REG - Grainger PLC - Final Results
17/11/2022 07:00
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RNS Number : 6952G Grainger PLC 17 November 2022
17 November 2022
Grainger plc
Full year financial results
for the twelve months ended 30 September 2022
Record performance
with four years of growth locked-in, funded and de-risked
§ Net Rental Income up +22%
§ Adjusted Earnings up +12%
§ Like-for-like rental growth up +4.7%
§ Record occupancy continues at 98% (PRS)
§ EPRA Net Tangible Asset ('NTA') up +7%
§ Total dividend per share up +16%
Grainger plc, the UK's largest listed residential landlord with a £3.2bn
operational portfolio of 9,669 rental homes and, £1.8bn build-to-rent
pipeline of 6,838 homes, today announces record performance for its financial
year to the end of September 2022.
Helen Gordon, Chief Executive, said:
"I am pleased to report a very successful year for Grainger, in which we
delivered record net rental income growth of 22%, driven by record occupancy,
rental growth and lease up of our new schemes. Adjusted earnings for the year
up 12%, EPRA NTA up 7% and dividend up 16%.
"Our £953m committed pipeline of 3,658 new build-to-rent homes is locked-in,
fully-funded and de-risked with fixed construction costs, providing visibility
on earnings growth for the next four years. On top of this we have the option
to proceed with a further £241m of 769 homes in our secured pipeline and we
have £599m in our planning and legal pipeline, comprising 2,411 homes. In
total, our build-to-rent pipeline stands at £1.8bn and 6,838 new homes.
"We have a strong financial footing with a robust balance sheet. Our debt is
97% hedged with average debt maturities of six and a half years and we have no
significant refinancing requirements until 2027. All of this puts Grainger in
a position of strength to take advantage of the increasing demand for renting
homes in the UK.
"Whilst we are mindful of the wider macro-economic environment, we are well
positioned for the challenges ahead and our market benefits from positive
long-term structural trends. Demand for renting continues to grow, supply
remains constrained as many small landlords exit the rental market, and we
benefit from a resilient customer base. The inflation-linked characteristics
of our asset class, coupled with our high-quality, energy-efficient and
well-located properties, scalable operating platform and unrivalled data,
insight and analytics gives us confidence for our continued strong operational
performance."
Highlights
§ +22% growth delivered in Net Rental Income(1) to £86.3m (FY21: £70.6m)
§ +12% growth in Adjusted Earnings(2) to £93.5m (FY21: £83.5m)
§ Total dividend up +16% to 5.97p per share
§ +4.7% like-for-like rental growth(3) across our total portfolio (FY21:
1.0%), with +3.5% growth in H1 and +5.5% growth in H2
o +4.8% like-for-like rental growth in our PRS portfolio (FY21: 0.3%), with
+3.5% in H1, +5.5% in H2 and maintained in October post year end
§ +5.6% like-for-like rental growth on new lets in our PRS portfolio
§ +4.1% like-for-like rental growth on renewals in our PRS portfolio
o +4.6% like-for-like rental growth in our regulated tenancy portfolio
(FY21: 3.6%), with 3.7% in H1 and 5.7% in H2
§ Record occupancy of 98% in our PRS portfolio
§ Total Property Return for the year of 7.5% due to strong valuation growth
of +£157m driven by strong performance on lettings and rental growth
§ EPRA NTA up +7% to 317pps (FY21: 297pps)
§ Debt 97% hedged with an average cost of debt 3.1% expected to rise
marginally by +20bps in FY23, a weighted average debt maturity of six and a
half years and no significant refinancing requirements until 2027
§ PRS Customer Net Promoter Score up +16pts to 34pts and 90% PRS customer
satisfaction
§ 26% reduction in Scope 1 & 2 emissions per £m assets under management
(market-based methodology)
§ 87% of PRS properties have EPC ratings A-C
Financial Highlights
Income returns FY21 FY22 Change
Rental growth (like-for-like) 1.0% 4.7% +372 bps
PRS rental growth (like-for-like) 0.3% 4.8% +450 bps
Regulated tenancy rental growth (like-for-like, annualised) 3.6% 4.6% +102 bps
Net rental income (Note 5) £70.6m £86.3m +22%
Adjusted earnings (Note 2) £83.5m £93.5m +12%
Profit before tax (Note 2)(4) £152.1m £298.6m +96%
Earnings per share (diluted, after tax) (Note 9)(4) 16.1p 30.9p +92%
Dividend per share (Note 10)(5) 5.15p 5.97p +16%
Capital returns FY21 FY22 Change
Total Property Return(6) 7.5% 7.5% +2 bps
Total Accounting Return (Note 3) 5.5% 8.8% +330 bps
EPRA NTA per share (Note 3) 297p 317p +7%
Net debt £1,042m £1,262m +21%
Group LTV 30.4% 33.4% +304 bps
Cost of debt (average) 3.1% 3.1% +1 bps
Reversionary surplus £265m £248m (6)%
Secured build-to-rent pipeline Investment Homes
Secured & committed £953m 3,658
Secured but not yet committed £241m 769
Total investment value £1,194m 4,427
ESG benchmark performance
FTSE4Good since 2010
ISS ESG Prime Rating
MSCI ESG 'AA'
Sustainalytics ESG Risk Rating Low Risk
EPRA Sustainability Best Practice Reporting Gold Award
CDP (formerly the Carbon Disclosure Project) 'B' Rating
Workforce Disclosure Initiative 85%
GRESB Public Disclosure 'A' Rating
Future reporting dates
2023
AGM & Trading update 8 February
Half year results 11 May
Trading update September
Full year results 22 November
( )
(1) Refer to Note 5 for net rental income calculation.
(2) Refer to Note 2 for profit before tax and adjusted earnings
reconciliation.
(3) Rental growth is the average increase in rent charged across our portfolio
on a like-for-like basis.
(4) Profit before tax includes an £81.2m valuation uplift from one-off
transfers from trading property to investment property in FY22. The transfer
does not impact the market value of properties reflected in EPRA measures, but
does increase EPRA NTA by 3pps following the reclassification of £20.3m
deferred and contingent tax.
(5) Dividends - Subject to approval at the AGM, the final dividend of 3.89p
per share (gross) amounting to £28.8m will be paid on 14 February 2023 to
Shareholders on the register at the close of business on 31 December 2022.
Shareholders will again be offered the option to participate in a dividend
reinvestment plan and the last day for election is 24 January 2023. An interim
dividend of 2.08p per share amounting to a total of £15.4m was paid to
Shareholders on 1 July 2022 - refer also to Note 10.
(6) Total Property Return (TPR) represents the change in gross asset value,
net of capital expenditure incurred, plus net income, expressed as a
percentage of gross asset value.
Results presentation
Grainger plc will be holding a presentation of the results at 08:30am (UK
time) today, 17 November 2022, which can be accessed via webcast and a
telephone dial-in facility (details below), which will be followed by a live
Q&A session for sell side analysts and shareholders.
Webcast details:
To view the webcast, please go to the following URL link. Registration is
required.
https://stream.brrmedia.co.uk/broadcast/633424dee019f405f294d272
(https://stream.brrmedia.co.uk/broadcast/633424dee019f405f294d272)
The webcast will be available for six months from the date of the
presentation.
Conference call details:
Call: +44 (0)330 551 0200
Confirmation Code: Quote Grainger when prompted by the operator
A copy of the presentation slides will also be available to download on
Grainger's website (http://corporate.graingerplc.co.uk/
(http://corporate.graingerplc.co.uk/) ) from 08:00am (UK time).
For further information, please contact:
Investor relations
Kurt Mueller, Grainger plc:
+44 (0) 20 7940 9500
Media
Ginny Pulbrook / Geoffrey Pelham-Lane, Camarco:
+44 (0) 20 3757 4992 /
4985
Forward-looking statements disclaimer
This publication contains certain forward-looking statements. Any statement in
this publication that is not a statement of historical fact including, without
limitation, those regarding Grainger plc's future financial condition,
business, operations, financial performance and other future events or
developments involving Grainger, is a forward-looking statement. Such
statements may, but not always, be identified by words such as 'expect',
'estimate', 'project', 'anticipate', 'believe', 'should', 'intend', 'plan',
'could', 'probability', 'risk', 'target', 'goal', 'objective', 'may',
'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or
variations on these expressions. By their nature, forward-looking statements
involve inherent risks, assumptions and uncertainties as they relate to events
which occur in the future and depend on circumstances which may or may not
occur and go beyond Grainger's ability to control. Actual outcomes or results
may differ materially from the outcomes or results expressed or implied by
these forward-looking statements. Factors which may give rise to such
differences include (but are not limited to) changing economic, financial,
business, regulatory, legal, political, industry and market trends, house
prices, competition, natural disasters, terrorism or other social, political
or market conditions.
Grainger's principal risks are described in more detail in its Annual Report
and Accounts, set out in the Risk Management report on pages 54-57 of the 2022
Annual Report and Accounts.
A number of risks faced by the Group are not directly within our control such
as the wider economic and political environment.
In line with our risk management approach detailed on pages 52-54 of the 2022
Annual Report and Accounts, the key risks to the business are under regular
review by the Board and management, applying Grainger's risk management
framework. The war in Ukraine, as well as the devastating human impact, has
substantially increased the geopolitical uncertainty in Europe and beyond.
This has led to wider economic ramifications for society and business, with
the duration and depth of the impact of the conflict being unclear. This lack
of clarity is in the pre-existing context of inflationary pressures and, more
recently, rising interest rates. Specifically in relation to Grainger, it is
currently considered that the principal risks previously reported remain our
principal risks. However, it is recognised that the Ukrainian war, the
prevailing economic context and future uncertainty in that regard have
arguably increased the likelihood of such risks being accelerated or becoming
more acute. This would include, but is not limited to, market, development,
regulatory and supplier risks. The risks to Grainger will continue to be
monitored closely as well as the potential controls and mitigants that may be
applied during this volatile and uncertain period.
These risks and other factors could adversely affect the outcome and financial
effects of the events specified in this publication. The forward-looking
statements reflect knowledge and information available at the date they are
made and Grainger plc does not intend to update on the forward-looking
statements contained in this publication.
This publication is for information purposes only and no reliance may be
placed upon it. No representative or warranty, either expressed or implied, is
provided in relation to the accuracy, completeness or reliability of the
information contained in this publication. Past performance of securities in
Grainger plc cannot be relied upon as a guide to the future performance of
such securities.
This publication does not constitute an offer for sale or subscription of, or
solicitation of any offer to buy or subscribe for, any securities of Grainger
plc.
Chief Executive's Statement
A year of strong performance, with growth de-risked and locked-in
Once again, I am pleased to report a very successful year for your Company. In
2022, we delivered a record increase in income, occupancy, lease up of our new
schemes and rental growth. In addition we have secured and de-risked our
medium-term growth. All of this puts Grainger in a position of strength to
take advantage of the increasing demand for renting homes in the UK.
As the UK has emerged from the Covid-19 pandemic, the foundations we laid over
previous years have enabled us to outperform. Demand for renting over the
past year accelerated significantly across all our key markets, while our
high-quality homes and scalable operating platform supported the exceptional
growth rate in our income and our portfolio. We have delivered record levels
of occupancy, rental growth and high levels of customer retention.
Our committed pipeline of new homes is funded, with permissions granted and
costs fixed. This committed pipeline amounts to £953m of investment to
deliver 3,658 new build-to-rent homes representing £47m of additional net
rental income over the next four years, and gives us excellent visibility over
our future earnings potential over the medium-term.
We know that, for many, home ownership has been put on hold and we are
committed to ensuring that the experience of renting we provide at Grainger
will be life enriching and fun.
A year of strong performance
During the pandemic we performed resiliently, with like-for-like rental growth
positive throughout, rent collection averaging 98% and occupancy held at above
90%. Since then, we drove a very swift return to normal levels of occupancy
and indeed by March achieved record levels. The speed of recovery was enabled
by the investment we made in our technology platform, CONNECT, and in our
in-house leasing team.
Through the course of the year, rental growth continued to build month on
month, achieving an average of 4.7% across our whole portfolio, 4.8% in our
Private Rented Sector ('PRS') portfolio and 4.6% in our regulated tenancy
portfolio (FY21: 1.0% overall, PRS 0.3%, Regulated 3.6%). Overall, we grew net
rental income by 22% to £86.3m (FY21: £70.6m), and therefore our proposed
final dividend will be 3.89p per share, reflecting a total dividend of 5.97p
per share (FY21: 5.15pps), a 16% increase.
On our capital returns, the growth in our income led to the value of our
portfolio showing strong valuation growth. Our EPRA Net Tangible Assets
('NTA'), grew strongly by 20p or 7% to 317p, reflecting the quality and
attractiveness of our properties.
Total Property Return for the business for the year was 7.5% (FY21: 7.5%).
Growth locked-in and de-risked, with optionality on longer-term commitments
Our committed pipeline is locked-in and de-risked and will deliver further net
rental income growth next year and in the years that follow.
Our £1.8bn secured pipeline of 6,838 build-to-rent homes includes those
projects that we have committed to, which represent £953m of investment,
3,658 homes and £47m NRI over the next four years, and those projects that we
have the option to proceed with but which we have not yet committed to,
representing £241m of investment, 769 homes and £10m potential NRI.
The remaining projects in our secured pipeline are predominantly schemes that
are direct development projects where we have the option of choosing when to
proceed, enabling us to manage the interplay between our financial commitments
and the market appropriately.
Disciplined capital allocation
We have a strong commitment to discipline in our investment decisions. This
includes our financial policies ensuring we have a solid balance sheet, the
stringent ESG criteria we apply to all our decisions, the locational targeting
we undertake, the detailed research we do for each of our investments, and our
policy of putting the funding in place before committing to any new
investments.
These all put us in a very strong position financially, and ensures we are
investing in the right assets in the right locations.
Delivering a great customer experience
Our success is predicated on our customers choosing to rent and live with us.
This means ensuring that we have great homes and an industry leading customer
service offering.
We know that when our customers have a positive rental experience with us,
they want to stay for longer, they are more willing to pay an appropriate rent
in line with the quality of product and service they receive, and they tell
others about their positive experience with Grainger.
All of this translates into stronger, more reliable rental income for your
business, and ultimately increased dividends for Shareholders.
We know there is much more to the experience of renting than a high-quality
apartment, which is why we have invested this year in our enhanced Customer
Experience Programme, which leverages our research, insight and data to inform
how we can continually improve our offering, delivering a better customer
experience and better value.
Every member of the Grainger team, whether external customer facing or not,
has undertaken a bespoke customer experience training programme. This is
already showing results in enhanced customer feedback and with a 16 point
improvement in our net promoter score to 34, one of our measures of customer
satisfaction.
Other initiatives include:
1. Rolling out our customer app, MyGrainger, across our whole PRS property
portfolio, which enables customers to log repairs or maintenance requests and
allows us to communicate more easily with them;
2. Continual investment in our customer engagement programme to better
understand what it means to deliver great customer service 'The Grainger Way';
3. An engaging campaign to help our customers 'Live a Greener Life',
helping them reduce their energy bills and also taking some early steps
towards reducing our Scope 3 carbon emissions.
Committed to our responsibility as a market leading landlord
We are proud of our 110-year heritage of being a responsible and market
leading residential landlord.
Our purpose of 'Renting homes, Enriching lives' and our core values guide
every one of our decisions.
· Every home matters
· Leading the way
· Exceeding expectations
· People at the heart
Our ambitious ESG programme reflects this, where we are proactively driving a
significant reduction in carbon emissions across Scopes 1, 2 and 3, and making
a positive, long-lasting impact locally. Reflecting our commitment, this year
we established a new Board-level Responsible Business Committee, overseeing
ESG and Employee Voice. I am pleased that our new Non-Executive Director,
Carol Hui, has taken Chairmanship of this committee.
Highlights during the year:
· A 26% reduction in our Scope 1 & 2 carbon emissions per £m
of assets under management 1 (#_ftn1)
· Investing further in the energy efficiency of our properties,
with 87% of our PRS portfolio now with the highest ratings (EPC ratings of A
to C), providing considerable savings on energy costs for our customers
· Making significant progress on measuring Scope 3 emissions
· Donating six homes, free-of-charge, to Ukrainian refugee
families, where they can live together and support each other
Health and safety
Health and safety is an absolute priority in our business of creating and
providing homes to thousands of people across the country. Our exemplary
Live.Safe programme ensures that we have in place the most robust health and
safety regime possible. From the investment and development process through to
ongoing operations and our Company safety culture, our Live.Safe programme
supports our commitment to being a long-term responsible landlord, protecting
our customers, our people and our reputation. This year the Building Safety
Act came into force. At Grainger we contributed insights to the work of Dame
Judith Hackitt and have gone beyond the requirements of the Act by employing
additional resources to provide a greater depth of experience to our onsite
teams in protecting the health and safety of our customers and employees.
Our people make the business
I am extremely proud of the very special colleagues I have at Grainger. The
success of this business and the quality of our customer service is down to
the care and hard work of our people. One of Grainger's core values is
'People at the heart' and this applies to our employees and our customers.
After a challenging time supporting our customers during the pandemic, the
Grainger team responded swiftly to the uptick in demand as life returned to
normal and to the new launches during the year.
From all the feedback we receive from our customers, it is clear that what
makes their experience great when renting with Grainger is our team. Our
interactions with our customers and the service we provide is what truly makes
the difference.
It's therefore hugely important that we focus a great deal of our energy on
supporting our colleagues and
ensuring that we are a great place to work.
At the end of last year our HR Director, Peter Tonathy, who had worked with me
as we repositioned Grainger, retired and I would like to thank him for his
dedication to building the Grainger team. Our new Chief People Officer,
Michelle Boothroyd, joined us at the start of 2022 and has refocused her team
and set out Grainger's People Strategy.
I am convinced that our commitment to a strong corporate culture and good
working practices will ensure many talented colleagues will develop their
careers at Grainger.
We are mindful of the financial stress felt by our employees which is why we
moved swiftly in August of this year to support our colleagues during these
difficult times, and made a one-off payment of £1,000 to all employees,
excluding the Executive Committee.
Through our many feedback channels and surveys for colleagues, they tell us
what they're thinking and how they're feeling, and in response we tailor our
policies, our communications, our support and our business to respond.
This year, I am very pleased to report that in an independent review by Best
Companies we moved from One to Watch to One Star status in our annual employee
survey. This is a significant achievement that signifies 'very good' levels
of workplace engagement and is a great milestone for Grainger.
Ensuring Grainger continues to be an inclusive and welcoming work environment
for everyone from any background also continues to be a core focus for us. We
have introduced more robust methods for measuring, tracking and understanding
the makeup of our workforce, so we can tailor and target our initiatives and
efforts when it comes to diversity and inclusion.
I am pleased to report that our gender pay gap has narrowed and that we have
increased female representation in more senior roles during the year.
Concluding remarks and outlook
The business delivered another strong performance last year, and we are in a
resilient position for the year to come. I am confident that we will continue
to perform well despite the ongoing economic uncertainty ahead.
Our market benefits from continuing positive tailwinds, with demand for
renting rising, constrained supply and a resilient customer base. The
inflation-linked characteristics of our asset class, coupled with our
high-quality properties, scalable operating platform and unrivalled data,
insight and analytics gives me the confidence for our continued strong
performance.
Despite the macro environment, we have locked-in and de-risked our medium-term
growth, enabling us to continue our growth trajectory and deliver into a
strong occupational market.
This successful year has been delivered by a talented and committed team at
Grainger. I would like to thank the Grainger team and the Grainger Board for
their hard work and dedication in building a business employees and
Shareholders can be proud of.
Helen Gordon
CEO
16 November 2022
Financial review
In a year that has seen excellent operational performance, Grainger's in-house
operational model has ensured that we capitalised on strong rental demand
whilst continuing to deliver operational efficiencies. Our high-quality
mid-market build-to-rent homes generated exceptionally strong demand in the
period which has seen us deliver record occupancy at 98%, and strong like for
like rental growth of 4.7% which continues to accelerate.
The 22% increase in net rental income was driven by this exceptional
operational and leasing performance combined with the delivery of our new
pipeline schemes. With a strong sales performance and a continued focus on
cost control, we delivered continued earnings growth with adjusted earnings of
£93.5m, up 12%.
We secured further pipeline opportunities earlier in the year amounting to
1,019 homes across three schemes and three land sites which provide
optionality over future growth. Our growth strategy has always been combined
with a prudent approach to balance sheet management, and with an LTV of 33.4%
and £663m of headroom we are in a strong place for the year ahead.
The proposed final dividend for the year is 3.89p per share, taking the total
dividend for the year to 5.97p per share, up 16%, reflecting the strength of
our business model.
Financial highlights
Income return FY21 FY22 Change
Rental growth (like-for-like) 1.0% 4.7% +372 bps
Net rental income (Note 5) £70.6m £86.3m +22%
Adjusted earnings (Note 2) £83.5m £93.5m +12%
Profit before tax (Note 2) £152.1m £298.6m +96%
Dividend per share (Note 10) 5.15p 5.97p +16%
Capital return FY21 FY22 Change
EPRA NTA per share (Note 3) 297p 317p +7%
Total Property Return 7.5% 7.5% +2 bps
Total Accounting Return (NTA basis) (Note 3) 5.5% 8.8% +330 bps
Net debt £1,042m £1,262m +21%
Group LTV 30.4% 33.4% +304 bps
Cost of debt (average) 3.1% 3.1% +1 bps
Income statement
The strong performance in the period is reflected in adjusted earnings
increasing by +12% to £93.5m (FY21: £83.5m). We have delivered significant
growth in net rental income in FY22, driven by strong like-for-like rental
growth and the delivery of our pipeline. Future growth is locked-in as our
fully funded committed pipeline converts into rental income, with the total
secured pipeline delivering a c.70% increase in net rents over time. This will
result in significant margin improvement and a doubling of recurring EPRA
earnings compared to FY22. Residential sales profits were robust and in line
with plan at £63.3m (FY21: £67.5m) reflecting the natural run off of vacant
sales in our regulated tenancy portfolio over time.
FY21 FY22
Income statement (£m) Change
Net rental income 70.6 86.3 +22%
Profit on sale of assets - residential 67.5 63.3 (6)%
Profit on sale of assets - development 1.8 2.0 +11%
CHARM income (Note 15) 4.9 4.8 (2)%
Management fees 5.1 4.4 (14)%
Overheads (30.2) (31.8) +5%
Pre-contract costs (0.6) (0.8) +33%
Joint ventures and associates (0.4) (1.4) +250%
Net finance costs (35.2) (33.3) (5)%
Adjusted earnings 83.5 93.5 +12%
Valuation movements 80.7 133.4 +65%
Other valuation movements(1) - 81.2
Other adjustments (12.1) (9.5) (21)%
Profit before tax 152.1 298.6 +96%
(1 ) Profit before tax includes an £81.2m valuation uplift from one-off
transfers from trading property to investment property in FY22. The transfer
does not impact the market value of properties reflected in EPRA measures, but
does increase EPRA NTA by 3pps following the reclassification of £20.3m
deferred and contingent tax.
Rental income
Net rental income was up +22% during the year at £86.3m (FY21: £70.6m) due
to increased occupancy (+£3.9m), £2.8m like-for-like rental growth and
£12.0m PRS investment, offset by disposals (- £3.0m).
During the year we delivered 669 units (FY21: 1,304) across four schemes, all
of which were fully stabilised at the year end. Passing rent at the end of
FY22 was £91m. FY23 pipeline deliveries of 1,640 homes will deliver c.£17m
net rent once stabilised, however given they are largely H2 weighted the lease
up mostly benefits FY24. With a view to moving towards REIT conversion, we
expect to see an increased level of disposals during FY23.
The rental market has been particularly strong in the period with rent
collection levels at 98%, like-for-like growth strong at 4.7% (FY21: 1.0%),
comprised of 4.8% rental growth in our PRS portfolio (FY21: 0.3%) and 4.6% in
our regulated tenancy portfolio (FY21: 3.6%). Rental growth was much stronger
in H2 at 5.5% (H1:3.5%) as rental growth continued to accelerate throughout
the year. Above long-term average rental growth is expected to continue into
FY23.
£m
FY21 Net rental income 70.6
Occupancy 3.9
Disposals (3.0)
PRS Investment 12.0
Rental growth 2.8
FY22 Net rental income 86.3
Sales and development activity
Our residential sales had a strong year delivering £63.3m of profit (FY21:
£67.5m) from revenues of £148.7m (FY21: £157.2m) and continue to provide a
key element of funding for our PRS growth. We delivered £32.4m of profit from
vacant property sales (FY21: £39.6m) from revenues of £73.9m (FY21: £75.5m)
and sales of tenanted properties delivered £30.9m of profit (FY21: £27.9m)
from revenues of £74.8m (FY21: £81.7m). The prices achieved were 3.9% (FY21:
2.6%) ahead of previous valuations.
FY21 FY22
Sales (£m) Revenue Profit Revenue Profit
Residential sales on vacancy 75.5 39.6 73.9 32.4
Tenanted and other sales 81.7 27.9 74.8 30.9
Residential sales total 157.2 67.5 148.7 63.3
Development activity 30.6 1.8 26.0 2.0
Overall sales 187.8 69.3 174.7 65.3
Balance sheet
Our balance sheet remains in a strong position with LTV of 33.4% (FY21: 30.4%)
which is below our target range of 40%-45%, a level that was set to withstand
a c.50% fall in values and gives us plenty of headroom in our financial
covenants which range from 70%-75% maximum LTV. Our policy of having our capex
commitments fully funded upfront means we have significant available headroom
of £663m (FY21: £641m). We also have the ability to flex our disposals to
manage debt levels going forward. Our PRS portfolio now makes up 73% (FY21:
69%) of our overall asset base.
Market value balance sheet (£m) FY21 FY22
Residential - PRS 2,024 2,189
Residential - regulated tenancies 896 812
Residential - mortgages (CHARM) 72 69
Forward funded - PRS work in progress 244 466
Development work in progress 146 182
Investment in JVs/associates 45 55
Total investments 3,427 3,773
Net debt (1,042) (1,262)
Other liabilities (35) (41)
EPRA NRV 2,350 2,470
Deferred and contingent tax - trading assets (142) (111)
EPRA NTA 2,208 2,359
Deferred and contingent tax - investment assets (59) (116)
Fair value of fixed rate debt and derivatives (38) 240
EPRA NDV 2,111 2,483
EPRA NRV pence per share 316 333
EPRA NTA pence per share 297 317
EPRA NDV pence per share 284 334
(
)
EPRA NTA increased by 7% during the year to 317p per share (FY21: 297p per
share). Our valuation uplift of 21pps was the major driver of this growth with
earnings adding 3pps, offset by dividend payments of 5pps.
EPRA NDV increased by 18% with our high levels of fixed rate or hedged debt
resulting in a £240m mark to market value of our debt.
EPRA NTA movement
£m Pence per share
EPRA NTA at 30 September 2021 2,208 297
Adjusted earnings 94 12
Valuations (trading & investment property) 157 21
Disposals (trading assets) (60) (8)
Tax (current, deferred & contingent) (11) (2)
Dividends (40) (5)
Other adjustments (9) (1)
Asset transfers(1) 20 3
EPRA NTA at 30 September 2022 2,359 317
(1) Transfer of properties from trading property to investment property
generating £20.3m contingent tax reclassification (see Note 1c).
Property portfolio performance
Our overall portfolio value growth was 4.4% (FY21: 4.5%) with our operational
PRS portfolio increasing by 4.6% (FY21: 3.4%) and our regulated portfolio
delivering 4.1% valuation growth (FY21: 3.7%). ERV growth at 3.1% was the
primary driver of valuation growth in our PRS portfolio with yields relatively
flat. Our regional regulated portfolio saw strong valuation growth at 7.5%,
ahead of the London regulated portfolio at 3.5%.
Portfolio Region Capital value Total valuation movement
£m £m %
PRS London & SE 1,262 37 3.1%
Regions 927 59 6.8%
PRS total 2,189 96 4.6%
Regulated Tenancies London & SE 680 22 3.5%
Regions 132 11 7.5%
Regulated total 812 33 4.1%
Operational portfolio 3,001 129 4.5%
Development 648 28 4.0%
Total portfolio 3,649 157 4.4%
Financing and capital structure
Our capital structure remains in a strong position with LTV at 33.4% (FY21:
30.4%), cash and available facilities of £663m (FY21: £641m) which more than
covers our committed pipeline and no significant refinancing requirements
until 2027. In August, we successfully refinanced our bank Revolving Credit
Facility ('RCF') and term debt, increasing to £575m from £500m and
maintaining margins.
The average cost of debt remained flat at 3.1% (FY21: 3.1%) during the period.
We have hedged 97% of our interest rate risk with an average maturity of six
years and expect a marginal increase in interest cost of c.20bps in FY23.
Net debt for the year was £1,262m (FY21: £1,042m) with £94m of operational
cash flows, £110m of proceeds from asset recycling, offset by £347m of
investment in our PRS pipeline.
For FY23 we expect similar levels of reinvestment into our PRS pipeline in
line with the delivery of our strategy, together with an increased level of
recycling in line with our ambition for future REIT conversion.
FY21 FY22
Net debt £1,042m £1,262m
Loan to value 30.4% 33.4%
Cost of debt 3.1% 3.1%
Headroom £641m £663m
Weighted average facility maturity (years) 5.6 6.5
Hedging 100% 97%
Summary and outlook
FY22 was a year of very strong performance with good growth in rental income,
earnings and dividend. With a fully funded, committed pipeline which has
construction and finance costs fixed, we have clear visibility over the next
four years of future growth and see our strong forecast earnings growth
unchanged.
Our strong balance sheet, fully funded pipeline and fixed cost debt gives real
strength to our capital structure. We have significant flexibility and
liquidity in our balance sheet that will enable us to maintain our prudent
approach to leverage whatever the macro-economic outlook, and will be well
placed to take advantage of any opportunities that arise.
Rob Hudson
Chief Financial Officer
16 November 2022
Consolidated income statement
For the year ended 30 September Notes 2022 2021
£m
£m
Group revenue 4 279.2 248.9
Net rental income 5 86.3 70.6
Profit on disposal of trading property 6 64.4 68.6
Profit on disposal of investment property 7 1.7 1.5
Income from financial interest in property assets 15 6.0 7.2
Fees and other income 8 4.4 5.1
Administrative expenses (31.8) (38.5)
Other expenses (10.3) (0.6)
Reversal of impairment / (impairment) of inventories to net realisable value 12 1.5 (0.1)
Operating profit 122.2 113.8
Net valuation gains on investment property 11 129.0 76.8
Net valuation gains on investment property reclassifications 1c, 11 81.2 -
Change in fair value of derivatives - (3.8)
Finance costs (34.6) (35.4)
Finance income 1.3 0.2
Share of profit of associates after tax 13 1.2 0.8
Share of loss of joint ventures after tax 14 (1.7) (0.3)
Profit before tax 2 298.6 152.1
Tax charge 20 (69.2) (42.6)
Profit for the year attributable to the owners of the Company 229.4 109.5
Basic earnings per share 9 31.0p 16.2p
Diluted earnings per share 9 30.9p 16.1p
Consolidated statement of comprehensive income
For the year ended 30 September Notes 2022 2021
£m
£m
Profit for the year 2 229.4 109.5
Items that will not be transferred to the consolidated income statement:
Remeasurement of BPT Limited defined benefit pension scheme 21 5.7 5.3
Items that may be or are reclassified to the consolidated income statement:
Changes in fair value of cash flow hedges 47.3 16.1
Other comprehensive income and expense for the year before tax 53.0 21.4
Tax relating to components of other comprehensive income:
Tax relating to items that will not be transferred to the consolidated income 20 (1.4) (1.0)
statement
Tax relating to items that may be or are reclassified to the consolidated 20 (11.9) (2.8)
income statement
Total tax relating to components of other comprehensive income (13.3) (3.8)
Other comprehensive income and expense for the year after tax 39.7 17.6
Total comprehensive income and expense for the year attributable to the owners 269.1 127.1
of the Company
( )
Consolidated statement of financial position
2022 2021
As at 30 September Notes £m £m
ASSETS
Non-current assets
Investment property 11 2,775.9 2,179.2
Property, plant and equipment 4.2 1.4
Investment in associates 13 16.7 15.5
Investment in joint ventures 14 38.5 29.4
Financial interest in property assets 15 69.1 71.7
Retirement benefits 21 9.8 3.5
Deferred tax assets 20 1.2 3.7
Intangible assets 0.5 0.5
2,915.9 2,304.9
Current assets
Inventories - trading property 12 453.8 595.2
Trade and other receivables 16 40.5 38.5
Derivative financial instruments 19 56.5 -
Current tax assets 16.5 16.0
Cash and cash equivalents 95.9 317.6
663.2 967.3
Total assets 3,579.1 3,272.2
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 19 1,317.6 1,347.5
Trade and other payables 17 2.2 0.6
Provisions for other liabilities and charges 18 1.1 1.1
Deferred tax liabilities 20 136.9 69.5
1,457.8 1,418.7
Current liabilities
Interest-bearing loans and borrowings 19 40.0 -
Trade and other payables 17 105.9 109.8
Provisions for other liabilities and charges 18 8.6 0.2
Derivative financial instruments 19 - 4.5
154.5 114.5
Total liabilities 1,612.3 1,533.2
NET ASSETS 1,966.8 1,739.0
EQUITY
Issued share capital 37.1 37.1
Share premium account 817.6 817.3
Merger reserve 20.1 20.1
Capital redemption reserve 0.3 0.3
Cash flow hedge reserve 32.1 (3.3)
Retained earnings 1,059.6 867.5
TOTAL EQUITY 1,966.8 1,739.0
Consolidated statement of changes in equity
Notes Issued Share Merger Capital Cash Retained Total
share
premium account
reserve
redemption
flow
earnings
equity
capital
£m
£m
reserve
hedge
£m
£m
£m
£m
reserve
£m
Balance as at 33.8 616.3 20.1 0.3 (16.6) 789.1 1,443.0
1 October 2020
Profit for the year 2 - - - - - 109.5 109.5
Other comprehensive income for the year - - - - 13.3 4.3 17.6
Total comprehensive income - - - - 13.3 113.8 127.1
Issue of share capital 24 3.3 200.8 - - - - 204.1
Award of SAYE shares - 0.2 - - - - 0.2
Purchase of own shares - - - - - (0.3) (0.3)
Share-based payments charge 22 - - - - - 1.7 1.7
Dividends paid - - - - - (36.8) (36.8)
Total transactions with owners recorded directly in equity 3.3 201.0 - - - (35.4) 168.9
Balance as at 37.1 817.3 20.1 0.3 (3.3) 867.5 1,739.0
30 September 2021
Profit for the year 2 - - - - - 229.4 229.4
Other comprehensive income for the year - - - - 35.4 4.3 39.7
Total comprehensive income - - - - 35.4 233.7 269.1
Award of SAYE shares - 0.3 - - - - 0.3
Purchase of own shares - - - - - (3.3) (3.3)
Share-based payments charge 22 - - - - - 1.7 1.7
Dividends paid - - - - - (40.0) (40.0)
Total transactions with owners recorded directly in equity - 0.3 - - - (41.6) (41.3)
Balance as at 37.1 817.6 20.1 0.3 32.1 1,059.6 1,966.8
30 September 2022
Consolidated statement of cash flows
For the year ended 30 September Notes 2022 2021
£m
£m
Cash flow from operating activities
Profit for the year 2 229.4 109.5
Depreciation and amortisation 0.9 1.2
Net valuation gains on investment property 11 (129.0) (76.8)
Net valuation gains on investment property reclassifications 1c, 11 (81.2) -
Net finance costs 33.3 35.2
Share of loss/(profit) of associates and joint ventures 13, 14 0.5 (0.5)
Profit on disposal of investment property 7 (1.7) (1.5)
Share-based payment charge 22 1.7 1.7
Change in fair value of derivatives - 3.8
Income from financial interest in property assets 15 (6.0) (7.2)
Tax 20 69.2 42.6
Cash generated from operating activities before changes in working capital 117.1 108.0
Increase in trade and other receivables (1.9) (6.9)
Increase in trade and other payables 8.5 48.0
Increase/(decrease) in provisions for liabilities and charges 8.4 (0.2)
Decrease in inventories 24.8 62.2
Cash generated from operating activities 156.9 211.1
Interest paid (42.0) (45.6)
Tax paid (12.3) (16.9)
Payments to defined benefit pension scheme 21 (0.6) (0.6)
Net cash inflow from operating activities 102.0 148.0
Cash flow from investing activities
Proceeds from sale of investment property 7 20.9 40.3
Proceeds from financial interest in property assets 15 8.6 8.8
Investment in joint ventures 14 (6.4) (0.8)
Loans advanced to joint ventures 14 (4.4) (1.6)
Acquisition of investment property 11 (289.2) (362.3)
Acquisition of property, plant and equipment and intangible assets (3.7) (0.3)
Net cash outflow from investing activities (274.2) (315.9)
Cash flow from financing activities
Net proceeds from issue of share capital 24 - 204.1
Award of SAYE shares 0.3 0.2
Purchase of own shares (3.3) (0.3)
Proceeds from new borrowings 14.2 30.0
Payment of loan costs (6.1) -
Cash flows relating to new derivatives / settlement of derivatives (13.7) (3.8)
Repayment of borrowings (0.9) (77.0)
Dividends paid (40.0) (36.8)
Net cash (outflow)/inflow from financing activities (49.5) 116.4
Net decrease in cash and cash equivalents (221.7) (51.5)
Cash and cash equivalents at the beginning of the year 317.6 369.1
Cash and cash equivalents at the end of the year 95.9 317.6
( )
Notes to the preliminary financial results
1. Accounting policies
1a Basis of preparation
The Board approved this preliminary announcement on 16 November 2022. The
financial information included in this preliminary announcement does not
constitute the Group's statutory accounts for the years ended 30 September
2021 or 30 September 2022. Statutory accounts for the year ended 30
September 2021 have been delivered to the Registrar of Companies. The
statutory accounts for the year ended 30 September 2022 will be delivered to
the Registrar of Companies following the Company's annual general meeting.
The auditors, KPMG LLP, have reported on the accounts for both years. The
reports were unqualified, did not include reference to any matters by way of
emphasis and did not contain statements under section 498 (2) or (3) of the
Companies Act 2006.
These financial statements for the year ended 30 September 2022 have been
prepared under the historical cost convention except for the following assets
and liabilities, and corresponding income statement accounts, which are stated
at their fair value; investment property; derivative financial instruments;
and financial interest in property assets.
The accounting policies used are consistent with those contained in the
Group's full annual report and accounts for the year ended 30 September 2022.
The financial information included in this preliminary announcement has been
prepared in accordance with UK-adopted international accounting standards
(IFRS) and applicable law.
1b Adoption of new and revised International Financial Reporting Standards
and interpretations
The following new standards and amendments to standards were issued in the
year and have no material impact on the financial statements:
i) Amendments to IFRS 16, IAS 39, IFRS 4 and IFRS 9 - Interest Rate
Benchmark Reform (Phase 2)
New interpretations and agenda decisions were issued in the year and the most
significant of these, and the impact on the Group's accounting, are set out
below:
i) IFRIC: Demand deposits with restrictions on use arising from a contract
with a third party (IAS 7 Statement of Cash Flows)
The agenda decision considered accounting for deposits subject to contractual
restrictions on use. The Committee clarified the position such that where an
entity has a contractual obligation with a third party to keep a specified
amount of cash in a separate demand deposit for specified purposes, it will
not meet the definition of cash and cash equivalents if it cannot be accessed
on demand. This agenda decision applies to deposits held in connection with
facility arrangements. At 30 September 2022, deposits amounting to £14.3m
have restricted use and have been reflected in trade and other receivables, as
set out in Note 16.
A number of new standards and amendments to standards have been issued but are
not yet effective for the Group and have not been early adopted. The
application of these new standards and amendments are not expected to have a
material impact on the Group's financial statements.
c Significant judgements and estimates
Estimates
i. Valuation of property assets
Residential trading property is carried in the statement of financial position
at the lower of cost and net realisable value and investment property is
carried at fair value. The Group does, however, in its principal non-GAAP net
asset value measures, EPRA NRV, EPRA NTA and EPRA NDV, include trading
property at market value.
The adjustment in the value of trading property is the difference between the
statutory book value and its market value as set out in Note 3. For investment
property, market value is the same as fair value. In respect of trading
properties, market valuation is the key assumption in determining the net
realisable value of those properties.
In all cases, forming these valuations inherently includes elements of
judgement and subjectivity with regards to the selection of unobservable
inputs. The valuation basis and key unobservable inputs are outlined in Note 2
in the 2022 Annual Report and Accounts.
The results and the basis of each valuation and their impact on both the
financial statements and market value for the Group's non-GAAP net asset value
measures are set out below:
PRS Other Total Valuer % of properties
for which
£m Reversionary £m £m
external valuer
provides
£m
valuation
Trading property 13.5 395.8 44.5 453.8
Investment property 2,753.5 22.4 - 2,775.9
Financial asset (CHARM) - 69.1 - 69.1
Total statutory book value 2,767.0 487.3 44.5 3,298.8
Trading property
Residential 13.9 789.0 - 802.9 Allsop LLP 75%
Developments - - 70.1 70.1 CBRE Limited 96%
Total trading property 13.9 789.0 70.1 873.0
Investment property
Residential 898.5 22.4 - 920.9 Allsop LLP / CBRE Limited 100%
Developments 111.8 - - 111.8 CBRE Limited 100%
New build PRS 1,409.8 - - 1,409.8 CBRE Limited 96%
Affordable housing 190.5 - - 190.5 Allsop LLP 100%
Tricomm housing 142.9 - - 142.9 Allsop LLP 100%
Total investment property 2,753.5 22.4 - 2,775.9
Financial asset (CHARM)(1) - 69.1 - 69.1 Allsop LLP 100%
Total assets at market value 2,767.4 880.5 70.1 3,718.0
Statutory book value 2,767.0 487.3 44.5 3,298.8
Market value adjustment(2) 0.4 393.2 25.6 419.2
Total assets at market value 2,767.4 880.5 70.1 3,718.0
Net revaluation gain recognised in the income statement for wholly-owned 129.0 - - 129.0
properties
Net revaluation gain recognised in the income statement for wholly-owned 81.2 - - 81.2
properties reclassified in the year
Net revaluation gain relating to joint ventures and associates(3) 0.9 - - 0.9
Net revaluation gain recognised in the year(3) 211.1 - - 211.1
( )
(1) Allsop provides vacant possession values used by the Directors to value
the financial asset.
(2) The market value adjustment is the difference between the statutory book
value and the market value of the Group's properties. Refer to Note 3 for
market value net asset measures.
(3) Includes the Group's share of joint ventures and associates revaluation
gain after tax.
Judgments
i. Distinction between investment and trading property
The Group considers the intention at the outset when each property is acquired
in order to classify the property as either an investment or a trading
property. Where the intention is either to trade the property or where the
property is held for immediate sale upon receiving vacant possession within
the ordinary course of business, the property is classified as trading
property. Where the intention is to hold the property for its long-term rental
yield and/or capital appreciation, the property is classified as an investment
property. The classification of the Group's properties is a significant
judgement which directly impacts the statutory net asset position, as trading
properties are held at the lower of cost and net realisable value, whilst
investment properties are held at fair value, with gains or losses taken
through the consolidated income statement.
The Group continually reviews properties for changes in use that could
subsequently change the classification of properties. A change of use occurs
if property meets, or ceases to meet, the definition of investment property
which is more than a change in management's intentions. The fact patterns
associated with changes in the way in which properties are utilised are
considered on a case by case basis and to the extent that a change in use is
established, property reclassifications are reflected appropriately.
During the year, four property portfolios were reclassified from trading
property to investment property where changes in use have been identified.
Trading property with a cost of £116.5m and market value of £197.7m has been
reclassified as investment property, resulting in valuations gains of £81.2m
on reclassification which have been recognised in the consolidated income
statement. In addition, £20.3m contingent tax on trading property has been
reclassified as deferred tax on investment property in our EPRA NAV metrics
which has increased EPRA NTA by 3p per share.
1d Group risk factors
The principal risks and uncertainties facing the Group are set out in the Risk
Management report of the 2022 Annual Report and Accounts.
A number of risks faced by the Group are not directly within our control such
as the wider economic and political environment.
Risks, including updates to principal risks, are outlined in the 2022 Annual
Report and Accounts.
1e Going concern assessment
The Directors are required to make an assessment of the Group's ability to
continue to trade as a going concern for the foreseeable future. Given market
volatility and the impact on the macro-economic conditions in which the Group
is operating, the Directors have placed a particular focus on the
appropriateness of adopting the going concern basis in preparing the financial
statements for the year ended 30 September 2022.
The financial position of the Group, including details of its financing and
capital structure, is set out in the financial review on pages 32 to 37 in the
2022 Annual Report and Accounts. In making the going concern assessment, the
Directors have considered the Group's principal risks (see pages 54 to 57 in
the 2022 Annual Report and Accounts) and their impact on financial
performance. The Directors have assessed the future funding commitments of the
Group and compared these to the level of committed loan facilities and cash
resources over the medium term. In making this assessment, consideration has
been given to compliance with borrowing covenants along with the uncertainty
inherent in future financial forecasts and, where applicable, severe
sensitivities have been applied to the key factors affecting financial
performance for the Group.
The going concern assessment is based on forecasts to the end of March 2024,
which exceeds the required period of assessment of at least 12 months in order
to be aligned to the Group's interim reporting date, and uses the same
forecasts considered by the Group for the purposes of the Viability Statement.
The assessment considers a severe downside scenario including a potential
extreme longer-term impact of Covid-19, reflecting the following key
assumptions:
· Reducing PRS occupancy to 92% by 31 March 2024
· Contraction in rental levels of 3.75% per annum
· Reducing property valuations by 19.5% per annum, driven by either
yield expansion or house price deflation
· 20% development cost inflation
· Operating cost inflation of 20% per annum
· An increase in SONIA rate of 5% from 1 October 2022
No new financing is assumed in the assessment period, but existing facilities
are assumed to remain available. Even in this severe downside scenario, the
Group has sufficient cash reserves, with the loan-to-value covenant remaining
no higher than 53% (facility maximum covenant ranges between 70% - 75%) and
interest cover above 2.45x (facility minimum covenant ranges between 1.35x -
1.75x) for the period to March 2024, which covers the required period of at
least 12 months from the date of authorization of these financial statements.
Based on these considerations, together with available market information and
the Directors' experience of the Group's property portfolio and markets, the
Directors continue to adopt the going concern basis in preparing the accounts
for the year ended 30 September 2022.
1f Forward-looking statement
Certain statements in this preliminary announcement are forward-looking.
Although the Group believes that the expectations reflected in these
forward-looking statements are reasonable, we can give no assurance that these
expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual results may
differ materially from those expressed or implied by these forward-looking
statements. We undertake no obligation to update any forward-looking
statements whether as a result of new information, future events or otherwise.
2. Analysis of profit before tax
The table below details adjusted earnings, which is one of Grainger's key
performance indicators. The metric is utilised as a key measure to aid
understanding of the performance of the continuing business and excludes
valuation movements and other adjustments that are one-off in nature, which do
not form part of the normal ongoing revenue or costs of the business and,
either individually or in aggregate, are material to the reported Group
results.
2022 2021
£m Statutory Valuation Other adjustments Adjusted earnings Statutory Valuation Other adjustments Adjusted earnings
Group revenue 279.2 - - 279.2 248.9 - - 248.9
Net rental income 86.3 - - 86.3 70.6 - - 70.6
Profit on disposal of trading property 64.4 (0.8) - 63.6 68.6 (0.8) - 67.8
Profit on disposal of investment property 1.7 - - 1.7 1.5 - - 1.5
Income from financial interest in property assets 6.0 (1.2) - 4.8 7.2 (2.3) - 4.9
Fees and other income 4.4 - - 4.4 5.1 - - 5.1
Administrative expenses (31.8) - - (31.8) (38.5) - 8.3 (30.2)
Other expenses (10.3) - 9.5 (0.8) (0.6) - - (0.6)
Reversal of impairment /(impairment) of inventories to net realisable value 1.5 (1.5) - - (0.1) 0.1 - -
Operating profit 122.2 (3.5) 9.5 128.2 113.8 (3.0) (8.3) 119.1
Net valuation gains on investment property 129.0 (129.0) - - 76.8 (76.8) - -
Net valuation gains on investment property reclassifications 81.2 (81.2) - - - - - -
Change in fair value of derivatives - - - - (3.8) - 3.8 -
Finance costs (34.6) - - (34.6) (35.4) - - (35.4)
Finance income 1.3 - - 1.3 0.2 - - 0.2
Share of profit of associates after tax 1.2 (0.9) - 0.3 0.8 (0.9) - (0.1)
Share of loss of joint ventures after tax (1.7) - - (1.7) (0.3) - - (0.3)
Profit before tax 298.6 (214.6) 9.5 93.5 152.1 (80.7) 12.1 83.5
Tax charge (69.2) (42.6)
Profit for the year attributable to the owners of the Company 229.4 109.5
Basic adjusted earnings per share 10.2p 10.0p
Diluted adjusted earnings per share 10.2p 9.9p
Profit before tax in the adjusted columns above of £93.5m (2021: £83.5m) is
the adjusted earnings of the Group. Adjusted earnings per share assumes tax of
£17.8m (2021: £15.9m) in line with the standard rate of UK Corporation Tax
of 19.0% (2021: 19.0%), divided by the weighted average number of shares as
shown in Note 9. The Group's IFRS statutory earnings per share is also
detailed in Note 9. The classification of amounts as other adjustments is a
judgement made by management and is a matter referred to the Audit Committee
for approval. The £9.5m cost within other adjustments in 2022 comprises fire
safety expenses including remedial work in respect of legacy assets. In 2021,
the £12.1m cost within other adjustments comprises £8.3m software
development costs following the change in accounting policy and £3.8m
refinancing costs. These transactions do not form part of the Group's ongoing
activities and, as such, have been classified as other adjustments.
3. Segmental Information
IFRS 8, Operating Segments 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 are the Executive
Directors.
The two significant segments for the Group are PRS and Reversionary. The PRS
segment includes stabilised PRS assets as well as PRS under construction due
to direct development and forward funding arrangements, both for wholly-owned
assets and the Group's interest in joint ventures and associates as relevant.
The Reversionary segment includes regulated tenancies, as well as CHARM. The
Other segment includes legacy strategic land and development arrangements,
along with administrative expenses.
The key operating performance measure of profit or loss used by the CODM is
adjusted earnings before tax, valuation and other adjustments.
The principal net asset value (NAV) measure reviewed by the CODM is EPRA NTA
which is considered to become the most relevant, and therefore the primary NAV
measure for the Group. EPRA NTA reflects the tax that will crystallise in
relation to the trading portfolio, whilst excluding the volatility of mark to
market movements on fixed rate debt and derivatives which are unlikely to be
realised. Other NAV measures include EPRA NRV and EPRA NDV which we report
alongside EPRA NTA.
Information relating to the Group's operating segments is set out in the
tables below. The tables distinguish between adjusted earnings, valuation
movements and other adjustments and should be read in conjunction with Note 2.
2022 Income statement
£m PRS Reversionary Other Total
Group revenue 103.2 150.5 25.5 279.2
Segment revenue - external
Net rental income 70.8 15.2 0.3 86.3
Profit on disposal of trading property (0.1) 61.7 2.0 63.6
Profit on disposal of investment property 1.6 0.1 - 1.7
Income from financial interest in property assets - 4.8 - 4.8
Fees and other income 3.8 - 0.6 4.4
Administrative expenses - - (31.8) (31.8)
Other expenses (0.8) - - (0.8)
Net finance costs (24.7) (7.8) (0.8) (33.3)
Share of trading loss of joint ventures and associates after tax (1.4) - - (1.4)
Adjusted earnings 49.2 74.0 (29.7) 93.5
Valuation movements 133.4
Valuation movements on investment property reclassifications 81.2
Other adjustments (9.5)
Profit before tax 298.6
A reconciliation from adjusted earnings to adjusted EPRA earnings is detailed
in the table below, with further details shown in the EPRA performance
measures section at the end of this document:
£m PRS Reversionary Other Total
Adjusted earnings 49.2 74.0 (29.7) 93.5
Profit on disposal of investment property (1.6) (0.1) - (1.7)
Previously recognised profit through EPRA market value measures - (58.2) (2.9) (61.1)
Adjusted EPRA earnings 47.6 15.7 (32.6) 30.7
2021 Income statement
£m PRS Reversionary Other Total
Group revenue 78.8 138.7 31.4 248.9
Segment revenue - external
Net rental income 51.9 18.4 0.3 70.6
Profit on disposal of trading property (0.1) 66.1 1.8 67.8
Profit on disposal of investment property 1.3 0.2 - 1.5
Income from financial interest in property assets - 4.9 - 4.9
Fees and other income 4.7 - 0.4 5.1
Administrative expenses - - (30.2) (30.2)
Other expenses (0.6) - - (0.6)
Net finance costs (24.5) (9.9) (0.8) (35.2)
Share of trading profit of joint ventures and associates after tax (0.3) - (0.1) (0.4)
Adjusted earnings 32.4 79.7 (28.6) 83.5
Valuation movements 80.7
Other adjustments (12.1)
Profit before tax 152.1
A reconciliation from adjusted earnings to adjusted EPRA earnings is detailed
in the table below:
£m PRS Reversionary Other Total
Adjusted earnings 32.4 79.7 (28.6) 83.5
Profit on disposal of investment property (1.3) (0.2) - (1.5)
Previously recognised profit through EPRA market value measures - (59.4) 3.4 (56.0)
Adjusted EPRA earnings 31.1 20.1 (25.2) 26.0
Segmental assets
The principal net asset value measures reviewed by the CODM are EPRA NRV, EPRA
NTA and EPRA NDV. These measures reflect the current market value of trading
property owned by the Group rather than the lower of historical cost and net
realisable value. These measures are considered to be a more relevant
reflection of the value of the assets owned by the Group.
EPRA NRV is the Group's statutory net assets plus the adjustment required to
increase the value of trading stock from its statutory accounts value of the
lower of cost and net realisable value to its market value. In addition, the
statutory statement of financial position amounts for both deferred tax on
property revaluations and derivative financial instruments net of deferred
tax, including those in joint ventures and associates, are added back to
statutory net assets. Finally, the market value of Grainger plc shares owned
by the Group are added back to statutory net assets.
EPRA NTA assumes that entities buy and sell assets, thereby crystallising
certain levels of deferred tax liabilities. For the Group, deferred tax in
relation to revaluations of its trading portfolio is taken into account by
applying the expected rate of tax to the adjustment that increases the value
of trading stock from its statutory accounts value of the lower of cost and
net realisable value, to its market value. The measure also excludes all
intangible assets on the statutory balance sheet, including goodwill.
EPRA NDV reverses some of the adjustments made between statutory net assets,
EPRA NRV and EPRA NTA. All of the adjustments for the value of derivative
financial instruments net of deferred tax, including those in joint ventures
and associates, are reversed. The adjustment for the deferred tax on
investment property revaluations excluded from EPRA NRV and EPRA NTA are also
reversed, as is the intangible adjustment in respect of EPRA NTA, except for
goodwill which remains excluded. In addition, adjustments are made to net
assets to reflect the fair value, net of deferred tax, of the Group's fixed
rate debt.
Total Accounting Return (NTA basis) of 8.8% is calculated from the closing
EPRA NTA of 317p per share plus the dividend of 5.97p per share for the year,
divided by the opening EPRA NTA of 297p per share.
These measures are set out below by segment along with a reconciliation to the
summarised statutory statement of financial position:
2022 Segment net assets
£m PRS Reversionary Other Total Pence per share
Total segment net assets (statutory) 1,711.7 190.7 64.4 1,966.8 265p
Total segment net assets (EPRA NRV) 1,833.0 584.9 52.7 2,470.6 333p
Total segment net assets (EPRA NTA) 1,827.6 485.6 45.8 2,359.0 317p
Total segment net assets (EPRA NDV) 1,712.0 485.6 285.4 2,483.0 334p
2022 Reconciliation of EPRA NAV measures
£m Statutory balance sheet Adjustments EPRA NRV Adjustments to deferred and contingent tax and intangibles EPRA NTA balance sheet Adjustments to derivatives, fixed rate debt and intangibles EPRA NDV
to market
balance
balance
value, deferred
sheet
sheet
tax and
derivatives
Investment property 2,775.9 - 2,775.9 - 2,775.9 - 2,775.9
Investment in joint ventures and associates 55.2 - 55.2 - 55.2 - 55.2
Financial interest in property assets 69.1 - 69.1 - 69.1 - 69.1
Inventories - trading property 453.8 419.2 873.0 - 873.0 - 873.0
Cash and cash equivalents 95.9 - 95.9 - 95.9 - 95.9
Other assets 129.2 (51.4) 77.8 (0.5) 77.3 56.5 133.8
Total assets 3,579.1 367.8 3,946.9 (0.5) 3,946.4 56.5 4,002.9
Interest-bearing loans and borrowings (1,357.6) - (1,357.6) - (1,357.6) 263.0 (1,094.6)
Deferred and contingent tax liabilities (136.9) 136.0 (0.9) (111.1) (112.0) (195.5) (307.5)
Other liabilities (117.8) - (117.8) - (117.8) - (117.8)
Total liabilities (1,612.3) 136.0 (1,476.3) (111.1) (1,587.4) 67.5 (1,519.9)
Net assets 1,966.8 503.8 2,470.6 (111.6) 2,359.0 124.0 2,483.0
2021 Segment net assets
£m PRS Reversionary Other Total Pence per share
Total segment net assets (statutory) 1,484.7 256.1 (1.8) 1,739.0 234p
Total segment net assets (EPRA NRV) 1,637.4 677.8 34.8 2,350.0 316p
Total segment net assets (EPRA NTA) 1,608.5 571.8 27.5 2,207.8 297p
Total segment net assets (EPRA NDV) 1,550.2 571.8 (10.9) 2,111.1 284p
2021 Reconciliation of EPRA NAV measures
£m Statutory balance sheet Adjustments EPRA NRV Adjustments to deferred and contingent tax and intangibles EPRA NTA balance sheet Adjustments to derivatives, fixed rate debt and intangibles EPRA NDV
to market
balance
balance
value, deferred
sheet
sheet
tax and
derivatives
Investment property 2,179.2 - 2,179.2 - 2,179.2 - 2,179.2
Investment in joint ventures and associates 44.9 - 44.9 - 44.9 - 44.9
Financial interest in property assets 71.7 - 71.7 - 71.7 - 71.7
Inventories - trading property 595.2 535.5 1,130.7 - 1,130.7 - 1,130.7
Cash and cash equivalents 317.6 - 317.6 - 317.6 - 317.6
Other assets 63.6 4.9 68.5 (0.5) 68.0 12.8 80.8
Total assets 3,272.2 540.4 3,812.6 (0.5) 3,812.1 12.8 3,824.9
Interest-bearing loans and borrowings (1,347.5) - (1,347.5) - (1,347.5) (46.7) (1,394.2)
Deferred and contingent tax liabilities (69.5) 66.1 (3.4) (141.7) (145.1) (58.3) (203.4)
Other liabilities (116.2) 4.5 (111.7) - (111.7) (4.5) (116.2)
Total liabilities (1,533.2) 70.6 (1,462.6) (141.7) (1,604.3) (109.5) (1,713.8)
Net assets 1,739.0 611.0 2,350.0 (142.2) 2,207.8 (96.7) 2,111.1
( )
4. Group revenue
2022 2021
£m
£m
Gross rental income (Note 5) 121.4 97.4
Gross proceeds from disposal of trading property (Note 6) 153.4 146.4
Fees and other income (Note 8) 4.4 5.1
279.2 248.9
5. Net rental income
2022 2021
£m
£m
Gross rental income 121.4 97.4
Property operating expenses (35.1) (26.8)
86.3 70.6
6. Profit on disposal of trading property
2022 2021
£m
£m
Gross proceeds from disposal of trading property 153.4 146.4
Selling costs (4.0) (3.1)
Net proceeds from disposal of trading property 149.4 143.3
Carrying value of trading property sold (Note 12) (85.0) (74.7)
64.4 68.6
7. Profit on disposal of investment property
2022 2021
£m
£m
Gross proceeds from disposal of investment property 21.3 41.5
Selling costs (0.4) (1.2)
Net proceeds from disposal of investment property 20.9 40.3
Carrying value of investment property sold (Note 11) (19.2) (38.8)
1.7 1.5
8. Fees and other income
2022 2021
£m
£m
Property and asset management fee income 2.7 2.6
Other sundry income 1.7 2.5
4.4 5.1
Included within other sundry income in the current year is £1.1m (2021:
£1.6m) liquidated and ascertained damages ('LADs') recorded to compensate the
Group for lost rental income resulting from the delayed completion of
construction contracts.
9. Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit or loss
attributable to the owners of the Company by the weighted average number of
ordinary shares in issue during the year, 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 Plan ('LTIP') and Deferred Bonus
Plan ('DBP'), on which the dividends are being waived.
Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of shares in issue by the dilutive effect of ordinary shares that the
Company may potentially issue relating to its share option schemes and
contingent share awards under the LTIP and DBP, based upon the number of
shares that would be issued if 30 September 2022 was the end of the
contingency period. Where the effect of the above adjustments is antidilutive,
they are excluded from the calculation of diluted earnings per share.
30 September 2022 30 September 2021
Profit for Weighted average number of shares (millions) Earnings Profit for Weighted average number of shares (millions) Earnings
the year
per share (pence)
the year
per share (pence)
£m
£m
Basic earnings per share
Profit attributable to equity holders 229.4 740.5 31.0 109.5 677.7 16.2
Effect of potentially dilutive securities
Share options and contingent shares - 2.6 (0.1) - 2.7 (0.1)
Diluted earnings per share
Profit attributable to equity holders 229.4 743.1 30.9 109.5 680.4 16.1
( )
10. Dividends
Subject to approval at the AGM, the final dividend of 3.89p per share (gross)
amounting to £28.8m will be paid on 14 February 2023 to Shareholders on the
register at the close of business on 31 December 2022. Shareholders will again
be offered the option to participate in a dividend reinvestment plan and the
last day for election is 24 January 2023. An interim dividend of 2.08p per
share amounting to a total of £15.4m was paid to Shareholders on 1 July 2022.
11. Investment property
2022 2021
£m
£m
Opening balance 2,179.2 1,778.9
Acquisitions 14.4 78.0
Capital expenditure - completed assets 9.2 22.8
Capital expenditure - assets under construction 265.6 261.5
Total additions 289.2 362.3
Transfer from inventories (Note 1c) 116.5 -
Disposals (Note 7) (19.2) (38.8)
Net valuation gains on investment properties 129.0 76.8
Net valuation gains on investment property reclassifications (Note 1c) 81.2 -
Closing balance 2,775.9 2,179.2
12. Inventories - trading property
2022 2021
£m
£m
Opening balance 595.2 657.4
Additions 58.6 12.6
Transfer to investment property (Note 1c) (116.5) -
Disposals (Note 6) (85.0) (74.7)
Reversal of impairment/(impairment) of inventories to net realisable value 1.5 (0.1)
Closing balance 453.8 595.2
13. Investment in associates
2022 2021
£m
£m
Opening balance 15.5 14.7
Share of profit for the year 1.2 0.8
Closing balance 16.7 15.5
The closing balance comprises share of net assets of £2.1m (2021: £0.9m) and
net loans due from associates of £14.6m (2021: £14.6m). At the balance sheet
date, there is no expectation of credit losses on loans due.
As at 30 September 2022, the Group's interest in active associates was as
follows:
% of ordinary share capital held Country of incorporation Accounting period end
Vesta LP 20.0 UK 30 September
14. Investment in joint ventures
2022 2021
£m
£m
Opening balance 29.4 27.3
Share of loss for the year (1.7) (0.3)
Further investment(1) 6.4 0.8
Loans advanced to joint ventures 4.4 1.6
Closing balance 38.5 29.4
( )
(1) Grainger invested £6.4m into Connected Living London (BTR) Limited in the
year (2021: £0.8m).
The closing balance comprises share of net assets of £13.2m (2021: £8.5m)
and net loans due from joint ventures of £25.3m (2021: £20.9m). At the
balance date, there is no expectation of credit losses on loans due.
At 30 September 2022, the Group's interest in active joint ventures was as
follows:
% of ordinary share capital held Country of incorporation Accounting period end
Connected Living London (BTR) Limited 51 UK 30 September
Curzon Park Limited 50 UK 31 March
Lewisham Grainger Holdings LLP 50 UK 30 September
15. Financial interest in property assets ('CHARM' portfolio)
2022 2021
£m
£m
Opening balance 71.7 73.3
Cash received from the instrument (8.6) (8.8)
Amounts taken to income statement 6.0 7.2
Closing balance 69.1 71.7
The CHARM portfolio is a financial interest in equity mortgages held by the
Church of England Pensions Board as mortgagee. It is accounted for under IFRS
9 and is measured at fair value through profit and loss.
It is considered to be a Level 3 financial asset as defined by IFRS 13. The
financial asset is included in the fair value hierarchy within Note 19.
16. Trade and other receivables
2022 2021
£m
£m
Rent and other tenant receivables 4.7 5.7
Deduct: Provision for impairment (1.5) (2.3)
Rent and other tenant receivables - net 3.2 3.4
Contract assets 1.9 2.6
Restricted deposits(1) 14.3 -
Other receivables 17.1 29.8
Prepayments 4.0 2.7
Closing balance 40.5 38.5
(1) In the prior year, the Group held £12.6m in restricted deposits within
cash and cash equivalents. This balance is immaterial to
the Group and as such prior year comparative figures have not been
restated.
The Group's assessment of expected credit losses involves estimation given its
forward-looking nature. This is not considered to be an area of significant
judgement or estimation due to the balance of gross rent and other tenant
receivables of £4.7m (2021: £5.7m). Assumptions used in the forward-looking
assessment are continually reviewed to take into account likely rent
deferrals.
At the balance sheet date, there is no expectation of any material credit
losses on contract assets.
Restricted deposits arise from contracts with third parties that place
restrictions on use of funds and cannot be accessed. These deposits are held
in connection with facility arrangements and are released by the lender on a
quarterly basis once covenant compliance has been met.
In the prior year, other receivables included £10.4m due from land sales
which have now been received.
The fair values of trade and other receivables are considered to be equal to
their carrying amounts.
17. Trade and other payables
2022 2021
£m
£m
Current liabilities
Deposits received 10.1 9.1
Trade payables 22.8 16.3
Lease liabilities 0.8 0.7
Tax and social security costs 0.7 4.9
Accruals 63.8 72.6
Deferred income 7.7 6.2
105.9 109.8
Non-current liabilities
Lease liabilities 2.2 0.6
2.2 0.6
Total trade and other payables 108.1 110.4
Within accruals, £43.0m comprises accrued expenditure in respect of ongoing
construction activities (2021: £43.7m).
18. Provisions for other liabilities and charges
2022 2021
£m
£m
Current provisions for other liabilities and charges
Opening balance 0.2 0.3
Additions 8.7 -
Utilisation (0.3) (0.1)
8.6 0.2
Non-current provisions for other liabilities and charges
Opening balance 1.1 1.2
Utilisation - (0.1)
1.1 1.1
Total provisions for other liabilities and charges 9.7 1.3
Following an extensive review of legacy development projects, £8.7m for
potential fire safety remediation costs has been provided for, relating to a
small number of legacy properties that Grainger historically had an
involvement in developing and may require fire safety related remediation
works. A further £0.8m has been provided for in respect of loans to service
charge accounts in respect of fire safety remediation costs, which is
recognised in trade and other receivables. Where appropriate, the Group is
seeking recoveries from contractors and insurers which may reduce the overall
liability over time.
19. Interest-bearing loans and borrowings and financial risk management
2022 2021
£m
£m
Current liabilities
Bank loans - Pounds sterling 40.0 -
40.0 -
Non-current liabilities
Bank loans - Pounds sterling 275.2 306.5
Bank loans - Euro 0.9 0.9
Non-bank financial institution 347.2 346.6
Corporate bond 694.3 693.5
1,317.6 1,347.5
Closing balance 1,357.6 1,347.5
The above analyses of loans and borrowings are net of unamortised loan issue
costs and the discount on issuance of the corporate bond. As at 30 September
2022, unamortised costs totalled £14.4m (2021: £10.7m) and the outstanding
discount was £2.2m (2021:
£2.6m).
Categories of financial instrument
The Group holds financial instruments such as financial interest in property
assets, trade and other receivables (excluding prepayments), derivatives, cash
and cash equivalents. For all assets and liabilities excluding
interest-bearing loans the book value was the same as the fair value as at 30
September 2022 and as at 30 September 2021.
As at 30 September 2022, the fair value of interest-bearing loans is lower
than the book value by £263.0m (2021: £46.7m greater than book value), but
there is no requirement under IFRS 9 to adjust the carrying value of loans,
all of which are stated at unamortised cost in the consolidated statement of
financial position.
Market risk
The Group is exposed to market risk through interest rates, the availability
of credit and house price movements relating to the Tricomm Housing portfolio
and the CHARM portfolio. The Group is not significantly exposed to equity
price risk or to commodity price risk.
Fair values
IFRS 13 sets out a three-tier hierarchy for financial assets and liabilities
valued at fair value. These are as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets
and liabilities;
Level 2 - inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly or indirectly; and
Level 3 - unobservable inputs for the asset or liability.
The following table presents the Group's assets and liabilities that are
measured at fair value:
2022 2021
Assets Liabilities Assets Liabilities
£m
£m
£m
£m
Level 3
CHARM 69.1 - 71.7 -
Investment property 2,775.9 - 2,179.2 -
2,845.0 - 2,250.9 -
Level 2
Interest rate swaps - in cash flow hedge accounting relationships 47.8 - - 4.5
47.8 - - 4.5
The significant unobservable inputs affecting the carrying value of the CHARM
portfolio are house price inflation and discount rates. A reconciliation of
movements and amounts recognised in the consolidated income statement are
detailed in Note 15.
The investment valuations provided by Allsop LLP and CBRE Limited are based on
RIC's Professional Valuation Standards, but include a number of unobservable
inputs and other valuation assumptions.
The fair value of swaps and caps were valued in-house by a specialised
treasury management system, using first a discounted cash flow model and
market information. The fair value is derived from the present value of future
cash flows discounted at rates obtained by means of the current yield curve
appropriate for those instruments. As all significant inputs required to value
the swaps and caps are observable, they fall within Level 2.
The reconciliation between opening and closing balances for Level 3 is
detailed in the table below:
Assets - Level 3 2022 2021
£m
£m
Opening balance 2,250.9 1,852.2
Amounts taken to income statement 216.2 84.0
Other movements 377.9 314.7
Closing balance 2,845.0 2,250.9
20. Tax
The tax charge for the year of £69.2m (2021: £42.6m) recognised in the
consolidated income statement comprises:
2022 2021
£m
£m
Current tax
Corporation tax on profit 17.8 11.4
Adjustments relating to prior years (5.2) (3.7)
12.6 7.7
Deferred tax
Origination and reversal of temporary differences 51.7 33.4
Adjustments relating to prior years 4.9 1.5
56.6 34.9
Total tax charge for the year 69.2 42.6
( )
The 2022 current tax adjustments relating to prior years reflect adjustments
which have been included in submitted tax returns and represent movements
between deferred and current tax in relation to investment properties and
capital allowances.
The Group works in an open and transparent manner and maintains a regular
dialogue with HM Revenue & Customs. This approach is consistent with the
'low risk' rating we have been awarded by HM Revenue & Customs and to
which the Group is committed.
The Group's results for this year are taxed at an effective rate of 19.0%
(2021: 19.0%).
In addition to the above, a deferred tax charge of £13.3m (2021: £3.8m) was
recognised within other comprehensive income comprising:
2022 2021
£m
£m
Remeasurement of BPT Limited defined benefit pension scheme 1.4 1.0
Fair value movement in cash flow hedges 11.9 2.8
Amounts recognised in other comprehensive income 13.3 3.8
Deferred tax balances comprise temporary differences attributable to:
2022 2021
£m
£m
Deferred tax assets
Short-term temporary differences 1.2 2.1
Losses carried forward - 0.2
Actuarial deficit on BPT Limited defined benefit pension scheme - 0.2
Fair value movement in derivative financial instruments - 1.2
and cumulative exchange adjustments
1.2 3.7
Deferred tax liabilities
Trading property uplift to fair value on business combinations (6.3) (7.8)
Investment property revaluation (108.9) (55.7)
Short-term temporary differences (8.6) (4.6)
Fair value movement in financial interest in property assets (1.2) (1.4)
Actuarial gain on BPT Limited defined benefit pension scheme (1.2) -
Fair value movement in derivative financial instruments (10.7) -
(136.9) (69.5)
Total deferred tax (135.7) (65.8)
( )
Deferred tax has been calculated at a rate of 25.0% (2021: 25.0%) in line with
the enacted main rate of corporation tax applicable from 1 April 2023.
In addition to the tax amounts shown above, contingent tax based on EPRA market value measures, being tax on the difference between the carrying value of trading properties in the consolidated statement of financial position and their market value has not been recognised by the Group. This contingent tax amounts to £104.8m, calculated at 25.0% (2021: £133.9m, calculated at 25.0%) and will be realised as the properties are sold.
21. Retirement benefits
The Group retirement benefit asset increased by £6.3m to £9.8m in the year
ended 30 September 2022. This movement has arisen from changes in assumptions
of £10.8m (primarily market observable discount rates) and £0.6m company
contributions, offset by a loss on plan assets of £5.1m. The principal
actuarial assumptions used to reflect market conditions as at 30 September
2022 are as follows:
2022 2021
% %
Discount rate 5.0 2.1
Retail Price Index (RPI) inflation 3.8 3.7
Consumer Price Index (CPI) inflation 3.0 2.9
Salary increases 4.3 4.2
Rate of increase of pensions in payment 5.0 5.0
Rate of increase for deferred pensioners 3.0 2.9
22. Share-based payments
The Group operates a number of equity-settled, share-based compensation plan
comprising awards under a Long-Term Incentive Plan ('LTIP'), a Deferred Bonus
Plan ('DBP'), a Share Incentive Plan ('SIP') and a Save As You Earn Scheme
('SAYE'). The share-based payments charge recognised in the consolidated
income statement for the period is £1.7m (2021: £1.7m).
23. Related party transactions
During the year ended 30 September 2022, the Group transacted with its
associates and joint ventures (details of which are set out in Notes 13 and
14). The Group provides a number of services to its associates and joint
ventures. These include property and asset management services for which the
Group receives fee income. The related party transactions recognised in the
consolidated income statement and consolidated statement of financial position
are as follows:
2022 2021
Fees Year end Fees Year end
recognised
balance
recognised
balance
£'000
£'000
£'000
£'000
Connected Living London (BTR) Limited 1,303 596 1,211 1,588
Lewisham Grainger Holdings LLP 319 - 319 930
Vesta Limited Partnership 743 207 559 275
2,365 803 2,089 2,793
2022 2021
Interest Year end loan Interest Interest Year end loan Interest
recognised
balance
rate
recognised
balance
rate
£'000
£m
%
£'000
£m
%
Curzon Park Limited - 18.1 Nil - 18.1 Nil
Lewisham Grainger Holdings LLP 692 7.2 6.9 - 2.8 Nil
Vesta LP - 14.6 Nil - 14.6 Nil
692 39.9 - 35.5
24. Issue of share capital
In September 2021, the Group issued 67,379,369 new shares at an issue price of
310.0p raising a total amount of £204.1m net of costs. The shares were issued
with a nominal value of £0.05p per share. This increased share capital by
£3.3m and the share premium account by £200.8m.
25. Post balance sheet events
On 1 November 2022, the maturity date on a £40m sterling bank loan was
extended by a further five years, with 2 x 1 year extension options.
EPRA Performance Measures - Unaudited
The European Public Real Estate Association (EPRA) is the body that represents
Europe's listed property companies. The association sets out guidelines and
recommendations to facilitate consistency in listed real estate reporting, in
turn allowing stakeholders to compare companies on a like-for-like basis. As a
member of EPRA, the Group is supportive of EPRA's initiatives and discloses
measures in relation to the EPRA Best Practices Recommendations ('EPRA BPR')
guidelines. The most recent guidelines, updated in February 2022, have been
adopted by the Group.
EPRA Earnings
2022 2021
Earnings Shares Pence per Earnings Shares Pence per share
£m millions share £m millions
Earnings per IFRS income statement 298.6 743.1 40.1 152.1 680.4 22.3
Adjustments to calculate adjusted EPRA Earnings, exclude:
i) Changes in value of investment properties, development properties held for (211.4) - (28.4) (79.1) - (11.6)
investment and other interests
ii) Profits or losses on disposal of investment properties, development (1.7) - (0.2) (1.5) - (0.2)
properties held for investment and other interests
iii) Profits or losses on sales of trading properties including impairment (63.4) - (8.5) (56.7) - (8.3)
charges in respect of trading properties
iv) Tax on profits or losses on disposals - - - - - -
v) Negative goodwill/goodwill impairment - - - - - -
vi) Changes in fair value of financial instruments and associated close-out - - - 3.8 - 0.5
costs
vii) Acquisition costs on share deals and non-controlling joint venture - - - - - -
interests
viii) Deferred tax in respect of EPRA adjustments - - - - - -
ix) Adjustments i) to viii) in respect of joint ventures (0.9) - (0.1) (0.9) - (0.1)
x) Non-controlling interests in respect of the above - - - - - -
xi) Other adjustments in respect of adjusted earnings 9.5 - 1.3 8.3 - 1.2
Adjusted EPRA Earnings/Earnings per share 30.7 743.1 4.1 26.0 680.4 3.8
Adjusted EPRA Earnings per share after tax 3.3 3.1
( )
EPRA NRV, EPRA NTA and EPRA NDV
2022 2021
EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV
£m £m £m £m £m £m
IFRS Equity attributable to shareholders 1,966.8 1,966.8 1,966.8 1,739.0 1,739.0 1,739.0
Include/Exclude:
i) Hybrid Instruments - - - - - -
Diluted NAV 1,966.8 1,966.8 1,966.8 1,739.0 1,739.0 1,739.0
Include:
ii.a) Revaluation of IP (if IAS 40 cost option is used) - - - - - -
ii.b) Revaluation of IPUC (if IAS 40 cost option is used) - - - - - -
ii.c) Revaluation of other non-current investments 5.1 5.1 5.1 6.0 6.0 6.0
iii) Revaluation of tenant leases held as finance leases - - - - - -
iv) Revaluation of trading properties 425.5 314.4 314.4 543.3 401.6 401.6
Diluted NAV at Fair Value 2,397.4 2,286.3 2,286.3 2,288.3 2,146.6 2,146.6
Exclude:
v) Deferred tax in relation to fair value gains of IP 115.6 115.6 - 58.3 58.3 -
vi) Fair value of financial instruments (42.4) (42.4) - 3.4 3.4 -
vii) Goodwill as a result of deferred tax - - - - - -
viii.a) Goodwill as per the IFRS balance sheet - (0.5) (0.5) - (0.5) (0.5)
viii.b) Intangible as per the IFRS balance sheet - - - - - -
Include:
ix) Fair value of fixed interest rate debt - - 197.2 - - (35.0)
x) Revalue of intangibles to fair value - - - - - -
xi) Real estate transfer tax - - - - - -
NAV 2,470.6 2,359.0 2,483.0 2,350.0 2,207.8 2,111.1
Fully diluted number of shares 742.9 742.9 742.9 742.8 742.8 742.8
NAV pence per share 333 317 334 316 297 284
1 (#_ftnref1) Market-based methodology
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