Grainger outperforms the UK housing market

A turn-around in the fair value of derivatives hit pre-tax profit at Grainger, the asset and property management focused on the residential sector.

Profit before tax slumped to £15.2m in the year to March 31st from £65.2m, with much of the reduction due to an £8.8m decline in the fair value of the group's derivatives portfolio; the previous year, the group had marked up the value of its derivatives portfolio by £22.9m.

Operating profit before valuation movements and non-recurring items rose 7.9% to £64.1m from £59.4m the year before.

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Group revenue rose from £133.8m last year to £144.1m, while net rental income increased by 16.4% to £31.8m, while fee income rose 61.2% to £5.0m.

Triple net asset value - a calculation based on the notion that any taxes due in connection with the sale of a property will reduce net asset value (NAV) accordingly - increased to 161p per share from 153p per share at the end of September.

Gross NAV per share rose 3.4% to 224p from 216p six months earlier.

The residential UK portfolios, assisted by the strong London and South East weighting, showed a market valuation uplift of 2.8%, with UK Residential increasing by 3.1% and Retirement Solutions by 1.6%. Values in the German portfolio increased by 0.4% over the half year period.

The company has continued to hack away at group net debt, which was reduced by £42m to £1,412m (September 30th 2011: £1,454m). The group expects to replicate this sort of level of debt reduction in the second half of the year.

Robin Broadhurst, Chairman of Grainger, said: "Grainger's residential UK portfolio valuation has risen 2.8% and sales on vacancy are being achieved at 5.7% above September 2011 vacant possession values. This demonstrates our ability to outperform the wider housing market as a result of our portfolio's strategic geographical weighting and the application of our specialist expertise and skills.

"The major market indices indicate that UK national house prices have remained broadly flat over the last six months and liquidity and transaction volumes remain low. Over the last three years, Grainger has rebalanced its UK residential portfolio to focus on geographic locations where economic activity is more robust and this continues to show benefits."

At the end of the half year, 62% of the firm's portfolio was located in London and the South East, compared to 53% in 2009.

The dividend was slightly increased year-on-year from 0.53p to 0.55p.

The share price rose 2.87% to 98.55p.

NR