Slide 1: Strong results, repositioned for growth
Strong results, repositioned for growth 2017 full year results Helen Gordon, Chief Executive Vanessa Simms, Chief Financial Officer 30 November 2017
Slide 2: Agenda
Agenda Originate Invest Operate 1. Highlights and Helen Gordon strategic update Chief Executive 2. Financial review Vanessa Simms Chief Financial Officer 3. Market, business update Helen Gordon and outlook Chief Executive 4. Q&A Helen Gordon, Chief Executive Vanessa Simms, Chief Financial Officer Jo
Slide 3: A year of strong performance
A year of strong performance Originate Invest Operate Adjusted Net rental Rental EPRA Total return earnings income growth NNNAV (ROSE) +40% +8% +3.8% +5.6% 7.3% £74.4m £40.4m Like-for-like 303pps Key highlights Achieved Target Significant progress on our investment pipeline £651m £850m (2020) Achiev
Slide 4: Repositioned for growth
Repositioned for growth Originate Invest Operate How we create value Planning process Capital allocation Design Geographical targeting Layout Investment management Specifications Acquisitions Delivery Asset recycling management Valuation Grow rents Simplify and focus Build on our experience Lettings
Slide 5: A busy year of activity to enhance delivery
A busy year of activity Originate Invest Operate to enhance delivery 12 months Originate Invest Operate Refocused Customer New efficient City strategy Customer End to end development focus groups acquisitions review research process review team to inform process and design improvement Development Ut
Slide 6: Delivering strong results
Delivering strong results Originate Invest Operate Delivering c.3,000 £651m new PRS homes PRS investment secured £14.7m 6.5-8% profit from Grow rents development gross yields activity secured Simplify and focus 3 new assets Build on our experience 26% completed and gross to net launched reduced 27 m
Slide 7: Further investment progress
Further investment progress Originate Invest Operate PRS investment, £m £850m target PRS Pipeline 651 243 373 -0 200 400 600 800 1,000 1,200 SECURED PLANNING / LEGAL UNDER CONSIDERATION Breakdown of pipeline by acquisition type, £m Forward Funding 312 37 167 Direct Development 179 173 149 Tenanted A
Slide 8: Summary
Summary Originate Invest Operate Apex House, London Strong financial performance Good progress securing investments Positive operational performance Repositioned for strong growth Grainger plc | www.graingerplc.co.uk | FY17 Results | 30 November 2017 8
Slide 9: Financial review
Financial review Gore Street, Manchester Vanessa Simms Chief Financial Officer
Slide 10: Financial highlights
Financial highlights Originate Invest Operate Strong financial results and robust balance sheet Income FY16 FY17 Change Rental growth (like for like) 4.1% 3.8% (30) bps Net rental income £37.4m £40.4m +8% Adjusted earnings £53.1m £74.4m +40% Profit before tax £84.2m £86.3m +2% Dividend per share 4.5
Slide 11: Income statement
Income statement Originate Invest Operate 40% growth in adjusted earnings, driven by rental growth, a strong sales performance and lower costs FY16 FY17 Change Net rental income £37.4m £40.4m +8% Profit from sales – residential £59.7m £60.4m +1% Profit from sales – development £11.8m £14.7m +25% Mor
Slide 12: Net rental income growth
Net rental income growth Originate Invest Operate Underpinning dividend growth of 8% £1.1m £40.4m +8% £1.4m Gross to net 28% -> 26% £2m £37.4m £(1.5)m PRS L4L 3.3% Regs L4L 4.3% Total L4L 3.8% FY16 Disposals Acquisitions Rental growth Gross to net FY17 improvement Grainger plc | www.graingerplc.co.u
Slide 13: Net rental income progression
Net rental income progression Originate Invest Operate £13m £80m +150% £4m £4m £(5)m £(5)m £28m £28m £67m £67m £243m planning / legals £8m £8m £40m £40m Tenanted £32m £32m acquisitions c.£2.6m FY15 FY15 Income Income FY17 FY17 Secured Secured Rental Rental growth Regulated Regulated Secured Secured
Slide 14: EPRA NNNAV movement
EPRA NNNAV movement Originate Invest Operate £1,375m 15p (12)p £1,325m (3)p 3p (5)p 18p 303p £1,275m £1,225m 287p £1,175m £1,125m FY16 Adjusted Revaluations* Disposals Tax Derivatives / Dividends FY17 earnings (trading (deferred & other assets) contingent) * Revaluations of trading property, investm
Slide 15: Portfolio performance – capital growth
Portfolio performance – Originate Invest Operate capital growth FY17 market value movement (PRS and regulated*) ▪ Modest growth in Central & Inner Central & Inner London 1.0% London Outer London 6.2% ▪ Good growth in South East, Outer South East 11.4% London & Regions South West 3.8% East and Midlan
Slide 16: EPRA NAV & NNNAV
EPRA NAV & NNNAV Originate Invest Operate Regulated FY17 £m tenancies* PRS Other** Total Pence per share Property assets (market value) 1,300 526 344 2,170 519 Net liabilities (736) (176) EPRA NAV 1,434 343 Tax – deferred & contingent (95) (41) (8) (144) (34) Mark to market fixed rate debt (22) (5)
Slide 17: Net debt
Net debt Originate Invest Operate Operational cashflow £138m £203m £848m £764m £(228)m £131m PRS investment £19m £33m £57m FY16 Revenue Propex, Finance costs Dividend Investment FY17 overheads and tax Grainger plc | www.graingerplc.co.uk | FY17 Results | 30 November 2017 17
Slide 18: Capital structure and cost of debt
Capital structure Originate Invest Operate FY16 FY17 6.8% 60% Net debt £764m £848m 6.3% 55% Loan to value 35.9% 37.7% Cost of debt (average) 5.8% Net finance cost £37.1m £27.0m 50% 5.3% LTV Cost of debt (average) 4.4% 3.5% 4.8% 45% Cost of debt (period end) 3.9% 3.4% 4.3% Headroom £321m £344m* 40% 3
Slide 19: Summary
Summary Originate Invest Operate Berewood, Hampshire Strong financial performance Investment activity progressing at pace Excellent progress on operational performance property operating expenses overheads finance costs Transformed cost base supporting future investment & returns Repositioned for st
Slide 20: Market, business update and outlook
Market, business Clippers Quay, Manchester update and outlook Helen Gordon Chief Executive
Slide 21: Supportive macro environment
Supportive macro environment Originate Invest Operate Argo Apartments, Defensive positioning A Government focused London from Brexit on supporting housing Analysis indicates PRS Professionalisation of the market will be resilient PRS, supported by Government funding Grainger analysis suggests limite
Slide 22: Positive PRS market fundamentals
Positive PRS market fundamentals Originate Invest Operate Strong A growth Opportunity to Significant Positive underlying market professionalise barriers to regulatory demand Estimated 40% Professional entry environment drivers growth in rental housing, Operational Public policy Lifestyle and demand
Slide 23: Regulated tenancy portfolio
Regulated tenancy portfolio Originate Invest Operate Strong performance, providing a great foundation for growth Portfolio snapshot Rental income Reasons for vacancy Typically 2 – 4% gross yield Mortality 37% 3,508 units* Annualised rental growth of +4.3% Asst. living 29% Tenanted market value: c.£1
Slide 24: Long-term growth potential
Targeting investible cities Originate Invest Operate £1.3trn Schemes secured Planning / legals Target locations Under consideration Not under consideration Weak existing Strong existing PRS market tenant demand tenant demand London but strong growth & strong growth prospects prospects +1.8m Bristol
Slide 25: The development of a regional cluster - Manchester
The development of Originate Invest Operate a regional cluster - Manchester £12psf to £21psf RESI portfolio, 277 homes 1 beds: £575pcm to £875pcm Acquired H2’15 (tenanted) 2 beds: £695pcm to £1,150pcm Acquired H1’16 Clippers Quay, 614 homes (fwd fund) First lets H1’19 Acquired H2’17 The Rock, 233 ho
Slide 26: Progressing our PRS investment pipeline
Progressing our Originate Invest Operate PRS investment pipeline Key acquisitions secured in FY17: 1,875 new homes, £250m investment* The Rock, Yorkshire Gilders Yard, Milton Tulse Hill, London Manchester Post, Birmingham Keynes Stabilised Leeds Fwd fund Stabilised Fwd fund GRIP REIT asset Fwd fund
Slide 27: What next? Beyond the £850m
What next? Beyond the £850m Originate Invest Operate PRS investment, £m £850m target PRS Pipeline 651 243 373 -0 200 400 600 800 1,000 1,200 SECURED PLANNING / LEGAL UNDER CONSIDERATION Compelling market opportunity with structural growth drivers Over 75% of £850m target secured Excellent funding ca
Slide 28: Looking ahead to FY18
Looking ahead to FY18 Originate Invest Operate Argo Clippers Apartments Quay Berewood 134 homes 614 homes 104 homes GRIP REIT JV Est. £5.75m net rent* Est. £1m net rent * First building expected to complete in early FY19 Grainger plc | www.graingerplc.co.uk | FY17 Results | 30 November 2017 28
Slide 29: A transformed business with a positive outlook
A transformed business with a Originate Invest Operate positive outlook Positive market drivers A structural growth market Progressing our investment Strong investment pipeline pipeline and securing new opportunities Scalable operational platform Growing net rental income and a vastly improved capit
Slide 30: Q&A
Q&A Originate Invest Operate Finzels Reach, Bristol London • Bristol • Birmingham • Leeds • Manchester Grainger plc | www.graingerplc.co.uk | FY17 Results | 30 November 2017 30
Slide 31: Appendices
Appendices grainger plc
Slide 32: FY18 reporting dates
FY18 reporting dates Originate Invest Operate Trading update 7 February HY18 results 17 May Trading update September FY18 results 29 November Grainger plc | www.graingerplc.co.uk | FY17 Results | 30 November 2017 32
Slide 33: Investment case
Investment case Originate Invest Operate Strong foundations for growth National reach 1 Leading operational platform 5 We have presence across the UK. Unparalleled scale and expertise Sourcing Transactions Development Local knowledge 2 Lettings and marketing Our local team’s market knowledge provide
Slide 34: Secured build to rent pipeline
Secured build to rent pipeline Originate Invest Operate Secured Location Units Grainger Net rent FY18 FY19 FY20 FY21 projects investment target est. Waterlooville, Phased Berewood 104 £17m £1m Hampshire lease up Gun Hill, Aldershot, Phased 107 £22m £1m Construction Wellesley Hampshire lease up Phase
Slide 35: Secured pipeline schedule (1 of 2)
Secured pipeline schedule Originate Invest Operate (1 of 2) Name Status No. units Est. Grainger Gross yield First lets investment target from Forward funding / acquisition Clippers Quay, Salford On site 614 £99m c.8% Early FY19 Gore Street, Manchester Construction to 375 £80m c.7% Early FY20 commenc
Slide 36: Secured pipeline schedule (2 of 2)
Secured pipeline schedule Originate Invest Operate (2 of 2) Name Status No. units Est. Grainger Gross yield Completion / investment target First lets Tenanted acquisitions Tribe Portfolio, Manchester Acquired 192 £26m c.7% FY18 The Rock, Bury, Manchester Acquired 233 £22m c.7.5% FY17 The Wirral Port
Slide 37: Sales
Sales Originate Invest Operate £m FY16 FY17 Units sold Revenue Profit Units sold Revenue Profit Residential sales on vacancy 307 103.1 52.0 274 110.1 51.1 Tenanted and other sales 59 12.5 7.7 242 20.7 9.3 Residential sales total 366 115.6 59.7 516 130.8 60.4 Development activity - 49.2 11.8 - 83.7 1
Slide 38: Balance sheet
Balance sheet Originate Invest Operate Market value balance sheet (£m) FY16 FY17 Residential – PRS 461 526 Residential – regulated tenancies 1,249 1,214 Residential – mortgages (CHARM) 93 86 Development work in progress 105 138 Investment in JVs/associates 193 206 Total investments 2,101 2,170 Net d
Slide 39: Portfolio summary
Portfolio summary Originate Invest Operate Portfolio summary – property assets No. Vacant Reversionary £m units Market value possession value surplus Residential – PRS 2,513 526 573 47 Residential – regulated tenancies 3,508 1,214 1,444 230 Residential – mortgages (CHARM) 634 86 86 - Development wor
Slide 40: Total assets under management by region
Total assets under management Originate Invest Operate by region Reversionary* & PRS (wholly owned and co-investments^) Homes under Grainger’s share Average house price management Market value of market value (avg VPV per unit) Region units £m £m £000s Central / Inner London 3,415 1,627 1,131 549 Ou
Slide 41: Reversionary assets under management by region
Reversionary assets under Originate Invest Operate management by region Reversionary assets (regulated tenancies & mortgages – CHARM) Homes under Average house price (avg management Market value VPV per unit) Region units £m £000s Central / Inner London 1,100 720 781 Outer London 382 144 449 South E
Slide 42: PRS assets under management by region
PRS assets under management Originate Invest Operate by region PRS (wholly owned & co-investments^) Homes under Grainger’s share Average house price management Market value of market value (avg VPV per unit) Region units £m £m £000s Central / Inner London 2,315 907 411 439 Outer London 129 84 43 674
Slide 43: PRS portfolio
PRS portfolio Originate Invest Operate Portfolio snapshot Rental income: 2,513 units on balance sheet +3.3% like for like rental growth Market value: £526m Capital growth: c.50% of Group Net Rental Income +3.0% increase in market value 4,789 units including co-investments Total AUM: £1.4bn Actions t
Slide 44: JVs & Associates
JVs & Associates Originate Invest Operate Balance Sheet FY17 £m GRIP Walworth Other Total Residential property assets 669 204 - 873 Development assets - - 50 50 Other assets 46 11 3 60 Total assets 715 215 53 983 External debt (214) (80) - (294) Loans from equity participants (93) - (46) (139) Other
Slide 45: JVs & Associates – Reconciliation
JVs & Associates – Reconciliation Originate Invest Operate Property Asset Reconciliation FY17 £m GRIP Walworth Total Units Total no. units 1,708 568 2,276 Grainger share 425 284 709 Third party share 1,283 284 1,567 Market value Residential property assets 669 204 873 Market value uplift 4 - 4 Total
Slide 46: Look through debt
Look through debt Originate Invest Operate Counterparty Group Walworth GRIP Total JVs Grainger Share JVs 50% 24.9% £m £m £m £m Syndicate 361 Corporate Bond 275 Core bilaterals 140 Core Total 776 Bilateral 150 HCA funding 9 Joint Ventures and associates 80 214 294 93 Total Group Gross Debt 935 80 214
Slide 47: Net asset reconciliation
Net asset reconciliation Originate Invest Operate Adj IAS 39 Add back re fixed rate Market fair value of loan and Deferred Statutory Market value Add back derivative derivative and NNNAV balance value balance def tax on financial financial contingent balance FY17 (£m) sheet adjustments sheet propert
Slide 48: Disclaimer
Disclaimer Originate Invest Operate This publication contains certain forward-looking statements. This publication is for information purposes only and no reliance Any statement in this publication that is not a statement of may be placed upon it. No representative or warranty, either historical fac