Slide 1: UK's Largest Listed Residential Landlord
UK’s Largest Listed Residential Landlord March 2020 Presentation
Slide 2: Agenda
Agenda Originate Invest Operate 1. Overview 2. FY19 Financial Results 3. Market and Business Update 4. Equity Placing 5. CONNECT 6. Summary Grainger Plc | www.graingerplc.co.uk 2
Slide 3: Renting homes, enriching lives
Originate Invest Operate Renting homes, enriching lives Serving over 20k customers The Grainger Collection at Wellesley, Hampshire Grainger Plc | www.graingerplc.co.uk 3
Slide 4: The market leader in a compelling sector
The market leader in a compelling Originate Invest Operate sector Why PRS Why Grainger Market leader with the largest Compelling long-term returns operational PRS portfolio Strong inflation linked rent growth £2.1bn pipeline to come Underpinned by structural supply Fully integrated business model We
Slide 5: A transformational year
A transformational year Originate Invest Operate Delivering today and building for tomorrow FY19: Rental Net rental Adjusted Profit Total property growth (L4L) income earnings before tax return +3.6% £63.5m £82.5m £131.3m 5.0% +45% +30% Delivering value today Building value for tomorrow A predominan
Slide 6: Successfully delivering returns from the GRIP acquisition
Successfully delivering returns Originate Invest Operate from the GRIP acquisition Strategic Portfolio Operational Financial fit scale synergies benefits We said… We delivered… Immediate income growth £17.7m additional net rent in 9 months Accelerates PRS transition PRS now majority of portfolio & i
Slide 7: A clear growth trajectory
A clear growth trajectory Originate Invest Operate Accelerating our pipeline with £1bn secured and £91m new investment in planning and legals Post equity raise Bringing forward £246m of investment in our secured pipeline, with an additional £59m of capacity FY19 OPERATIONAL PORTFOLIO PIPELINE 8,940
Slide 8: 2. FY19 Financial Results
2. FY19 Financial Results grainger plc grainger plc
Slide 9: Financial highlights
Financial highlights Originate Invest Operate Transformational year; PRS and net rent now the key drivers Income FY18 FY19 Change Rental growth (like-for-like) 4.0% 3.6% (38) bps Net rental income £43.8m £63.5m +45% Adjusted earnings £94.0m £82.5m (12)% Profit before tax £100.7m £131.3m +30% Dividen
Slide 10: Income statement
Income statement Originate Invest Operate Greater reliance on recurring net rental income Key highlights: FY18 FY19 Change Significant growth in NRI Net rental income £43.8m £63.5m +45% Profit from residential sales £70.1m £60.4m (14)% Gross to net = 26.1% Stabilised GtN = 25.2% Profit from developm
Slide 11: EPRA Net Asset Values
EPRA Net Asset Values Originate Invest Operate Revised EPRA measures provide a more appropriate measure £m pence per share Property assets (market value) 2,932 478 Net liabilities (1,111) (181) EPRA NAV / EPRA Net Reinstatement Value (NRV) 1,821 297 Tax – deferred & contingent – trading assets (102)
Slide 12: Net debt
Net debt Originate Invest Operate Strong operational cashflow supports our growth plans GRIP Transaction +£239m +£400m £(335)m Operating cashflow £(184)m +£235m £(88)m £(292)m +£25m £1,097m +£4m +£174m +£38m £866m +£70m Grainger Plc | www.graingerplc.co.uk 12
Slide 13: Robust and flexible capital structure
Robust and flexible capital structure Originate Invest Operate Low risk, flexible capital structure to support growth FY19 Net debt £1,097m Cost of debt LTV Loan to value 37.1% 6.5% 60% 6.0% 55% Cost of debt (period end) 3.0% 5.5% 50% 5.0% Incremental cost of debt 1.7% 4.5% 45% 4.0% 40% Fully drawn
Slide 14: Financial summary
Financial summary Originate Invest Operate Acceleration of our PRS strategy and repositioning our return profile Strong rental growth continues at +3.6% Transitioning our return profile – greater reliance on resilient net rental income Asset base now 58% PRS and post pipeline >75% Strong and flexibl
Slide 15: 3. Market and business update
3. Market and business update
Slide 16: Structural undersupply underpins returns
Structural undersupply Originate Invest Operate underpins returns PRS growth set to continue as undersupply increases Renting has grown across all age groups +24% +32% +81% +77% +43% +20% +2 .7m 7.2m households 4.5m households 2019 2025 Non-BTR BTR PRS Growth High barriers to home ownership (43)% de
Slide 17: Creating shareholder value by creating great homes
Creating shareholder value by Originate Invest Operate creating great homes Creating great homes & Sourcing great communities opportunities Successful Capital allocation partnerships Cluster strategy Great buildings £2bn pipeline 1,152 PRS homes delivered this year Large market opportuni
Slide 18: Long-term growth potential
Research backed capital allocation Originate Invest Operate Driving outperformance through proprietary research Schemes secured Target locations Under review Not under consideration Near term acquisition target Schemes secured & additional near term opportunities Weak existing tenant demand Strong e
Slide 19: Building strategic clusters across the UK
Building strategic clusters across Originate Invest Operate the UK LEEDS & SHEFFIELD (PRS Homes) 1,508 Clustering approach delivers operational efficiencies Operational 418 (inc 237 at Brook Place) MANCHESTER (PRS Homes) 1,672 Pipeline Well Meadow, Sheffield 284 Operational 1,297 1,297 (inc 614 at C
Slide 20: Creating homes through partnerships
Creating homes through partnerships Originate Invest Operate Building on our reputation as an excellent partner London Besson Street, > 3,000 homes London c.300 homes Hale Wharf, Pontoon Dock, London London 108 homes 236 homes Grainger Plc | www.graingerplc.co.uk 20
Slide 21: TfL Partnership
TfL Partnership Originate Invest Operate Our Shared Vision To create quality rental homes for London in sustainable communities where people from all backgrounds are living, connecting and thriving. Our objectives Develop at least 3,000 quality, well designed and sustainable homes in London by 2025
Slide 22: ESG: Securing our long-term future
ESG: Securing our long-term future Originate Invest Operate 4 long-term ESG People: 1 Measure and deliver positive social value commitments 2 Diverse workforce reflective of our customer base Enhance investment decisions further by Assets: 3 integrating ESG considerations Net zero carbon of our oper
Slide 23: Delivering great homes
Delivering great homes Originate Invest Operate 1,152 homes delivered this year and the same to come next Delivered this year Delivering next year Clippers Quay, Manchester Silbury Blvd, Milton Keynes 614 PRS homes 139 PRS homes £99m investment £32m investment c.8% gross yield targeted c.6% gross yi
Slide 24: 4. Placing
4. Placing grainger plc grainger plc
Slide 25: Funding our growth acceleration
Funding our growth acceleration Originate Invest Operate Accelerating our strategy and delivering enhanced returns Expanded Equity Enhanced Pipeline Raise Returns Fund additional c.10% placing Accelerated earnings schemes c.£185m proceeds Improved income Increased pace of profile pipeline delivery O
Slide 26: Compelling new pipeline opportunities totalling £246m
Compelling new pipeline Originate Invest Operate opportunities totalling £246m Funding additional schemes in prime locations Exchange Sq Canning Town 3 Birmingham London 373 homes 132 homes £77m £56m Over 6.5% GY c.5.5% GY Grainger Plc | www.graingerplc.co.uk 26
Slide 27: Compelling new pipeline opportunities totalling £246m
Compelling new pipeline Originate Invest Operate opportunities totalling £246m Balanced portfolio with opportunities across the UK Capital Quarter Queens Road Cardiff Nottingham 307 homes 348 homes £57m £56m c.7% GY c.7% GY Grainger Plc | www.graingerplc.co.uk 27
Slide 28: Net rental income progression
Net rental income progression Originate Invest Operate Additional capacity enables acceleration of £16m of income Remaining planning / legals** Secured pipeline: £732m Additional Capacity: £305m* £469m TfL: £600m*** +2.5x £24m £173m £21m +1.8x +£9m £128m +£4m +£3m +£7m £112m +£11m +£8m +£6m +£10m £7
Slide 29: Cumulative funding capacity
Cumulative funding capacity Originate Invest Operate Disciplined capital management Sources and uses Funding our growth Opening Headroom* Existing Committed Capex Cash from operations** Additional Committed Capex £120m £305m Equity raise *** Outer Pipeline Capacity £185m Additional debt **** £1,254m
Slide 30: Accretive use of proceeds
Accretive use of proceeds Originate Invest Operate Projected earnings accretion upon Impact on returns stabilisation Earnings & dividend Projected impact on EPRA EPS +30% FY19* stabilsation Adjusted Earnings per share +5% EPRA EPS (after tax) 4.0p 5.2p +30% Adjusted Earnings 10.8p 11.3p +5% per shar
Slide 31: 5. CONNECT
5. CONNECT Vanessa Simms Chief Financial Officer
Slide 32: CONNECT: the market leading PRS technology platform
CONNECT: the market leading Originate Invest Operate PRS technology platform CONNECT will enable us to realise our transformational growth plans. It will bring together leading technologies with best-practice ways of working to improve outcomes for customers, colleagues and investors. Customer Opera
Slide 33: Our CONNECT platform
Our CONNECT platform Originate Invest Operate CONNECT is equipping all aspects of the business with the best of breed technology – underpinning our future success as the industry leader. Implementing 8 technology solutions Customer Relationship Asset & Property Management Management Online Leasing J
Slide 34: Key benefits of CONNECT
Key benefits of CONNECT Originate Invest Operate High Customer Longer 1. Customer Delivering a differentiated experience through higher-quality, more consistent satisfaction data and retention experience service levels, and better customer insight. insight Lower Faster Optimised 2. Rent Growing our
Slide 35: 6. Summary
6. Summary Originate Invest Operate Delivering strong, sustainable returns, well ahead of plan Leading transformation in a growth sector Strong performance Step change in NRI Change in balance of business, now PRS dominant Good growth trajectory Strong pipeline, now delivering Connect: extending our
Slide 36: Appendix
Originate Invest Operate Appendix Contents Schemes Page 37-40 1. Property information Portfolio overview Page 41 Portfolio summary Page 42 Portfolio geographical breakdown Page 43 Valuation movements by region Pages 44-45 PRS Portfolio Pages 46-47 Secured pipeline schedule Page 48-49 Pipeline inform
Slide 37: Clippers Quay
Clippers Quay Originate Invest Operate At Salford Quays, Greater Manchester Forward Funding project – 614 apartments Developer: Amstone Contractor: Sir Robert McAlpine c.£99m acquisition secured in Feb 2016 Completed in Spring 2019 Grainger Plc | www.graingerplc.co.uk 37
Slide 38: The Grainger Collection at Wellesley
The Grainger Collection at Wellesley Originate Invest Operate At Gunhill, Wellesley, Hampshire Direct Development project – 107 apartments Developer: Grainger Contractor: PJ Carey c.£22m acquisition secured in 2016 Completed in Summer 2019 Grainger Plc | www.graingerplc.co.uk 38
Slide 39: Hawkins & George
Hawkins & George Originate Invest Operate At Finzels Reach, Bristol Forward Funding project – 194 apartments Developer: Cubex Contractor: Willmott Dixon c.£46m acquisition secured in Nov 2016 Completed in Summer 2019 Grainger Plc | www.graingerplc.co.uk 39
Slide 40: Brook Place
Brook Place Originate Invest Operate At Sheffield Forward Funding project – 237 apartments Developer: Abode Hallam Contractor: Winvic c.£32m acquisition secured in Jan 2018 Completed in Autumn 2019 Grainger Plc | www.graingerplc.co.uk 40
Slide 41: Portfolio overview
Portfolio overview Originate Invest Operate Regulated tenancies PRS Tenant has the right to live in the property for the rest Leases with typical duration of 1-3 years of their life Market rents Sub-market rent set by Valuation Office Agency Returns based on Upon vacancy Grainger sells the property
Slide 42: Portfolio summary
Portfolio summary Originate Invest Operate Vacant Market possession Reversionary value value surplus Units £m £m £m Net yield Residential – PRS 5,597 1,526 1,638 112 4.0% Residential – regulated tenancies 2,822 1,017 1,207 190 2.0% Residential – mortgages (CHARM) 521 76 76 - - Forward Funded – PRS w
Slide 43: Portfolio geographical breakdown
Portfolio geographical breakdown Originate Invest Operate PRS & Reversionary* (FY19) PRS market Reversionary Total PRS value Reversionary market value Total market value Region units £m units £m units £m Central / Inner London 1,335 585 959 608 2,294 1,193 Outer London 572 249 293 111 865 360 South
Slide 44: Valuation movements by region
Valuation movements by region Originate Invest Operate FY19 Units Market value Change since Avg house price Region £m FY18 Avg VP per unit £000s Central / Inner London 2,292 1,193 (0.1)% 590 Outer London 860 359 +1.1% 461 South East 1,161 261 +6.0% 275 South West 732 221 +4.1% 313 East and Midlands
Slide 45: Portfolio geographical breakdown
Portfolio geographical breakdown Originate Invest Operate PRS & Regulated tenancies (FY19) PRS Regulated tenancies Market Change Market Change Units value since FY18 Net yield Units value since FY18 Net yield Region £m £m Central / Inner London 1,335 585 +1.0% 3.4% 957 607 (1.1)% 1.6% Outer London 5
Slide 46: PRS portfolio
PRS portfolio Originate Invest Operate Top 10 assets by value Asset City Units Annual ERV Clippers Quay Manchester 614 £8.0m Hawkins & George Bristol 194 £3.3m The Gardens London 209 £3.1m Argo Apartments London 134 £2.7m Ability Plaza London 112 £2.5m Brook Place Sheffield 237 £2.4m Ability Towers
Slide 47: PRS portfolio
PRS portfolio Originate Invest Operate Rent per calendar month (% of units) 7.7% £1500+ 18.3% 11.8% £1000-1500 8.1% 18.7% £750-£1000 2.9% 27.7% Under £750 4.7% Regions London 97.5% 5-year Avg Annual Rental Growth Occupancy Grainger Plc | www.graingerplc.co.uk 47
Slide 48: Secured pipeline schedule
Secured pipeline schedule Originate Invest Operate (1 of 2 pages) Targeted Est. Grainger Spend to Gross yield Name No. units launch Status investment date target Forward funding / acquisition Silbury Boulevard, Milton Keynes 139 Early FY20 On site £32m £27m c.6% Pontoon Dock, London (Vesta JV – 20%)
Slide 49: Secured pipeline schedule
Secured pipeline schedule Originate Invest Operate (Continued from previous page) Targeted Est. Grainger Spend to Gross yield Name No. units launch Status investment date target Direct development Apex House, London 163 Mid FY20 On site £60m £38m c.6.5% Newbury, West Berks 232 Mid FY22 On site £61m
Slide 50: Pipeline update
Pipeline update Originate Invest Operate Type of investment Top 5 cities by value £252m Forward funding (£) Direct development (£) £307m £480m £95m £80m £76m £61m London Milton Keynes Manchester Leeds Newbury Indicative launches and future schemes FY20 Launches FY21 FY22 FY23 Future schemes Silbury
Slide 51: Net rental income growth
Net rental income growth Originate Invest Operate Step change in net rent during the year +45% +£19.3m +£2.3m £63.5m PRS L4L +3.4% Regs L4L +4.4% Total L4L +3.6% £43.8m £(1.9)m FY18 Net Disposals PRS Rental FY19 Net Rental Income investment growth Rental Income Grainger Plc | www.graingerplc.co.uk 5
Slide 52: EPRA Net Tangible Assets (NTA)
EPRA Net Tangible Assets (NTA) Originate Invest Operate Net rent and PRS valuation gains now key components +3p +10p (5)p +11p (8)p (4)p +7p +12p (5)p (4)p (3)p 278p PRS +3.3% 274p Regs (0.3)% Total +1.9% * Breakdown of valuation growth by region available in the Appendix. Grainger Plc | www.grainge
Slide 53: Income statement
Income statement Originate Invest Operate FY18 FY19 Change Net rental income £43.8m £63.5m +45% Profit from sales – residential £70.1m £60.4m (14)% Profit from sales – development £11.7m £7.4m (37)% Mortgage income (CHARM) £5.8m £5.5m (5)% Management fees1 £7.1m £4.4m (38)% Overheads £(27.9)m £(28.0
Slide 54: Segmental income statement
Segmental income statement Originate Invest Operate FY18 FY19 £m PRS Reg* Other Group PRS Reg* Other Group Net rental income 23.3 20.1 0.4 43.8 42.6 20.6 0.3 63.5 Profit from sales – trading property - 68.7 11.7 80.4 1.6 56.9 7.4 65.9 Profit from sales – investment property 1.4 - - 1.4 1.9 - - 1.9 M
Slide 55: Balance sheet
Balance sheet Originate Invest Operate Market value balance sheet (£m) Residential – PRS 591 1,526 Residential – regulated tenancies 1,107 1,017 Residential – mortgages (CHARM) 82 76 Forward Funded – PRS work in progress 198 160 Development work in progress 100 120 Investment in JVs/associates 146 3
Slide 56: Segmental balance sheet
Segmental balance sheet Originate Invest Operate FY18 FY19 EPRA NTA market value PRS Reg* Other Group PRS Reg* Other Group balance sheet (£m) Investment property 564.4 25.3 - 589.7 1,550.7 23.9 - 1,574.6 Investment in joint ventures and 134.4 - 11.6 146.0 16.3 - 17.0 33.3 associates Financial intere
Slide 57: EPRA Earnings
EPRA Earnings Originate Invest Operate FY18 FY19 Earnings Shares Pence per Earnings Shares Pence per £m millions^ share* £m millions^ share Earnings per IFRS income statement 100.7 463.0 21.7 131.3 581.2 22.6 Adjustments to calculate adjusted EPRA Earnings: Changes in value of investment properties,
Slide 58: EPRA NAV & NNNAV
EPRA NAV & NNNAV Originate Invest Operate FY18 FY19 Net assets Shares Pence per Net assets Shares Pence per £m millions^ share* £m millions^ share NAV from the financial statements 815.6 463.5 176 1,223.5 613.8 199 Revaluation of other non-current investments 7.0 - 1 6.5 - 1 Revaluation of trading p
Slide 59: EPRA NRV, EPRA NTA and EPRA NDV
EPRA NRV, EPRA NTA and EPRA Originate Invest Operate NDV FY18 FY19 EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV £m £m £m £m £m £m IFRS Equity attributable to shareholders 815.6 815.6 815.6 1,223.5 1,223.5 1,223.5 Diluted NAV 815.6 815.6 815.6 1,223.5 1,223.5 1,223.5 Include: Revaluation of
Slide 60: Debt facilities
Debt facilities Originate Invest Operate Facility Lender Size Drawn Maturity Core Facilities: Corporate Bond Listed £350m £350m Apr 2028 Revolving Credit Facility HSBC, NatWest, Barclays £330m £31m Aug 2024 Term Debt Nationwide £100m £100m Aug 2020 Term Debt HSBC, NatWest, Barclays, AIB £170m £170m
Slide 61: Future reporting dates
Future reporting dates Originate Invest Operate 2020 Half year results 14 May Trading update September Full year results 19 November 2021 AGM / Trading update 10 February Half year results 13 May Trading update September Full year results 18 November Grainger Plc | www.graingerplc.co.uk 61