REG - Grainger PLC - Preliminary Full Year Financial Results
21/11/2024 07:00
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RNS Number : 0352N Grainger PLC 21 November 2024
21 November 2024
Grainger plc
Preliminary full year financial results
for the twelve months ended 30 September 2024
Excellent performance
Accelerating growth
Further upgrade to EPRA earnings guidance
§ Net Rental Income up +14%
§ Total dividend per share up +14%
§ EPRA Earnings up +21%
§ Expanded portfolio by 1,236 new homes
§ Like-for-like PRS rental growth up +6.3%
§ EPRA NTA resilient at 298pps
§ High customer satisfaction
Grainger plc, the UK's largest listed residential landlord and leader in the
build-to-rent sector, today announces an excellent performance for the 12
months ended 30 September 2024. Grainger has a £3.4bn operational portfolio
of 11,069 private rental homes and a £1.4bn build-to-rent pipeline comprising
4,730 new homes.
Helen Gordon, Chief Executive, said:
"It is my pleasure to report an excellent performance and another year of
accelerated growth for Grainger.
"Building on last year's record, we have delivered another strong year of
growth, adding 1,236 new homes to our expanding nationwide portfolio. We added
four new communities to our existing clusters in Birmingham, Bristol, London,
and Manchester. Building on our national footprint of carefully selected
locations, we now have meaningful scale in many cities across the country
providing good quality rental homes into areas of high demand. We also opened
our first scheme in Cardiff, The Copper Works.
"These new homes together with like-for-like rental growth of 6.3% have meant
we have once again delivered double digit net rental income growth at 14%
ahead of last year's 12% growth whilst continuing to provide quality homes and
communities. For our shareholders this also means a 14% growth in our
dividend. We increased EPRA Earnings 21% in the year.
"Customer affordability remains strong at 28%, below the national average of
over 34%, and Grainger's customer satisfaction is higher than ever. 9 in 10
customers tell us that they "really like" their Grainger home.
"This coming year is the last financial year before Grainger converts to a
REIT, a major milestone in our transformation to becoming the leader in the
UK's build-to-rent (BTR) sector. Since setting out our strategy in 2016, we
have invested £2.5bn into delivering new BTR homes, and at the same time
delivered value by divesting £2bn from non-core businesses and assets. Over
this period, we have more than tripled the net rental income for the business.
In the last year alone, we have disposed of £274m of non-core assets,
recycling £270m of this capital into higher yielding, new, high-quality,
energy-efficient BTR homes.
"The delivery of our committed pipeline has the potential to increase EPRA
Earnings by another 50% over the medium term, whilst in the near term we
expect EPRA Earnings to reach £60m by FY26, a second upgrade from our
previous guidance. In addition, we anticipate our EBITDA margin to increase
substantially from 54% today to over 60% by FY29.
"We have been pleased to see the new Labour Government's public rejection of
rent controls and the acknowledgement that such controls would hurt supply and
investment. On the contrary, it has been pleasing to see the Government's
commitment to increase housing supply and investment. Plans to raise standards
in the rental sector plays to Grainger's strengths as a leading landlord with
a best-in-class operating platform and a responsible approach to housing
provision.
"The market opportunity for the UK build-to-rent sector is considerable with
demand for renting growing and the shortage of rental supply worsening, and
with its proven track record, Grainger is best placed to help alleviate this
through continued investment and housing delivery, accelerating our growth for
years to come."
Highlights
§ +14% growth delivered in Net Rental Income(1) to £110.1m (FY23: £96.5m)
§ +21% growth delivered in EPRA Earnings to £48.0m (FY23: £39.8m)
§ Dividend up +14% to 7.55p per share (FY23: 6.65p per share)
§ Adjusted Earnings(2) down (6)% to £91.6m (FY23: £97.6m) as guided due to
our reducing regulated tenancy portfolio and therefore reduced contribution
from sales profits
§ +6.3% like-for-like rental growth(3) in our portfolio (FY23: 7.7%)
o +6.3% like-for-like rental growth in our BTR/PRS Portfolio
§ +5.6% on new lets (FY23: 9.2%)
§ +6.8% on renewals (FY23: 7.2%)
o +6.6% like-for-like rental growth in our Regulated Tenancy Portfolio
(FY23: 5.9%)
§ Occupancy of 97.4% in our BTR/PRS portfolio
§ Strong sales performance of £274m, driven by an increase in asset
recycling
§ EPRA NTA robust at 298pps (FY23: 305pps), slightly ahead of FY23 excluding
the 8p impact of tax changes (MDR), with a return to valuation growth in the
second half
§ Strong balance sheet and funding position, debt costs fixed in mid 3%'s for
the next four years
§ During the year we acquired two sites for direct development opportunities
expanding on our existing target cluster locations:
o Cardiff - potential for up to 405 additional new BTR homes, building on
our existing asset, The Copper Works (307 homes)
o Sheffield - potential for up to 193 additional new BTR homes, building on
our two existing assets in Sheffield (521 homes)
§ Customer affordability remains robust at 28% of gross household income
§ Customer satisfaction remains high, with our Customer Net Promoter Score
increasing again year-on-year, placing Grainger ahead of leading consumer
brands, including Coca-Cola and Google
§ Rental growth for the year ahead is expected to remain above the long-term
historical average of 3-3.5%, as well as above our underwriting assumptions
§ Grainger is well placed to deliver a sustainable Total Accounting Return of
8%, reflecting conservative assumptions including stable yields and the
low-risk nature of our asset class
Financial Highlights
Income returns FY24 FY23 Change
Rental growth (like-for-like) 6.3% 7.7% -141bps
PRS rental growth (like-for-like) 6.3% 8.0% -167bps
PRS like-for-like (new lets) 5.6% 9.2% -362bps
PRS like-for-like (renewals) 6.8% 7.2% -45bps
Regulated tenancy rental growth (like-for-like, annualised) 6.6% 5.9% +74bps
Net rental income (Note 5) £110.1m £96.5m +14%
Adjusted earnings (Note 2) £91.6m £97.6m (6)%
EPRA Earnings (Note 3)(4) £48.0m £39.8m +21%
IFRS Profit before tax (Note 2) £40.6m £27.4m +48%
Earnings per share (diluted, after tax) (Note 9) 4.2p 3.5p +20%
Dividend per share (Note 10)(5) 7.55p 6.65p +14%
Capital returns FY24 FY23 Change
Total Property Return(6) 1.9% 0.4% +153bps
Total Accounting Return (NTA Basis) (Note 3) 0.3% (1.8)% +207bps
EPRA NTA per share (Note 3) 298p 305p (2)%
Net debt £1,453m £1,416m +3%
Group LTV 38.2% 36.8% +135bps
Cost of debt (average) 3.2% 3.3% -13bps
Reversionary surplus £147m £213m (31)%
Build-to-rent investment pipeline Investment Homes
Committed £481m 1,330
Secured £541m 2,009
Planning/ Legals £379m 1,391
Total investment value £1.4bn 4,730
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 98%
GRESB Public Disclosure 'A' Rating
National Equality Standard Accredited in FY24
Future reporting dates
2025
AGM & Trading update 5 February
Half year results 15 May
Trading update September
Full year results 20 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) EPRA Earnings is a measure of recurring earnings from core operational
activities which the Company uses in accordance with the Best Practices
Recommendations of the European Public Real Estate Association (EPRA). For
more details please see page 171-172 of the Annual Report and Accounts
(5) Dividends - Subject to approval at the AGM, the final dividend of 5.01p
per share (gross) amounting to £37.0m will be paid on 21 February 2025 to
Shareholders on the register at the close of business on 17 January 2025.
Shareholders will again be offered the option to participate in a dividend
reinvestment plan and the last day for election is 31 January 2025. An interim
dividend of 2.54p per share amounting to a total of £18.8m was paid to
Shareholders on 5 July 2024 - 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 will be holding a presentation of the results at 09.00am (UK time)
today, 21 November 2024, 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://brrmedia.news/GRI_FY_24
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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 Full Year Results 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 08:30am (UK time).
Annual Report & Accounts
We are today also publishing our 2024 Annual Report & Accounts on our
website, including the ESEF (tagged) version,
(https://corporate.graingerplc.co.uk/investors/investor-downloads) and we
will also be submitting the both versions to the National Storage Mechanism
and they will shortly be available for inspection at:
data.fca.org.uk/#/nsm/nationalstoragemechanism
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.
We will be publishing our Notice of Annual General Meeting in December 2024,
and we will also submit this to the National Storage Mechanism to make it
available for inspection. A further announcement will be made at this 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 announcement may contain certain statements that are forward-looking
statements. They appear in a number of places throughout this announcement and
include statements regarding Grainger plc's intentions, beliefs or current
expectations and those of our officers, directors and employees concerning,
amongst other things, our results of operations, financial condition,
liquidity, prospects, growth, strategies and the business we operate. By their
nature, these statements involve risks and uncertainty since future events and
circumstances can cause results and developments to differ materially from
those anticipated. The forward-looking statements reflect knowledge and
information available at the date of preparation of this announcement and,
unless otherwise required by applicable law, Grainger plc undertakes no
obligation to update or revise these forward-looking statements. Nothing in
this announcement should be construed as a profit forecast. Grainger plc and
its Directors accept no liability to third parties in respect of this
announcement save as would arise under English law.
Information about the management of the Principal Risks and Uncertainties
facing Grainger plc is set out within the Annual Report and Accounts 2024. Any
forward-looking statements in this announcement speak only at the date of this
announcement and Grainger plc undertakes no obligation to update publicly or
review any forward-looking statement to reflect new information or events,
circumstances or developments after the date of this announcement.
Nature of announcement
This announcement 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 announcement. Past performance of securities in
Grainger plc cannot be relied upon as a guide to the future performance of
such securities. This announcement 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
Substantial opportunity to accelerate growth
It is my pleasure to report another year of continuing accelerated growth for
your Company and a very strong growth outlook.
Building on last year's record delivery of new homes, we have had another year
of strong delivery, adding 1,236 new homes to our expanding portfolio.
We added four new communities to our existing clusters in Birmingham, Bristol,
London, and Manchester, and building on our national footprint of carefully
selected locations, we are now building meaningful scale in these cities.
One of these was the acquisition of an existing BTR asset, The Astley,
demonstrating the potential of stabilised acquisitions as a route to growth.
We also opened our first scheme in Wales in Cardiff.
These new homes together with like-for-like rental growth of 6.3% have meant
we have once again delivered double digit income growth at 14%, ahead of last
year's 12% growth. For our Shareholders this also means a 14% growth in our
dividend.
Our portfolio returned to valuation growth in the second half with a 1.1%
increase which offset the decline in the first half related to the one-off
impact of tax changes (the removal of multiple dwellings relief, MDR). Over
the whole year valuation declined by 0.8% (FY23: (2.4)%) including this one
off impact; excluding MDR underlying valuations increased 0.8% during the
year.
Over the past two years, due to rising interest rates, we've experienced yield
expansion yet our portfolio value's decline was successfully largely offset by
rental growth due to the resilience of our assets and the strength of our
operating platform.
Our proactive asset recycling programme drives continued growth, which also
preserves the strength of our balance sheet. This year we disposed of a record
number of non-core assets generating £274m of gross revenue from these lower
yielding assets. We are then reinvesting this capital into higher-yielding,
modern, purpose-built, energy efficient, attractive homes. This, together with
our high level of asset recycling last year is leading to the continued high
quality and strong potential of our portfolio.
The investment and focus we have placed on creating the UK's leading
build-to-rent (BTR) operating platform means that we can leverage our planned
growth using our central platform and deliver significant margin gains, with
our EBITDA margin set to grow by six percentage points to over 60% by FY29, a
compounding effect on our earnings growth.
The strategic transformation we have undergone since setting out our strategy
in 2016 is enabling us to convert to a REIT in October 2025, made possible by
the fact that the business will be majority BTR homes, focused on investment
and growing net rental income and no longer reliant on trading profits. Our
BTR/PRS portfolio now represents 81% of our operational portfolio given the
success of both our pipeline delivery and recycling of our regulated tenancy
portfolio.
High customer satisfaction and healthy customer affordability
We are committed to delivering great homes and a great service to our
customers. Satisfied customers deliver the most robust returns for our
Shareholders.
Our investment in customer experience, including deeper customer insight, our
CONNECT technology platform and our Company-wide customer service training
programme, has led to year-on-year improvements in customer metrics.
Our key metric for customer satisfaction, Net Promoter Score (NPS), has
increased even further this year following last year's exceptional score, and
is now +48, significantly ahead of industry peers and many other industry
market leaders.
Customer retention is high at 63%. On average, our customers stay with
Grainger for nearly three years.
In addition to our customers telling us that they are happy renting with
Grainger, we closely monitor the financial health of our customers and their
rental affordability. It is generally accepted that housing costs should be no
more than a third of a household's gross income.
I am pleased to report that Grainger's customer affordability remains healthy
at 28%.
Operational excellence
We have successfully been leasing our four new schemes well ahead of
underwriting, which typically assumes 12-18 months to fully lease up a new
building.
In Cardiff at the Coppers Works (307 homes), in Bristol at Millwrights Place
(231 homes), in Birmingham at The Silver Yard (375 homes), and in London, our
second phase of Windlass Apartments (65 homes), our newly completed buildings
are all leasing exceptionally well, ahead of underwriting.
We continue to reap the benefits of scale as we grow. Operating expenses
continue to be improved with our 'gross to net' leakage down from 25.5% to
25%, a 75% gross rental margin. This margin is after refresh and refurbishment
costs which are included in the 25%.
In addition, with scale we have created efficiencies in our procurement and
supply chain. Good examples of this were our consolidation of our repairs and
maintenance supplier in the South of England and our consolidation of national
furniture suppliers this year, both enabling us to drive savings and,
importantly, further enhance customer experience.
Our fully integrated and fully digitised customer journey, combined with our
CONNECT technology platform, enables us to benefit from the significant data
and insight we have at our fingertips, a benefit of operating all our own
properties directly. CONNECT, along with our data, enables us to readily
utilise AI and analytics across the business, such as lettings, customer
experience, building operations, asset management, development and our core
corporate functions too.
We also launched a new website improving our leasing journey for those wishing
to rent with Grainger.
Leading the way on sustainability and responsibility
We continue to demonstrate our leadership in sustainability and
responsibility.
94% of our properties are compliant with future energy efficiency standards
expected to come into force in 2030 (BTR/PRS portfolio, EPC ratings A-C).
We continue to make good progress against our target to be net zero carbon for
our operations by 2030 with our Scope 1 & 2 emissions reducing again year
on year by 8%.
Our focus to reduce Scope 3 emissions, particularly our customer emissions,
supported by our consumer campaign, Living a Greener Life, continues to bear
fruit, with Scope 1-3 emissions per m(2) reduced by 9% year on year on the PRS
portfolio.
Through targeted initiatives, we have successfully established a robust
baseline of customer emissions data, which has enabled us to apply for our
established carbon targets to be recognised as science-based targets, an
important step on our net zero carbon pathway.
Safety remains a core focus for Grainger. All housing businesses have a
responsibility to keep their residents safe.
Most of our BTR properties were built post Grenfell. This year, with the
report on Grenfell, we have further invested in keeping safety at the front of
all Grainger employees' minds, a commitment that runs from the Board all the
way through the organisation. Our Live.Safe programme continues to
successfully engender a safety-first culture. With the enactment of the
Building Safety Act, we have been at the forefront of the industry, getting
ahead of new building safety regulations and going beyond the new minimum
safety standards.
Political and regulatory landscape
During the year we worked with both Governments on their proposals for
reforming the rental housing market, which have been broadly similar.
The UK now has a Labour Government with a notable majority. The Labour
manifesto focused on driving economic growth through stimulating the supply
side, particularly through the delivery of 1.5 million new homes over this
Parliament. At the same time, the Labour Government also committed to raising
standards in the private rented sector.
We have been heavily engaged in dialogue with policy makers, including the
Labour Party, both before the election and now they are in government, to
ensure our perspective is understood and that policy and regulation continues
to encourage investment into private rented homes, which is being met
positively.
We were pleased to see that the Labour Government publicly ruled out any form
of rent controls in favour of stimulating housing supply and raising
standards.
Proposals to raise rental standards have been consistently informed by
Grainger over the years. We will continue to engage with Government and policy
makers to ensure such changes protect future investment and housing delivery.
Our ambition is to lead in the quality of homes and services our customers
enjoy.
The Labour Government's commitment to reforming the planning system to
stimulate housing delivery is also welcome and aligns to our growth strategy.
We will continue to engage with policy makers and the UK Government in the
shaping of future legislation and regulation.
A great place to work
We know Grainger is a great place to work because our colleagues tell us it
is. The number one reason is because of the people.
I am very proud to announce that Grainger this year achieved the UK's leading
benchmark for Equality, Diversity and Inclusion (ED&I), the National
Equality Standard, which entailed an in-depth and comprehensive assessment of
our ED&I programme and supportive culture and policies.
I am also proud that this year Grainger was recognised as a leading FTSE
business for women in business, ranking 19(th) out of the FTSE250 in the FTSE
Women Leaders review.
It is also pleasing to report that our colleague engagement scores remain
high, achieving a 'Very Good' rating in our annual survey administered
independently by Best Companies. Grainger is now in the Top 100 Employers
according to Best Companies.
Outlook of compounding growth and market momentum
FY24 marked another year of very strong growth in net rental income and EPRA
earnings as our operating platform and excellent pipeline continue to deliver
compounding growth. With earnings guidance increased for the next two years
and a sizable opportunity for further additional growth beyond, we are
accelerating our growth and delivering on our strategy.
The market opportunity for the UK BTR sector is substantial and Grainger, as
market leader with a proven track record of successfully launching and
operating new BTR homes, is best placed to continue to accelerate and grow in
this sector.
Rental growth for the year ahead is expected to remain above the long-term
historical average of 3-3.5% as well as above our underwriting assumptions.
Our pipeline for growth is impressive at c.50% of our current BTR portfolio.
This growth in our core cities will be delivered with our strengthening
relations with partners including public sector landowners.
Our asset recycling programme will continue to support our growth ambitions
whilst allowing us to maintain a strong balance sheet.
Structural undersupply combined with pipeline for growth, our expertise and
leading operating platform means we are perfectly positioned to continue to
grow rapidly. The benefits of scale will enhance returns and deliver
compound earnings growth for our Shareholders as well as providing a great
experience for renters.
I am proud to lead a great team whose purpose is to enrich people's lives by
the homes we create and the service we deliver. I want to thank the Grainger
team, our Board and our Shareholders for continuing to support us in this
endeavour.
Helen Gordon
Chief Executive Officer
20 November 2024
Financial review
The 14% growth in our net rents has been achieved by the continuing delivery
of our high quality pipeline and excellent operational performance with
like-for-like rental growth of 6.3% and occupancy of 97.4%.
The demand for our homes continues to grow as consumers' awareness of the
benefits of our offering increases. This strong revenue growth is magnified by
the operational leverage generated through our CONNECT platform, scale
efficiencies and continued cost control to deliver even stronger earnings
growth with EPRA earnings up 21% in the year.
It was also an exceptional year for sales with a record £274m of sales
delivered during the year. This higher level of asset recycling ensures that
our property level returns are optimised while also providing capital for
further investment and managing our net debt in line with our plans.
The second half of the year saw a return to valuation growth. Over the year we
saw a continuation of the theme of strong ERV growth of 5.2% offsetting yield
shift of c.20bps, but with yields stabilising the balance of these two
components should prove more positive going forward.
Our balance sheet remains in great shape with strong liquidity and a strong
hedging profile giving us minimal exposure to interest rate rises for the next
four years. Both net debt and LTV have decreased from the half year levels
demonstrating our ability to flex our capital structure through the strong
liquidity in our asset base.
Our dividend per share continues its strong growth trajectory, increasing by
14% to 7.55p on a per share basis (FY23: 6.65p). This year's strong growth
looks set to continue with similar levels of absolute growth in net rents
expected next year as well as a dividend that will continue to grow strongly
as we convert to a REIT. We also upgrade our EPRA earnings guidance for FY26
by £5m to £60m, the second upgrade over the last 12 months, with the
potential to deliver 50% EPRA earnings growth from the delivery of our
committed pipeline over the medium term.
Financial highlights
Income return FY24 FY23 Change
Rental growth (like-for-like) 6.3% 7.7% -141bps
- PRS 6.3% 8.0% -167bps
- Regulated tenancies 6.6% 5.9% +74bps
Net rental income (Note 5) £110.1m £96.5m +14%
Adjusted earnings (Note 2) £91.6m £97.6m (6)%
EPRA Earnings (Note 3) £48.0m £39.8m +21%
IFRS Profit before tax (Note 2) £40.6m £27.4m +48%
Earnings per share (diluted, after tax) (Note 9) 4.2p 3.5p +20%
Dividend per share (Note 10) 7.55p 6.65p +14%
Capital return FY24 FY23 Change
Total Property Return 1.9% 0.4% 153bps
Total Accounting Return (NTA basis) (Note 3) 0.3% (1.8)% +207bps
EPRA NTA per share (Note 3) 298p 305p (2)%
Net debt £1,453m £1,416m +3%
Group LTV 38.2% 36.8% +135bps
Cost of debt (average) 3.2% 3.3% +13bps
Reversionary surplus £147m £213m (31)%
Income statement
The business continues to deliver very strong growth in EPRA earnings, up 21%
to £48.0m (FY23: £39.8m) with the strong growth in net rents of 14% driving
even stronger earnings growth as a result of the strong operational leverage
inherent in our business.
Adjusted earnings decreased by 6% to £91.6m (FY23: £97.6m) as sales profits
were lower than prior years as we continue to shrink our regs portfolio in
line with our strategy. Other adjustments include hedge ineffectiveness of
£6.6m and a £5.0m fire safety provision.
FY24 FY23
Income statement (£m) Change
Net rental income 110.1 96.5 +14%
Mortgage income (CHARM, Note 15) 4.6 4.7 (3)%
Management fees and other income(1) 8.1 5.0 +59%
Overheads (35.3) (33.5) (5)%
Pre-contract costs (1.0) (1.2) +20%
Net finance costs (38.8) (31.8) (21)%
Joint ventures 0.3 0.1 +193%
EPRA Earnings(2) 48.0 39.8 +21%
EPRA EPS 6.5p 5.4p +21%
Profit from sales 43.6 57.8 (24)%
Adjusted Earnings 91.6 97.6 (6)%
Adjusted EPS (diluted, after tax)(3) 9.3p 10.3p (10)%
Valuation movements(4) (39.4) (70.2) +44%
Other adjustments (11.6) - (100)%
IFRS profit before tax 40.6 27.4 +48%
Earnings per share (diluted, after tax) 4.2p 3.5p +20%
1 Including LADs: "liquidated and ascertained damages" which provide
financial compensation for the loss of rental income caused by delays to the
practical completion of our schemes
2 EPRA Earnings is a measure of recurring earnings from core operational
activities which the Company uses in accordance with the Best Practices
Recommendations of the European Public Real Estate Association (EPRA). For
more details please see page 172
3 Adjusted earnings per share includes tax of £22.9m (FY23: £21.5m) in
line with Corporation Tax of 25% (FY23: 22%)
4 Including £(59)m in H1 due to the removal of MDR; excluding this,
underlying valuation movement was +£20m in FY24
Rental income
Net rental income increased by 14% to £110.1m (FY23: £96.5m), as we continue
our trajectory of recurring double-digit growth. The substantial £13.6m
increase was driven by a combination of strong delivery of pipeline scheme
launches which contributed £10.9m along with another year of good rental
growth reflecting strong demand for our product.
Overall like-for-like rental growth was +6.3% (FY23: +7.7%) with the PRS
portfolio continuing to deliver strong growth at +6.3% (FY23: +8.0%), with
rental growth on renewals of +6.8% (FY23: +7.2%) and +5.6% (FY23: +9.2%) on
new lets. Our regulated tenancy portfolio also delivered strong rental growth
at +6.6% (FY23: +5.9%). Looking forward we see rental growth in the coming
year continuing above the long-run average of 3.5%.
Gross to net for our stabilised portfolio improved to 25.0% (FY23: 25.5%) as
we continue to deliver efficiency benefits as we build out our clusters.
We expect FY25 to deliver similar levels of absolute growth in net rent.
£m
FY23 Net rental income 96.5
Rental growth and occupancy 6.1
PRS Investment 10.9
Disposals (3.4)
FY24 Net rental income 110.1
Sales
FY24 was an exceptional year for sales. As we had previously guided we stepped
up asset recycling in the year in order to maintain our balance sheet and
create further capacity for investment. Delivery on this strategy has been
very strong with overall sales revenue of £274.3m, a 42% increase on the
prior year (FY23: £193.7m) with £147.6m of sales revenue coming from PRS
recycling.
Sales profits were lower at £43.6m (FY23: £57.8m) as expected reflecting a
smaller regulated tenancy portfolio from which sales profits are generated
whereas profits from PRS recycling are based on valuation and therefore have
much lower profit margins.
Vacant property sales profits in the period were down 26%, as expected
delivering £25.4m (FY23: £34.1m), due to the reducing regulated tenancy
portfolio size and a strong end to the prior years' sales. Vacancy rates were
flat at 7.1% (FY23: 7.8%) with margins similar to the prior year. Pricing
achieved remained robust with sales values within 2.0% of vacant possession
values.
Sales of tenanted and other properties delivered £15.6m of profit (FY23:
£19.4m) from £194.0m of revenue (FY23: £88.1m) with the increased revenues
driven by the higher PRS recycling. Margins on the tenanted regulated tenancy
sales which make up the balance and deliver the profit were broadly in line
with prior years.
Development profits in the period were £2.6m which relates to the sale of two
land plots at our Berewood location.
FY24 FY23
Sales (£m) Revenue Profit Revenue Profit
Residential sales on vacancy 54.9 25.4 70.1 34.1
Tenanted and other sales 194.0 15.6 88.1 19.4
Residential sales total 248.9 41.0 158.2 53.5
Development sales 25.4 2.6 35.5 4.3
Overall sales 274.3 43.6 193.7 57.8
Overheads
Overheads increased by 5% in the period to £35.3m (FY23: £33.5m) as a result of wage growth across our employee base.
Balance sheet
Our PRS portfolio now represents 81% of our operational portfolio given the
success of both our pipeline delivery and regulated tenancy recycling, putting
us in the position to convert to a REIT in October 2025.
LTV is up marginally on the prior year at 38.2% (FY23: 36.8%) reflecting
investment, however it is down from the half year of 39.1%, reflecting
accelerated sales in the second half. Looking forward, in the higher interest
rate environment, we will be using our strong operating cash flows to reduce
debt and LTV over the medium term.
EPRA NTA decreased by 2% to 298p per share (FY23: 305p per share) reflecting
the impact during the first half of the removal of multiple dwellings relief
(MDR) equating to 8p per share; excluding this one-off impact NTA would be
marginally up. EPRA NTA was up 4p (1.4%) on the half year position of 294p.
Market value balance sheet (£m) FY24 FY23
Residential - PRS 2,708 2,423
Residential - regulated tenancies 591 693
Residential - mortgages (CHARM) 57 67
Forward Funded - PRS work in progress 266 441
Development work in progress 84 126
Investment in JVs/associates 91 91
Total investments 3,797 3,841
Net debt (1,453) (1,416)
Other liabilities (48) (66)
EPRA NRV 2,296 2,359
Deferred and contingent tax - trading assets (76) (91)
Exclude: intangible assets (2) (1)
EPRA NTA 2,218 2,267
Add back: intangible assets 2 1
Deferred and contingent tax - investment assets (113) (106)
Fair value of fixed rate debt and derivatives 88 171
EPRA NDV 2,195 2,333
EPRA NRV pence per share 309 318
EPRA NTA pence per share 298 305
EPRA NDV pence per share 295 314
EPRA NTA movement
£m Pence per share
EPRA NTA at 30 September 2023 2,267 305
Net rents, fees & income 122 17
Overheads (35) (5)
Finance costs (39) (5)
EPRA earnings 48 7
Valuations (MDR) (59) (8)
Valuations (trading & investment property) 14 2
Dividends, tax & other (53) (8)
EPRA NTA at 30 September 2024 2,218 298
Property portfolio performance
Our portfolio returned to valuation growth in the second half with a 1.1%
increase offsetting the 1.9% decline in the first half (of which 1.6% related
to the one-off £59m impact of the removal of MDR).
Over the whole year valuation declined by 0.8% (FY23: (2.4%)) including this
one-off impact; excluding MDR the underlying valuation increase was 0.8%
during the year.
Our PRS portfolio saw strong ERV growth of 5.2% which more than offset the
c.20bps outward yield movement in the period. Our regional PRS portfolio
outperformed London as the capital saw a larger outward yield shift.
Valuations in the regulated portfolio were largely flat in the year.
Portfolio Region Capital Value Total Valuation movement
(£m) £m %
PRS London & SE 1,277 (31) (2.5)%
Regions 1,431 6 0.4%
PRS total 2,708 (25) (0.9)%
Regulated tenancies London & SE 512 (2) (0.4)%
Regions 79 1 0.9%
Regulated tenancy total 591 (1) (0.2)%
Operational portfolio 3,299 (26) (0.8)%
PRS development 350 (5) (1.3)%
Total portfolio 3,649 (31) (0.8)%
Financing and capital structure
Net debt increased slightly during the year to £1,453m (FY23: £1,416m),
however it was down from the half year position of £1,497m. The significant
investment in our pipeline of £270m was offset by the step up in our sales
programme which generated £269m of net sales proceeds.
We maintained a strong level of liquidity with £509m of headroom in our
facilities with an average debt maturity of 4.7 years including extension
options. Refinancing risk is minimal with no material refinancing required
until 2028. We continue to benefit from a very strong hedging profile, with
four years remaining and with our average cost of debt remaining relatively
flat at 3.2% (FY23: 3.3%).
FY24 FY23
Net debt £1,453m £1,416m
Loan to value 38.2% 36.8%
Cost of debt 3.2% 3.3%
Headroom £509m £519m
Weighted average facility maturity (years) 4.7 5.5
Hedging 95% 95%
Summary and outlook
FY24 marked another year of very strong growth in net rents and EPRA earnings
as our operating platform and excellent pipeline continue to deliver
compounding growth. With earnings guidance increased for the next two years
and a sizeable opportunity to deliver further additional growth beyond, we are
accelerating our growth and delivering on our strategy.
Rob Hudson
Chief Financial Officer
20 November 2024
Consolidated income statement
For the year ended 30 September Notes 2024 2023
£m
£m
Group revenue 4 290.1 267.1
Net rental income 5 110.1 96.5
Profit on disposal of trading property 6 49.4 54.8
(Loss)/profit on disposal of investment property 7 (5.8) 3.3
(Expense)/income from financial interest in property assets 15 (1.3) 4.6
Fees and other income 8 8.1 5.0
Administrative expenses (35.3) (33.5)
Other expenses (6.0) (1.2)
Goodwill impairment - (0.1)
Impairment of inventories to net realisable value 12 (0.1) (1.0)
Operating profit 119.1 128.4
Net valuation losses on investment property 11 (32.5) (68.8)
Hedge ineffectiveness under IFRS9 (6.6) -
Finance costs (41.8) (34.0)
Finance income 3.0 2.2
Share of loss of associates after tax 13 (0.4) (0.1)
Share of loss of joint ventures after tax 14 (0.2) (0.3)
Profit before tax 2 40.6 27.4
Tax charge 20 (9.4) (1.8)
Profit for the year attributable to the owners of the Company 31.2 25.6
Basic earnings per share 9 4.2p 3.5p
Diluted earnings per share 9 4.2p 3.5p
Consolidated statement of comprehensive income
For the year ended 30 September Notes 2024 2023
£m
£m
Profit for the year 2 31.2 25.6
Items that will not be transferred to the consolidated income statement:
Remeasurement of BPT Limited defined benefit pension scheme 21 (3.1) (1.1)
Items that may be or are reclassified to the consolidated income statement:
Changes in fair value of cash flow hedges (20.8) (16.1)
Other comprehensive income and expense for the year before tax (23.9) (17.2)
Tax relating to components of other comprehensive income:
Tax relating to items that will not be transferred to the consolidated income 20 0.8 0.3
statement
Tax relating to items that may be or are reclassified to the consolidated 20 5.2 4.0
income statement
Total tax relating to components of other comprehensive income 6.0 4.3
Other comprehensive income and expense for the year after tax (17.9) (12.9)
Total comprehensive income and expense for the year attributable to the owners 13.3 12.7
of the Company
( )
Consolidated statement of financial position
2024 2023
As at 30 September Notes £m £m
ASSETS
Non-current assets
Investment property 11 2,996.8 2,948.9
Property, plant and equipment 10.6 8.6
Investment in associates 13 14.9 15.8
Investment in joint ventures 14 76.4 75.2
Financial interest in property assets 15 57.4 67.0
Retirement benefits 21 6.5 9.6
Deferred tax assets 20 6.1 3.7
Intangible assets 1.8 1.0
3,170.5 3,129.8
Current assets
Inventories - trading property 12 331.6 392.2
Investment property - held for sale 11 31.5 -
Trade and other receivables 16 90.9 34.0
Derivative financial instruments 19 19.8 45.3
Current tax assets 5.2 -
Cash and cash equivalents 93.2 121.0
572.2 592.5
Total assets 3,742.7 3,722.3
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 19 1,592.9 1,533.5
Trade and other payables 17 6.3 6.9
Provisions for other liabilities and charges 18 1.0 1.1
Deferred tax liabilities 20 121.5 122.3
1,721.7 1,663.8
Current liabilities
Trade and other payables 17 114.1 120.7
Provisions for other liabilities and charges 18 13.2 8.6
Current tax liabilities - 0.6
127.3 129.9
Total liabilities 1,849.0 1,793.7
NET ASSETS 1,893.7 1,928.6
EQUITY
Issued share capital 37.2 37.2
Share premium account 817.9 817.8
Merger reserve 20.1 20.1
Capital redemption reserve 0.3 0.3
Cash flow hedge reserve 4.4 20.0
Retained earnings 1,013.8 1,033.2
TOTAL EQUITY 1,893.7 1,928.6
( )
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
1 October 2022
37.1 817.6 20.1 0.3 32.1 1,059.6 1,966.8
Profit for the year 2 - - - - - 25.6 25.6
Other comprehensive loss for the year - - - - (12.1) (0.8) (12.9)
Total comprehensive income - - - - (12.1) 24.8 12.7
Award of SAYE shares 0.1 0.2 - - - - 0.3
Purchase of own shares - - - - - (7.9) (7.9)
Share-based payments charge 22 - - - - - 2.4 2.4
Dividends paid - - - - - (45.7) (45.7)
Total transactions with owners recorded directly in equity 0.1 0.2 - - - (51.2) (50.9)
Balance as at 37.2 817.8 20.1 0.3 20.0 1,033.2 1,928.6
30 September 2023
Profit for the year 2 - - - - - 31.2 31.2
Other comprehensive loss for the year - - - - (15.6) (2.3) (17.9)
Total comprehensive income - - - - (15.6) 28.9 13.3
Award of SAYE shares - 0.1 - - - - 0.1
Purchase of own shares - - - - - (0.1) (0.1)
Share-based payments charge 22 - - - - - 2.8 2.8
Dividends paid - - - - - (51.0) (51.0)
Total transactions with owners recorded directly in equity - 0.1 - - - (48.3) (48.2)
Balance as at 37.2 817.9 20.1 0.3 4.4 1,013.8 1,893.7
30 September 2024
Consolidated statement of cash flows
For the year ended 30 September Notes 2024 2023
£m
£m
Cash flow from operating activities
Profit for the year 2 31.2 25.6
Depreciation and amortisation 1.5 1.1
Impairment of goodwill - 0.1
Net valuation losses on investment property 11 32.5 68.8
Hedge ineffectiveness under IFRS 9 6.6 -
Net finance costs 38.8 31.8
Share of loss of associates and joint ventures 13, 14 0.6 0.4
Loss/(profit) on disposal of investment property 7 5.8 (3.3)
Share-based payment charge 22 2.8 2.4
Expense/(income) from financial interest in property assets 15 1.3 (4.6)
Tax charge 20 9.4 1.8
Cash generated from operating activities before changes in working capital 130.5 124.1
(Increase)/decrease in trade and other receivables (3.8) 6.5
Increase in trade and other payables 9.9 37.0
Increase in provisions for liabilities and charges 4.5 -
Decrease in inventories 60.6 61.6
Cash generated from operating activities 201.7 229.2
Interest paid (52.6) (46.9)
Tax (paid)/received (12.5) 2.7
Payments to defined benefit pension scheme 21 - (0.3)
Net cash inflow from operating activities 136.6 184.7
Cash flow from investing activities
Proceeds from sale of investment property 90.2 63.5
Proceeds from financial interest in property assets 15 8.3 6.7
Dividends received from associates 13 0.5 0.8
Investment in joint ventures 14 - (34.0)
Loans advanced to joint ventures 14 (1.4) (3.0)
Acquisition of investment property 11 (261.0) (302.0)
Acquisition of property, plant and equipment and intangible assets (4.3) (6.1)
Net cash outflow from investing activities (167.7) (274.1)
Cash flow from financing activities
Award of SAYE shares 0.1 0.3
Purchase of own shares (0.1) (7.9)
Proceeds from new borrowings 244.0 330.0
Payment of loan costs (2.8) (2.3)
Cash flows relating to new derivatives / settlement of derivatives (1.9) (4.9)
Repayment of borrowings (185.0) (155.0)
Dividends paid (51.0) (45.7)
Net cash inflow from financing activities 3.3 114.5
Net (decrease)/increase in cash and cash equivalents (27.8) 25.1
Cash and cash equivalents at the beginning of the year 121.0 95.9
Cash and cash equivalents at the end of the year 93.2 121.0
( )
Notes to the preliminary financial results
1. Accounting policies
1a Basis of preparation
The Board approved this preliminary announcement on 20 November 2024. The
financial information included in this preliminary announcement does not
constitute the Group's statutory accounts for the years ended 30 September
2023 or 30 September 2024. Statutory accounts for the year ended 30
September 2023 have been delivered to the Registrar of Companies. The
statutory accounts for the year ended 30 September 2024 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 2024 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 2024.
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 and
adopted in the year and have no material impact on the financial statements:
• Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of
accounting policies;
• Amendments to IAS 8 - Definition of Accounting Estimates;
• Amendments to IAS 12 - Deferred tax related to assets and
liabilities arising from a single transaction;
• Amendments to IAS 12 - International tax reform - Pillar Two model
rules;
• IFRS 17 - Insurance Contracts
The following new standards and amendments to standards have been issued but
are not yet effective for the Group and have not been early adopted:
• Amendments to IAS 1 - Classification of liabilities as current or
non-current;
• Amendments to IAS 1 - Non-current Liabilities with Covenants;
• Amendments to IAS 7 and IFRS 7 - Disclosures: Supplier finance
arrangements;
• Amendments to IFRS 16 - Lease liability in a sale and leaseback;
• Amendments to IFRS 9 and IFRS 7: classification and measurement of
financial instruments;
• Amendments to IAS 21 - Lack of exchangeability;
• IFRS 18 - Presentation and Disclosure in Financial Statements
With the exception of IFRS 18, the application of these new standards and
amendments are not expected to have a material impact on the Group's financial
statements.
1c 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.
Notes to the preliminary financial results continued
The net valuation loss of £33.4m for the year ended 30 September 2024
includes the one-off impact of £58.8m following the Government's removal of
MDR.
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 2024 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 4.3 305.8 21.5 331.6
Investment property(1) 3,011.9 16.4 - 3,028.3
Financial asset (CHARM) - 57.4 - 57.4
Total statutory book value 3,016.2 379.6 21.5 3,417.3
Trading property
Residential 3.9 574.6 - 578.5 Allsop LLP 79%
Developments - - 41.6 41.6 CBRE Limited 94%
Total trading property 3.9 574.6 41.6 620.1
Investment property
Residential 670.9 16.4 - 687.3 Allsop LLP / CBRE Limited 100%
Developments 42.1 - - 42.1 CBRE Limited 83%
New build PRS 1,936.7 - - 1,936.7 CBRE Limited 100%
Affordable housing 210.0 - - 210.0 Allsop LLP 100%
Tricomm Housing 152.2 - - 152.2 Allsop LLP 100%
Total investment property 3,011.9 16.4 - 3,028.3
Financial asset (CHARM)(2) - 57.4 - 57.4 Allsop LLP 100%
Total assets at market value 3,015.8 648.4 41.6 3,705.8
Statutory book value 3,016.2 379.6 21.5 3,417.3
Market value adjustment(3) (0.4) 268.8 20.1 288.5
Total assets at market value 3,015.8 648.4 41.6 3,705.8
Net revaluation loss recognised in the income statement for wholly-owned (32.5)
properties
Net revaluation loss relating to joint ventures and associates(4) (0.9)
Net revaluation loss recognised in the year(4) (33.4)
( )
(1) Includes investment property - held for sale
(2) Allsop LLP provide vacant possession values used by the Directors to
value the financial asset.
(3) 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.
(4 )Includes the Group's share of joint ventures and associates revaluation
loss after tax.
Notes to the preliminary financial results continued
Judgements
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.
1d Group risk factors
The principal risks and uncertainties facing the Group are set out in the Risk
Management report of the 2024 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.
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 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
2024.
The financial position of the Group, including details of its financing and
capital structure, is set out in the financial review on pages 31 to 36 in the
2024 Annual Report and Accounts. In making the going concern assessment, the
Directors have considered the Group's principal risks (see pages 59 to 63 in
the 2024 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.
Notes to the preliminary financial results continued
The going concern assessment is based on forecasts to the end of March 2026,
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 but plausible downside scenario, reflecting
the following key assumptions:
· Reducing PRS occupancy to 87.5% by 30 September 2026
· Rental growth reduced by 100bps to 2.5% in FY25
· Reducing property valuations by 10% by 30 September 2025, driven
by rents, yield expansion or house price deflation
· Operating and development cost inflation of 10% p.a.
· An increase in SONIA rate of 2% from 1 October 2024
The Group's forecasts incorporate the likely impact of climate change and
sustainability requirements including costs to deliver our climate related
targets. This includes EPC upgrades across the portfolio and investing in
energy efficient solutions for central heating systems.
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 48% (facility maximum covenant ranges between 70% - 75%) and
interest cover no lower than 3.29x (facility minimum covenant ranges between
1.35x - 1.75x) for the period to March 2026 to align with reporting periods,
which covers the required period of at least 12 months from the date of
authorisation 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 2024.
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.
See page 5 for the full forward-looking statements disclaimer.
Notes to the preliminary financial results continued
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.
2024 2023
£m Statutory Valuation Other adjustments Adjusted earnings Statutory Valuation Other adjustments Adjusted earnings
Group revenue 290.1 - - 290.1 267.1 - - 267.1
Net rental income 110.1 - - 110.1 96.5 - - 96.5
Profit on disposal of trading property 49.4 - - 49.4 54.8 (0.3) - 54.5
(Loss)/profit on disposal of investment property (5.8) - - (5.8) 3.3 - - 3.3
(Expense)/income from financial interest in property assets (1.3) 5.9 - 4.6 4.6 0.1 - 4.7
Fees and other income 8.1 - - 8.1 5.0 - - 5.0
Administrative expenses (35.3) - - (35.3) (33.5) - - (33.5)
Other expenses (6.0) - 5.0 (1.0) (1.2) - - (1.2)
Goodwill impairment - - - - (0.1) 0.1 - -
Impairment of inventories to net realisable value (0.1) 0.1 - - (1.0) 1.0 - -
Operating profit 119.1 6.0 5.0 130.1 128.4 0.9 - 129.3
Net valuation losses on investment property (32.5) 32.5 - - (68.8) 68.8 - -
Hedge ineffectiveness under IFRS9 (6.6) - 6.6 - - - - -
Finance costs (41.8) - - (41.8) (34.0) - - (34.0)
Finance income 3.0 - - 3.0 2.2 - - 2.2
Share of loss of associates after tax (0.4) 0.9 - 0.5 (0.1) 0.5 - 0.4
Share of loss of joint ventures after tax (0.2) - - (0.2) (0.3) - - (0.3)
Profit before tax 40.6 39.4 11.6 91.6 27.4 70.2 - 97.6
Tax charge (9.4) (1.8)
Profit for the year attributable to the owners of the Company 31.2 25.6
Basic adjusted earnings per share 9.3p 10.3p
Diluted adjusted earnings per share 9.3p 10.3p
Profit before tax in the adjusted columns above of £91.6m (2023: £97.6m) is
the adjusted earnings of the Group. Adjusted earnings per share assumes tax of
£22.9m (2023: £21.5m) in line with the standard rate of UK Corporation Tax
of 25.0% (2023: 22.0%), 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. Included in other adjustments are £5.0m of fire safety
provisions (2023: £nil) and hedge ineffectiveness under IFRS9 of £6.6m
(2023: £nil).
Notes to the preliminary financial results continued
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.
2024 Income statement
£m PRS Reversionary Other Total
Group revenue 150.3 112.5 27.3 290.1
Segment revenue - external
Net rental income 97.6 11.5 1.0 110.1
Profit on disposal of trading property (1.3) 48.1 2.6 49.4
Loss on disposal of investment property (5.9) 0.1 - (5.8)
Income from financial interest in property assets - 4.6 - 4.6
Fees and other income 7.5 - 0.6 8.1
Administrative expenses - - (35.3) (35.3)
Other expenses (0.4) - (0.6) (1.0)
Net finance costs (31.3) (6.6) (0.9) (38.8)
Share of trading profit of joint ventures and associates after tax 0.3 - - 0.3
Adjusted earnings 66.5 57.7 (32.6) 91.6
Valuation movements (33.5) (5.9) - (39.4)
Other adjustments (5.0) - (6.6) (11.6)
Profit before tax 28.0 51.8 (39.2) 40.6
A reconciliation from adjusted earnings to 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 66.5 57.7 (32.6) 91.6
Profit on disposal of trading property 1.3 (48.1) (2.6) (49.4)
Loss on disposal of investment property 5.9 (0.1) - 5.8
EPRA earnings 73.7 9.5 (35.2) 48.0
Notes to the preliminary financial results continued
2023 Income statement
£m PRS Reversionary Other Total
Group revenue 121.5 123.9 21.7 267.1
Segment revenue - external
Net rental income 82.2 13.4 0.9 96.5
Profit on disposal of trading property (0.5) 54.2 0.8 54.5
Profit on disposal of investment property 3.3 - - 3.3
Income from financial interest in property assets - 4.7 - 4.7
Fees and other income 4.6 - 0.4 5.0
Administrative expenses - - (33.5) (33.5)
Other expenses (1.2) - - (1.2)
Net finance costs (24.9) (6.3) (0.6) (31.8)
Share of trading profit of joint ventures and associates after tax 0.1 - - 0.1
Adjusted earnings 63.6 66.0 (32.0) 97.6
Valuation movements (70.1) (0.1) - (70.2)
Other adjustments - - - -
Profit before tax (6.5) 65.9 (32.0) 27.4
A reconciliation from adjusted earnings to adjusted EPRA earnings is detailed
in the table below:
£m PRS Reversionary Other Total
Adjusted earnings 63.6 66.0 (32.0) 97.6
Profit on disposal of trading property 0.5 (54.2) (0.8) (54.5)
Profit on disposal of investment property (3.3) - - (3.3)
EPRA earnings 60.8 11.8 (32.8) 39.8
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.
Notes to the preliminary financial results continued
Total Accounting Return (NTA basis) of 0.3% is calculated from the closing
EPRA NTA of 298p per share plus the dividend of 7.55p per share for the year,
divided by the opening EPRA NTA of 305p per share.
These measures are set out below by segment along with a reconciliation to the
summarised statutory statement of financial position:
2024 Segment net assets
£m PRS Reversionary Other Total Pence per share
Total segment net assets (statutory) 1,757.6 117.5 18.6 1,893.7 255
Total segment net assets (EPRA NRV) 1,873.5 386.9 35.5 2,295.9 309
Total segment net assets (EPRA NTA) 1,870.3 319.1 28.7 2,218.1 298
Total segment net assets (EPRA NDV) 1,757.3 319.1 118.5 2,194.9 295
2024 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(1) 3,028.3 - 3,028.3 - 3,028.3 - 3,028.3
Investment in joint ventures and associates 91.3 - 91.3 - 91.3 - 91.3
Financial interest in property assets 57.4 - 57.4 - 57.4 - 57.4
Inventories - trading property 331.6 288.5 620.1 - 620.1 - 620.1
Cash and cash equivalents 93.2 - 93.2 - 93.2 - 93.2
Other assets 140.9 (3.2) 137.7 (1.8) 135.9 21.1 157.0
Total assets 3,742.7 285.3 4,028.0 (1.8) 4,026.2 21.1 4,047.3
Interest-bearing loans and borrowings (1,592.9) - (1,592.9) - (1,592.9) 98.1 (1,494.8)
Deferred and contingent tax liabilities (121.5) 116.9 (4.6) (76.0) (80.6) (142.4) (223.0)
Other liabilities (134.6) - (134.6) - (134.6) - (134.6)
Total liabilities (1,849.0) 116.9 (1,732.1) (76.0) (1,808.1) (44.3) (1,852.4)
Net assets 1,893.7 402.2 2,295.9 (77.8) 2,218.1 (23.2) 2,194.9
( )
(1) Includes investment property - held for sale
2023 Segment net assets
£m PRS Reversionary Other Total Pence per share
Total segment net assets (statutory) 1,729.8 151.7 47.1 1,928.6 260
Total segment net assets (EPRA NRV) 1,839.3 476.9 43.1 2,359.3 318
Total segment net assets (EPRA NTA) 1,835.1 395.0 37.4 2,267.5 305
Total segment net assets (EPRA NDV) 1,729.2 395.0 208.7 2,332.9 314
Notes to the preliminary financial results continued
2023 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 2,948.9 - 2,948.9 - 2,948.9 - 2,948.9
Investment in joint ventures and associates 91.0 - 91.0 - 91.0 - 91.0
Financial interest in property assets 67.0 - 67.0 - 67.0 - 67.0
Inventories - trading property 392.2 342.1 734.3 - 734.3 - 734.3
Cash and cash equivalents 121.0 - 121.0 - 121.0 - 121.0
Other assets 102.2 (33.7) 68.5 (1.0) 67.5 45.9 113.4
Total assets 3,722.3 308.4 4,030.7 (1.0) 4,029.7 45.9 4,075.6
Interest-bearing loans and borrowings (1,533.5) - (1,533.5) - (1,533.5) 182.1 (1,351.4)
Deferred and contingent tax liabilities (122.3) 122.3 - (90.8) (90.8) (162.6) (253.4)
Other liabilities (137.9) - (137.9) - (137.9) - (137.9)
Total liabilities (1,793.7) 122.3 (1,671.4) (90.8) (1,762.2) 19.5 (1,742.7)
Net assets 1,928.6 430.7 2,359.3 (91.8) 2,267.5 65.4 2,332.9
( )
4. Group revenue
2024 2023
£m
£m
Gross rental income (Note 5) 154.8 133.7
Gross proceeds from disposal of trading property (Note 6) 127.2 128.4
Fees and other income (Note 8) 8.1 5.0
290.1 267.1
5. Net rental income
2024 2023
£m
£m
Gross rental income 154.8 133.7
Property operating expenses (44.7) (37.2)
110.1 96.5
Notes to the preliminary financial results continued
6. Profit on disposal of trading property
2024 2023
£m
£m
Gross proceeds from disposal of trading property 127.2 128.4
Selling costs (2.3) (2.8)
Net proceeds from disposal of trading property 124.9 125.6
Carrying value of trading property sold (Note 12) (75.5) (70.8)
49.4 54.8
7. (Loss)/profit on disposal of investment property
2024 2023
£m
£m
Gross proceeds from disposal of investment property 147.1 65.3
Selling costs (3.8) (1.8)
Net proceeds from disposal of investment property 143.3 63.5
Carrying value of investment property sold (Note 11) (149.1) (60.2)
(5.8) 3.3
8. Fees and other income
2024 2023
£m
£m
Property and asset management fee income 2.6 3.2
Other sundry income 5.5 1.8
8.1 5.0
Included within other sundry income in the current year is £5.2m (2023:
£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 2024 was the end of the
contingency period. Where the effect of the above adjustments is antidilutive,
they are excluded from the calculation of diluted earnings per share.
Notes to the preliminary financial results continued
30 September 2024 30 September 2023
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 31.2 738.2 4.2 25.6 739.9 3.5
Effect of potentially dilutive securities
Share options and contingent shares - 3.3 - - 2.5 -
Diluted earnings per share
Profit attributable to equity holders 31.2 741.5 4.2 25.6 742.4 3.5
10. Dividends
Subject to approval at the AGM, the final dividend of 5.01p per share (gross)
amounting to £37.0m will be paid on 21 February 2025 to Shareholders on the
register at the close of business on 17 January 2025. Shareholders will again
be offered the option to participate in a dividend reinvestment plan and the
last day for election is 31 January 2025. An interim dividend of 2.54p per
share amounting to a total of £18.8m was paid to Shareholders on 5 July 2024.
11. Investment property
2024 2023
£m
£m
Opening balance 2,948.9 2,775.9
Acquisitions 85.9 9.8
Capital expenditure - completed assets 13.9 20.4
Capital expenditure - assets under construction 161.2 271.8
Total additions 261.0 302.0
Disposals (Note 7) (149.1) (60.2)
Net valuation losses on investment properties(1) (32.5) (68.8)
Reclassifications to investment property - held for sale (31.5) -
Closing balance 2,996.8 2,948.9
(1) Within the above are provisions for fire safety works. No potential
recovery of these costs has been accounted for.
Within investment property are a number of assets held for sale at the
reporting date, valued at £31.5m. Held for sale properties are those that are
for sale, where solicitors have been instructed, or where contracts have been
exchanged. All investment properties which are held for sale are included
within our PRS segment.
12. Inventories - trading property
2024 2023
£m
£m
Opening balance 392.2 453.8
Additions 15.0 10.2
Disposals (Note 6) (75.5) (70.8)
Impairment of inventories to net realisable value (0.1) (1.0)
Closing balance 331.6 392.2
Notes to the preliminary financial results continued
13. Investment in associates
2024 2023
£m
£m
Opening balance 15.8 16.7
Share of loss for the year (0.4) (0.1)
Dividends paid in the year (0.5) (0.8)
Closing balance 14.9 15.8
The closing balance comprises share of net assets of £0.4m (2023: £1.3m) and
net loans due from associates of £14.5m (2023: £14.5m). At the balance sheet
date, there is no expectation of any material credit losses on loans due.
As at 30 September 2024, 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
2024 2023
£m
£m
Opening balance 75.2 38.5
Share of loss for the year (0.2) (0.3)
Further investment(1) - 34.0
Loans advanced to joint ventures 1.4 3.0
Closing balance 76.4 75.2
( )
(1) Grainger invested £nil into Connected Living London (BTR) Limited in the
year (2023: £34.0m).
The closing balance comprises share of net assets of £46.7m (2023: £46.9m)
and net loans due from joint ventures of £29.7m (2023: £28.3m). At the
balance date, there is no expectation of credit losses on loans due.
At 30 September 2024, 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)
2024 2023
£m
£m
Opening balance 67.0 69.1
Cash received from the instrument (8.3) (6.7)
Amounts taken to income statement (1.3) 4.6
Closing balance 57.4 67.0
Notes to the preliminary financial results continued
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
2024 2023
£m
£m
Rent and other tenant receivables 4.8 3.0
Deduct: Provision for impairment (1.5) (1.5)
Rent and other tenant receivables - net 3.3 1.5
Restricted deposits 63.3 10.2
Other receivables 19.3 17.9
Prepayments 5.0 4.4
Closing balance 90.9 34.0
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 £4.8m (2023: £3.0m). Assumptions used in the forward-looking
assessment are continually reviewed to take into account likely rent
deferrals.
Restricted deposits arise from contracts with third parties that place
restrictions on use of funds and cannot be accessed on demand. 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.
The fair values of trade and other receivables are considered to be equal to
their carrying amounts.
17. Trade and other payables
2024 2023
£m
£m
Current liabilities
Deposits received 12.8 10.7
Trade payables 19.0 15.9
Lease liabilities 0.7 0.2
Tax and social security costs 4.9 3.0
Accruals 64.5 81.9
Deferred income 12.2 9.0
114.1 120.7
Non-current liabilities
Lease liabilities 6.3 6.9
6.3 6.9
Total trade and other payables 120.4 127.6
Within accruals, £43.9m comprises accrued expenditure in respect of ongoing
construction activities (2023: £60.2m).
Notes to the preliminary financial results continued
18. Provisions for other liabilities and charges
2024 2023
£m
£m
Current provisions for other liabilities and charges
Opening balance 8.6 8.6
Additions 5.0 0.3
Utilisation (0.4) (0.3)
13.2 8.6
Non-current provisions for other liabilities and charges
Opening balance 1.1 1.1
Utilisation (0.1) -
1.0 1.1
Total provisions for other liabilities and charges 14.2 9.7
Following an extensive review of legacy development projects, £13.2m 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. Where appropriate, the Group is seeking recoveries from contractors and
insurers which may reduce the liability over time.
19. Interest-bearing loans and borrowings and financial risk management
2024 2023
£m
£m
Non-current liabilities
Bank loans - Pounds sterling 548.2 490.1
Bank loans - Euros 0.8 0.9
Non-bank financial institution 347.9 347.3
Corporate bonds 696.0 695.2
1,592.9 1,533.5
Closing balance 1,592.9 1,533.5
The above analyses of loans and borrowings are net of unamortised loan issue
costs and the discount on issuance of the corporate bonds. As at 30 September
2024, unamortised costs totalled £13.7m (2023: £13.8m) and the outstanding
discount was £1.6m (2023: £1.9m).
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 2024 and as at 30 September 2023.
As at 30 September 2024, the fair value of interest-bearing loans is lower
than the book value by £319.1m (2023: £291.6m), 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.
Notes to the preliminary financial results continued
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:
2024 2023
Assets Liabilities Assets Liabilities
£m
£m
£m
£m
Level 3
CHARM 57.4 - 67.0 -
Investment property(1) 3,028.3 - 2,948.9 -
3,085.7 - 3,015.9 -
Level 2
Interest rate swaps - in cash flow hedge accounting relationships 19.8 - 45.3 -
19.8 - 45.3 -
( )
(1) Includes investment property - held for sale
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
RICS 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 2024 2023
£m
£m
Opening balance 3,015.9 2,845.0
Amounts taken to income statement (33.8) (64.2)
Other movements 103.6 235.1
Closing balance 3,085.7 3,015.9
Notes to the preliminary financial results continued
20. Tax
The tax charge for the year of £9.4m (2023: £1.8m) recognised in the
consolidated income statement comprises:
2024 2023
£m
£m
Current tax
Corporation tax on profit 14.5 18.9
Adjustments relating to prior years (7.8) (4.3)
6.7 14.6
Deferred tax
Origination and reversal of temporary differences (4.0) (14.2)
Adjustments relating to prior years 6.7 1.4
2.7 (12.8)
Total tax charge for the year 9.4 1.8
( )
The 2024 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.
In addition to the above, a deferred tax credit £6.0m (2023: £4.3m) was
recognised within other comprehensive income comprising:
2024 2023
£m
£m
Remeasurement of BPT Limited defined benefit pension scheme (0.8) (0.3)
Fair value movement in cash flow hedges (5.2) (4.0)
Amounts recognised in other comprehensive income (6.0) (4.3)
Deferred tax balances comprise temporary differences attributable to:
2024 2023
£m
£m
Deferred tax assets
Short-term temporary differences 6.1 3.7
6.1 3.7
Deferred tax liabilities
Trading property uplift to fair value on business combinations (3.9) (5.2)
Investment property revaluation (93.8) (95.2)
Short-term temporary differences (21.9) (13.2)
Fair value movement in financial interest in property assets (0.2) (1.1)
Actuarial gain on BPT Limited defined benefit pension scheme (0.2) (0.9)
Fair value movement in derivative financial instruments (1.5) (6.7)
(121.5) (122.3)
Total deferred tax (115.4) (118.6)
( )
Notes to the preliminary financial results continued
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 £72.1m, calculated at 25.0% (2023: £85.5m, calculated at 25.0%) and will be realised as the properties are sold.
21. Retirement benefits
The Group retirement benefit asset decreased from £9.6m to £6.5m in the year
ended 30 September 2024. This movement has arisen from changes in assumptions
of £1.8m and a loss on plan assets of £1.3m. The principal actuarial
assumptions used to reflect market conditions as at 30 September 2024 are as
follows:
2024 2023
% %
Discount rate 5.0 5.6
Retail Price Index (RPI) inflation 3.3 3.5
Consumer Price Index (CPI) inflation 2.6 2.8
Rate of increase of pensions in payment 5.0 5.0
22. Share-based payments
The Group operates a number of equity-settled, share-based compensation plans
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 £2.8m (2023: £2.4m).
23. Related party transactions
During the year ended 30 September 2024, 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:
2024 2023
Fees Year end Fees Year end
recognised
balance
recognised
balance
£'000
£'000
£'000
£'000
Connected Living London (BTR) Limited 735 870 1,455 480
Lewisham Grainger Holdings LLP 226 513 307 368
Vesta Limited Partnership 811 214 838 227
1,772 1,697 2,600 1,075
2024 2023
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 1,196 11.5 11.0 871 10.2 11.2
Vesta LP - 14.5 Nil - 14.5 Nil
1,196 44.1 871 42.8
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 September 2024, have been
adopted by the Group.
EPRA Earnings
2024 2023
Earnings Shares Pence per Earnings Shares Pence per share
£m millions share £m millions
Earnings per IFRS income statement 40.6 738.2 5.5 27.4 739.9 3.7
Adjustments to calculate adjusted EPRA Earnings, exclude:
i) Changes in value of investment properties, development properties held for 38.4 - 5.2 68.9 - 9.3
investment and other interests
ii) Profits or losses on disposal of investment properties, development 5.8 - 0.8 (3.3) - (0.4)
properties held for investment and other interests
iii) Profits or losses on sales of trading properties including impairment (49.3) - (6.7) (53.8) - (7.4)
charges in respect of trading properties
iv) Tax on profits or losses on disposals - - - - - -
v) Negative goodwill/goodwill impairment - - - 0.1 - -
vi) Changes in fair value of financial instruments and associated close-out 6.6 - 0.9 - - -
costs
vii) Acquisition costs on share deals and non-controlling joint venture - - - - - -
interests
viii) Adjustments related to funding structure - - - - - -
ix) Adjustments related to non-operating and exceptional items 5.0 - 0.7 - - -
x) Deferred tax in respect of EPRA adjustments - - - - - -
xi) Adjustments i) to viii) in respect of joint ventures 0.9 - 0.1 0.5 - 0.1
xii) Non-controlling interests in respect of the above - - - - - -
Adjusted EPRA Earnings/Earnings per share 48.0 738.2 6.5 39.8 739.9 5.4
Adjusted EPRA Earnings per share after tax 4.9 4.2
( )
ix) Adjustments relate to fire safety provisions as outlined with the Group's
consolidated income statement.
EPRA Performance Measures - Unaudited (continued)
EPRA NRV, EPRA NTA and EPRA NDV
2024 2023
EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV
£m £m £m £m £m £m
IFRS Equity attributable to shareholders 1,893.7 1,893.7 1,893.7 1,928.6 1,928.6 1,928.6
Include/Exclude:
i) Hybrid Instruments - - - - - -
Diluted NAV 1,893.7 1,893.7 1,893.7 1,928.6 1,928.6 1,928.6
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 11.8 11.8 11.8 11.6 11.6 11.6
iii) Revaluation of tenant leases held as finance leases - - - - - -
iv) Revaluation of trading properties 292.4 216.4 216.4 347.3 256.5 256.5
Diluted NAV at Fair Value 2,197.9 2,121.9 2,121.9 2,287.5 2,196.7 2,196.7
Exclude:
v) Deferred tax in relation to fair value gains of IP 112.9 112.9 - 105.8 105.8 -
vi) Fair value of financial instruments (14.9) (14.9) - (34.0) (34.0) -
vii) Goodwill as a result of deferred tax - - - - - -
viii.a) Goodwill as per the IFRS balance sheet - (0.4) (0.4) - (0.4) (0.4)
viii.b) Intangible as per the IFRS balance sheet - (1.4) - - (0.6) -
Include:
ix) Fair value of fixed interest rate debt - - 73.4 - - 136.6
x) Revaluation of intangibles to fair value - - - - - -
xi) Real estate transfer tax - - - - - -
NAV 2,295.9 2,218.1 2,194.9 2,359.3 2,267.5 2,332.9
Fully diluted number of shares 743.1 743.1 743.1 743.0 743.0 743.0
NAV pence per share 309 298 295 318 305 314
EPRA Performance Measures - Unaudited (continued)
EPRA NIY
2024 2023
£m
£m
Investment property - wholly-owned 3,028.3 2,948.9
Investment property - share of JVs/Funds 66.5 65.6
Trading property (including share of JVs) 620.1 734.3
Less: developments (401.7) (617.1)
Completed property portfolio valuation 3,313.2 3,131.7
Allowance for estimated purchasers' costs 180.5 125.2
Gross up completed property portfolio valuation B 3,493.7 3,256.9
Annualised cash passing rental income 166.1 140.1
Property outgoings (48.8) (39.1)
Annualised net rents A 117.3 101.0
Add: rent incentives 0.2 0.3
'Topped up' net annualised rents C 117.5 101.3
EPRA NIY A/B 3.4% 3.1%
EPRA 'topped up' NIY C/B 3.4% 3.1%
Gross up completed property portfolio valuation 3,493.7 3,256.9
Adjustments to completed property portfolio in respect of regulated tenancies (634.5) (740.9)
Adjusted gross up completed property portfolio valuation b 2,859.2 2,516.0
Annualised net rents 117.3 101.0
Adjustments to annualised cash passing rental income in respect of newly 8.3 11.2
completed developments and refurbishment activity
Adjustments to property outgoings in respect of newly completed developments (2.4) (3.2)
and refurbishment activity
Adjustments to annualised cash passing rental income in respect of regulated (15.0) (17.0)
tenancies
Adjustments to property outgoings in respect of regulated tenancies 4.5 4.7
Adjusted annualised net rents a 112.7 96.7
Add: rent incentives 0.2 0.3
EPRA 'topped up' NIY c 112.9 97.0
Adjusted EPRA NIY a/b 3.9% 3.8%
Adjusted EPRA 'topped up' NIY c/b 3.9% 3.9%
EPRA Vacancy Rate
2024 2023
£m
£m
Estimated rental value of vacant space A 3.3 1.8
Estimated rental value of the whole portfolio B 122.9 112.7
EPRA Vacancy Rate A/B 2.7% 1.6%
The vacancy rate reflects estimated rental values of the Group's stabilised
habitable PRS units as at the reporting date.
EPRA Performance Measures - Unaudited (continued)
EPRA Cost Ratio
2024 2023
£m
£m
Administrative expenses 35.3 33.5
Property operating expenses 44.7 37.2
Share of joint ventures expenses 0.6 (0.1)
Management fees (2.6) (3.2)
Other operating income/recharges intended to cover overhead expenses (5.5) (1.8)
Exclude:
Investment property depreciation - -
Ground rent costs (0.1) (0.2)
Costs (including direct vacancy costs) A 72.4 65.4
Direct vacancy costs (2.4) (2.2)
Costs (excluding direct vacancy costs) B 70.0 63.2
Gross rental income 154.8 133.7
Less: ground rent income (0.6) (0.6)
Add: share of joint ventures (gross rental income less ground rents) 0.8 0.8
Add: adjustment in respect of profits or losses on sales of properties 43.6 58.1
Gross Rental Income and Trading Profits C 198.6 192.0
Adjusted EPRA Cost Ratio (including direct vacancy costs) A/C 36.5% 34.1%
Adjusted EPRA Cost Ratio (excluding direct vacancy costs) B/C 35.2% 32.9%
EPRA LTV
2024
£m Group Share of Joint Ventures Share of Associates Combined
Borrowings from Financial Institutions 908.2 - - 908.2
Bond loans 700.0 - - 700.0
Net payables 29.5 6.7 14.6 50.9
Exclude:
Cash and cash equivalents (140.1) (1.4) (0.5) (142.0)
Net debt A 1,497.6 5.3 14.2 1,517.1
Investment properties at fair value 2,720.2 - 14.5 2,734.7
Investment properties under development 308.1 52.0 - 360.1
Properties held for sale 620.1 - - 620.1
Financial assets 101.7 - - 101.7
Total property value B 3,750.1 52.0 14.5 3,816.6
EPRA LTV % A/B 39.9% 10.1% 97.6% 39.7%
EPRA Performance Measures - Unaudited (continued)
2023
£m Group Share of Joint Ventures Share of Associates Combined
Borrowings from Financial Institutions 849.2 - - 849.2
Bond loans 700.0 - - 700.0
Net payables 93.6 6.7 14.6 114.9
Exclude:
Cash and cash equivalents (117.8) (3.5) (0.5) (121.8)
Net debt A 1,525.0 3.2 14.1 1,542.3
Investment properties at fair value 2,433.4 - 15.4 2,448.8
Investment properties under development 515.5 50.3 - 565.8
Properties held for sale 734.3 - - 734.3
Financial assets 109.9 - - 109.9
Total property value B 3,793.1 50.3 15.4 3,858.8
EPRA LTV % A/B 40.2% 6.4% 91.6% 40.0%
EPRA Capital Expenditure
2024
£m Trading Properties Investment Properties Group (excl Joint Ventures) Share of Joint Ventures Combined
Acquisitions 0.2 85.9 86.1 - 86.1
Development 11.0 149.6 160.6 1.2 161.8
Completed assets
- Incremental letting space - - - - -
- No incremental letting space 3.8 13.9 17.7 - 17.7
- Tenant incentives - - - - -
- Other material non-allocated types of expenditure - - - - -
Capitalised interest - 11.6 11.6 0.6 12.2
Total capital expenditure 15.0 261.0 276.0 1.8 277.8
2023
£m Trading Properties Investment Properties Group (excl Joint Ventures) Share of Joint Ventures Combined
Acquisitions - 9.8 9.8 - 9.8
Development 5.9 255.9 261.8 33.3 295.1
Completed assets
- Incremental letting space - - - - -
- No incremental letting space 2.7 20.4 23.1 - 23.1
- Tenant incentives - - - - -
- Other material non-allocated types of expenditure
- - - - -
Capitalised interest 1.6 15.9 17.5 0.4 17.9
Total capital expenditure 10.2 302.0 312.2 33.7 345.9
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