29th Nov 2007 07:02
Grainger PLC29 November 2007 29 November 2007 GRAINGER plc ("Grainger" / "Group" / "Company") Unaudited Preliminary Results for the year ended 30 September 2007 GRAINGER REPORTS 22.3% INCREASE IN GROSS NAV Grainger plc, the UK's largest quoted residential property owner, todayannounces its (unaudited) results for the year ended 30 September 2007. Financial highlights • Profit before tax up 62% to £77.5m (2006: £47.7m (restated)) • Gross Net Asset Value per share up 22.3% to 828p (2006: 677p); Grainger NAV up 23.0% to 732p (2006: 595p) • Market value of property assets up 25% to £2.5bn (2006: £2.0bn) • Earnings per share up 82% to 47.3p (2006: 26p (restated)) • Final dividend up 10% to 4.12p per share, making a total dividend for the year of 6.18p per share (2006: 5.62p) - 13th consecutive year of increased dividends • Strong liquidity position - headroom of £226m • Return on shareholders' equity increased to 27.1% from 26.5%. Operational highlights Strong growth across all operating divisions, including: • G:res1 fund successfully completed fundraising with £159m of new equity raised - market value of assets now £457m, retained share 21% • Market value of retirement solutions portfolio has more than doubled in value to £542m (2006: £241m) - retains market leadership with 40% market share • Continued strong progress in Europe, with the German portfolio now comprising 4,520 units with a market value of £242m • Development portfolio continues to progress - estimated end development value of projects up 20% to £809m, of which £324m has planning consent. Robin Broadhurst, Chairman of Grainger plc, said: "In my first year as Chairman of Grainger, I am pleased to report another yearof strong progress and significant achievement in our three emerging businesslines that complement our core residential regulated tenancy business. "We continue to see good opportunities to apply our own variety and blend ofskills to different residential asset classes, whilst continuing our longstanding prudent approach towards acquisitions and liquidity. We believe thatour spread of activities will give us resilience and increase our long termgrowth prospects to create shareholder value." For further information:Grainger plc Financial DynamicsRupert Dickinson/Andrew Cunningham Stephanie Highett/Dido Laurimore/Jamie RobertsonTel: +44 (0) 20 7795 4700 Tel: +44 (0) 20 7831 3113 Chairman's Statement In my first year as Chairman of Grainger, I am pleased to report another year ofstrong progress and significant achievement in our three emerging business linesthat complement our core residential regulated tenancy business. Overview Conditions over the financial year have generally been favourable and we haveincreased our gross property asset base to £2.5bn from £2.0bn in 2006. Theincrease has come from both revaluation uplifts (our UK portfolio has shown anuplift of 9.8%) and from acquisitions. In total we spent £614m on propertyassets in the year, including the major corporate and portfolio acquisitions ofCHARM, The Capital Appreciation Trust and The Tilt Estate. The year end valueof our retirement solutions business has grown to £542m and we are pleased withour progress in Germany where we now own over 4,500 units worth £242m. Capitalrecycling through the successful launch of our G:res1 fund and prudent debtraising in the early part of the year have meant that this growth has beenachieved at sensible loan to value ratios (53% at 30 September 2007) whilstmaintaining a valuable liquidity position - our headroom on our lendingfacilities at the year end amounted to £226m. Results In the light of evolving practice of accounts presentation under IFRS, we haveconducted a review of the classification of our property assets. This hasinvolved reclassifying a small proportion of those assets (4%) from tradingstock to investment property or vice versa. The main impact has been that therevaluation surplus of £23.5m taken through the 2006 income statement on thetransfer of assets to the Jersey Property Unit Trust ("JPUT") (that forms partof G:res1) has instead been taken through retained earnings at the beginning ofthat year net of tax of £7.0m. There is no change to market value net assetvalue measures or to business cash flows. Our 2006 figures have been restatedaccordingly and further details are given in the financial review section ofthis report. Profit before tax has increased by 62% to £77.5m from £47.7m (restated), theprincipal driver of this being an improved contribution from our associates andjoint ventures (up to £40.6m from £0.4m). Operating profit (before fair value movements and goodwill impairment) hasincreased to £89.0m from £81.5m, largely due to improvements in trading profitsfrom our core business. Gross net asset value per share ("Gross NAV") has increased by 22.3% to 828pfrom 677p and there are similar improvements in our other NAV measures: Triplenet asset value ("NNNAV") up 25.8% to 613p from 487p and base case Grainger NAVup 23.0% to 732p from 595p. Details of the calculations of these are given inthe financial review. Return on shareholders' equity has increased to 27.1% from 26.5%. We are again increasing our dividend by 10% (our 13th consecutive year ofincreased dividends) with the result that the board are recommending a finaldividend of 4.12p per share. Together with the interim dividend of 2.06p pershare paid on 16 July 2007, this will produce a total dividend for the year of6.18p per share (2006: 5.62p). At this level the dividend is covered 7.7 times(2006: 4.6 times). If approved the final dividend will be paid on 18 February2008, to shareholders on the register on 18 January 2008. Strategy The Group's goal is to maintain and consolidate its position as the UK's leadingquoted residential property company. It is proud of its core propertymanagement services model which is at the heart of the business and seeks todeliver a personal and caring service to its many tenants. Expanding andcontinuing the successful delivery of this service model will allow the Group toexpand and diversify its offerings, particularly in the fields of fundmanagement and development, but operating within the residential arena utilisingthe experience gained over its long history. We believe this goal will continue to deliver consistent long term growth inresults and in dividends to our shareholders. We are developing a mix ofresidential businesses away from our previous heavy reliance on regulatedtenancies Following the Housing Act 1988, the number of these tenancies willreduce over the next ten years as this type of structure gradually disappears.Historically the business has been largely centred on the ownership and tradingof these large-scale residential portfolios of regulated tenancies. Returnshave been generated through rental income and, more significantly, fromcapturing reversionary surpluses on sales when the properties fall vacant.These returns have been enhanced by a cautious approach to acquisition, theapplication of rigorous management, growth in house prices and by appropriatelevels of financial gearing. In recent years we have used our cash generationand property management platform in the residential sector to enable us tocapture a wider range of assets. This expansion and diversification has enabled us to become market leaders inthree residential sectors; the ownership of properties subject to regulatedtenancies, providers of home reversions and residential fund management. Thislatter activity, in particular, produces an income stream not reliant on thedirect ownership of property and at low incremental cost. We have also widenedour risk and return exposure by increasing our involvement in residentialdevelopment and by entering the German residential market. Board changes At the beginning of May, we welcomed Henry Pitman as a non-executive director.He was previously Chief Executive of Tribal Group Plc and his experience, whichincludes both property and government related housing business, will be of greatassistance to the Board. My personal thanks go to Robert Dickinson from whom I took over as Chairman atthe conclusion of the AGM in February. His long service and contribution to thegrowth of the Group has been previously recorded, but his help and guidance inthe handover of the Chairmanship was hugely appreciated. Outlook Whilst residential house prices continued to rise through this financial year,the listed property sector (including real estate investment trusts) fell bymore than 20%, largely fuelled by the sentiment that the rapid rises of recentyears are unsustainable. This has now proved to be the case and there is littledoubt that the next year will be a challenging one both for the sector and forGrainger. Notwithstanding this, recent evidence suggests that properties in ourportfolio are continuing to sell at or slightly above current valuation levels.Grainger's average house price in its core portfolio is £205,000 and theportfolio is geographically diverse. In light of this and our limited exposureto new build flats in City centres (the area we expect to be the most difficultin the coming months), we believe that we are relatively well protected from theslowdown in the current market. Going forward, we see good opportunities in continuing to apply our own varietyand blend of skills to different residential asset classes. Where appropriate,we will introduce third party capital to enhance our returns and reduce ourdirect balance sheet exposure. This may be in the form of joint ventures (forexample along the lines of Grainger GenInvest and Curzon Park) or inco-investing funds (G:res1). This will not be the first period of more challenging market conditions that theCompany has weathered in its long history. Our experience, combined with themore diversified business model we now have in place, gives us confidence in ourpositioning and prospects. We plan to continue our long standing prudentapproach towards acquisitions and liquidity and believe that our spread ofactivities will give us resilience and increase our long term growth prospectsto create shareholder value. I would like to take this opportunity to thank everyone at Grainger for thewelcome and help that they have given me in my first nine months as Chairman.Their commitment and enthusiasm will serve the company and its shareholders wellin the future. Robin BroadhurstChairman29 November 2007 Chief Executive's Review Market Review There has been much recent debate over the state of the UK housing market andthe impact that recent events in the world credit markets, triggered by eventsin the US sub prime sectors, will have in the future. Many indicators point toa slowdown in the rate of house price growth - in particular, falling levels ofmortgage approvals, falls in certain house price indices and slowing salesvolumes from house builders. Commentators vary between predictions of a severefall in actual house prices (as was the case in the early 1990's) and a softlanding where price growth slows and possibly stagnates for a period. Our view is that rates of house price growth are fundamentally determined by twofactors: the balance between supply and demand and levels of affordability. The UK is currently suffering from long term imbalance between the supply ofhousing stock and the amount required to support the increasing number ofhouseholds. In the first seven years of this century UK housing completionsaveraged 166,000 per annum. Government initiatives have been announced toincrease this level of supply to 240,000 (recently increased from 200,000) perannum by 2016. Set against this are population forecasts indicating that the UKpopulation will rise from 60.6m in 2006 to 65m in 2016. More importantly, thetrends of immigration, an ageing population and an increasing number of singleperson households will lead to an additional requirement of 209,000 householdsper year to 2026. This is a continuation of the trend that has seen the numbersof households increase by 30% in the last three decades of the 20th Century -matched by a fall in the level of new housing built over the same period of 50%.It remains to be seen whether, given the current planning environment,increased availability will be able to absorb both existing and future demand. As well as the imbalance at a total stock level, of equal importance is thelimited supply for the right type of dwelling at the right price in the rightlocation. For example, London and the South East has limited availability andgreat levels of wealth generation. This has produced some of the largest priceincreases we have seen over the last few years which, we believe, will help tosustain the market in this area for some time to come. We have some 55% byvalue of our portfolio in this region. Conversely, there appears to be oversupply in certain provincial cities of, inparticular, recently built one or two bedroom city centre apartments primarilybuilt for the buy to let market. We have kept out of these more speculativemarkets and therefore have virtually no exposure to this sector. The second key factor is the level of affordability, with many commentatorspointing to the impact this had on the housing market in the early 1990's. Thereare two main differences between that period and now. Firstly, base ratesbetween mid 1988 and mid 1992 did not drop below 10% and, at their peak,mortgage rates were approaching 17%. Current base rates are at 5.75% and mostcommentators expect that the next interest rate move will be downwards.Secondly the economic situation is far more robust - GDP at 3.3% in Q3 2007(above the average long term rate of 2.5%) and employment levels are at a recordhigh (in 1992 unemployment approached 3 million). One of the key measures of affordability is the ability of households to meettheir normal expenditure once they have paid all their housing costs. Researchindicates that, whilst income net of housing costs still exceeds householdspend, the surplus is narrowing as a result of increased mortgage costs arisingfrom rate rises. The unwinding of relatively cheap fixed rate loans may wellreduce it further in the coming months but not to levels that would be likely toprecipitate a severe correction in house prices. Consequently, whilst we are planning for a period of slower house price growthand are therefore being more cautious in our acquisitions, we do not expect awholesale and significant fall in prices in the short term. However, our longterm model can withstand short term price fluctuations and we believe that thewide geographic spread, low average price and reversionary potential in ourportfolio will enable it to continue to deliver enhanced returns. Although the volume of transactions is relatively small, since the year endsales values achieved on vacancy have exceeded our September vacant possessionvalues by 4.0%. Risk Review The key risks to the Grainger business are:- - a severe long term downturn in the UK housing market - significant increases in interest rates - a lack of availability of finance Dealing with each of these in turn:- Housing market We have assembled our unique residential portfolio over a significant period of time and its current market value is substantially greater than cost. Moreover, much of the portfolio is reversionary and the value that we will obtain by selling on vacancy currently exceeds market value by over £600m (the "reversionary surplus"). The nature of our portfolio is inherently defensive in times of house price slowdown. It is geographically diverse and, whilst one of its long term strengths is a significant exposure to the high demand areas of London and the South East, we are not overly exposed to cluster risk. In other areas house price growth tends to follow the South East but, coming from a lower base, can show dramatic levels of increase. The majority of our properties are unrefurbished and of relatively low value. This level of affordability is a key element of continued and sustained demand for our properties when they become available for sale. Our average vacant possession value is £205,000 (the UK average is £198,000) and 60% of the portfolio is below £250,000. Our exposure to the higher end of the market ( > £500,000) which traditionally shows greater volatility is restricted to some 279 properties out of our total UK owned portfolio of over 14,000 units. We have found that demand for our typical properties (affordable and offering potential for value appreciation through refurbishment) is resilient even in times of market slowdown. Operationally we manage our exposure to house price inflation by constant reviews of the portfolio to ensure that we crystallise gains to maximise returns at the right time. We are also diversifying our income streams (for example fund management income) and our geographic spread (investment in Germany) to spread risk. Interest rates Our exposure to adverse interest rate movements is limited by adopting a prudent hedging policy. At 30 September 2007 over 70% of group debt was hedged by being either fixed or subject to caps or swaps. The hedging instruments used and the fixed rate debt have a variety of maturity dates giving protection over the medium term. Availability of finance At 30 September the Group's headroom amounted to £226m and the average maturity of our debt was six years. The first significant maturity (a revolving facility of £400m) is not until March 2010. We guard against lack of liquidity by constantly recycling capital; for example we raised £282m of third party funding through equity and debt raising in the G:res1 fund during the course of the year. The core business in particular is very cash generative - gross rents and property sales amounted to £165m in the year. Whilst we spent £151m on new acquisitions, the vast majority of this can be stopped in adverse market conditions. Consequently we are able to reduce gearing levels and improve liquidity quickly by cutting back on purchases if necessary. As explained above, the low value, unrefurbished nature of our portfolio means that it is very liquid and easily realisable. Operating Review General Despite the repercussions of the credit crunch in the banking markets in latesummer, the UK residential market showed strong levels of growth to the end ofSeptember - the Nationwide and Halifax House Price indices recording gains of9.0% and 10.7% respectively. Several regions showed growth of over 15%, inparticular Greater London at 18.6%. Our own portfolio, with some 55% by value in London and the South East, showedan average increase of 9.8%. Our main operating divisions and the market value of each as a percentage of ourtotal property and investment assets are:- Core portfolio 57% - Primarily our portfolio of properties subject to regulated tenancies. Retirement solutions 22% - Our interests of home reversion and retirement related assets. Fund management and 7% - These are investments in managed funds (G:res1 and Schroders) and ininvestments in residential GenInvest (our JV with Genesis Housing Group).joint ventures Development 4% - Focussed on relatively large scale residential or residential led mixed use developments. Continental Europe 10% - Principally investment in German residential portfolios. These operating divisions are supported by our property and asset managementdivisions of over 100 staff based in our seven UK and one German offices. Core portfolio 2007 2006Regulated units owned 7,655 7,715Market value £1,221m £1,090mValue possession value £1,571m £1,403m Other assets (vacants, assured etc) 882 652Market value £196m £141mVacant possession value £220m £160m Trading performance in this division has been strong. Although the number ofunits sold has declined from 787 to 661, as explained below, sales proceeds haveincreased marginally from £126m to £128m, reflecting higher average valueachieved (£193,000 compared to £160,000). Margins on normal sales (i.e. when aproperty is sold on vacancy) have also improved from 48.6% to 50.7%. The number of sales has declined because we have made fewer investment sales(when a property is sold with a tenant in situ), down to 86 at a gross salesvalue of £17.2m and profit of £9.7m, from 224 at a value of £31.3m and a profitof £13.0m in 2006. This is ultimately a trading portfolio and, as such, we make a number of thesesales as a result of active portfolio management where we feel that returnswould not be significantly enhanced by waiting for vacancy in the usual way.The level of investment sales has been relatively high in recent years as wehave worked through assets acquired in major portfolios. We would expect thevolumes to continue to decline in the future as this process is completed. We have been pleased with the levels of acquisitions in the year, enhanced bytwo major corporate transactions. Firstly, The Tilt Estate Company, bought for£48.0m and comprising a mixed tenure estate of over 300 units in East Dulwich,London SE22 and secondly Portland House Holdings comprising 135 propertieslocated across England and Scotland for £12.2m. In total we have acquired 863units for £151m (2006:462 for £70m). Operating contribution for this division (comprising profits on sale of tradingand investment assets together with net rents and other income, after deductingdivisional overheads) amounted to £81m (2006: £76m). Retirement Solutions 2007 2006Interest in residential units (no.) 5,952 3,003 Market value £542m £241m Vacant possession value £779m £421m We have retained our market leadership in the writing of home reversion plans,with a 40% market share at 30 September 2007. Of particular note has been ourachievement in obtaining regulated status from the Financial Services Authorityin April of this year. This puts home reversion plans on a level footing withother equity release products which were regulated by virtue of being mortgages.Although there was some market disruption during the period approaching theregulation deadline, leading to a slowdown in acquisitions, we believe that, inthe long term, regulation will be a key factor in the continuing success of notonly our business, but the home reversion market in general. In the period we sold interests in 139 home reversion assets for £14.9m andrecorded a profit of £7.4m (2006: 110 assets for £12.5m and a profit of £5.7m). We have made significant progress in building this business in the year,investing a total of £252m on 2,899 assets (2006: £29m on 432 assets). Theseincluded the major acquisitions of the CHARM portfolio (a financial interest insome 1,287 equity mortgages from the Church Commissioners for £134m) and TheCapital Appreciation Trust (Isle of Man) plc ("CAT") which comprise 911sheltered housing units for £72m. This latter acquisition is significant inthat it enhances our product offering in this sector, giving us the opportunityto provide more flexible tenure alternatives from rental and lifetime leasethrough to shared equity. Operating contribution from this division amounted to £8m (2006: £3m).Fund Management and Residential Investments Gross asset Net asset Grainger Holding value £m value £m Share £mGrainger GenInvest 50.0% 364 80 40G:res1 21.6% 457 219 47Schroders 22.4% 90 90 20 Total 2007 911 389 107 Total 2006 312 27 14 This division has made significant progress in the year, the highlight being theclose of G:res1, our market rented fund. Total third party investment in thefund stands at £159m, representing 78.4% and investors include MitsubishiCorporation, Achmea, APP, British Airways Pensions Fund, FF&P, LGPI, Nomura,Norsk Hydro, Storebrand, Swiss Re and the Universities Superannuation Scheme.The fund itself grew considerably in the year with the acquisition of theAbility Portfolio (700 units in East London for £205m) and NAV grew by 14% inthe period from launch in November 2006 to the end of June 2007. Grainger GenInvest, our joint venture with Genesis Housing Group, has also shownstrong growth on the back of the London house price market - average increasesin the value of the portfolio amount to 24.7% and the value of our totalinvestment has increased from £10m to £40m. Including amounts lent by Graingerto the joint venture of £68m (2006: £58m) our total investment is £108m (2006:£68m). Annualised fee income from our fund and property management activities nowstands at £7m. The contribution from this division (being share of profits, dividends received,fee income and share of revaluation surpluses in the year) amounted to £40m(2006: £5m). We hope that current market conditions alongside political and socialimperatives will mean that the government and Local Authorities have to lookmore favourably towards the professional private rented sector as a potentialpartner in providing some of the new housing supply to 2016. We are engaged inthis debate and are confident that the model we are creating will be well placedto respond to any initiatives that are introduced. Property Services This division carries out the asset and day to day property management of ourcore portfolios and those of our co-invested funds. The division also nowincludes our lettings team and regional sales and acquisitions. In this way wecan provide a consistent level of service to each of the portfolios we manage. 2007 2006Residential Units Managed 19,312 15,221Gross Rent Roll £69m £51mGross Property Expenditure £18m £12m Development 2007 2006Market value of development portfolios £110m £97m(including share of joint ventures) Estimate of completed development value £809m £675m Of this, with planning consent £324m £178m We have been building our team and refining our strategy for development so thatit is more aligned to the long term ownership model of the group. We intend tocontinue to sell assets to the open market to assist in generating cash flowsfor the group, whilst also retaining some stock. Good progress has beenachieved on all major development sites during 2007. In particular, at Newlands (West Waterlooville) we obtained a resolution togrant planning for the development of 100,000 sq m of commercial space and 1,550new homes. In addition the adopted Hampshire County Structure plan includes areserve allocation for a further 1,000 units. We are currently in the process ofagreeing the Section 106 agreement and hope to start on infrastructure work inthe latter part of 2008. This is an exemplar scheme where we will be directlyinvolved in some of the construction and in the long term management of theestate. We expect the first house sales to commence in the financial yearending 2009. The current status of our other major projects is set out below:- Expected Gross Development Value Income fromProject Description Status Wholly ownedHornsey Road Islington 212 residential units, Under construction £44m 2008 community buildings Macaulay Road 97 residential units Consent granted and demolition £56m 2009 commenced Clapham 30,000 sq.ft retail Barnsbury Complex 141 residential units Detailed planning consent £49m 2010Islington obtained Wards Corner 198 residential units Conditional development £76m 2012 agreement signed Newbury 330 residential units Preferred developer status, £82m 2011 conditional development 50,000 sq.ft retail agreement early 2008 Gateshead College 263 residential units Detailed planning application £72m 2009 late 2007 Joint venture Curzon Park Mixed use joint venture with Outline application submitted £196m 2009 Development Securities including 400,000 (Grainger share) sq. ft. residential 800,000 sq.ft. office, 20,000 sq.ft retail and 118 bed hotel The above analysis demonstrates that revenues from this division will becomemore significant from 2009 onwards. Operating contribution from this business in the year (including tradingprofits, profits on sale of fixed assets and joint venture interests, net ofdivisional overheads) amounted to £4m (2006: £7m). Continental Europe 2007 2006Residential units owned 4,520 2,739 Market value £241.7m £116.9m Gross annual rent £9.8m £4.5mGross annual running rent £15.0m £7.5m We have made significant advances in our European operation, in particular theopening of our Mannheim asset and property management business, which nowemploys seven members of staff. Whilst increasing interest costs have narrowedthe spread between yields and funding costs we remain optimistic for theprospects of our German residential business. This is based on our long termstrategy which includes buying good quality assets with favourable tenantstructures in areas where residential demand is likely to remain high. Theresults of this have been reflected in the valuation of our portfolio whichshows an uplift of 4.0%. We focus on smaller value portfolios (below 20mEuros) and do not rely on overly aggressive privatisation rates to deliver therequired level of returns. We continue to investigate alternative funding structures for our Germanbusiness and, in particular, the possibility of introducing third party equity. The operating contribution from our German portfolio in the year was £5m,primarily from net rental yield on the properties which is running at 4.5%(2006: 5.0%). We have two further European interests, one of which was sold inthe year, delivering profit of £1.2m on an original investment of £2m. Theother, a subsidiary company in which we own an 81.6% stake, holds a developmentsite in Zizkov, Prague and is going through the planning process. Ourinvestment amounts to £3.5m and the gross development value may amount to asmuch as £170m on phase I with a second phase of similar size to follow. Prospects We have been building each of our businesses in a prudent way, without assumingthe relatively high levels of house price growth that we have benefited from inrecent years. However, we believe that we now have in place a market leadingplatform that can acquire, develop, fund, manage and sell a diverse range ofresidential products on a national basis. We are also confident that we can still produce good long term returns from ourspecialist portfolios which rely on active management, development and tradingof reversionary surpluses and will continue to concentrate our resources inthese areas. Rupert DickinsonChief Executive29 November 2007 Financial Review Evolution of the application of IFRS and a review of our accounts by theFinancial Reporting Review Panel has caused us to reconsider the suitability ofcertain of our accounting policies, in particular the classification of marketrented residential assets which were transferred to G:res1 during the year ended30 September 2006. In full agreement with our auditors, these assets have beenreclassified as investment assets rather than trading assets with effect from 1October 2005 and a prior year adjustment has been made accordingly. The effecthas been to remove a revaluation surplus of £23.5m taken through the incomestatement in 2006 and instead take it through retained earnings at 1 October2005 net of tax of £7.0m. This adjustment has no effect on the key indicator ofmarket value, namely net asset value, and has no implications for the economicsor cash generation of the business. An added benefit is that by removing theone-off revaluation surplus taken to profit in 2006 the disclosed incomestatements for 2006 and 2007 are far more directly comparable. We have alsotaken this opportunity to reclassify an immaterial balance of equity releasehome reversion assets to ensure consistent presentation. Full details of theadjustment are given in note 2. Performance Overview Our key performance indicators are:- 2007 2006 ChangeGross net asset value per share (pence) 828p 677p 22.3% Return on shareholder equity (1) 27.1% 26.5% 0.6% Return on capital employed (2) 12.1% 14.0% (1.9)% Operating profit before fair value and goodwilladjustments £89.0m £81.5m 9.2% (1) Growth in NNNAV plus dividends paid per share as a percentage of opening NNNAV(2) Profit before financing costs plus all revaluation surpluses as percentage of opening gross capital General Most of our properties are held as trading stock and are therefore shown in thestatutory balance sheet at cost. This does not reflect the true worth of theassets and so we set out below a summary of our net assets with the propertiesrestated to market value. Adjustments to Statutory market value, Gross NAV Triple NAV Balance deferred tax and balance Contingent Balance Sheet derivatives sheet Tax Derivatives Sheet £m £m £m £m £m £m Properties 1,679 643 2,322 - - 2,322Investments/other assets 186 5 191 - 2 193Goodwill 17 - 17 - - 17Cash 80 - 80 - - 80 Total assets 1,962 648 2,610 - 2 2,612Borrowings etc (1,408) (12) (1,420) - 9 (1,411)Other net liabilities (117) (6) (123) - - (123)Provisions/deferred tax (114) 112 (2) (285) (3) (290) Total liabilities (1,639) 94 (1,545) (285) 6 (1,824) Net assets 323 742 1,065 (285) 8 788 2007 Net assets per share (pence) 251 577 828 (221) 6 613 2006 Net assets per share(pence) 193 484 677 (187) (3) 487 The European Public Real Estate Association ("EPRA") Best Practices Committeehas recommended the calculation and use of a diluted EPRA NAV and a diluted EPRANet Net Assets Value (NNNAV). The definitions of these measures are consistentwith Gross NAV and Triple NAV as described and shown in the table above. This definition of Gross NAV requires us to take out any adjustments fordeferred tax and changes in the fair value of derivatives as calculated underIFRS. NNNAV requires certain of these adjustments to be reinstated and inaddition a deduction is made for contingent tax which is calculated by applyingthe expected rate of tax to the full inherent gains at the balance sheet date. Market value analysis of property assets Fixed assets/ Shown Financial as stock Interest in at cost Market value Market value property £m adjustment £m £m at value £m Total £m Residential 964 627 1,591 610 2,201 Development 105 16 121 - 121 Total September 2007 1,069 643 1,712 610 2,322 Total September 2006 (restated) 986 527 1,513 388 1,901 Net asset value Measurements of net asset value are key performance indicators for the Group.We set out three measurements to better enable shareholders to compare ourperformance year on year and with our peers, whilst reflecting the unique natureof our business:- Gross net assets per share Up 22.3% to 828p from 677p(market value of net assets per share beforededuction for deferred tax on property assets andbefore adjustments for fair value of derivatives) Triple net assets per share NNNAV Up 25.8% to 613p from 487p(gross NAV per share adjusted for deferredtax on revaluation gains and for mark tomarket adjustments) Grainger NAV Up 23.0% to 732p from 595p(NNNAV adjusted for the discounted and taxedreversionary surplus in our long term regulatedand home reversion portfolios) Gross net assets per share £m pence per shareGross NAV as at 30 September 2006 879 677 Revaluation surpluses 158 122 Profit after tax 61 47 Elimination of previously recognised surpluses (55) (43) Other 22 25 Gross NAV as at 30 September 2007 1,065 828 Grainger net assets per share Reconciliation of Grainger NAV to NNNAV £m pence per shareNNNAV as at 30 September 2007 788 613 Discounted reversionary surplus 216 168 Discounted tax thereon (62) (49) Grainger NAV as at 30 September 2007 942 732 As in previous years, we set out below the major assumptions we have used incalculating the base case Grainger NAV and how it might change by amending thoseassumptions:- - house price inflation is taken as zero over the entire reversionary period - a discount rate of 9.38% has been used (weighted average cost of capital plus 3%) - no discounting of contingent tax on the revaluation surpluses - reversionary periods taken as 13 years for regulated properties and 11 years for home reversions Sensitivity analysis (refer to the financial model on our website(www.graingerplc.co.uk). No discount of deferred tax Discounting deferred tax House price inflation Discount rate Discount rate per annum WACC + 3% WACC WACC +3% WACC 0% 732p 780p 878p 896p 4% 805p 882p 951p 998p 6% 855p 952p 1,001p 1,069p Financial Performance in the Year Operating profit before fair value movements and goodwill impairment increasedto £89.0m from £81.5m as shown below. £m2006 operating profit before fair value movements 75.1Add back goodwill impairment 6.42006 operating profit before fair value movements and goodwill impairment 81.5Increase in gross rents and other income 4.1Increase in property expenses and overheads (4.3)Increase in residential trading profits 10.5Decrease in development trading profits (3.5)Other 0.72007 Operating profit before fair value movements and goodwill impairment 89.0 The major movement in operating profit derives from an increase in tradingprofits from our core residential and home reversion portfolios. As expected,development profits have decreased in line with the fall in the number ofprojects coming through for completion in the year. Earnings per share Basic earnings per share have increased by 71.5% to 47.3p from 26.0p (re-stated)as shown below:- Pence £m per share 2006 EPS (restated) 33.5 26.0 Change in goodwill impairment 6.4 4.9 Increase in operating profit before fair value movements 7.5 5.8 Decrease in gain on revaluation of investment properties (9.0) (6.9) Decrease in fair value of derivatives and financial assets (7.4) (5.7) Increased contribution from JV/associates 40.2 31.2 Increase in interest payable (7.9) (6.1) Increase in taxation and other (2.4) (1.9) 2007 EPS 60.9 47.3 As well as an improvement in operating profit, this year's result has beenenhanced by the significant contribution from our joint ventures and associates.In particular, Grainger GenInvest which is an exclusively London basedportfolio, has shown large revaluation gains, our share of which amounts to some£35m. Interest and Tax Our net interest charge has increased by £7.9m to £65.0m with interest payableincreasing by £11.5m. The increase has arisen from a combination of higher debtlevels used to finance the growth in our asset base (particularly homereversions and Germany) and higher underlying interest rate costs. On averagemonthly debt levels have exceeded 2006 figures by £208m and we have seen threemonth LIBOR and Euribor rates rise by 123 basis points and 137 basis pointsrespectively in the year. Our annual tax charge is at an effective rate of 21. 4%, the major itemsaffecting it being:- £mGroup profit before tax 77.5 Tax at 30% 23.2 Adjustments:-Impact of tax rate change on deferred tax (6.0)Utilisation of capital losses (3.0)Other including prior period adjustments 2.4 Actual tax charge 16.6 Financial Resources The business continues to be highly cash generative producing £497m (2006:£208m) from operating activities and sales of investment property. Major cash outflows relate to interest (£66.1m), tax £8.5m and dividends £7.6m.Furthermore we spent a total of £723m on acquiring new properties, fundingdevelopment and investing in joint ventures. To assist in funding this weraised additional net debt of £336m. During the year we revised the terms of our core borrowing facility, extendingthe average maturity by two years and reducing the overall borrowing margin by13 basis points. The first major repayment of £400m under this facility is notdue until March 2010. We also issued a seven year convertible bond producing netproceeds of £110m. The bond has a coupon of 3.625%, a post tax cash cost ofapproximately 1.5% and a conversion share price of 864p. Subsequent to thisissue we bought 1,525,000 shares back in the market for cancellation at anaverage price per share of £5.12. The average maturity of our debt is 5.9 years(2006: 4.1 years). At 30 September 2007 we had total headroom of £226m and theloan to value ratio stood at 53% (2006: 52%). Our all-in cost of debt in the year was 6.1% (2006: 5.8%) and our weightedaverage cost of capital has moved out to 6.38% from 5.67%. Net borrowings of£1,332m were 74% hedged (2006: £1,051m and 66%). We put in place a significantlevel of new hedging early in the year including a 15 year £100m swap, at 4.98%.In total our financial instruments were 'in the money' by £12.2m at 30 September2007 (2006: out of the money (£2.1m)) and we have hedges/fixed rates of at least£711m in place until March 2009. Andrew CunninghamDeputy Chief Executive and Finance Director29 November 2007 Consolidated income statement (unaudited) For the year ended 30 September 2007 Restated 2007 2006 Note £m £m Group revenue 229.3 205.7 Net rental income 3 23.2 28.3 Profit on disposal of trading properties 4 62.8 55.9 Administrative expenses 5 (9.5) (10.4) Other income 6.2 2.1Goodwill impairment loss - (6.4) Net other income/(expense) 6.2 (4.3) Profit on disposal of investment property 6 2.5 5.2 Profit on disposal of shares in subsidiary 2.0 - Profit on disposal of joint venture interest - 0.4 Interest income from financial assets 1.8 - Operating profit before net valuation gains on investmentproperties and changes in fair value 89.0 75.1 Net valuation gains on investment properties 9.9 18.5 Change in fair value through profit or lossfinancial assets - 0.4 Operating profit 98.9 94.0 Change in fair value of derivatives 1 3.0 10.4Interest expense (74.4) (62.9)Interest income 9.4 5.8Share of profit/(loss) of associates after tax 7.7 (0.1)Share of profit of joint ventures after tax 32.9 0.5 Profit before tax 77.5 47.7 Taxation - current (16.6) (30.6)Taxation - deferred - 16.4 Tax charge for the year 15 (16.6) (14.2) Profit for the year attributable to equity holders of the 60.9 33.5company Basic earnings per share 7 47.3p 26.0p Diluted earnings per share 7 46.6p 25.8p Dividend per share 8 6.18p 5.62p Included within profit for the financial year is a loss of £91,000 (2006:£29,000) attributable to minority interests. Consolidated Statement of Recognised Income and Expense (unaudited) For the year ended 30 September 2007 Restated 2007 2006 £m £m Profit for the year 60.9 33.5 Actuarial profit on BPT Limited defined benefit pension scheme net of tax 1.5 0.4 Net exchange adjustments offset in reserves net of tax 0.3 0.1 Changes in fair value of cash flow hedges net of tax 9.0 (0.8) Net income/(expense) recognised directly in equity 10.8 (0.3) Total recognised income and expense for the year 71.7 33.2 Effect of adoption of IAS 32 and IAS 39 on 1 October 2005 net of tax - (5.4) Prior year adjustment - reclassification of equity release assets (0.5) - Total recognised income and expense since last report 71.2 27.8 The total recognised income and expense in the year is attributable to: Equity shareholders of the parent 71.2 33.2Minority interest - - 71.2 33.2 Consolidated balance sheet (unaudited) as at 30 September 2007 Restated 2007 2006 Note £m £m ASSETSNon-current assetsInvestment property 9 478.6 219.4Property, plant and equipment 2.3 2.1Investment in associates 10 68.5 2.0Investment in joint ventures 11 114.8 71.5Financial interest in property assets 12 131.7 -At fair value through profit or loss financial assets - 19.0Goodwill 17.4 - 813.3 314.0 Current assetsInventories - trading properties 1,069.1 985.5Trade and other receivables 13 16.4 5.3Derivative financial instruments 13.1 2.3Cash and cash equivalents 80.1 34.5Assets held for sale - 168.3 1,178.7 1,195.9 Total assets 1,992.0 1,509.9 LIABILITIESNon-current liabilitiesInterest bearing loans and borrowings 14 1,393.8 1,070.5Trade and other payables 8.0 8.0Retirement benefits 2.7 4.6Provisions for other liabilities and charges 1.2 1.3Deferred tax liabilities 15 113.5 91.1 1,519.2 1,175.5Current liabilitiesInterest bearing loans and borrowings 14 18.2 19.4Trade and other payables 16 84.9 23.3Current tax liabilities 15 45.8 37.2Derivative financial instruments 0.8 4.4 149.7 84.3 Total liabilities 1,668.9 1,259.8 Net assets 323.1 250.1 EQUITYCapital and reserves attributable to the company's equity holdersIssued share capital 17 6.4 6.5Share premium 17 23.0 22.6Merger reserve 17 20.1 20.1Capital redemption reserve 17 0.3 0.2Cash flow hedge reserve 17 8.2 (0.8)Equity component of convertible bond 17 22.4 -Retained earnings 17 242.6 201.3 Total shareholders' equity 323.0 249.9Equity minority interests 0.1 0.2 Total Equity 18 323.1 250.1 Statement of consolidated cash flows (unaudited) For the year ended 30 September 2007 Restated 2007 2006 Note £m £m Cash flow from operating activitiesProfit for the year 60.9 33.5Depreciation 0.6 0.6Impairment of goodwill - 6.4Net valuation gains on investment properties (9.9) (18.5)Net finance costs 65.0 57.1Share of profit of associates and joint ventures (40.6) (0.4)Gain on disposal of investment properties and other (2.5) (5.6)Gain on disposal of shares in subsidiary (2.0) -Share based payment charge 1.0 0.9Change in fair value of derivatives and fair value through profit or lossfinancial assets (3.0) (10.8)Interest income from financial assets (1.8) -Taxation 16.6 14.2 Operating profit before changes in working capital and provisions 84.3 77.4 (Increase)/decrease in trade and other receivables (12.1) 3.2(Decrease)/Increase in trade and other payables (1.9) 4.0Increase in trading properties (65.1) (64.3) Cash generated from operations 5.2 20.3 Interest paid (66.1) (55.0)Taxation paid (8.5) (15.4) Net cash outflow from operating activities (69.4) (50.1) Cash flow from investing activitiesProceeds from sale of investment property and property, plant and equipment 14.8 41.1 Proceeds from sale of joint venture - 5.4Proceeds from financial interest in property assets 4.9 -Disposal of subsidiary net of cash disposed of 251.0 -Interest received 4.7 2.6Dividends/distributions received 8.0 0.4Acquisition of subsidiaries, net of cash acquired (146.5) (3.4)Investment in associates and joint ventures (93.3) (57.8)Acquisition of investment property and property, plant and equipment (100.9) (98.9)Acquisition of financial interest in property assets (134.7) -Acquisition of at fair value through profit or loss financial assets - (0.4) Net cash outflow from investing activities (192.0) (111.0) Cash flows from financing activitiesProceeds from the issue of share capital 0.5 1.0Purchase of own shares (14.8) (0.5)Proceeds from new borrowings 227.2 165.2Issue of convertible bond 109.6 -Repayment of borrowings (12.1) (12.0)Dividends paid (7.6) (6.9)Purchase of financial derivative (0.3) - Net cash inflow from financing activities 302.5 146.8 Net increase/(decrease) in cash and cash equivalents 41.1 (14.3)Cash and cash equivalents at beginning of year 39.0 53.3 Cash and cash equivalents at end of year 80.1 39.0 Notes to the Preliminary Announcement of Unaudited Results 1. Basis of preparation These 2007 preliminary results are unaudited and do not constitute statutoryaccounts as defined in section 240 of the Companies Act 1985. They have beenprepared in accordance with International Financial Reporting Standards asendorsed by the European Union (IFRS). The financial information contained in these preliminary results hasbeen prepared in accordance with the Listing rules of the Financial ServicesAuthority and, other than a) the new accounting policy for financial interest inproperty assets set out in note 12 and b) changes described in note 2 below, inaccordance with, the accounting policies set out on pages 69 to 78 of the 2006Annual Report and Accounts which is available on the Group's website(www.graingerplc.co.uk). The accounting policies have been consistently appliedto all periods presented. In addition changes in fair value of derivatives isnow presented below operating profit in the income statement as the instrumentsare not held for trading purposes. 2. Prior Year Adjustment Evolution of the application of IFRS and a review of our accounts by theFinancial Reporting Review Panel has caused us to reconsider the treatment ofcertain items in our accounts. We have reviewed the treatment andclassification in the balance sheet of our residential assets and, inparticular, the transfer of assets to the JPUT in 2006. Classification of property assets After a considered and detailed review we have concluded that all of ourproperty assets are correctly classified with the exception of some of ourequity release home reversion assets and assets transferred to JPUT (see below).The equity release home reversion assets had been shown in the balance sheetas investment property but as the most likely outcome will be the sale of theseassets on vacancy the more appropriate classification is as trading stock. Thishas been corrected retrospectively through a prior year adjustment. There is noimpact on the accounts for the year ended 30 September 2005 or prior but theaccounts for the year ended 30 September 2006 have been restated. The assetshave been reduced from market value to historical cost by deducting £0.5m bothfrom the 2006revaluation gain in the 2006 income statement and from the value ofinvestment property. The assets have then been correctly shown as stock rather than investmentproperty with the result that trading stock in the 30 September 2006 balancesheet has increased by £32.8m and investment property decreased by the sameamount. Sales of assets of £0.5m and the related cost of sales of £0.2m havebeen moved from profit on disposal of investment property and added to profit ondisposal of trading property; the additional profit arising is insignificant. Transfer of assets to the JPUT Included within the assets transferred to the JPUT on 1 December 2005 was £67mof properties that had been classified as trading stock. On transfer, these werereclassified as investment properties and a revaluation gain of £23.5m wasrecognised in the 2006 income statement. A tax charge of £7.0m arose in respectof this transfer. However, this reclassification did not comply with therequirements of IAS 40 paragraph 57 which explains the circumstances whichprovide evidence of a change in use of a property asset allowing a transferbetween categories to be made. These assets were originally acquired for thepurpose of long term capital appreciation and rental growth and, consequently,should always have been shown as investment property rather than trading stock.Indeed one of the main reasons why these assets were chosen to be transferred tothe JPUT was that they had always been held for that purpose. Propertiessimilar to these and retained by Grainger are shown in the accounts asinvestment properties. This error has been corrected by a prior year adjustment restating the opening2006 balance sheet (i.e. at 1 October 2005) and the income statement for theyear ended 30 September 2006. Retained earnings at 1 October 2005 have been increased by the revaluation gainof £23.5m and a provision for deferred tax of £7.0m has been made (see note 18). The gain of £23.5m has been eliminated from the income statement for the yearended 30 September 2006. The tax charge for the year is reduced by £7.0m as thedeferred tax provision is released against the current tax charge arising. Costs of £2.5m relating to the cost of raising equity investment in the JPUToffset against this revaluation gain in 2006 have been transferred to interestexpense. This transfer has no impact on 2006 profit before tax. The above changes have no effect on the market value NAV of the business or onits cash flows. Basic earnings per share for the year ended 30 September 2006are reduced from 39.1 pence as previously stated to 26.0 pence and dilutedearnings per share from 38.9 pence to 25.8 pence. In addition we are showing separately a profit on disposal of joint venturesinterest of £0.4m in the 2006 income statement. Previously this was includedwithin profit on disposal of investment property. 3. Net rental income 2007 2006 £m £m Gross rental income 52.7 52.6Property repair and maintenance costs (15.8) (12.7)Property operating expenses (see note 5) (13.7) (11.6) 23.2 28.3 4. Profit on disposal of trading properties 2007 2006 £m £mProceeds from sale of trading properties 166.0 151.0Carrying value of trading properties sold (92.8) (85.1)Other sales costs (see note 5) (10.4) (10.0) 62.8 55.9 5. Administrative expenses 2007 2006 £m £mTotal Group expenses 33.6 32.0 Many of the Group's expenses relate directly to either property managementactivities or to staff involved directly with the sale and acquisition ofproperty. Accordingly, total Group expenses shown above have been allocated asfollows:- 2007 2006 £m £mDeducted within net rental income (see note 3) 13.7 11.6Costs attributable to the disposal of trading properties (see note 4) 10.4 10.0Administrative expenses 9.5 10.4 33.6 32.0 6. Profit on disposal of investment property 2007 2006 £m £mProceeds from sale of investment property 14.8 41.1Carrying value of investment property sold (12.3) (35.9) 2.5 5.2 7. Earnings per share 2007 2006 No. of No. of Shares Shares '000 '000Weighted average number of shares for basic earnings per share 128,849 129,001Weighted average number of shares for diluted earnings per share 134,467 129,804 Basic Basic earnings per share is calculated by dividing the profit attributable toequity holders of the company by the weighted average number of ordinary sharesin issue during the year, excluding ordinary shares purchased by the group andheld both in Trust and as treasury shares to meet its obligations under the LongTerm Incentive Scheme (LTIS). Diluted Diluted earnings per share is calculated by adjusting the weighted averagenumber of shares outstanding by the dilutive effect of ordinary shares that thecompany may potentially issue relating to its convertible bond and its shareoption schemes and contingent share awards under the LTIS, based upon the numberof shares that would be issued if 30 September 2007 was the end of thecontingency period. The profit for the year is adjusted to add back the aftertax interest cost on the debt component of the convertible bond. 8. Dividends A final dividend of 4.12p per share has been proposed by the directors forpayment on 18 February 2008 (30 September 2006: 3.75p per share). Thisdividend, totalling £5.3m, has not been provided for in the accounts to 30September 2007. In the year to 30 September 2007, the final proposed dividendof £4.9m for the year ended 30 September 2006 and the interim dividend for 2007of £2.7m have been paid. 9. Investment property Restated 2007 2006 £m £mOpening balance (2006 as previously reported) 219.4 222.4 Prior year adjustment - transfer of assets to the JPUT (see note 2) - 67.0 219.4 289.4 Additions 295.8 115.7Disposals (12.3) (35.9)Disposal as part of disposal of subsidiary (209.8) -Revaluation gain 9.9 18.5Exchange adjustments 7.3 -Transfer from/(to) a disposal group 168.3 (168.3)Closing balance 478.6 219.4 10. Investment in associates 2007 2006 £m £mOpening balance 2.0 0.1 Loans advanced - 2.0Loans repaid (2.1) -Share of profits/(losses) 7.7 (0.1)Distributions received (0.6) -Share of change in fair value of cash flow hedges taken through equity 0.4 -At fair value through profit or loss financial assets transferred to 19.0 -investment in associatesNet assets of subsidiary transferred to investment in associates 88.3 - Additional equity invested in G:res1 Limited 84.4 - Sale of equity in G:res1 Limited (130.6) -Closing balance 68.5 2.0 As at 30 September 2007, the Group's interest in associates was as follows:- % of share capital/ units Country of held IncorporationG:res1 Limited 21.6 JerseySchroders Residential Property Unit Trust 22.4 JerseyOu Robbins 43.2 Estonia 11. Investment in joint ventures 2007 2006 £m £mOpening balance 71.5 17.9 Additions - 6.6Loans advanced 17.1 51.7Share of profits 32.9 0.5Share of change in fair value of cash flow hedges taken through equity 0.7 (0.2)Distribution received (7.4) -Disposals - (5.0)Closing balance 114.8 71.5 As at 30 September 2007, the Group's interest in joint ventures wasas follows:- % of share capital/ units Country of held IncorporationGrainger GenInvest LLP 50 United KingdomGrainger GenInvest No. 2 (2006) LLP 50 United KingdomRegen (NT) LLP 33 1/3 United Kingdom 12. Financial interest in property assets 2007 2006 £m £m Financial interest in property assets 131.7 - Financial interest in property assets relates to the CHARMportfolio, which is a financial interest in equity mortgages, acquired in theyear. It is accounted for under IAS 39 in accordance with the designationavailable-for-sale financial assets. The interest is initially recognised atfair value plus transaction costs and is subsequently carried at fair value.Subsequent to initial recognition, changes in the values of our interest in themortgages are recorded through the income statement based on updated estimatedcash flows using the effective interest rate applicable at acquisition.Differences relating to updated, estimated cash flows, using the effectiveinterest rate applicable at acquisition compared with the effective interestrate at the year end, assessed as the rate available in the market for aninstrument with a similar maturity and credit risk, are taken through equity.When gains or losses in the assets are realised, the accumulated fair valueadjustments recognised in equity are included in the income statement as gainsand losses from financial interest in property assets. Income received from themortgages is recognised in the income statement on an accruals basis. Allmovements in the income statement are shown on the line "interest income fromfinancial assets". 13. Trade and other receivables 2007 2006 £m £mTrade receivables 5.7 2.9Other receivables 9.0 2.2Prepayments and accrued income 1.7 0.2 16.4 5.3 14. Interest bearing loans and borrowings As at 30 September 2007 the maturity profile of the Group's debt,net of finance costs, was as follows:- 2007 2006 £m £mWithin one year 18.2 19.4Between one and two years 5.0 0.4Between two and five years 783.6 822.3Over five years 605.2 247.8 1,412.0 1,089.9 15. Tax As at Payments Acquired in Movements Movements As at 30 September in the recognised recognised 30 September 2006 the year year in income in equity 2007 £m £m £m £m £m £m Current tax 37.2 (8.5) 0.5 16.6 - 45.8Deferred taxTrading property uplift to fair value on acquisition 73.7 - 3.3 (9.5) - 67.5Investment property revaluation 16.5 - 15.6 8.5 - 40.6Accelerated capital allowances Short term timing differences (0.5) - - 0.3 - (0.2)Actuarial surplus on BPT pension scheme 0.2 - - - 0.6 0.8Fair value movement in cash flow hedges (0.2) - - - 2.9 2.7 91.1 - 18.9 - 3.5 113.5 Total tax 128.3 (8.5) 19.4 16.6 3.5 159.3 The tax charge for the period of £15.3m comprises:- 2007 £mUK taxation 9.2Overseas taxation 7.4 16.6 16. Trade and other payables 2007 2006 £m £mDeposits received 0.6 0.8Trade payables 29.7 8.4Other taxation and social security 0.3 1.5Accruals and deferred income 54.3 12.6 84.9 23.3 Trade payables in 2007 includes £23.6m relating to acquisitions of propertywhere contracts have either been unconditionally exchanged or notarised. Accruals and deferred income in 2007 includes £31.2m of rent received in advanceon the granting of lifetime leases. 17. Capital and reserves attributable to the Company's equity holders Equity Issued Capital Cash flow component of share Share Merger redemption hedge convertible Retained capital premium reserve reserve reserve bond earnings £m £m £m £m £m £m £m Balance as at 1 October 2006 as previously reported 6.5 22.6 20.1 0.2 (0.8) - 201.8Prior year adjustment - reclassification of equityrelease assets (see note 2) - - - - - - (0.5) Balance as at 1 October 2006 restated 6.5 22.6 20.1 0.2 (0.8) - 201.3Retained profit for the year - - - - - - 60.9Actuarial gain on BPT pension scheme net of tax - - - - - - 1.5Issue of shares - 0.4 - - - - -Changes in fair value of cash flow hedges net of tax - - - - 9.0 - -Net exchange adjustments offset in reserves net of tax - - - - - - 0.3Purchase of own shares - - - - - - (7.0)Cancellation of treasury shares (0.1) - - 0.1 - - (7.8)Share-based payments charge - - - - - - 1.0Issue of convertible bond - - - - - 22.4 -Dividends paid - - - - - - (7.6)Balance as at 30 September 2007 6.4 23.0 20.1 0.3 8.2 22.4 242.6 18. Consolidated statement of changes in equity Restated 2007 2006 £m £m Opening equity shareholders funds (2006 as previously reported) 250.1 211.1 Prior year adjustment - transfer of assets to the JPUT (see note 2) - 16.5 250.1 227.6Effect of adoption of IAS 32 and IAS 39 on 1 October 2006 - (5.4) 250.1 222.2Retained profit for the year (2006 restated) 60.9 33.5Actuarial gain on BPT Limited defined benefit pension scheme net of tax 1.5 0.4Changes in fair value of cash flow hedges net of tax 9.0 (0.8)Net exchange adjustment offset in reserves net of tax 0.3 0.1Purchase of own shares (7.0) (0.5)Cancellation of treasury shares (7.8) -Issue of shares 0.4 1.0Share based payments charge 1.0 0.9Dividends paid (7.6) (6.9)Issue of convertible bond 22.4 -Minority interest on business combination (0.1) 0.2Closing equity shareholders funds 323.1 250.1 19. Copies of this statement are being sent to all shareholders. Copiesmay be obtained from the Group's registered office, Citygate, St. James'Boulevard, Newcastle upon Tyne, NE1 4JE. Further details of this announcementcan be found on our website, www.graingerplc.co.uk. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Grainger plc