Grainger plc · LSE:GRI
Grainger — H1 2010 Earnings Presentation
42 slides from Grainger's earnings presentation, May 20, 2010
Slide 1: Interim results
Interim results For the six months ended 31 March 2010 20 May 2010 Page 1
Slide 2: Highlights
Highlights • Operating profit up 16% to £48.0m (March 2009: £41.3m) • Balance sheet reinforced by successful equity raise £250m (gross) – Undrawn committed facilities and cash of £300m • Selective recommencement of acquisition programme – Total acquisition pipeline of £52m at 14 May 2010 • Portfolio
Slide 3: Financial Results - Financial Summary
Financial Results - Financial Summary Proforma post Actual 30 September 31 March 2010 rights 2009 Property and related assets (£m) 2,158 2,200 2,200 Gross NAV per share (p) 191 194 411 Grainger NAV per share (p) (basic) 173 177 360 LTV% (on core facility) 54% 54% 66% Interest cover 3.1x 2.7x 31 Marc
Slide 4: Financial Results - Market Value Balance Sheet
Financial Results - Market Value Balance Sheet 31 March 30 September 2010 2009 Before any deferred and contingent tax £m £m Property related assets - wholly owned 2,041 2,083 - JV/associates 117 117 Total property related assets 2,158 2,200 Other assets and cash 160 50 Gross assets 2,318 2,250 Debt
Slide 5: Financial Results - market value of wholly owned assets
Financial Results - market value of wholly owned assets 31 March 30 September 2010 2009 Residential Development Total Total £m UK 1,513 69 1,582 1,610 Germany 459 - 459 473 1,972 69 2,041 2,083 Trading stock is shown at 30 September 2009 values adjusted for sales and purchases in the period Page 5
Slide 6: Financial Results - Movement in Gross NAV
Financial Results - Movement in Gross NAV • No revaluation of stock of 31 March 2010. Revaluation surplus arises from movement of properties into vacant with corresponding IV increase 850 £6m £(21)m £(5)m £5m £795m £237m £807m £3m 800 750 700 m 650 £' 600 £570m 550 500 450 Gro ss NA V Rights issue P
Slide 7: Financial Results - Net Asset Value Per Share
Financial Results - Net Asset Value Per Share Actual Pence per Share 31 March Proforma post 30 September 2010 rights issue 2009 Gross net asset value 191 194 411 Deduct: Mark to market adjustments (21) (20) (61) Deferred tax on revaluation surpluses (undiscounted) (33) (33) (99) NNNAV 137 141 251 Gr
Slide 8: Financial Results – Property Income
Financial Results – Property Income 6 months ended 31 March 2010 2009 Valuation and Valuation and £m Trading Non-recurring Total Trading Non-recurring Total Net rents 27.0 - 27.0 27.5 - 27.5 Trading profit 28.6 - 28.6 24.2 - 24.2 Profit/(loss) on investment properties 0.4 - 0.4 (0.2) - (0.2) Other i
Slide 9: Financial Results – Pre-Tax Earnings
Financial Results – Pre-Tax Earnings 6 months ended 31 March 2010 2009 Valuation and Valuation and £m Trading Non-recurring Total Trading Non-recurring Total Property income 48.0 - 48.0 41.3 (30.9) 10.4 JV/associates (1.4) 6.3 4.9 (2.1) (20.4) (22.5) Goodwill impairment/provisions - (3.3) (3.3) - (1
Slide 10: Financial Results - Cashflow
Financial Results - Cashflow 6 months ended £m March 2010 March 2009 Income Rents and other income net of overheads 15 16 Property sales 97 78 Working capital movements (5) (7) 107 87 Interest, tax and dividends (42) (64) Net operating income 65 23 Loan movements including issue costs (156) 34 Net p
Slide 11: Financial Results - Debt Analysis
Financial Results - Debt Analysis £m 31 March 2010 30 September 2009 Gross debt 1,445 1,589 Cash 137 28 Net debt (before deducting costs) 1,308 1,561 Undrawn commited facilities and cash 300 171 Average maturity (years) 4.0 4.4 Hedging level 85% 92% Blended interest rate 5.4% 5.5% LTV (Group basis)
Slide 12: UK Core Banking Facility – Covenant Compliance
Financial Results - UK Core Banking Facility – Covenant Compliance • Interest cover – Net cashflow (sales, net rents, other income less costs, tax and dividends) to be 1.25 x interest cost – Position at March 2010 is 3.1x – Tested quarterly on a 12 monthly rolling basis • Loan to value (“LTV”) – At
Slide 13: The Market - UK Residential Market
The Market - UK Residential Market • Nationwide and Halifax show annual increase of 9.0% and 5.2% from March 2009 to March 2010 • Mortgage approvals for house purchases in March 2010 were 48,900 – up 17% compared with March 2009, but significantly below ‘pre crisis’ normal levels • Wide geographic a
Slide 14: The Market - UK Residential
The Market - UK Residential • Current conditions – Some evidence of market conditions easing since mid 2009, but house prices still fragile – Significant challenges facing broader UK economy • Longer term prospects more favourable – Medium and long term prices supported by imbalance between supply a
Slide 15: The Market - UK Residential – Grainger’s response
The Market - UK Residential – Grainger’s response • Robust and liquid portfolio • Relatively low average value, generally un-modernised properties provide stable floor with greater reversionary potential • Properties bought at discount to vacant possession and held for the long term which mitigates
Slide 16: The Market - UK Residential – Recent Acquisitions
The Market - UK Residential – Recent Acquisitions • Apostles Portfolio; 16 properties £3.9m • Charles Allen House; 14 properties £3.8m Page 16
Slide 17: The Market - UK Residential – Recent Acquisitions
The Market - UK Residential – Recent Acquisitions • Paignton Portfolio; 235 properties £17.2m • Harley House; 3 properties £4.5m (including 73 garages) Page 17
Slide 18: The Market - UK Residential – Recent Acquisitions
The Market - UK Residential – Recent Acquisitions • Hazel House, Gloucestershire; £190K • Clapham Common North side; 8 properties £2.8m Page 18
Slide 19: Portfolio Analysis - Wholly Owned
Portfolio Overview - Portfolio Analysis - Wholly Owned Gross Vacant No of Market Possession Reversionary units Value £m Value £m Surplus £m VP% Regulated 6,171 851 1,169 318 73% Assured shorthold 584 94 108 14 87% Vacant 246 47 47 - 100% Other 50 47 63 16 75% Uk Residential 7,051 1,039 1,387 348 Ret
Slide 20: Portfolio Overview – UK Residential - Characteristics
Portfolio Overview – UK Residential - Characteristics Gross Asset Value £1,039m • Portfolio acquired at discount to vacant possession value, reversionary surplus £348m • Primarily regulated properties or vacant ex-regulateds (86% by value) • Diverse portfolio assembled over a number of years; active
Slide 21: Portfolio Overview – Retirement Solutions - Characteristics
Portfolio Overview – Retirement Solutions - Characteristics Gross Asset Value £474m • Grainger is market leader with a 26% market share (Source: quarter to March 2010 figures from SHIP) through our various marketing initiatives • Winner of Home Reversions Provider of the Year for the fourth consecut
Slide 22: Fund Management and Residential Investments
Portfolio Overview - Fund Management and Residential Investments - Grainger Investment Value £102m • Major co-investment vehicle is G:res1; Grainger has £26m equity (21.63%) • Property and asset advisor to Schroders ResPUT: Grainger equity £1m (21.8%); liquidation strategy in progress • Grainger Gen
Slide 23: Property and Asset Management Services
Portfolio Overview - Property and Asset Management Services • Provides unique perspective of owner/manager • Combines long term asset management, day to day property management and specialist sales and acquisitions teams on nationwide basis • Provides services to JV’s/associates as well as owned por
Slide 24: Portfolio Overview - Development - Summary
Portfolio Overview - Development - Summary • Balance sheet value at end March £69m • Expected end development value: – with planning consent £442m – without planning consent £136m £578m • Committed spend up to 2013 of only £10m (of which £6m in remainder of 2010) • Focus on residential led schemes,
Slide 25: Portfolio Overview - Strategy for Germany
Portfolio Overview - Strategy for Germany Grainger strategy • Focus on areas where population growth is predicted to be highest • Portfolio has been built on property characteristics through smaller lot sizes • Potential for long term capital growth • Medium term aim remains to attract third party e
Slide 26: Germany
Germany German Portfolio Overview Key Portfolio Statistics Portfolio Concentration and Assessment • Middle-quality multi-family housing • Book value of assets: €514m (£459m) • Gross rental income: €17.6m(1) (£15.7m) • Total number of units: 7,189 - Residential units: 6,812 - Commercial units: 377 •
Slide 27: Strategy – Group
Strategy – Group • Take advantage of attractively priced opportunities in core business areas • Strong and scaleable operating platform to diversify income streams and further reinforce market position • Unique brand as long term holder, asset manager, manager, trader and developer of residential pr
Slide 28: Outlook
Outlook • Highly experienced and soon to be further strengthened management team which has operated through many cycles • Long term HPI expectations – although cautious in the immediate term • Unique portfolio and diversification of income streams • Market leading infrastructure • Strong stakeholder
Slide 29: Management Structure
Management Structure Page 29
Slide 30: Appendices
Appendices 4 grainger plc
Slide 31: Detailed Profit and Loss Account (Management Basis)
Appendices - Detailed Profit and Loss Account (Management Basis) 31 March 2010 31 March 2009 Total Total UK Residential European UK Residential European Property Development Residential Total Property Development Residential Total £m £m £m £m £m £m £m £m Gross rents/other income 24.7 0.5 15.9 41.1 2
Slide 32: Detailed Total UK Residential Property Profit and Loss Account
Appendices - Detailed Total UK Residential Property Profit and Loss Account (Management Basis) Six months to 31 March 2010 (£m) Total UK UK Retirement Fund Management/ Property Residential Residential Solutions Residential Investments Services Property Gross rents/other income 19.2 2.7 2.5 0.3 24.7
Slide 33: Detailed Profit and Loss Account (Statutory Basis)
Appendices – Detailed Profit and Loss Account (Statutory Basis) 31 March 2010 Segment revenue and result £m Fund management/ UK Retirement Property residential European All other residential solutions services investments Development residential segments Total Revenue - property 58.8 11.3 - - 9.7 0.
Slide 34: Portfolio Overview - UK Portfolio Location
Appendices - Portfolio Overview - UK Portfolio Location Number Investment Value Vacant Possession Value of units £m % £m % 01 Central London 533 179 12% 241 12% 12 01 Inner London 1,090 233 15% 304 15% 01 Outer London 1,189 167 11% 233 11% 02 South East 2,252 246 16% 343 16% 03 South West 1,531 142
Slide 35: Total UK Residential Property – Sales and Acquisitions Summary
Appendices – Total UK Residential Property – Sales and Acquisitions Summary Sales Acquisitions Number Proceeds £m Profit £m Number Cost £m 288 44 18 Regulated 87 10 17 4 0 Assured 116 17 138 16 6 Retirement Solutions 35 3 - 15 4 Other 7 2 443 79 28 245 32 * Retirement solutions acquisitions include
Slide 36: Portfolio Analysis - JV’s and associates
Appendices - Portfolio Overview – Portfolio Analysis - JV’s and associates Gross Gross Vacant Grainger Market Possession Share of No of Value Value Grainger Grainger Reversionary units £m £m Share % Equity £m Surplus £m G:res1 2,029 352 399 21.6% 26 10 Schroders 35 3 4 21.8% 1 - GenInvest 1,507 282
Slide 37: Analysis of JV’s and associates
Appendices - Portfolio Overview - Analysis of JV’s and associates Total Gross Liabilities/ Net Grainger Grainger Grainger Assets Debt Assets Share Share Goodwill Loan Investment Designation £m £m £m % £m £m £m £m UK - Residential G:res1 Associate 378 (256) 122 21.6% 26 - - 26 Schroder Associate 5 -
Slide 38: Financial Results – Debt maturity profile
Appendices – Financial Results – Debt maturity profile 1850 1800 1750 1700 1650 1600 1550 1500 1450 1400 1350 1300 1250 1200 1150 Bond 1100 1050 Total German 1000 Bantam 950 £m Syndicate 900 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar
Slide 39: Development - Status of Major Projects
Appendices - Portfolio Overview – Development - Status of Major Projects With planning Without planning permission permission Project Description Status £m £m Planning consent granted, but master 100,000 sq. m commercial, 1,550 new homes & 1,000 plan for the site is being revised in Newlands 167* -
Slide 40: Grainger NAV – Sensitivity Analysis
Appendices - Grainger NAV – Sensitivity Analysis Without discounting tax Discount rate 8.69% 7.0% 5.69% Note • Grainger NAV brings in the present 0% 173p 180p 187p taxed value of reversionary surpluses in our long term portfolio 2% 182p 192p 200p HPI 4% 194p 206p 217p • Grainger WACC:5.69% 5% 201p 2
Slide 41: Glossary of Terms
Appendices - Glossary of Terms Property Assured periodic tenancy (“APT”) Market rented tenancy arising from succession from regulated. Tenant has security of tenure. Assured shorthold tenancy (“AST”) Market rented tenancy where landlord may obtain possession if appropriate notice served. Assured ten
Slide 42: Glossary of Terms
Appendices - Glossary of Terms Financial (continued) Gearing The ratio of borrowings, net of cash, to market net asset value. Hedging The use of financial instruments to protect against interest rate movements. IFRS International Financial Reporting Standards. Interest cover Profit on ordinary activ