Final Results - Pre-tax Profit Up 46%
Grainger Trust PLC
9 December 1999
Grainger Trust plc
Preliminary Results for the Year Ended 30th September 1999
Grainger Trust plc, the tenanted residential property specialist, today
announces Preliminary Results for the year ended 30th September 1999.
Highlights are as follows:-
* Pre-tax profits before exceptional net credit up 46 percent to £12.3
million (1998: £8.4 million).
* Earnings per share before exceptional items up 47 percent to 33.9p
(1998 : 23.1p).
* Exceptional credit of £16.5 million following receipt of Outline
Planning Permission for Kennel Farm in June. The cost of debt
restructuring of £4.6 million reduced this to a net exceptional credit
of £11.9 million.
* Net Asset Value per share after exceptional credit increased by 52
percent to £7.08 (as at 30th September 1998: £4.67).
* Proposed Dividends for the year of 9.32p per share, an increase of 15
percent (1998: 8.1p).
Commenting on the results, Stephen Dickinson, Managing Director said:-
' I am delighted to report an excellent result for the year in which the
highlight was the securing of Outline Planning Permission for Kennel Farm
in June. This followed a prolonged period of uncertainty surrounding the
project; we are already beginning to benefit from the cashflows associated
with its development, enabling us to exploit opportunities elsewhere across
the business.
'In particular, we continue to invest in Tenanted Residential stock
following another strong performance from this division. Within the
Commercial division, we have made a number of portfolio and policy changes
to improve capital performance, and see considerable scope for a more
creative approach incorporating new build.
'Overall the Group has a strong financial and operational base from which
to progress and we remain confident for the future.'
Enquires
Stephen Dickinson Managing Director Grainger Trust plc 0191 261 1819
Andrew Cunningham Financial Director Grainger Trust plc
James Garthwaite Brunswick Group 0171 404 5959
Tricia Parish Brunswick Group
Results and Dividend
The results for the year ended 30th September 1999 show a pre tax profit up
46 percent to £12.3m (prior to the exceptional net credit of £11.9m) (1998:
£8.4m). The exceptional credit consists of the write back of provisions of
£16.5m on Kennel Farm on obtaining Outline Planning Permission in June this
year, net of loan restructuring costs of £4.6m.
Earnings per share (prior to the exceptional items) increased 47 percent to
33.9p per share (1998: 23.1p).
Year end Net Asset Value prior to contingent tax on revaluation surpluses
('NAV') per share has increased by 52 percent to £7.08 (1998: £4.67).
Retained profits including the net exceptional items, and year end property
valuation surpluses, contributed 58p and £1.83p respectively.
The Directors are recommending a final dividend of 7.32p per share (1998:
6.35p per share), payable on 29th February 2000 to shareholders on the
register at the close of business on 4th February 2000. Dividends for the
year will amount to 9.32p, an increase of 15 percent (1998: 8.1p).
Review of Operations
Tenanted Residential
The operating contribution has increased 19 percent to £17.5m from £14.7m
last year. Gross and net rentals have increased to £13.0m (1998: £11.8m)
and £7.4m (1998: £6.9m) respectively. Trading profits have increased to
£11.5m (1998: £9.0m), and are the major factor in the pre exceptional
profit increase. The majority of our stock, by vacant possession value, is
in London and the South East, and selling prices realised for properties
sold in this region in the year, have exceeded our estimate of vacant
possession value as at 30th September 1998 by 20 percent. We have spent
£23m on replacement stock during the year, 71 percent of this being
regulated tenancies. This included major portfolios in London, Liverpool
and Glasgow, and the deposit on 21 flats to be built by a national house
builder at Redcliffe Backs in Bristol. Sales are satisfactory in all
regions.
Since the year end we have completed the acquisition of Real Estate
Securities Limited (RES), on 4th October, for a consideration of £6.1m
which takes into account debt, associated liabilities and deferred
taxation. RES brings with it nine properties in London, in the Kensington
and Fulham areas, valued at £12m. These properties are income producing
and the majority have outline planning permission for redevelopment,
principally for residential use. We expect to carry through this programme
over the next five years. We have also entered into a conditional agreement
with a major Housing Association concerning the 79 flat and car space
private housing element of the redevelopment of the Victoria Bus Station.
We will be entitled to share in the gross proceeds of the private housing
element, and can also opt to retain all or part of it for our own account.
This development should start next year and complete in late 2002.
Rental increases on two-yearly reviews have declined from 18 percent to 15
percent over the year, due to the effect of capping. The gap, however,
between regulated and market rents continues and is most noticeable in
London and the South East where regulated rents are typically some 55
percent of market.
The increase in NAV arising from the year end valuation, is £24.5m, or 97p
per share.
Commercial
The operating contribution fell by 6 percent to £7.8m (1998: £8.3m). The
decline is due in great part to timing, in that sales of £12m occurred
earlier in the year, with purchases of £9m mainly in the second half. It
also relates to our policy of purchasing lower yielding properties, that
are either reversionary, or where there is the prospect of increasing value
through redevelopment on expiry of existing leases. This policy has also
led to us buying in interests which adjoin existing holdings with a view to
creating marriage value or redevelopment surpluses.
Purchases in the year include properties in each of these categories.
Examples include a reversionary shop in Notting Hill Gate with a rent
review due in February 2000, two properties adjoining existing holdings, an
office building in Slough and 4 shops in Winsford. The major purchase in
the year was Townsend House, a 20,000 sq.ft. office building in Victoria
let to London Regional Transport until 2003, when we believe it will be
suitable for a major redevelopment, subject to planning. We have also
completed the redevelopment of the former Safeway store in Tonbridge,
increasing its size from 11k sq.ft. to 16k sq.ft., having prelet it to
Lidl on a 25 year lease.
Since the year end we have purchased 163-165 Westbourne Grove, Notting
Hill, London for £2.5m, to be let on a 35 year lease at an initial yield of
9.4 percent to a niche hotel operator. We have also exchanged contracts on
the purchase of 1 Uxbridge Street in Kensington, for £4.1m, let to the
Voyager Group (a Branson company) to 2012 at an initial yield of 7.2
percent, and a retail park in central Accrington for £3.6m at an initial
yield of 8.3 percent. The retail park has an open A1 planning consent, and
tenants are Halfords, Netto, Poundstretcher and GUS. We are exploring a
number of new build industrial opportunities.
Whilst the total return on our commercial portfolio is satisfactory, it has
been biased towards rental yield rather than capital growth. We are taking
steps to improve the capital performance of the portfolio by increasing the
speed at which we dispose of non performing assets and smaller lot sizes
and by careful reinvestment in the areas set out above. We are also
improving the skill base within the group and will become more involved in
direct development. In this regard we are pleased to have recruited James
Fielder, a development surveyor who was previously with Pillar Property
plc.
The increase in NAV arising from the year end valuation is £6.0m, or 24p
per share.
Land Development
The operating contribution has increased to £0.9m as opposed to a deficit
of £0.3m last year as a result of land sales commencing on our 70
developable acre Kennel Farm site, planning consent finally being received
in June. The first site was sold in the year, and an adjacent site has
been sold since the start of the current year. A strong level of interest
exists in the site from house builders, and the programme of major site
infrastructure works is in hand.
The Waterlooville Major Development Area (MDA) has been confirmed for 2000
housing units in the recently published Modifications to the Hampshire
County Structure Plan, with a further 1000 units being additional as part
of the County's proposed site specific reserve allocation. This hopefully
returns us to the 3000 house target for the site. An inaugural meeting of
the West Waterlooville Working Party, set up by the local Councils to
discuss all matters relevant to the MDA, has taken place. We have also
exercised our option on the 5 acre parcel, allocated for leisure use in the
Havant Town Plan, which is situated at what is likely to be the main
entrance to the proposed MDA.
The increase in NAV, arising from the year end valuation is £15.6m, or 62p
per share.
Personnel
This has been an extremely active year, overshadowed by Peter Milburn's
illness, which led to his decision to resign from the Board at the year
end. Peter has made a most important contribution to Grainger through the
years, managing the land development activity at Hatch Warren, and the long
battle of Kennel Farm, which was to all intents and purposes won prior to
his ceasing work. We extend to him every good wish for the recovery of his
health and the enjoyment of his retirement.
All our staff have made a tremendous effort to produce these excellent
results, and we are grateful to Andy James of DTA Management Services, who
has helped us to drive forward the land development activity. We also pay
tribute to the entrepreneurial approach of our London staff, ably led by
Rupert Dickinson, and to Brian Crumbley and his team for their continuous
hard work in developing and controlling the portfolios overseen by the
Newcastle office.
Prospects
This has been a very satisfactory year with material achievements in all
our fields of activity, particularly in residential sales in the South East
and at Kennel Farm. The Group's strategy of operating across three sectors
of property provides the firm base, which allows the Group to balance long
term positions with cash generative development activity.
Group cashflow is rising because of higher selling prices in tenanted
residential and is now materially enhanced by Kennel Farm coming on stream.
The Group's priorities are to continue to develop its main areas of
activity, whilst using our increasing cashflow to seek higher returns from
a more entrepreneurial approach within our areas of expertise. This will
very probably involve material elements of new build and refurbishment.
Gearing, which was 188 percent at October 1995, and 115 percent at the
start of the year, fell to 77 percent at the year end. This creates
opportunities for the future. Your Board consider that these excellent
results indicate that your Group has the correct strategies, the management
team and the asset base, to continue to record strong growth.
Registered Office
Chaucer Buildings Robert Dickinson
57 Grainger Street Chairman
Newcastle upon Tyne.
NE1 5LE 10th December 1999
GRAINGER TRUST plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30TH SEPTEMBER 1999
Year ended 30th September 1999
Year
Excluding Ended 30
Exceptional Exceptional September
Item Item Total 1998
£000s £000s £000s £000s
Turnover 60,118 60,118 44,812
-------- ----------- ------- ------
Gross rental income
22,752 22,752 21,915
Trading profits 12,601 12,601 8,843
Exceptional item:
Write back of
provision against
development land 16,457 16,457 -
Other income 361 361 283
------- ------- ------
35,714 16,457 52,171 31,041
Less:
Property expenses (6,970) (6,970) (6,220)
Administrative
expenses (3,164) (3,164) (2,536)
--------- -------- ------ ------
Operating Profit 25,580 16,457 42,037 22,285
Net profit on sale
of fixed assets 641 641 442
--------- -------- ------ -------
Profit on ordinary
activities before
interest 26,221 16,457 42,678 22,727
Net interest and
similar charges (13,891) (4,569) (18,460) (14,323)
--------- -------- ------- --------
Profit on ordinary
activities before
taxation 12,330 11,888 24,218 8,404
Taxation (3,766) (3,626) (7,392) (2,605)
-------- -------- ------- -------
Profit on ordinary
activities after
taxation 8,564 8,262 16,826 5,799
Dividends (2,353) (2,353) (2,045)
-------- -------- ------- ------
Retained profit for
the year
6,211 8,262 14,473 3,754
-------- --------- ------- -----
Earnings per share 33.9p 32.7p 66.6p 23.1p
--------- ------- ------- ------
Fully diluted
earnings per share 33.8p 32.6p 66.4p 23.0p
--------- -------- ------- -------
GRAINGER TRUST plc
CONSOLIDATED BALANCE SHEET
AT 30TH SEPTEMBER 1999
30.09.99 30.09.98
£000s £000s
Fixed assets
Tangible assets 115,879 107,248
Investments 302 302
Negative goodwill (205)
-------- --------
115,976 107,550
-------- --------
Current assets
Stocks 134,475 118,343
Debtors:
Amounts falling due within one year 4,023 4,989
Cash at bank and in hand 18,432 8,074
------- --------
156,930 131,406
-------- --------
Creditors: amounts falling due within one year
Short term borrowings 9,967 6,552
Other creditors 19,054 18,450
------- --------
Net current assets 127,909 106,404
------- --------
Total assets less current liabilities 243,885 213,954
Creditors: amounts falling due after more
than one year 144,665 137,930
Provision for liabilities and charges
Deferred taxation 5,019 2,801
-------- --------
Net assets 94,201 73,223
-------- --------
Capital and reserves
Called-up share capital 6,312 6,312
Share premium account 20,435 20,435
Revaluation reserve 22,369 15,965
Capital reserves 14,093 14,473
Profit and loss account 30,988 16,034
-------- --------
Equity shareholders' funds 94,197 73,219
Minority interests 4 4
------- --------
Total capital employed 94,201 73,223
------- --------
Notes:
1. PROPERTY VALUATIONS
Properties were valued at 30th September 1999 by qualified professional
valuers. Investment properties are shown in the Balance Sheet at valuation.
Trading properties are shown at the lower of cost and net realisable value.
The comparison of cost net of provisions against valuation, on the same basis,
is as follows:-
£m
30th September 30th September
1999 1998
Cost Valuat- Cost Valuat-
ion ion
Investment
Properties:-
Commercial
Properties 88.6 106.3 88.8 100.1
Tenanted
Residential 6.8 9.2 4.5 6.6
----- ------ ------ ------
95.4 115.5 93.3 106.7
Trading Properties
134.5 219.1 118.3 163.1
----- ------ ------ ------
229.9 334.6 211.6 269.8
----- ------ ------ ------
2. NET ASSET VALUE PER SHARE
Net asset value per share as adjusted for market value of trading properties
(as described in Note 1. above), but excluding any provision for contingent
tax, was £7.08 as compared with £4.67 at 30th September 1998. This increase
includes a net movement of 33p in respect of exceptional items.
3. EARNINGS PER SHARE
The calculation of earnings per share is based on 25,247,387 ordinary shares
in issue during the period (1998: weighted average 25,103,168). The diluted
earnings per share is based on a weighted average of 25,353,410 ordinary
shares (1998: 25,167,099).
4. FRS 13 ADJUSTMENT
The after tax adjustment on marking the value of our long term debt
and derivatives to market has moved as follows:-
NAV Per
£m Share (p)
At 1st October 1998 10.4 41
Loan restructure (3.3) (13)
Movements on derivatives and loans (1.8) (7)
------- --------
At 30th September 1999 5.3 21
------- --------
The FRS 13 adjustment is not included in the year end NAV.
GROUP CASHFLOW FOR THE YEAR ENDED 30TH SEPTEMBER 1999
1999 1998
£'000s £'000s
Operating profit on continuing 42,037 22,285
operations
Movement on Kennel Farm provision (16,457) -
Cost of trading properties sold 18,141 12,260
Depreciation 247 222
-------- --------
Gross cashflow from continuing 43,968 34,767
operations
Net interest payable (20,551) (14,478)
-------- --------
Operating cashflow 23,417 20,289
Sales of commercial property and fixed
assets 13,455 8,107
Shares issued on acquisition of
subsidiary 3,809
Goodwill acquired 205 (201)
-------- --------
Available cashflow 37,077 32,004
Tax and dividends paid (5,954) (2,798)
17,542
New loans raised 10,865
Loans repaid (7,392) (11,934)
Net loans raised 10,150 (1,069)
Additions to trading properties (18,773) (30,646)
Additions to commercial property/fixed
assets (15,515) (5,267)
-------- --------
6,985 (7,776)
Movements in debtors and creditors 3,373 (858)
-------- --------
Net cash movement for year 10,358 (8,634)
Opening cash 8,074 16,708
-------- --------
Closing cash 18,432 8,074
-------- --------
The purpose of the above statement is to show the major elements of
cashflow for the year ended 30 September 1999. The financial statements of
the Group will include a cashflow statement prepared in accordance with
FRS1.
This announcement does not constitute statutory accounts within the meaning
of Section 240 of the Companies Act 1985. Statutory accounts for the
period ended 30th September 1998 have been filed with the Registrar of
Companies. The auditors have reported on these accounts; their report was
unqualified and did not contain a 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,
PricewaterhouseCoopers. The statutory accounts of the Group for the year
ended 30th September 1999 have been prepared, but the auditors' report has
yet to be signed. It is expected that the auditors' report on the
statutory accounts for the year ended 30th September 1999 will be
unqualified.