Grainger plc Regulatory News (GRI)

8 October 2010

Grainger plc

Trading Update

Grainger plc ("Grainger" or the "Company" or the "Group"), the UK's largest quoted residential property owner, today provides a trading update in advance of its preliminary results announcement for the year to 30 September 2010. 

For the twelve month period to 30 September 2010, we expect normal sales (i.e. sales on vacancy) from our UK residential and retirement solutions portfolios to amount to £110m (2009: £109m). Investment sales (i.e. sales with a tenant in place) and sales of other assets such as agricultural holdings will be approximately £40m (2009: £60m). 

These sales will have been achieved at improved margins compared to those achieved in 2009 and consequently trading profits will show an improvement.

As anticipated, sales from our development division at approximately £19m will be lower than the equivalent figure last year of £48m, as the majority of sales at our successful development at Hornsey Road, Islington had been completed by the end of 2009.

Including sales of £4m in Germany (2009: £3m), total group property sales will therefore amount to approximately £173m (2009: £220m).

As reported previously, we recommenced a prudent buying programme during the year, acquiring some £63m of property compared to £12m in 2009. In addition the acquisition of Sovereign Reversions plc brought £68m of gross property assets to the Group which will be placed into the joint venture with Moorfield that was announced on 23 August 2010. We will continue to identify realistically priced opportunities offering similar potential to create shareholder value.

We remain realistic in our view that the near term outlook for the UK housing market and the wider economy will continue to be challenging. However, we are confident in our ability to achieve outperformance through the proactive management of our portfolios, including pre-sale refurbishment where appropriate. Our confidence is borne out by the sales results we have achieved in the year. Completed normal sales were some 7.4% above September 2009 vacant possession values (2009: 7.5% below). We enter the year with a sales pipeline (contracts exchanged and solicitors instructed) of £29m which is an increase on the position twelve months ago which was £25m.

The preliminary valuation of our UK residential portfolio, assisted by its London and south-east bias, indicates a year on year increase in vacant possession values of 4.5% compared to increases of 2.5% and 3.1% in the Halifax and Nationwide indices respectively. Values in UK Retirement Solutions, which has a wider geographical distribution, show no change on last year on vacant possession values and our assets in Germany show a small decrease of 0.6%.

Treasury hedging derivatives are sensitive to movements in long term interest rates which are significantly lower than in previous periods. Movements in the mark to market adjustment as a result of this are of a non-cash and non-trading nature but will have an adverse impact on profit before tax.

Banking covenants are forecast to continue to be comfortably met. Nonetheless forward planning for shaping appropriate facilities going forward has commenced.

The Company will comment in more detail on its progress at the time of its preliminary results announcement in November. 

-ENDS-

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