* H1 loss before tax 143 million sterling
* Defers H1 dividend but hopes to maintain FY dividend
* Confident of meeting end-Sept. covenant test
* Shares rise 3.4 percent to 161 pence by 0900 GMT
(Adds CEO interview)
By Daryl Loo
LONDON, May 20 (Reuters) - Grainger Plc, Britain's largest listed residential landlord, reported a first-half loss due to falling property values and deferred its dividend, but sees signs the UK housing market is finally starting to improve. Grainger's chief executive said on Wednesday sales volumes have risen since the six months to end-March, for which it posted a pretax loss of 143 million pounds ($222 million) after UK house prices fell to their lowest in five years.
Grainger is deferring its half-year dividend due to the uncertain market conditions, but it hopes to at least maintain a full-year payout similar to last year's 6.18 pence a share, acting CEO Andrew Cunningham told Reuters in an interview.
"If market conditions continue to improve, and they have improved somewhat over the last six weeks, then I think we will be pretty confident of announcing a dividend," Cunningham said.
By 0900 GMT, Grainger shares were up 3.4 percent at 161 pence on thin volumes, against the broader UK property stocks index, which was up 0.7 percent.
Indicative data from the housing derivatives market showed on Monday that UK homeowners should still brace for a potential fall of about 20 percent in value by end-2010, even as the slump in house prices slows.
"It's still too early to say that the market is on an upward trend because prices are still falling. We still need to see sustained growth and stability in the housing market, and a recovery in mortgage financing," Cunningham said.
Grainger, which owns more than 14,000 properties in the UK and 7,000 in Germany, said it expects full-year sales revenue to reach 144 million pounds. It is confident of meeting its end-September interest cover covenant test well before then.
The company is focused on conserving cash and paying down debt, and was not actively exploring a rights issue to raise new funds, Cunningham said, even though many of its UK-listed peers have tapped the market for billions of pounds so far this year.
Grainger recorded a one-off cost in the March half due to early conversion of 78 percent of its convertible bonds, which it expects will increase net asset value by 42 million pounds. On Tuesday, the company said Rupert Dickinson, CEO since 2002, has gone on a leave of absence for the immediate future due to ill health, and appointed deputy CEO and finance director Cunningham in his place.
"There is a degree of uncertainty about how long he will be away. Our concern is getting him back on his feet and getting him back to the office," Cunningham said. He declined to provide further details, citing privacy reasons. (Editing by Andrew Macdonald and Simon Jessop) ($1=.6454 Pound) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)