing
New loans raised 85,923 43,388
Repayment of loans (47,512) (17,064)
Issue of shares 68 140
Buy back of shares - (4,273)
Net cash inflow from financing 38,479 22,191
Increase / (decrease) in cash in the period 15,541 (10,883)
2001 2000
£000 £000
Group operating profit 35,625 32,047
Depreciation 197 157
Amortisation of goodwill 39 39
Decrease / (increase) in debtors 3,454 (3,086)
Increase in creditors 61 1,089
Increase in stocks (14,202) (50,175)
Net cash inflow / (outflow) from operating 25,174 (19,929)
activities
This preliminary announcement was approved by the Board of Directors on 6th
December 2001.
This announcement does not constitute statutory accounts within the meaning of
Section 240 of the Companies Act 1985. Statutory accounts for the year ended
30th September 2000 have been filed with the Registrar of Companies. The
auditors have reported on these accounts; their report was unqualified and did
not contain any statement under Section 237(2) or (3) of the Companies Act
1985.
The release of this announcement has been agreed by the Group's auditors,
Pricewaterhouse-Coopers. It is expected that the auditors' report on the
statutory accounts for the year ended 30th September 2001 will be unqualified.
Copies of this announcement can be obtained from the Company's registered
office, Times Square, Newcastle upon Tyne. NE1 4EP
NOTES TO THE RESULTS ANNOUNCEMENT
1. Property valuations
For NAV purposes, all properties are shown at valuation.
Investment properties are shown in the balance sheet at valuation, while
trading stock, which consists of tenanted residential properties and
development and trading properties, are shown at the lower of cost and net
realisable value.
Directors' valuations of tenanted residential properties have been arrived at
from in-house or managing agents' valuations. Chesterton have undertaken an
independent review of the Directors' valuations and have been able to state
that they fairly reflect the open market value of the residential properties
in the portfolio as at 30th September 2001.
All other property and land portfolios have been valued by qualified
professional valuers.
The comparison of cost, net of provisions, against valuation, on the above
basis, is as follows:
30th September 2001 30th September 2000
Cost Valuation Cost Valuation
£m £m £m £m
Investment properties 22.4 27.0 56.3 64.5
Trading stock
Tenanted residential properties 163.1 287.7 152.4 258.9
Development and trading 71.3 113.1 67.8 114.6
234.4 400.8 220.2 373.5
Total properties 256.8 427.8 276.5 438.0
2. Net asset value per share
This consists of balance sheet equity plus the excess of market value over
book cost of trading stock, together with our share of the excess of market
value over the book cost of the net assets of Bromley Property Holdings
Limited and its subsidiaries.
Net asset value per share at 30th September 2001 before the adjustments
referred to below was £12.22, compared with £9.85 at 30th September 2000.
Two proforma adjustments are commonly made to NAV:
i) Contingent tax
This is the tax that would be payable if all Group and Joint Venture
properties were disposed of at valuation, and amounts to £2.93 per share
(2000: £2.18).
ii) FRS13
This records the difference between the current market value of fixed rate
debt and derivatives and their book values of the group and its share of the
joint venture. After allowing for tax, this adjustment is 29p (2000: 26p).
This results in a net net net asset value per share (NNNAV) of £9.00 (2000: £
7.41).
3. Earnings per share
The calculation of earnings per share is based on the weighted average of
24,660,074 ordinary shares in issue during the year (2000: weighted average
25,258,530). The diluted earnings per share is based on a weighted average of
24,779,114 ordinary shares (2000: weighted average 25,376,250).
4. Dividends
Dividends on ordinary shares:-
30.9.2001 30.9.2000
£'000s £'000s
Interim paid of 2.65p per share (2000: 2.30p per share) 653 590
Final proposed of 9.68p per share (2000: 8.42p per 2,389 2,076
share)
3,042 2,666
5. Reconciliation of Net Cashflow Etc.
30.9.2001 30.9.2000
£'000s £'000s
Increase/(decrease) in cash over period 15,541 (10,883)
Cash inflow from increase in debt (38,411) (26,324)
Change in net debt resulting from cashflows (22,870) (37,207)
Other non-cash items:-
Loans acquired with subsidiary - (4,597)
Movement in net debt for the period (22,870) (41,804)
Net debt at 1 October 2000 (178,004) (136,200)
Net debt at 30 September 2001 (200,874) (178,004)
6. Taxation
Tax on profit on ordinary activities:-
30.9.2001 30.9.2000
Group £'000s £'000s
Normal 7,066 5,150
Exceptional item (1,046) -
6,020 5,150
Joint venture (1,305) -
4,715 5,150
Contact: Grainger Trust plc Tel: 0191 261 1819
Stephen Dickinson Managing Director
Andrew Cunningham Finance Director
Baron Phillips Associates Tel: 020 7397 8932
Baron Phillips
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