The Grosvenor Group reported a fall in pre-tax profits of £196.6 mln, down from £233.1 mln the previous year, on assets worth £7 bn largely due to a fall in property values, according to its latest financial report.
The UK group’s share of property assets increased by 2.0% to £7 bn, while assets under management decreased by £0.3 bn to £12.3 bn.
Grosvenor, one of the world’s largest private property groups, is looking to diversify further overseas in order to mitigate the impact of the commercial property slowdown in the UK, caused by Brexit uncertainty.
The group now has just under half of its property interests overseas so that its financial performance is hedged against extreme results from any one market, resulting in a 2018 total return of 5.5%.
Chief executive Mark Preston said: ‘There was strong performance from indirect investment and our Asia business; solid results in North America; and improved total returns in both the UK and Continental Europe.’
Grosvenor Asia Pacific generated revenue profit of £26.9 mln, up from £6.9 mln in 2017, driven by trading profits on disposals from residential development Opus in Tokyo and units at Jardine’s Lookout in Hong Kong.
Preston said: ‘Against a background of moderate global growth, our 2018 financial performance proved better than we had expected. This was again largely due to our international diversification, which has helped to even out regional variations in results over the past year and over the cycle.’
The CEO said one of the group’s most significant transactions last year was the sale of 20% of Sonae Sierra – the international retail real estate specialist with a strong presence in Iberia and Brazil, reducing Grosvenor’s stake to 30%.
‘While this strong relationship continues, the transaction provides us with significant capital to further diversify and rebalance our international portfolio,’ Preston said.
Due to the uncertainty, Preston said the group had a low-geared balance sheet and development exposure. Economic gearing was 20.5% at year-end, down from 23% the previous year, and resilience was above the group’s internal minimum at 83%.
Grosvenor had available funds of £1.7 bn at 31 December 2018 and no plans to seek further equity capital through the issue of new shares.
To counter digital disruption, the group is looking at how to take advantage of opportunities through its ‘Digital: Over the Horizon’ project. It expects to be implementing local and group-wide digital initiatives throughout the year.
