Slide 1: 2019 Full Year Results
A year of major transformation, delivering strong, sustainable returns, well ahead of plan 2019 Full Year Results 27 November 2019
Slide 2: Agenda
Agenda Originate Invest Operate 1. Overview Helen Gordon Chief Executive 2. Financial Results Vanessa Simms Chief Financial Officer 3. CONNECT Vanessa Simms Chief Financial Officer 4. Market and business update Helen Gordon Chief Executive 5. Summary and Q&A Helen Gordon Chief Executive 6. Appendix
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 sector Originate Invest Operate Why PRS Why Grainger Compelling long-term returns Market leader with the largest operational PRS portfolio Strong inflation linked rent growth £2.0bn pipeline to come Underpinned by structural supply Fully integrated business model de
Slide 5: Strong performance
Strong performance Originate Invest Operate Profit before tax Adjusted earnings Net rental income Rental Total property growth (L4L) return £131.3m £82.5m £63.5m +30% (12)% +45% +3.6% 5.0% (38) bps (100) bps Key highlights: ESG achievements: Significant income growth, both underlying and through inv
Slide 6: A transformational year
A transformational year Originate Invest Operate Delivering today and building for tomorrow Delivering value today Building value for tomorrow Transitioned to a predominantly PRS £2bn PRS pipeline – representing c.9k business – Balance sheet and earnings now homes aligned to PRS TfL partnership – se
Slide 7: 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 8: A clear growth trajectory
A clear growth trajectory Originate Invest Operate Delivery of the fully funded pipeline will create a PRS dominated business OPERATIONAL PORTFOLIO PIPELINE 8,940 homes, £2.6bn 9,104 homes, £2.0bn £1,093m £683m c.£600m £1,526m £732m Regulated Planning/ TfL* PRS Secured pipeline c.3,000 tenancies Leg
Slide 9: 2. FY19 Financial Results
2. FY19 Financial Results Vanessa Simms Chief Financial Officer
Slide 10: 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 11: 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 12: 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 1
Slide 13: 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 14: 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 15: 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 15
Slide 16: 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 17: GRIP Acquisition
GRIP Acquisition Originate Invest Operate Fully integrated and delivering ahead of plan Restructure Operational Value add ▪ Voluntarily exited REIT regime ▪ Operational integration ▪ 55 homes renovated & re-let implemented on day one with 36 in progress ▪ Delisted from Jersey stock ▪ Silbury Bouleva
Slide 18: Passing net rent progression
Passing net rent progression Originate Invest Operate Dividend growth underpinned by NRI growth Secured pipeline: £732m Planning / legals: £683m TfL: £600m* +£24m £169m +2.4x +£13m +£20m +£7m £112m +1.6x +£8m +£10m +£11m +£6m £70m *TfL Partnership – indicative estimate of Grainger’s unlevered 51% sh
Slide 19: 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 20: 3. CONNECT
3. CONNECT Vanessa Simms Chief Financial Officer
Slide 21: 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 22: 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 23: 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 24: 4. Market and business update
4. Market and business update Helen Gordon Chief Executive
Slide 25: Structural undersupply underpins returns
Structural undersupply Originate Invest Operate underpins returns Rental demand continues to increase… PRS doubled since 2000 20% PRS growth set to continue as undersupply increases +2 .7m 10% 2019 2025 Non-BTR BTR PRS growth Supply continues to slow Slowing London housing supply Exodus of small pri
Slide 26: Positive political backdrop
Positive political backdrop Originate Invest Operate Our professional management and mid-market approach is aligned to the parties across the political spectrum Conservative Labour Liberal Democrats Supports build to rent and “Tackle dodgy landlords” Improve rental standards investment in new privat
Slide 27: 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 28: Research backed capital allocation
Research backed capital allocation Originate Invest Operate Driving outperformance through proprietary research Annual review of cities’ investability Rigorous investment analysis City Champions Strong sourcing ability Robust underwriting Analysed 62 cities Using 22 economic indicators Targeting 18
Slide 29: Sourcing success
Sourcing success Originate Invest Operate Operational portfolio and pipeline OPERATIONAL PORTFOLIO PIPELINE 8,940 homes, £2.6bn 9,104 homes, £2.0bn FY19 £1,093m £1,526m £732m £683m c.£600m* Regulated tenancies PRS Secured pipeline Planning/Legals TfL 3,343 homes 5,597 homes 3,209 homes 2,895 homes c
Slide 30: 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 30
Slide 31: 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 32: Seven initial seed sites within the TfL PRS Partnership
Seven initial seed sites within the Originate Invest Operate TfL PRS Partnership Cockfosters Station c.400 rental homes Arnos Grove Station c.140 rental homes Limmo Peninsula Canning Town c.900 rental homes Woolwich c.500 rental homes Southall Sidings c.450 rental homes Nine Elms Station c.450 renta
Slide 33: 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 34: Creating great communities
Creating great communities Originate Invest Operate A successful asset is more than the bricks and mortar Benefits Lower churn Greater retention More referrals Lower voids Less marketing Lower costs Lower gross to net High satisfaction Maximise net rental income Hawkins & George, Bristol Grainger Pl
Slide 35: Great customer service is key
Great customer service is key Originate Invest Operate A B2C business driven by customer service Intensive In House Integrated Interactions on a daily basis Customers interact with Informs investment Grainger directly decision Not just point of sale Unique approach in the sector Feedback into design
Slide 36: Summary
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 le
Slide 37: Thank you Q&A
Thank you Q&A Argo Apartments, London
Slide 38: CONNECT: The Online Leasing Journey
Originate Invest Operate CONNECT Making renting easy The Online Leasing Journey Grainger Plc | www.graingerplc.co.uk 38
Slide 39: CONNECT: The MyGrainger App
Originate Invest Operate CONNECT Making renting easy The MyGrainger App Grainger Plc | www.graingerplc.co.uk 39
Slide 40: 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 40
Slide 41: 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 41
Slide 42: 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 42
Slide 43: 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 43
Slide 44: Appendix
Originate Invest Operate Appendix Contents Portfolio overview Page 45 1. Property information Portfolio summary Page 46 Portfolio geographical breakdown Page 47 Valuation movements by region Page 48-49 PRS Portfolio Pages 50-51 Secured pipeline schedule Pages 52-53 Secured pipeline projects Page 54
Slide 45: 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 46: 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 47: 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 48: 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 49: 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 50: 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 51: 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 +3.3% 97.5% 5-year Avg Annual Rental Growth Occupancy Grainger Plc | www.graingerplc.co.uk 51
Slide 52: Secured pipeline schedule
Secured pipeline schedule Originate Invest Operate (1 of 2 pages) Gross No. Targeted Est. Grainger Spend to yield Name 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 53: Secured pipeline schedule
Secured pipeline schedule Originate Invest Operate (Continued from previous page) Gross Targeted Est. Grainger Spend to 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 54: Secured pipeline projects
Secured pipeline projects Originate Invest Operate 15 high quality PRS schemes Forward funding/ Acquisitions Pontoon Silbury Gore Street, East Street, Gilders Yard, Dock, London Boulevard, Manchester Southampton Birmingham Milton Keynes Yorkshire Post, Hale Wharf, Fabrik, YMCA, Milton Canning Town L
Slide 55: 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 56: 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 57: Income statement
Income statement Originate Invest Operate FY18 FY19 Change Grainger (excl GRIP) GRIP3 Combined total Net rental income £43.8m £45.8m £17.7m £63.5m +45% Profit from sales – residential £70.1m £59.3m £1.1m £60.4m (14)% Profit from sales – development £11.7m £7.4m - £7.4m (37)% Mortgage income (CHARM)
Slide 58: 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 59: Balance sheet
Balance sheet Originate Invest Operate Market value balance sheet (£m) Grainger (excl GRIP) GRIP Combined total Residential – PRS 591 868 658 1,526 Residential – regulated tenancies 1,107 1,017 - 1,017 Residential – mortgages (CHARM) 82 76 - 76 Forward Funded – PRS work in progress 198 117 43 160 De
Slide 60: 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 61: 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 62: 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 63: 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 64: 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 65: Future reporting dates
Future reporting dates Originate Invest Operate 2020 AGM / Trading update 5 February 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 | ww