INTERIM RESULTS

RNS Number : 2389M

Grainger PLC

20 May 2010

 



20 May 2010

Grainger plc ("Grainger"/"Group"/"Company")

INTERIM RESULTS FOR THE SIX MONTHS TO 31 MARCH 2010

Grainger shows return to profit and active acquisitions and disposal programme

Grainger plc, the UK's largest quoted residential property owner, announces its results for the six months ended 31 March 2010.

Financial highlights

·    Operating profit of £48.0m (31 March 2009  £41.3m) (before valuation movements and non-recurring items) an increase of 16% over the same period in 2009

·    Profit before tax improved to £3.5m (31 March 2009: £143.0m loss)

·    Gross NAV per share of 191p (30 Sept 2009: 194p*); Grainger NAV of 173p (30 Sept 2009: 177p*). Full valuation not undertaken at half year

·    Residential sales of £79m completed (2009: £55m) with margins on sales of vacant properties improving to 42% from 37% in 2009. These sales have been made at values approximately 6% above September vacant possession values, during which time the average Nationwide and Halifax indices increased by 3%

·    Total sales pipeline (including properties in solicitors' hands and contracts exchanged) at 31 March 2010 was £108m (2009: £86m) and this had increased to  £121m at 14 May 2010.

·    Successful Rights Issue completed in December 2009, raising £236.7m (net), providing Grainger with additional equity finance to improve the Group's balance sheet leverage ratios, reduce the overall size and cost of its debt and better enable it to recommence active trading

·    At 31 March 2010, Group cash and committed facilities amounted to c.£300m

·    Interim dividend of 0.5p per share (2009: nil)

Operational highlights

·     Following improved market stability and strengthening of its financial position, the Group has commenced selective residential acquisitions at attractive prices. At 31 March, property valued at £43m had been acquired (completed, exchanged contracts or put into solicitors' hands). At 14 May, this figure was £52m

·     Acquisitions focus is on well priced, quality properties in areas where the Group anticipates long term capital growth will be the strongest and where values will be most protected against any future downturn

·    Group's ability to generate income in adverse conditions remains strong with cashflow from operating activities of £50m (31 Mar 2009: £55m)

·     In addition to the appointment of Andrew Cunningham as Chief Executive in October 2009, in April the Group announced the appointments to the Board of Nick Jopling (Executive Director responsible for property and real estate matters), Mark Greenwood (Finance Director) and Peter Couch (Chief Operating Officer and Executive Director responsible for Grainger's Retirement Solutions business).

·     On 6 May, Grainger announced a recommended offer for Sovereign Reversions plc ("Sovereign") of 202p per share representing an acquisition price of approximately £34.2m. At 31 October 2009, Sovereign's interim results indicated that it owned equity release assets of c.£63.7m (as at 30 April 2009 values)

* Restated to allow for the effects of the Rights Issue, which was completed in December 2009

Robin Broadhurst, Chairman of Grainger plc, commented:

"Prospects for the Group are good. We have a resilient high quality portfolio of residential assets supported by an experienced team with a broad base of knowledge across the residential sector.  Recently announced Board appointments and our financial restructuring will serve to strengthen this position further.

"Although we anticipate that general economic conditions will continue to be challenging for some time, our resilient, cash generative portfolio will stand us in good stead.  Our immediate focus is to take advantage of buying opportunities in our core reversionary portfolios and to leverage our residential skills and experience to explore value accretive and well-priced opportunities on behalf of our shareholders, investors and partners.

"Historical results show the long term strength of returns from the residential sector compared to commercial real estate: over the last 50 years real house prices have risen by 274% compared to a 55% fall in real commercial property values (source: IPD).  Returns such as these together with, for example, the HCA's Private Rented Sector Initiative, have heightened interest in the residential sector as an asset class suitable for institutional investment.

"We believe that we are well placed to take advantage of this momentum and look forward to the future with confidence."

Analyst presentation

Grainger plc will be holding a presentation for analyst and investors today at 11.00a.m. at JP Morgan Cazenove, 20 Moorgate, London, EC2R 6DA.

The meeting can be accessed through the following dial-in facility and a copy of the presentation slides will be available on Grainger's website, www.graingerplc.co.uk.

Participant Dial in Number: [phone]

The Conference ID number is 76910537

For further information, please contact:

Grainger plc

Andrew Cunningham/Dave Butler

Tel: [phone]

Financial Dynamics

Stephanie Highett / Dido Laurimore / Rachel Drysdale

Tel: [phone]

Chairman's Statement

Grainger has shown its resilience over the two financial years ended September 2009 and, in particular, its ability to generate income in adverse market conditions.  Sales have continued to be strong in the first six months of this year and, following our successful Rights Issue in December, we have started to take advantage of well priced buying opportunities.

Overview of market and trading conditions

House prices have stabilised and improved over the last twelve months - the Nationwide Index of House Prices for April 2010 indicated a 10.5% annual rise.  Against this, trading volumes are relatively low and the mortgage market remains subdued with levels of advances significantly down on pre-crisis levels.  The challenges facing the broader UK economy are considerable and, whilst we are taking advantage of the improved conditions, we anticipate that the general outlook for the housing market, particularly in provincial areas, will be sluggish for the foreseeable future.

Nevertheless, our business model, knowledge of the residential market and unique portfolio enables us to perform well even in testing market conditions.  For example, in the two years ended September 2009 the vacant possession value of our UK portfolio fell by c.12% outperforming both the Nationwide and Halifax Indices for that period which averaged a fall of 16%.

This relative out performance has continued in the first six months of this financial year.  We have completed on residential sales of £79m (2009: £55m) with margins on sales of vacant properties from this portfolio improving to 42% from the 2009 figure of 37%.  Such sales have been made at values approximately 6% above September vacant possession values, a period in which the average of the Nationwide and Halifax Indices has moved by 3%.

Our total pipeline of residential sales (completed, with contracts exchanged or in solicitors hands) was £108m at 31 March 2010 (2009: £86m). Sales have continued in this vein since the period end and as at 14 May 2010 our total pipeline of residential sales stood at £121m.

The improved stability in the residential market and our strengthened financial position (at 31 March 2010 our cash and committed facilities amounted to c.£300m) have encouraged us to recommence a selective programme of residential acquisitions at attractive prices.  At 31 March 2010 we had acquired (completed, exchanged contracts on or put in solicitors hands) some £43m of property and this figure has increased to £52m at 14 May 2010.  This includes the acquisition of a 162 unit portfolio in Devon for gross consideration of £17.2m.  Furthermore, on 6 May we announced that the Boards of Grainger and Sovereign Reversions plc (an AIM listed equity release provider) had reached in principle agreement on a recommended offer of 202p per Sovereign share representing an acquisition price of approximately £34.2m.

Our focus is on well priced, quality properties in areas where we anticipate long term capital growth will be strongest and where values will be most protected against any future downturn.

Results

Our results for the period reflect both the increasing stability of the housing market and our ability to maximise revenue from our portfolio.  We have recorded an operating profit (before valuation movements and non-recurring items) of £48.0m, an increase of 16% over the same period in 2009.

Profit before tax has improved to £3.5m compared to a loss of £143.0m in 2009, a result which was severely affected by valuation deficits and non-recurring items.  Our cash generation remains strong:-

	31 March 2010 £m	31 March 2009 £m
Profit/(loss) before taxation	4	(143)
Adjust for:        valuation movements	2	103
:        mark to market adjustments and non recurring items	1	37
:        cost of sales and other movements	43	58
	---	---
Cashflow from operating activities	50	55
	---	---

Net assets

Our net asset values are a key indicator of performance although their significance at the half year is diminished as we do not produce a full interim valuation of our portfolio (see section on valuation for details).  We present three measures of NAV with full definitions in the financial review.

	31 March 2010	30 September 2009 (adjusted for the Rights Issue)
Gross net asset value	191p	194p
Triple net asset value	137p	141p
Grainger net asset value	173p	177p

Dividend

The Board is declaring an interim dividend of 0.5p per share (2009: nil) to be paid on 2 July 2010 to shareholders on the register of members at close of business on 4 June 2010.

The Board feels that this level of payment balances its caution about the fragility of the housing market and the wider economy and its confidence in the Group's ability to generate strong cash returns in the future.  A decision on the Group's final dividend for the year will be made in the light of its full year results to be released in November.

Board changes

Andrew Cunningham was made Chief Executive in October 2009 and we have recently announced the appointment of three new executives to the Grainger Board; Nick Jopling, currently Head of Residential at CBRE, will assume responsibility for property and real estate matters.  Mark Greenwood, formerly Finance Director of Alfred McAlpine plc, takes up the same role with Grainger.  Peter Couch, who has been with Grainger since 2005, becomes executive director responsible for the Retirement Solutions business and continues in his position as Chief Operating Officer.

These additions will significantly strengthen the executive and add to what is already an outstanding team.

Outlook

Prospects for the Group are good. We have a resilient high quality portfolio of residential assets supported by an experienced team with a broad base of knowledge across the residential sector.  Recently announced Board appointments and our financial restructuring will serve to strengthen this position further.

Although we anticipate that general economic conditions will continue to be challenging for some time to come, our resilient, cash generative portfolio will stand us in good stead.  Our immediate focus is to take advantage of buying opportunities in our core reversionary portfolios to leverage our residential skills and experience to explore value accretive and well-priced opportunities on behalf of our shareholders, investors and partners.

Historical results show the long term strength of returns from the residential sector compared to commercial real estate; over the last 50 years real house prices have risen by 274% compared to a 55% fall in real commercial property values (source: IPD).  Returns such as these together with, for example, the HCA's Private Rented Sector Initiative, have heightened interest in the residential sector as an asset class suitable for institutional investment.

We believe that we are well placed to take advantage of this momentum and look forward to the future with confidence.

 

Robin S. Broadhurst

Chairman

20 May 2010

Operating and Financial Review

Operating Review

Our main operating divisions and the market value of the assets in each are as follows:-

Division	Market value £m	Percentage of total	Assets
UK residential	1,039	48.2	Primarily properties subject to regulated tenancies
Retirement solutions	474	22.0	Home reversions and retirement related assets
Fund management and  residential investments	102	4.7	Investments in managed funds and in joint ventures
Development	81	3.8	Residential or residential led mixed use developments
European residential	459	21.3	Investment in German residential portfolio
	---	---
	2,155	100
	---	--

In total, we own and/or manage some 36,524 properties, including those managed by Gebau Vermogen GmbH in Germany, in which we have a 50% stake.

Valuation

The majority of our property assets are classified as trading stock and are therefore shown in our accounts at the lower of cost and net realisable value.  For the purposes of our market value balance sheet (shown in the financial review section) these assets are shown at market value.  This presents a more realistic view of the portfolio's worth.  In view of the number of properties involved, a full valuation of our portfolio is only conducted once a year, at 30 September.  Consequently at 31 March 2010 these assets are shown at September 2009 values, adjusted for sales and purchases in the period.  These assets amount to £1,293m at 31 March, representing 63% of our wholly owned property portfolio of £2,041m.

Our German residential portfolio, and some assets in the UK residential portfolio are held as investment property.  The 'CHARM' portfolio is classified as a financial interest in property assets. These assets are included in both the statutory and the market value balance sheets at directors' valuation at 31 March 2010 of £748m representing 37% of our wholly owned portfolio. Also subject to directors' valuation at 31 March are the assets held in our investments in joint ventures and co-investment vehicles with a Grainger investment value of £102m.

These Directors' valuations indicate that the vacant possession value of those UK residential assets that have been valued (i.e. the investment assets) have increased by 2.5% in the six month period to 31 March 2010. The German portfolio is virtually unchanged.

Analysis of Grainger portfolio -wholly owned

As at 31 March 2010

		£m
			Vacant
			Possession	Reversionary
	No of units	Market value	Value	Surplus
Regulated	6,171	851	1,169	318
Retirement solutions	5,997	474	694	220
Assured shorthold	584	94	108	14
Vacant	246	47	47	-
Other*	50	47	63	16
	---	---	---	---
UK - residential	13,048	1,513	2,081	568
- development	-	69	69	-
	---	---	---	---
Total UK	13,048	1,582	2,150	568
			---	---
German portfolio	7,189	459
	---	---
Total 31 March 2010	20,237	2,041
	---	---
Total 30 September 2009	20,439	2,083
	---	---

* Other units relate to serviced accommodation with a value of c£8m.  The market value figure also includes £16m sundry agricultural land and c.£23m relating to 6,960 ground rents, 1,149 garages and other residential assets. 

UK residential

	31 March 2010	30 September 2009
Regulated units owned	6,171	6,327
Market value	£851m	£871m
Vacant possession value	£1,169m	£1,197m
Other assets (vacants, assured etc)	880	831
Market value	£188m	£188m
Vacant possession value	£218m	£214m

	6 months to 31 March 2010		6 months to 31 March 2009
	Value £m	Profit £m	Value £m	Profit £m
Sales of vacant properties	39	17	33	13
Investment sales	5	1	11	2
Other one-off sales	19	4	-	-
	--	--	--	--
	63	22	44	15
Net rental and other income		14		16
Divisional overhead costs		(4)		(5)
		--		--
		32		26
		--		--

The results reflect the improvement in market conditions in the first six months of this financial year and our focus on maximising sales values.  Increases in house prices have led to an improvement in the margins achieved on sales of vacant properties from this portfolio (up to 44% from 39%).  The average price achieved on such sales was £171,000 (2009: £149,000) and our sales have been at prices on average some 6.3% above September's vacant possession values.

We have also made investment sales (sales with a tenant in place) of £5m (2009: £11m) and one-off sales mostly relating to agricultural property of £19m.  As previously announced we have reduced our investment sales programme and it is unlikely that this level of sales activity will be repeated in the second half of the year.

Following our successful Rights Issue and the increasing stability of the residential market we have selectively recommenced our buying programme.  At 31 March we had completed on £29m of residential property and had a further £9m in solicitors hands or with contracts exchanged.

Retirement solutions

	31 March 2010	30 September 2009
Residential units (number)	5,997	6,101
Market value	£474m	£481m
Vacant possession value	£694m	£699m

	6 months to 31 March 2010		6 months to 31 March 2009
	Value £m	Profit £m	Value £m	Profit £m
Sales and CHARM receipts	16	6	11	3
Net rental and other income		3		3
		--		--
		9		6
Divisional overhead costs		(1)		(1)
		--		--
		8		5
		--		--

We have continued to trade well in this division.  Acquisitions have been slow to restart because of reduced activity levels on the part of Independent Financial Advisers (IFA's) who sell home reversion plans on our behalf.  We have recently introduced measures to encourage new business, such as increasing the limit on release size, with positive results.  In the period we bought 35 units for £2.3m (2009: 93 units for £7.1m).

Our Bridgewater brand was voted Best Home Reversion Provider of the Year for the fourth year in succession.

On 6 May we announced that the Boards of Grainger and Sovereign Reversions plc had reached an in principle agreement on a recommended offer for Sovereign.  At 31 October 2009 Sovereign's interim results indicated that it owned equity release assets of c.£63.7m (valuation as at 30 April 2009).

Fund management and residential investments

		Number	Gross asset	Net asset	Grainger
	Holding %	of units	Value £m	Value £m	Investment £m
Grainger GenInvest	50.0	1,507	292	59*	75
G:res 1	21.6	2,029	378	122	26
Schroders ResPUT	21.8	35	5	5	1
		---	---	---	---
Total 31 March 2010		3,571	675	186	102
		---	---	---	---
Total 30 September 2009		3,975	696	205	101
		---	---	---	---

*Net asset value for Grainger GenInvest is shown after adjusting for the mezzanine loan provided by Grainger.

Contribution from these investments comprises Grainger's share of profit/losses including revaluation movements, receipts of management income, profit on redemption of units in Schroders ResPUT and interest on loans provided and amount to a gain of £9m (2009: loss of £28m).  Management income included in this amounted to £2.5m (2009: £2.6m).  The external debt in these ventures is non-recourse to Grainger plc.

As we have previously disclosed, the investors in Schroders ResPUT agreed to a controlled liquidation of the fund.  This has largely and successfully been completed and the remaining asset value at 31 March is only c£1m.

Development

	31 March 2010	30 September 2009
Market value of development portfolio (including share of joint ventures)	£81m	£83m
Estimate of completed development value	£578m	£580m
Of this, with planning consent	£442m	£442m
Committed cash expenditure	£10m	£10m

The development activities of this division have been curtailed of late but we continue to sell very successfully at our Hornsey Road site in North London.  We have sold 25 units from the second phase for proceeds of £7.3m and have only eight remaining to be sold.  After allocation of overheads our development division has contributed £1.3m (2009: loss of £0.6m).

A recent White Paper on the proposed High Speed Rail Network from London to Birmingham indicates that the potential route will cover at least part of our development site (held in a joint venture with Development Securities plc) at Curzon Park in Birmingham.  We are assessing the long term impact with our advisers and aim to collaborate with other affected owners in the area.

European residential

	31 March 2010	30 September 2009
Residential units owned	7,189*	7,180*
Market value	£459m	£473m
	31 March 2010	31 March 2009
Gross rents	£15.7m	£15.2m

*This includes 377 commercial units (2009: 373 commercial units).

After allocation of overheads, our German portfolio has contributed £9.0m (2009: £7.0m).

Financial Review

We set out below a summary of our net assets as shown in both the statutory and market value balance sheet:-

		Adjustments	Gross	Deferred		Triple
	Statutory	to market value,	NAV	and		NAV
	Balance	deferred tax and	Balance	contingent	Derivatives	balance
	Sheet £m	derivatives £m	sheet £m	tax £m	£m	sheet £m
Properties	1,752	289	2,041	-	-	2,041
Investments/other assets	116	17	-133	-	(8)	125
Goodwill	6	-	6	-	-	6
Cash	137	-	137	-	-	137
Total assets	2,011	306	2,317	-	(8)	2,309
Borrowings etc	(1,542)	109	(1,433)	-	(117)	(1,550)
Other net liabilities	(88)	-	(88)	-	-	(88)
Provisions/deferred tax	(23)	22	(1)	(136)	35	(102)
Total liabilities	(1,653)	131	(1,522)	(136)	(82)	(1,740)
Net assets	358	437	795	(136)	(90)	569
31 March 2010 net assets per share (pence)	86	105	191	(33)	(21)	137
30 September 2009 net assets per share (pence) (adjusted for Rights Issue)	88	106	194	(33)	(20)	141

The European Public Real Estate Association ("EPRA") Best Practices Committee has recommended the calculation and use of a diluted EPRA NAV and a diluted EPRA Net Net Net Asset Value (NNNAV). The definitions of these measures are consistent with Gross NAV and Triple NAV as described and shown in the table above.

This definition of Gross NAV requires us to remove any balances for deferred tax on property revaluations and the fair value of derivatives as calculated under IFRS. Triple NAV requires certain of these adjustments to be reinstated and, in addition, a deduction is made for contingent tax which is calculated by applying the expected rate of tax to the full inherent gains at the balance sheet date.

Market value analysis of wholly owned property assets

				Investment property/
	Shown as			financial interest
	stock at	Market value	Market	in property assets
	cost £m	adjustment £m	value £m	£m	Total £m
Residential	918	306	1,224	748	1,972
Development	86	(17)	69	-	69
Total 31 March 2010	1,004	289	1,293	748	2,041
Total 30 September 2009	1,016	304	1,320	763	2,083

Net asset value

Movements in net asset value are key performance indicators for the Group.  We set out three measurements to better enable shareholders to compare our performance year on year and with our peers, whilst reflecting the unique nature of our business.  Figures for 30 September 2009 are after adjusting for the effects of the Rights Issue.

	March 2010	September 2009
Gross net assets per share (NAV)	191p	194p
-     market value of net assets per share before deduction for deferred tax on property         revaluations and before adjustments for the fair value of derivatives

Triple net assets per share (NNNAV)	137p	141p
-      gross NAV per share adjusted for deferred  and contingent tax on revaluation gains        and for mark to market adjustments

Grainger NAV	173p	177p
-       NNNAV adjusted for the discounted and taxed reversionary surplus (the difference         between vacant possession and current market value) in our long term regulated and home reversion portfolios. As noted before there is no complete revaluation of the portfolio at 31 March 2010.

The major movements in NAV in the period have been:-

	£m	Pence per share
Gross net assets 1 October 2009	570	411
Effect of Rights Issue	237	(217)
	---	---
Restated net assets post Rights Issue 1 October 2009	807	194
Results after tax	3	1
Revaluation movements	6	1
Elimination of previously recognised surpluses	(21)	(5)
Dividends paid	(5)	(1)
Other	5	1
	---	---
Gross net assets 31 March 2010	795	191
	---	---

Net assets generally decrease between the year end and half year position.  This is because we eliminate revaluation surpluses on the sale of assets in the period but do not undertake a full revaluation of the portfolio.

Reconciliation of NAV Movements

	£m	Pence per share
Gross NAV	795	191
Deferred and contingent tax	(136)	(33)
Mark to mark adjustments net of tax	(90)	(21)
	---	---
NNNAV	569	137
Discounted reversionary surplus	208	50
Tax thereon	(58)	(14)
	---	---
Grainger NAV at 31 March 2010	719	173
	---	---

The major assumptions in calculating the base case Grainger NAV are set out below:-

-   house price inflation taken as zero over the entire reversionary period

-  discount rate of 8.69% used to calculate the present value of the reversionary surplus (weighted average cost of capital +3%) (2009: discount rate 8.22%). An equity risk premium of 4% (2009: 4%) is used within the calculation of the cost of equity

-  no discounting of contingent tax on the revaluation surpluses

-  reversionary periods taken as 13 years for regulated properties and 10 years for home reversions

Our website (www.graingerplc.co.uk) sets out how these assumptions may be varied.

Financial performance

Operating profit before all revaluation movements, fair value, impairment, goodwill adjustments and non-recurring items has increased by £6.7m from £41.3m to £48.0m.

	£m
31 March 2009 result	41.3
Improvement in UK residential and retirement solutions trading profits	9.7
Net UK rental and CHARM income	0.2
German residential	1.9
Development trading profits	(4.5)
Other	(0.6)
	---
31 March 2010 result	48.0
	---

The most significant movement in operating profit is an increase in trading profit from the UK residential and Retirement solutions businesses. This reflects both increased sales and increased margins compared to 2009.  Development trading profits have fallen with sales in 2009 benefiting from the sales of properties at Barnsbury, Hornsey Road, Kensington Church Street and Elder Street.  The increased German residential profit reflects both an improvement in net yield and a reduction in overhead costs.

Basic earnings per share have moved as follows:-

	Pence per share	Gross £m
31 March 2009 result attributable to equity holders of the Company	(77.2)	(104.1)
Adjusted for Rights Issue	46.6	-
	---	---
Restated	(30.6)	(104.1)
Operating profit	2.0	6.7
Fair value and revaluation	21.8	74.1
Net interest payable	2.3	8.0
Joint ventures and associates	8.1	27.5
Taxation and other	(2.8)	(9.6)
	----	---
31 March 2010 result attributable to equity holders of the Company	0.8	2.6
	----	---

The movement in fair value and revaluation includes the following movements: £21.3m improvement in revaluation of investment property, £31.0m improvement relating to the fair value of our derivatives not hedged through equity, a £21.0m difference in provisions made against the net realisable value of stock and against loan balances.  The positive movement in joint ventures and associates relates primarily to our share of the change in value of investment property held within Grainger GenInvest and G:res.

Financial resources

At 31 March 2010, Group net debt levels stood at £1,308m (30 September 2009 £1,561m) and committed undrawn facilities and cash amounted to £300m (30 September 2009 £171m).

Average debt maturity is 4.0 years and there are no committed debt repayments until June 2011. A total amount of £50m is due for repayment in the period up to 30 September 2011.

Cost of debt and hedging

Our all in cost of debt at 31 March 2010 was 5.4% (30 September 2009 5.3%).  The gross debt was 85% hedged (2009: 92%) of which £68m was subject to caps.

Rights Issue and covenants

In December 2009, the Group completed a 2 for 1 Rights Issue at an issue price of 90p, representing a discount of 39.7% to the theoretical ex rights price. A net amount of £236.7m was raised, of which £104.5m was used for immediate debt repayment, and the loan to value on our core debt reduced to 53.7%.  At 31 March this had moved to 54.0% and at this level a fall of approximately 32% in UK house prices would be required before we reached default levels on the core debt facility.  Under this facility interest cover has to exceed 1.25 times and at 31 March it was 3.1 times.

Andrew R. Cunningham

Chief Executive

20 May 2010

Consolidated Income Statement		Unaudited
		31 March	31 March
		2010	2009
For the half year ended 31 March 2010	Notes	£m	£m
Group revenue	2,3	126.3	120.3
Net rental income	4	20.6	19.9
Profit on disposal of trading properties	5	25.1	19.5
Administrative expenses	6	(6.4)	(4.3)
Other income and expenses		2.9	3.8
Goodwill impairment		-	(0.9)
Profit/(loss) on disposal of investment property	7	0.4	(0.2)
Profit on redemption of equity units in associate	11	0.7	-
Interest income from financial interest in property assets	13	2.7	1.5
Write back/(write down) of inventories to net realisable value		0.3	(10.2)
Provision for impairment of loans receivable net of write-backs		(3.3)	(13.8)
Operating profit before net valuation gains/(deficits) on investment properties		43.0	15.3
Net valuation gains/(deficits) on investment properties	10	1.7	(19.6)
Operating profit/(loss) after net valuation gains/(deficits) on investment properties		44.7	(4.3)
Change in fair value of derivatives		(6.7)	(37.7)
Interest expense		(41.4)	(50.4)
Interest income		2.0	3.0
Inducement costs and expenses on convertible bond		-	(31.1)
Share of profit/(loss) of associates after tax	11	3.0	(11.4)
Share of profit/(loss) of joint ventures after tax	12	1.9	(11.1)
Profit/(loss) before tax		3.5	(143.0)
Taxation - current		(2.0)	11.1
Taxation - deferred		1.1	27.8
Tax (charge)/credit for the period	16	(0.9)	38.9
Profit/(loss) for the period attributable to equity shareholders		2.6	(104.1)
Basic earnings/(loss) per share (2009 restated)	8	0.75p	(43.5)p
Diluted earnings/(loss) per share (2009 restated)	8	0.74p	(43.5)p
Dividend per share	9	0.5p	-

Consolidated Statement of Comprehensive Income
		Unaudited
		31 March	31 March
		2010	2009
For the half year ended 31 March 2010	Notes	£m	£m
Profit/(loss) for the period		2.6	(104.1)
Actuarial loss on BPT Limited defined benefit pension scheme net of tax		-	(1.5)
Fair value movement on available-for-sale financial asset net of tax	18	1.9	2.2
Net exchange adjustments offset in reserves net of tax	18	0.3	-
Changes in fair value of cash flow hedges net of tax	18	(3.2)	(59.3)
Other comprehensive income and expense for the period		(1.0)	(58.6)
Total comprehensive income and expense for the period attributable to equity shareholders		1.6	(162.7)

Consolidated statement of financial position
		Unaudited	Audited
		31 March 2010	30 September 2009
As at 31 March 2010	Notes	£m	£m
ASSETS
Non-current assets
Investment property	10	639.1	654.3
Property, plant and equipment		1.5	1.9
Investment in associates	11	26.5	24.5
Investment in joint ventures	12	87.3	80.7
Financial interest in property assets	13	109.3	109.1
Goodwill		6.2	5.9
		869.9	876.4
Current assets
Investment in associates	11	1.0	8.7
Inventories - trading properties		1,003.9	1,015.6
Trade and other receivables	14	12.1	20.0
Derivative financial instruments		-	0.2
Cash and cash equivalents		136.6	28.3
		1,153.6	1,072.8
Total assets		2,023.5	1,949.2
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings	15	1,425.2	1,557.0
Trade and other payables		4.0	4.0
Retirement benefits		5.5	5.8
Provisions for other liabilities and charges		0.8	0.9
Deferred tax liabilities	16	21.7	21.1
		1,457.2	1,588.8
Current liabilities
Interest-bearing loans and borrowings	15	8.4	19.9
Trade and other payables	17	60.1	88.1
Current tax liabilities	16	30.6	24.4
Derivative financial instruments		108.7	99.5
		207.8	231.9
Total liabilities		1,665.0	1,820.7
Net assets		358.5	128.5
EQUITY
Capital and reserves attributable to the company's equity holders
Issued share capital		20.8	6.9
Share premium		109.7	109.7
Merger reserve		256.0	20.1
Capital redemption reserve		0.3	0.3
Cash flow hedge reserve		(44.8)	(41.6)
Equity component of convertible bond		5.0	5.0
Available-for-sale reserve		3.8	1.9
Retained earnings		7.6	26.1
Total shareholders' equity		358.4	128.4
Minority interest		0.1	0.1
Total Equity	18	358.5	128.5

Consolidated statement of changes in equity
	Issued share capital	Share premium	Merger reserve	Capital redemption reserve	Cash flow hedge reserve	Equity component of convertible bond	Available- for-sale reserve	Retained earnings	Minority Interest	Total Equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance as at 1 October 2008 (audited)	6.4	23.1	20.1	0.3	5.4	22.4		152.0	0.1	229.8
Loss for the period								(104.1)		(104.1)
Other recognised income and expense for the period					(59.3)		2.2	(1.5)		(58.6)
Total recognised income and expense for the period	-	-	-	-	(59.3)	-	2.2	(105.6)	-	(162.7)
Issue of shares	0.5	86.6								87.1
Conversion of convertible bond						(17.4)				(17.4)
Transfer on early conversion of convertible bond								3.2		3.2
Purchase of own shares								(0.2)		(0.2)
Share-based payments charge								0.7		0.7
Dividends paid								(5.4)		(5.4)
Balance as at 31 March 2009 (unaudited)	6.9	109.7	20.1	0.3	(53.9)	5.0	2.2	44.7	0.1	135.1
Loss for the period	-	-	-	-	-	-	-	(17.9)	-	(17.9)
Other recognised income and expense for the period	-	-	-	-	12.3		(0.3)	(0.8)	-	11.2
Total recognised income and expense for the period	-	-	-	-	12.3	-	(0.3)	(18.7)	-	(6.7)
Purchase of own shares								(0.2)	-	(0.2)
Share-based payments charge								0.1	-	0.1
Dividends paid	-	-	-	-	-	-	-	0.2	-	0.2
Balance as at 1 October 2009 (audited)	6.9	109.7	20.1	0.3	(41.6)	5.0	1.9	26.1	0.1	128.5
Profit for the period	-	-	-	-	-	-	-	2.6	-	2.6
Other recognised income and expense for the period	-	-	-	-	(3.2)	-	1.9	0.3	-	(1.0)
Total recognised income and expense for the period	-	-	-	-	(3.2)	-	1.9	2.9	-	1.6
Purchase of own shares	-	-	-	-	-	-	-	(3.7)	-	(3.7)
Rights Issue (see note 21)	13.9	-	235.9	-	-	-	-	(13.1)	-	236.7
Share-based payments charge	-	-	-	-	-	-	-	0.7	-	0.7
Dividends paid	-	-	-	-	-	-	-	(5.3)	-	(5.3)
Balance as at 31 March 2010 (unaudited)	20.8	109.7	256.0	0.3	(44.8)	5.0	3.8	7.6	0.1	358.5

Consolidated Cash Flow Statement		Unaudited
		31 March 2010	31 March 2009
For the half year ended 31 March 2010	Notes	£m	£m
Cash flow from operating activities
Profit/(loss) for the period		2.6	(104.1)
Depreciation		0.4	0.4
Impairment of goodwill		-	0.9
Net valuation (gains)/deficits on investment properties	10	(1.7)	19.6
Net finance costs		39.4	47.4
Share of (profit)/loss of associates and joint ventures	11,12	(4.9)	22.5
(Profit)/loss on disposal of investment properties	7	(0.4)	0.2
Provision for impairment of loans receivable net of write-backs		3.3	13.8
Profit on redemption of equity units in associate	11	(0.7)	-
Inducement costs on convertible bond		-	31.1
Share-based payment charge		0.7	0.7
Change in fair value of derivatives		6.7	37.7
Interest income from financial assets	13	(2.7)	(1.5)
Taxation	16	0.9	(38.9)
Operating profit before changes in working capital		43.6	29.8
Decrease in trade and other receivables		3.1	1.9
Decrease in trade and other payables		(25.8)	(7.2)
Decrease in trading properties		(28.9)	30.4
Cash generated from operations		49.8	54.9
Interest paid		(40.9)	(52.0)
Taxation refund/(paid)	16	4.0	(8.9)
Net cash inflow/(outflow) from operating activities		12.9	(6.0)
Cash flow from investing activities
Proceeds from sale of investment property and property, plant and equipment	7	6.8	3.0
Proceeds from financial interest in property assets	13	5.1	4.1
Redemption of units in associate	11	8.7	2.3
Interest received		0.8	0.7
Dividends/distributions received		-	0.2
Acquisition of subsidiaries, net of cash acquired	22	(14.9)	(0.4)
Investment in associates and joint ventures		(0.5)	(5.3)
Acquisition of investment property and property, plant and equipment       10		(0.6)	(0.6)
Net cash inflow from investing activities		5.4	4.0
Cash flows from financing activities
Proceeds from the issue of share capital	21	236.7	-
Purchase of own shares		(3.7)	(0.2)
Inducement payment to convertible bondholders		-	(31.1)
Proceeds from new borrowings		-	35.1
Repayment of borrowings		(134.2)	(0.9)
Dividends paid	9	(5.3)	(5.4)
Payments to defined benefit pension scheme		(0.3)	-
Net cash inflow/(outflow) from financing activities		93.2	(2.5)
Net increase/(decrease) in cash and cash equivalents		111.5	(4.5)
Cash and cash equivalents at beginning of the period		28.3	43.2
Net exchange movements on cash and cash equivalents		(3.2)	2.5
Cash and cash equivalents at end of the period		136.6	41.2

Notes to the unaudited interim financial statements

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 Financial Services 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 2009 which have been prepared in accordance with IFRS's as adopted by the European Union.

These condensed interim financial statements have been prepared in accordance with the accounting policies set out on pages 48 to 55 of the 2009 Annual Report and    Accounts which is available on the Group's website (www.graingerplc.co.uk). Where necessary, comparative information has been reclassified or expanded from the previously reported interim results to take into account any presentational changes made in the Annual Report and Accounts or in these interim results.

Historically, the residential housing market is more active in the second half of our financial year. Therefore, we would normally expect that property sales and trading profit would be higher in the second half compared to the first half of the year. Although current market conditions are still challenging we would still expect, in the absence of unforeseen circumstances, this trend to be repeated in respect of sales of vacant properties.  As previously announced we have reduced our investment sales programme and it is unlikely that the level of investment sales in the first half of the year will be repeated in the second half. Net rental income is not impacted by seasonality. Trading in the development division is subject to cyclicality with results dependent on the timing of development sales.

A full revaluation of our properties is not performed at the interim date because of the  cost and time involved. Investment property and financial interest in property assets are subject to a Directors' valuation.

The Group's financial derivatives were valued as at 31 March 2010 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 income tax rate expected for the full year.

1b        Adoption of new and revised International Financial Reporting Standards

At the date of approval of these condensed interim financial statements, the following interpretations and amendments were issued, endorsed by the EU and are mandatory for the Group for the first time for the financial year beginning 1 October 2009.

            International Financial Reporting Standards ("IFRS")

·     IFRS 3 (revised) 'Business combinations' (effective from I July 2009) and IAS 27 'Consolidated and Separate Financial Statements' (effective from 1 January 2009). Some of the key changes are: i) the requirement to measure all consideration at fair value at acquisition date, with any subsequent changes (e.g. contingent consideration) re-measured at fair value through income ii) the expensing of all transaction costs iii) stepped acquisitions to be accounted for as a disposal of existing interests and an acquisition of an enlarged interest, giving rise to potential profits or losses on disposal of the existing interest. The expensing of transaction costs has been applied in these interim financial statements although the impact has not been material.

·    IFRS 8, 'Operating segments' (effective from 1 January 2009).  IFRS 8 amends the current segmental reporting requirements of IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131. It requires a 'management approach' to be adopted so that segment information is presented on the same basis as that used for internal reporting purposes.  This standard has been applied in these interim financial statements and further information is provided in note 3.

·    IAS 1 (revised), 'Presentation of financial statements'(effective from 1 January 2009).  The amendment requires the introduction of a Statement of Comprehensive Income along with voluntary changes to the titles of some of the primary financial statements and the requirement to aggregate information in the financial statements on the basis of shared characteristics.

This standard has therefore resulted in changes to the statement of recognised income and expense which has been split into two statements, one showing changes in equity resulting from transactions not reflected in the income statement and the other showing changes in equity resulting from transactions with shareholders. The statement of changes in equity has now become a primary statement in the Group's financial statements.  

·    IAS 23 (revised), 'Borrowing costs' (effective from 1 January 2009).  This amendment requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of the asset.  A qualifying asset is one that takes a substantial period of time to get ready for use or sale.  The option of immediately expensing these borrowing costs is removed.  This amendment has been applied to the Group from 1 October 2009 but has had no  impact on the interim financial statements.  

            The interim financial statements have been adjusted to reflect presentational issues primarily as a             result of implementing both IAS 1 and IFRS 8.         

            International Financial Reporting Interpretations Committee ("IFRIC") interpretations

·     IFRIC 13, 'Customer loyalty programmes relating to IAS 18, Revenue'

·     IFRIC 14, 'IAS 19 - The limit of a defined benefit asset, minimum funding requirements and their interaction'

·     IFRIC 17, 'Distributions of non cash assets to owners'

            Other amendments to existing standards

·    Amendment to IFRS 1 'First time adoption of IFRS' and IAS 27 'Consolidated and separate financial statements' on the 'Cost of an investment in a subsidiary, jointly controlled entity or associate'

·    Amendments to IAS 32 Financial instruments: Presentation on classification of Rights Issues and IAS1, 'Presentation of financial statements on Puttable financial instruments and obligations arising on liquidation'

·    Amendment to IFRS 7, 'Financial instruments: Disclosures'. This amendment has changed the IFRS 7 disclosure requirements in the financial statements. The main impact will be the classification of fair value assets and liabilities against a fair value hierarchy. 

·     Amendment to IAS 39 Financial instruments: Recognition and measurement: Eligible hedged items

·     Annual improvements to IFRSs (2008)

None of the above interpretations and amendments have had any material impact on the Group's financial statements.

At the date of approval of these condensed interim financial statements, the following standards, interpretations and amendments were issued but not yet mandatory for the Group and early adoption has not been applied.

            International Financial Reporting Standards ("IFRS")

·     IFRS 9, 'Financial instruments'- We are currently assessing the impact of IFRS 9 on the Group financial statements

            International Financial Reporting Interpretations Committee ("IFRIC")          interpretations

·     IFRIC 12, 'Service concession arrangements'

·     IFRIC 15, 'Agreements for construction of real estates'

·     IFRIC 16, 'Hedges of a net investment in a foreign operation'

·     IFRIC 18, 'Transfer of assets from customers'.

·     Amendment to IFRIC 14, 'Prepayments of a minimum funding requirement'

·     IFRIC 19, 'Extinguishing financial liabilities with equity instruments'

            Amendments to existing standards

·    Annual improvements 2009

·    Amendment to IFRS 2, 'Share based payments - Group cash-settled share-based payment transactions'

·    Amendment to IFRS 1 for additional exemptions

·    Amendment to IAS 24, 'Related Party disclosures'

All the above IFRS's, IFRIC interpretations and amendments to existing standards are yet to be endorsed by the EU at the date of approval of these condensed interim financial statements with the exception of IFRIC 12, IFRIC 15, IFRIC 16, IFRIC 18.

1c.       Group risk factors

As with all businesses, the Group is affected by certain risks, not wholly within our control, which could have a material impact on the Group and could cause actual results to differ materially from forecast and historical results.  The most significant of these, both of which are macro-economic, are as follows:-

·    A further downturn in house prices and stagnation in the market through lack of mortgage finance and/or finance to acquire properties

·    Significant increases in borrowing costs and/or a lack of or reduction in finance available to Grainger.

The principal risks and uncertainties facing the Group have not changed from those as set out on page 7 of the 2009 Annual Report and Accounts.

1d        Forward-looking statements

Certain statements in these condensed interim financial statements 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.

2          Analysis of profit/(loss) before tax

The results for the periods to 31 March 2009 and 2010 respectively have been significantly affected by valuation movements and non-recurring items, although the impact of these items in 2009 was much greater than it has been in 2010.  The table below provides further analysis of the income statement showing the results of trading activities separately from these other items.

	31 March 2010 (Unaudited)				31 March 2009 (Unaudited)
	Trading	Valuation	Non-recurring	Total	Trading	Valuation	Non-recurring	Total
	£m	£m	£m	£m	£m	£m	£m	£m
Group revenue	126.3	-	-	126.3	120.3	-	-	120.3
Net rental income	20.6	-	-	20.6	20.1	-	(0.2)	19.9
Profit on disposal of trading properties	25.1	-	-	25.1	19.9	-	(0.4)	19.5
Administrative expenses	(4.4)	-	(2.0)	(6.4)	(3.8)	-	(0.5)	(4.3)
Other income and expenses	2.9	-	-	2.9	3.8	-	-	3.8
Goodwill impairment	-	-	-	-	-	(0.9)	-	(0.9)
Profit/(loss) on disposal of investment property	0.4	-	-	0.4	(0.2)	-	-	(0.2)
Profit on redemption of equity units in associate	0.7	-	-	0.7	-	-	-	-
Interest income from financial interest in property assets	2.7	-	-	2.7	1.5	-	-	1.5
Write back/(write down) of inventories to net realisable value	-	0.3	-	0.3	-	(10.2)	-	(10.2)
Provision for impairment of loans receivable net of write-backs	-	(3.3)	-	(3.3)	-	(13.8)	-	(13.8)
Operating profit before net valuation gains/(deficits) on investment properties	48.0	(3.0)	(2.0)	43.0	41.3	(24.9)	(1.1)	15.3
Net valuation gains/(deficits) on investment properties	-	1.7	-	1.7	-	(19.6)	-	(19.6)
Operating profit/(loss) after net valuation gains/(deficits) on investment properties	48.0	(1.3)	(2.0)	44.7	41.3	(44.5)	(1.1)	(4.3)
Change in fair value of derivatives	-	(6.7)	-	(6.7)	-	(37.7)	-	(37.7)
Interest expense	(42.3)	-	0.9	(41.4)	(45.3)	-	(5.1)	(50.4)
Interest income	2.0	-	-	2.0	3.0	-	-	3.0
Inducement costs and expenses on conversion of bond	-	-	-	-	-	-	(31.1)	(31.1)
Share of profit/(loss) of associates after tax	-	3.0	-	3.0	(0.1)	(11.3)	-	(11.4)
Share of (loss)/profit of joint ventures after tax	(1.4)	3.3	-	1.9	(2.0)	(9.1)	-	(11.1)
Profit/(loss) before tax	6.3	(1.7)	(1.1)	3.5	(3.1)	(102.6)	(37.3)	(143.0)

3          Segmental Information

The Group has adopted IFRS 8, "Operating Segments" ("IFRS 8") for these condensed    interim financial statements. 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 Group has identified six segments and is treating all of these as reportable segments. The segments are: UK residential; Retirement solutions; Property services; Fund management and residential investments; Development and European  residential. The Group has a segment director responsible for the performance of each of these six segments and the Group reports key financial information to the CODM on the basis of these six segments. Each of these six segments operate within a different part of the overall residential market.

The title "All other segments" has been included in the tables below to reconcile the segments to the figures reviewed by the CODM.

The measure of profit or loss used by the CODM is the trading profit or loss before valuation gains or deficits on investment properties and excluding all revaluation and non-recurring items as set out in Note 2. The CODM reviews by segment two key balance sheet measures of net asset value. These are Gross Net Asset Value and Triple Net Asset Value.

The adoption of IFRS 8 has resulted in several changes to the Group's segmental information. Major changes are to add property services as a reportable segment, combine UK and European development into a signal segment, to change the basis of the segment operating profit/(loss) and to show Gross Net Asset Value and Triple Net Asset Value by segment in addition to statutory net assets by segment.

            Information relating to the Group's operating profit or loss by segments is set out below.  

31 March 2010
Segment revenue and result				Fund
(unaudited) (£m)				management/
	UK	Retirement	Property	Residential		European	All other
	residential	solutions	services	Investments	Development	residential	segments		Total
Segment revenue-external	78.1	14.0	0.3	2.5	10.2	21.2	-		126.3
Segment revenue-internal	-	-	3.6	-	-	-	-		3.6
Segment result -operating profit/(loss)	32.2	8.5	0.3	1.2	1.3	9.0	(4.5)		48.0
Net interest payable									(40.3)
Share of trading loss of joint ventures and associates after tax									(1.4)
Trading profit before tax									6.3
Write back of inventories to net realisable value									0.3
Net valuation gains on investment properties									1.7
Change in fair value of derivatives									(6.7)
Provision for impairment of loans receivable net of write-backs									(3.3)
Share of valuation gains in joint ventures and associates after tax									6.3
Non-recurring items									(1.1)
Profit before tax									3.5

31 March 2009
Segment revenue and				Fund
result (unaudited) (£m)				management/
	UK	Retirement	Property	Residential		European	All other
	residential	solutions	services	Investments	Development	residential	Segments		Total
Segment revenue-external	62.7	10.9	0.2	2.6	23.9	20.0	-		120.3
Segment revenue-internal	-	-	3.6	-	-	-	-		3.6
Segment result - operating profit/(loss)	26.8	5.4	0.3	0.6	4.9	7.0	(3.7)		41.3
Net interest payable									(42.3)
Share of trading loss of joint ventures and associates after tax									(2.1)
Trading loss before tax									(3.1)
Write down of inventories to net realisable value									(10.2)
Net valuation deficits on investment properties									(19.6)
Change in fair value of derivatives									(37.7)
Provision for impairment of loans receivable and goodwill impairment									(14.7)
Share of valuation losses in joint ventures and associates after tax									(20.4)
Non-recurring items									(37.3)
Loss before tax									(143.0)

Most of the Group's properties are held as trading stock and are therefore shown in the Statutory balance sheet at the lower cost and net realisable value.  This does not reflect the market value of the assets and so our key balance sheet measures of net asset value include trading stock at market value.  The two principal net asset value measures reviewed by the CODM are Gross Net Asset Value ("NAV") and Triple Net Asset Value ("NNNAV").  NAV is defined as the market value of net assets before deduction for deferred tax on property revaluations and before adjustments for the fair value of derivatives.  NNNAV is defined as gross net asset value adjusted for deferred and contingent tax on revaluation gains and for mark to market adjustments.

These measures are set out below by segment along with a reconciliation to the   statutory balance sheet.

31 March 2010
Segment Assets (unaudited) £m
				Fund
				management/
	UK	Retirement	Property	Residential		European	All other
	residential	solutions	services	Investments	Development	residential	segments		Total
Total segment assets (Statutory)	778.2	372.8	-	102.0	86.9	138.3	(1,119.7)		358.5
Total segment assets (NAV)	1,089.9	415.2	-	108.6	71.5	160.0	(1,050.2)		795.0
Total segment assets (NNNAV)	969.4	397.0	-	102.0	75.8	138.6	(1,113.7)		569.1

		Adjustments to		Deferred
	Statutory	market value,	Gross NAV	and		Triple NAV
	Balance	deferred tax and	balance	contingent		balance
	Sheet	derivatives	sheet	tax	Derivatives	sheet
	£m	£m	£m	£m	£m	£m
Properties	1,752.3	289.0	2,041.3	-	-	2,041.3
Investments/other assets	116.3	17.0	133.3	-	(7.9)	125.4
Goodwill	6.2	-	6.2	-	-	6.2
Cash	136.6	-	136.6	-	-	136.6
Total assets	2,011.4	306.0	2,317.4	-	(7.9)	2,309.5
Borrowings etc.	(1,542.3)	108.7	(1,433.6)	-	(117.1)	(1,550.7)
Other net liabilities	(88.1)	-	(88.1)	-	-	(88.1)
Provisions/Deferred Tax	(22.5)	21.8	(0.7)	(135.9)	35.0	(101.6)
Total liabilities	(1,653.0)	130.5	(1,522.4)	(135.9)	(82.1)	(1,740.4)
Net assets	358.5	436.5	795.0	(135.9)	(90.0)	569.1

31 March 2009
Segment Assets (unaudited) £m
				Fund
				management/
	UK	Retirement	Property	residential		European	All other
	residential	solutions	services	investments	Development	residential	segments		Total
Total segment assets (Statutory)	842.8	388.3	-	88.4	128.1	143.7	(1,456.1)		135.2
Total segment assets (NAV)	1,215.7	448.2	-	96.4	118.8	162.7	(1,387.1)		654.7
Total segment assets (NNNAV)	1,068.0	424.0	-	88.4	121.4	143.7	(1,456.7)		388.8

		Adjustments to		Deferred
	Statutory	market value,	Gross NAV	and		Triple NAV
	Balance	deferred tax and	balance	contingent		balance
	Sheet	derivatives	sheet	tax	Derivatives	sheet
	£m	£m	£m	£m	£m	£m
Properties	1,904.0	365.5	2,269.5	-	-	2,269.5
Investments/other assets	107.2	7.4	114.6	-	(9.9)	104.7
Goodwill	7.6	-	7.6	-	-	7.6
Cash	41.2	-	41.2	-	-	41.2
Total assets	2,060.0	372.9	2,432.9	-	(9.9)	2,423.0
Borrowings etc.	(1,805.9)	112.7	(1,693.2)	-	(124.0)	(1,817.2)
Other net liabilities	(90.0)	-	(90.0)	-	-	(90.0)
Provisions/Deferred Tax	(28.9)	33.9	5.0	(169.4)	37.4	(127.0)
Total liabilities	(1,924.8)	146.6	(1,778.2)	(169.4)	(86.6)	(2,034.2)
Net assets	135.2	519.5	654.7	(169.4)	(96.5)	388.8

4.         Net rental income

	Unaudited
	31-March	31-March
	2010	2009
	£m	£m
Gross rental income	38.1	38.8
Property repair and maintenance costs	(11.1)	(11.4)
Property operating expenses (see note 6)	(6.4)	(7.5)
	20.6	19.9

5.         Profit on disposal of trading properties

	Unaudited
	31-March	31-March
	2010	2009
	£m	£m
Proceeds from sale of trading properties	78.3	71.8
Carrying value of trading properties sold	(49.7)	(47.5)
Other sales costs (see note 6)	(3.5)	(4.8)
	25.1	19.5

6.         Administrative expenses

	Unaudited
	31-March	31-March
	2010	2009
	£m	£m
Total Group expenses	16.3	16.6
Many of the Group's expenses relate directly to either property management activities or to staff involved directly with the sale and acquisition of property. Accordingly, total Group expenses shown above have been allocated as follows:
	Unaudited
	31-March	31-March
	2010	2009
	£m	£m
Property operating expenses (see note 4)	6.4	7.5
Costs directly attributable to the disposal of trading properties (see note 5)	3.5	4.8
Administrative expenses	6.4	4.3
	16.3	16.6

7.         Profit/(loss) on disposal of investment property

	Unaudited
	31-March	31-March
	2010	2009
	£m	£m
Proceeds from sale of investment property	6.8	3.0
Carrying value of investment property sold	(6.4)	(3.2)
	0.4	(0.2)

8.         Earnings/(loss) per share

Basic

Basic earnings/(loss) per share is calculated by dividing the profit or loss attributable to    equity holders 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"). The weighted average number of shares has been adjusted   for the bonus element inherent in the Rights Issue completed in December 2009.  The adjustment has been treated as occurring at the beginning of the earliest period   reported.  This has resulted in the EPS figures for the six month period to 31 March 2009 being restated.

Diluted

Diluted earnings/(loss) per share is calculated by adjusting the weighted average number of shares outstanding by the dilutive effect of ordinary shares that the company may potentially issue relating to its convertible bond and its share option schemes and contingent share awards under the LTIS. The profit/(loss) for the period is adjusted to add back the after tax interest cost on the debt component of the convertible bond. Where the effect of the above adjustments is anti-dilutive, they are excluded from the calculation of diluted earnings/(loss) per share.

	31 March 2010				31 March 2009
		Weighted				Weighted
	Profit	average	Earnings		Loss for	average	Loss
	for the	number	per		the	number	per
	period	of shares	share		period	of shares	share
(unaudited)	£m	(thousands)	pence		£m	(thousands)	pence
Basic earnings/(loss) per share
Earnings/(loss) attributable to equity holders (2009 as originally stated)	2.6	340,534	0.75		(104.1)	134,859	(77.2)
Basic earnings/(loss) attributable to equity holders in 2009 (as restated)					(104.1)	239,383	(43.5)
Effect of potentially dilutive securities
Share options and contingent shares	-	2,805	(0.01)		-	-	-
Diluted earnings/(loss) per share
Earnings/(loss) attributable to equity holders (2009 as originally stated)	2.6	343,339	0.74		(104.1)	134,859	(77.2)
Earnings/(loss) attributable to equity holders in 2009 (as restated)					(104.1)	239,383	(43.5)

9.         Dividends

The directors propose the payment of an interim dividend of 0.5p per share amounting to £2.1m (31 March 2009: nil).  In the six months to 31 March 2010, the final proposed dividend of £5.3m, for the year ended 30 September 2009, has been paid.

 

10.       Investment Property

	Unaudited	Audited
	31-March	30-Sep
	2010	2009
	£m	£m
Opening balance	654.3	619.3
Additions:
- Acquisitions	-	1.1
- Subsequent expenditure	0.6	3.7
Disposals	(6.4)	(9.9)
Revaluation gains/(deficits)	1.7	(25.6)
Exchange adjustments	(11.1)	65.7
Closing balance	639.1	654.3

11.       Investment in Associates

	Unaudited		Audited
	31-March		30-Sep
	2009		2009
	£m		£m
Opening balance	33.2		51.6
Share of profit/(loss)	3.0		(6.4)
Distributions received	-		(0.4)
Profit on redemption of equity units	0.7		-
Redemption of equity units	(8.7)		(7.6)
Share of change in fair value of cash flow hedges taken through equity	(0.7)		(4.0)
Closing balance	27.5		33.2
Disclosed as:-
Non-current assets		26.5		24.5
Current assets		1.0		8.7
		27.5		33.2

The investors in Schroders ResPUT have agreed to a controlled liquidation of the fund and the Group has received a number of redemption payments as assets have been realised. The investment is therefore held as a current asset.

            As at 31 March 2010, the Group's interest in associates was as follows:

	% of ordinary share	Country of
	capital/units held	Incorporation
G:res1 Limited	21.6%	Jersey
Schroder Residential Property Unit Trust (ResPUT)	21.8%	Jersey

12.       Investment in joint ventures

	Unaudited	Audited
	31-March	30-Sep
	2010	2009
	£m	£m
Opening balance	80.7	90.8
Loans advanced	1.9	7.5
Provisions for impairment of loans receivable net of write backs	1.5	(14.8)
Share of profit/(loss)	1.9	(1.4)
Net assets acquired through purchase of joint venture	-	0.1
Goodwill arising on investment in Gebau Vermogen GmbH	-	2.7
Exchange adjustment	(0.1)	0.4
Share of change in fair value of cash flow hedges taken through equity	1.4	(4.6)
Closing balance	87.3	80.7

The write back of the provision for impairment of loans receivable in 2010 of £1.5m relates to the Group's mezzanine loan to Grainger GenInvest No. 2 (2006) LLP.  It is included within the provision for impairment of loans receivable net of write-backs on the face of the consolidated income statement.

            As at 31 March 2010, the Group's interest in joint ventures was as follows:

	% of ordinary share	Country of
	capital held	Incorporation
Grainger GenInvest LLP	50.00%	United Kingdom
Grainger GenInvest No. 2 (2006) LLP	50.00%	United Kingdom
Curzon Park Limited	50.00%	United Kingdom
King Street Developments (Hammersmith) Limited	50.00%	United Kingdom
CCZ a.s.	50.00%	Czech Republic
CCY a.s.	50.00%	Czech Republic
Prazsky Project a.s.	50.00%	Czech Republic

13.       Financial interest in property assets

	Unaudited	Audited
	31-March	30-Sep
	2010	2009
	£m	£m
Opening balance	109.1	121.2
Cash received from the instrument	(5.1)	(10.1)
Amounts taken to income statement	2.7	(4.7)
Amounts taken to equity before tax	2.6	2.7
Closing balance	109.3	109.1

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.

For interests held at 31 March 2010 we have revised our assessment of future cash flows and of the effective interest rate to discount those cash flows. This has resulted in an increase to the fair value of £2.6m before tax which has been taken through equity reserves.

14        Trade and other receivables

	Unaudited	Audited
	31-March	30-Sep
	2010	2009
	£m	£m
Trade receivables	8.4	10.1
Less: Provision for impairment of trade receivables	(2.5)	(2.2)
	5.9	7.9
Other receivables	4.1	9.9
Prepayments	2.1	2.2
	12.1	20.0

15        Interest bearing loan and borrowing

The maturity profile of the Group's debt, net of finance costs, is as follows:
	Unaudited	Audited
	31-March	30-Sep
	2010	2009
	£m	£m
Within one year	8.4	19.9
Between one and two years	74.8	109.6
Between two and five years	1,168.9	1,275.6
Over five years	181.5	171.8
	1,433.6	1,576.9

16        Tax

	Audited	Net					Unaudited
	As at	receipts	Acquired	Movements		Movements	As at
	30-Sep	in the	in the	recognised	Exchange	recognised	31-March
	2009	period	year	in income	adjustments	in equity	2010
	£m	£m	£m	£m	£m	£m	£m
Current tax	24.4	4.0	0.2	2.0	-	-	30.6
Deferred tax
Trading property uplift to fair value on acquisition	42.0	-	2.4	(0.3)	-	-	44.1
Investment property revaluation	9.4	-	-	0.9	(0.1)	-	10.2
Accelerated capital allowances	0.4	-	-	-	-	-	0.4
Short-term timing differences	(14.8)	-	-	(1.7)	-	-	(16.5)
Actuarial deficit on BPT pension scheme	(0.4)	-	-	-	-	-	(0.4)
Equity component of available-for-sale financial asset	0.7	-	-	-	-	0.8	1.5
Fair value movement in cash flow hedges and exchange adjustments	(16.2)	-	-	-	-	(1.4)	(17.6)
	21.1	-	2.4	(1.1)	(0.1)	(0.6)	21.7
Total tax	45.5	4.0	2.6	0.9	(0.1)	(0.6)	52.3

					Unaudited
The tax charge for the period of £0.9m comprises:					31-March
					2010
					£m
UK taxation					1.1
Overseas taxation					(0.2)
					0.9

17.       Trade and other payables

		Unaudited	Audited
		31-March	30-Sep
		2010	2009
		£m	£m
Deposits received		3.9	3.6
Trade payables		6.9	7.3
Other taxation and social security		0.4	0.3
Accruals and deferred income		48.9	76.9
		60.1	88.1

Accruals and deferred income at 31 March 2010 includes £24.4m of rent received in advance on the granting of lifetime leases (30 September 2009: £26.1m)

18.       Movement in equity shareholders' funds

	Unaudited
	31-March	31-March
	2010	2009
	£m	£m
Opening equity shareholders' funds	128.5	229.8
Profit/(loss) for the period	2.6	(104.1)
Actuarial loss on BPT pension scheme net of tax	-	(1.5)
Changes in fair value of cash flow hedges net of tax	(3.2)	(59.3)
Net exchange adjustment offset in reserves net of tax	0.3	-
Purchase of own shares	(3.7)	(0.2)
Issue of shares	-	87.1
Rights Issue (see note 21)	236.7	-
Share-based payments charge	0.7	0.7
Dividends paid	(5.3)	(5.4)
Fair value movement on available-for-sale financial asset net of tax	1.9	2.2
Conversion of convertible bond	-	(17.4)
Transfer on early conversion of convertible bond	-	3.2
Closing equity shareholders' funds	358.5	135.1

19.       Post balance sheet events

On 6 May Grainger announced a recommended offer for Sovereign Reversions plc of 202p per share representing an acquisition price of approximately £34.2m.

20.       Related party transactions

Detailed disclosure of all related party arrangements was provided in note 35 of the 2009 Annual Report and Accounts. There has been no material change in the period to 31 March 2010. Material transactions in the period to 31 March 2010 and as at 31 March 2010 were as follows:

	Unaudited
	31-Mar	31-Mar
	2010	2009
	£m	£m
Fee income from joint ventures and associates	2.5	2.8
Interest receivable from joint ventures and associates	1.2	1.9
	Unaudited
	31-Mar	31-Mar
	2010	2009
	£m	£m
Loans to Grainger Geninvest LLP and Grainger Geninvest No 2 (2006) LLP (net of impairment provision)	83.1	75.7

21.       Rights Issue

In December 2009 the Group completed a 2 for 1 rights issue at an issue price of 90p raising a total gross amount of £249.8m. The rights issue increased the number of shares in issue by 277,553,406 shares, increasing share capital by £13.9m.                                                                                                                                                                                      

The Group took advantage of Section 612 CA 2006 to take proceeds in excess of the nominal value of shares issued, amounting to £235.9m, to a merger reserve. Costs of issue, which totalled £13.1m, have been taken directly to reserves.                                                                                                                                                                                                                                               

22.       Acquisition in the period

On 31 March 2010 the Group acquired PHA Limited, a company which owns 162 residential properties located in Devon. The total consideration for the purchase net of cash acquired was £14.9m subject to the agreement of completion accounts. The acquisition has been treated as a business combination and goodwill of £0.4m arose.

23.       Directors' responsibility statement

The directors confirm that this condensed set of interim financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·    an indication of important events that have occurred during the six months and the 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;

·    Material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The directors of Grainger plc are listed in the Grainger plc Annual report and Accounts for the year ended 30 September 2009 and on the Grainger plc website: www.graingerplc.co.uk.

            By order of the Board

            Andrew R. Cunningham

            Director

            20 May 2010

Copies of this statement either are being sent to all shareholders or made available to them through the Group's website or by e-communication. Copies may be obtained from the Group's registered office, Citygate, St. James' Boulevard, Newcastle upon Tyne, NE1 4JE. Further details of this announcement can be found on the Group's website,   www.graingerplc.co.uk.

 

END

 

 

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