Grainger posts rise in first-half profit, sees FY profit ahead

FTSE 250 residential landlord Grainger reported a rise in first-half profit and said recurring profit for the full year is likely to be ahead of management expectations.

In the six months to the end of March, net rental income was up 13% to £18m while recurring profit rose 13% to £25.4m from £22.5m in the first half of 2015.

Profit before tax on continuing operations came in at £36.6m, up from £21.1m, supported by positive movements on valuations and derivatives.

Chief executive officer Helen Gordon said: “Grainger has performed strongly in the first six months of the year. Good progress has been made against our key strategic targets of growing rental income, simplifying and focusing the business and improving operational performance.

“"In the past six months we have secured £268m of investment into the private rented sector, nearly a third of our £850m target, with a further £398m in advanced stages. We have identified cost savings that will reduce our overheads by almost a quarter and will be realised fully in our next financial year. The board is pleased to announce our new dividend policy which is aligned to growing net rental income and will materially increase distributions to our shareholders."

The company proposed an interim dividend of 1.45p per share compared to 0.64p in the first half of last year, giving an estimated total dividend for the year of around 4p versus 2.75p.

In addition, Grainger announced a new dividend policy that will significantly increase distribution returns to shareholders and is aligned with the strategy of growing rents.

“During our transition, and supported by our strong cash generation, we will distribute the equivalent of 50% of annual net rental income through dividend distributions, with around one third of the payment being declared at the interim results.

“As the shape of the business evolves to a rental led model, we are committed to delivering progressive and sustainable dividend returns.”

Grainger said the second half of the year has started well, helped by £5.8m profit from a development land sale in Basingstoke.

The company said that while sales on vacancy are expected to be first-half weighted due to high levels of activity before the stamp duty land tax changes on 1 April, it anticipates recurring profit for the full year to be above management’s expectations.

At 1145 BST, Grainger shares were up 0.8% to 229.80p.