Slide 1: Delivering growth through operational excellence
Delivering growth through operational excellence Half Year Financial Results From 1 October 2018 to 31 March 2019 16 May 2019 Updated on 30/05/2019 to make a correction on page 49
Slide 2: Agenda
Agenda Originate Invest Operate 1. Overview Helen Gordon Chief Executive 2. Financial Results Vanessa Simms Chief Financial Officer 3. Market and business update Helen Gordon Chief Executive 4. Summary and Q&A Helen Gordon Chief Executive 5. Appendix Grainger Plc | www.graingerplc.co.uk | HY19 | May
Slide 3: Leading in a growth sector
Leading in a growth sector Originate Invest Operate Grainger Plc | www.graingerplc.co.uk | HY19 | May 2019 3
Slide 4: Leading in a growth sector
Originate Invest Operate Leading in a growth sector Delivering mid-market rental homes in a country facing a housing crisis A vast market opportunity Grainger’s competitive advantage Demand growing Operational excellence 4.5m to 7.2m by 2025 with 8,400 existing operational rental homes Strong pipeli
Slide 5: Strong performance in HY19
Strong performance in HY19 Originate Invest Operate Six month performance Profit before Adjusted Net rental Rental EPRA tax earnings income growth (L4L) NNNAV £54.3m £38.3m £29.1m +3.7% 271pps +7% (6)% +33% (40bps) Key activities: #1 Delivering resilient rental growth 2018 Asset Manager GRIP integra
Slide 6: Accelerating growth with two major achievements
Accelerating growth with Originate Invest Operate two major achievements GRIP Acquisition TfL PRS Partnership Operational improvements delivered day one 49:51 JV (TfL: Grainger) ‒ Gross to net from 32% to 26% Strong rental growth achieved of +3.4% Sites located adjacent to London tube stations Valua
Slide 7: A strong growth trajectory
A strong growth trajectory Originate Invest Operate Growth internally funded from headroom, regulated tenancies and recycling OPERATIONAL PORTFOLIO PIPELINE 8,431 units, £2.5bn 8,202 units, £1.8bn £1,157m £465m £1,343m £760m c.£600m Planning/ Regulated tenancies PRS Secured pipeline TfL* Legals 3,53
Slide 8: 2. HY19 Financial Results
2. HY19 Financial Results Vanessa Simms Chief Financial Officer
Slide 9: Financial highlights
Financial highlights Originate Invest Operate Robust financial performance and repositioned income profile Income HY18 HY19 Change Rental growth (like-for-like) 4.1% 3.7% (40) bps Net rental income £21.8m £29.1m +33% Adjusted earnings £40.9m £38.3m (6)% Profit before tax £50.6m £54.3m +7% Interim di
Slide 10: Income statement
Income statement Originate Invest Operate Repositioned income profile with +33% growth in NRI Key highlights: HY18 HY19 Change Significant growth in NRI Net rental income £21.8m £29.1m +33% £6.5m from 3.4 months of GRIP Profit from residential sales £32.3m £26.5m (18)% Gross to net = 26.2% Profit fr
Slide 11: Net rental income growth
Net rental income growth Originate Invest Operate Underpinning dividend growth of +10% +£1.1m £29.1m +33% +£6.9m PRS L4L +3.4% Regs L4L +4.4% Total L4L +3.7% £21.8m £(0.7)m GRIP Acquisition £6.5m for 3.4 months HY18 Disposals PRS Rental HY19 investment growth Grainger Plc | www.graingerplc.co.uk | H
Slide 12: EPRA NNNAV
EPRA NNNAV Originate Invest Operate Rights Issue dilution, impacting non-participating shareholders (96% take-up) Greater London +0.1% South East +2.7% East & Midlands +2.6% 286p (16)p Other regions +0.6% +6p (3)p +4p +2p +5p (3)p (2)p (3)p +6p (2)p (3)p 271p 270p * Breakdown of valuation growth by
Slide 13: EPRA NAV & NNNAV
EPRA NAV & NNNAV Originate Invest Operate £m pence per share Property assets (market value) 2,861 466 Net liabilities (1,060) (172) EPRA NAV 1,801 294 Tax – deferred & contingent – trading assets (102) (18) Sub-total 1,699 276 Tax – deferred & contingent – investment assets (12) (2) Mark to market f
Slide 14: Net debt
Net debt Originate Invest Operate Strong operational cashflow supports our growth plans GRIP Transaction +£239m +£400m £(335)m Operating cashflow Net investment £(103)m +£63m £(157)m +£98m £(35)m £1,080m +£15m +£174m +£18m +£36m £866m Grainger Plc | www.graingerplc.co.uk | HY19 | May 2019 14
Slide 15: Robust and flexible capital structure
Robust and flexible capital structure Originate Invest Operate HY19 Net debt £1,080m Cost of debt LTV 6.5% 60% Loan to value 37.2% 6.0% 55% Cost of debt (period end) 3.2% 5.5% 50% 5.0% Marginal cost of debt 1.8% 4.5% 45% 40% 4.0% Fully drawn cost of debt 3.0% 3.5% 35% Headroom £395m 3.0% 30% FY14 FY
Slide 16: GRIP integration
GRIP integration Originate Invest Operate Ahead of plan and delivering strong results Restructure Operational Value add Voluntarily exited REIT regime Operational integration Refurbishments delivering implemented on day one rental growth of +46% Delisted from Jersey stock exchange People and process
Slide 17: Portfolio and pipeline overview
Portfolio and pipeline overview Originate Invest Operate Operational portfolio and pipeline OPERATIONAL PORTFOLIO PIPELINE 8,431 units, £2.5bn 8,202 units, £1.8bn £1,157m £1,343m £760m £465m c.£600m* Regulated tenancies PRS Secured pipeline Planning/Legals TfL 3,538 units 4,893 units 3,510 units 1,6
Slide 18: Funding our pipeline
Funding our pipeline Originate Invest Operate Through regulated sales, asset recycling and headroom Cumulative £1,695m Blue = Funding capacity Orange = Targeted capex 500 £1,315m £1,095m 360 £970m £895m 275 120 200 £695m £720m 800 465 60 125 380 425 £495m 300 280 50 175 50 £380m 120 470 490 395 395
Slide 19: Passing rent progression
Passing rent progression Originate Invest Operate Dividend growth underpinned by NRI growth Secured pipeline: £760m Planning / legals: £465m TfL: £600m +£24m £153m +2.3x +£12m +£9m +£13m £108m +1.6x +£9m +£10m +£8m £67m +£1m £32m *TfL Partnership – indicative estimate of Grainger’s unlevered 51% sha
Slide 20: Financial summary
Financial summary Originate Invest Operate Significant growth plans, underpinned by operational leverage Pipeline fully funded by regulated tenancy sales and asset recycling Strong capital structure and flexibility GRIP integration ahead of plan and delivering results Robust balance sheet Reposition
Slide 21: 3. Market and business update
3. Market and business update Helen Gordon Chief Executive
Slide 22: A vast structural market opportunity
A vast structural market opportunity Originate Invest Operate 2.7m projected PRS undersupply (households, thousands) Renting growing across all age groups Private landlords Large scale investors PRS growth +17% +57% +115% +77% +80% +50% 8,000 +2.7m 2.7m 68% 6,000 Est. undersupply 56% 44% 4,000 2
Slide 23: Who rents in the UK?
Who rents in the UK? Originate Invest Operate 20% UK households in PRS 40 average age of PRS customer 33% 48% 25-34 age 35-64 age group groups 21% 37% couples 74%in work 34% income spent on rent families with children Source: English Housing Survey, Private Rented Sector report, 2016-2017 Grainger P
Slide 24: Our mid-market PRS strategy
Our mid-market PRS strategy Originate Invest Operate Maximising net rental income Pricing based on embedded local rents, calibrated against local average wages Why? Resulting in… Faster lease up Lower risk Longer retention Lower void & turnover costs Lower churn Higher occupancy Political support fo
Slide 25: Investing in strong rental growth markets
Investing in strong rental growth markets Originate Invest Operate Targeting the largest PRS locations with the best proven rental growth prospects Schemes secured Target locations Under review Not under consideration Weak existing Strong existing London tenant demand tenant demand but strong growth
Slide 26: Secured investments in key cities
Secured investments in key cities Originate Invest Operate Forward Funding scheme Direct Development – On Site Direct Development – In planning / pre-site Yorkshire Post, Leeds Clippers Quay, Salford Leeds, Yorkshire Gore Street, Manchester Eccy Village, Sheffield Gilders Yard, Silbury Blvd, Milton
Slide 27: A fully integrated business model
A fully integrated business model Originate Invest Operate How we create value Site assembly Capital allocation Planning process Geographical targeting Design Investment management Layout Acquisitions Specifications Asset recycling Delivery management Valuation Grow rents Simplify and focus Build on
Slide 28: Operational excellence delivering growth through continual improvement
Operational excellence delivering Originate Invest Operate growth through continual improvement Design Marketing Leasing Concierge & Facilities Customer building management service managers Customer Asset Renewals Rent collection Repairs & Community analysis managers maintenance development Grainger
Slide 29: Understanding our PRS customers
Understanding our PRS customers Originate Invest Operate 30 average age* £36k average income* 32 months average time with Grainger Pet friendly 42% Customers are couples** c.1/3 income spent on rent** policies more popular in regions** Sources: *Grainger’s Applicant Data; **Grainger’s Annual PRS Cus
Slide 30: Why partner with Grainger?
Why partner with Grainger? Originate Invest Operate The UK’s leading PRS business 8,431 A leading, responsible landlord since 1912 A fully integrated business, combining rental homes investment, development and operations Trusted partner, with strong credentials 17 A proven ability to deliver scheme
Slide 31: Growth through partnerships
Growth through partnerships Originate Invest Operate London Besson Street, London > 3,000 homes London 7 sites, 162 homes c.300 homes *Completed* Wellesley, Hale Wharf, Pontoon Dock, Hampshire London London c.3,850 homes 108 homes 154 homes Market Street, Newbury 232 homes Grainger Plc | www.grainge
Slide 32: Pipeline update
Pipeline update Originate Invest Operate Some of the schemes launching in 2019 & 2020 Clippers Quay, Manchester – 614 apartments Lease up underway – Phase 1 fully let in 4.5 months, Rents achieved +6.3% above ERV 8% targeted gross yield on cost at underwriting Gunhill, Wellesley, Finzels Reach, Eccy
Slide 33: 4. Summary Driving growth through operational excellence
4. Summary Originate Invest Operate Driving growth through operational excellence Leading in a growth sector Strong H1 performance Step change in NRI Change in balance of business, now PRS dominant Good growth trajectory Strong pipeline, now delivering Scale delivers improved returns and greater opp
Slide 34: Thank you
Thank you grainger plc
Slide 35: Appendix
Originate Invest Operate Appendix Contents Portfolio overview Page 36 1. Property information Portfolio summary Page 37 Portfolio geographical breakdown Page 38 Valuation movements Page 39 PRS Portfolio Page 40 Pipeline information Page 42 ESG Page 47 Income statement Page 48 2. Financial informatio
Slide 36: 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 37: Portfolio summary
Portfolio summary Originate Invest Operate Vacant Market possession Reversionary value value surplus Units £m £m £m Net yield Residential – PRS 4,893 1,343 1,472 129 3.8% Residential – regulated tenancies 2,986 1,077 1,279 202 1.9% Residential – mortgages (CHARM) 552 80 80 - - Forward Funded – PRS w
Slide 38: Portfolio geographical breakdown
Portfolio geographical breakdown Originate Invest Operate PRS & Reversionary* (HY19) PRS market Reversionary Total PRS value Reversionary market value Total market value Region units £m units £m units £m Central / Inner London 1,337 577 1,000 641 2,337 1,218 Outer London 649 264 322 124 971 388 Sout
Slide 39: Valuation movements by region
Valuation movements by region Originate Invest Operate HY19 Units Market value Change since Avg house price Region £m FY18 Avg VP per unit £000s Central / Inner London 2,335 1,217 0.0% 596 Outer London 964 386 +0.5% 447 South East 944 214 +2.7% 283 South West 554 162 +0.6% 313 East and Midlands 741
Slide 40: PRS portfolio
PRS portfolio Originate Invest Operate Top 10 assets by value Annual gross Asset City Units rent Clippers Quay* Manchester 614 £7.9m The Gardens London 209 £2.7m Argo Apartments London 134 £2.6m Ability Plaza London 112 £2.3m Ability Towers London 93 £2.2m Kew Bridge Court London 103 £2.1m Springfie
Slide 41: PRS portfolio
PRS portfolio Originate Invest Operate Rent per calendar month (% of units) 7.1% £1500+ 21.1% 5.4% £1000-1500 11.4% 14.1% £750-£1000 3.6% 31.1% Under £750 6.2% Regions London +3.3% 97.5% 5-year Avg Annual Rental Growth Occupancy Grainger Plc | www.graingerplc.co.uk | HY19 | May 2019 41
Slide 42: Secured pipeline schedule
Secured pipeline schedule Originate Invest Operate (1 of 2 pages) Gross No. Targeted Est. Grainger Spend yield Name units launch Status investment to date target Forward funding / acquisition Remaining Clippers Quay, Manchester 202 Mid FY19 Phased £33m £25m c.8% (part complete) / 614 Completions / £
Slide 43: Secured pipeline schedule
Secured pipeline schedule Originate Invest Operate (Continued from previous page) Est. Gross Targeted Grainger Spend to yield Name No. units launch Status investment date target Direct development Remaining Gunhill, 92 Early FY19 Part £19m £14m c.6.5% Wellesley (Part complete) /107 Complete /£22m Ap
Slide 44: Secured pipeline projects
Secured pipeline projects Originate Invest Operate 17 high quality PRS schemes Forward funding/ Acquisitions Clippers Quay, Finzels Reach, Eccy Village, Silbury Gore Street, Salford Bristol Sheffield Boulevard, Manchester Milton Keynes Pontoon Gilders Yard, East Street, Yorkshire Post, Hale Wharf, D
Slide 45: Pipeline update
Pipeline update Originate Invest Operate Type of investment Top 5 cities by value £271m Forward funding Direct development £245m £179m £489m £95m £76m £61m London ManchesterMilton Keynes Leeds Newbury Indicative launches and future schemes FY19 FY20 FY21 FY22 Future schemes Clippers Quay Silbury Blv
Slide 46: Delivering affordable housing, enabled by PRS
Delivering affordable housing, Originate Invest Operate enabled by PRS 360 +c.1,400 +c.2,100 operational new affordable homes in our new affordable homes to be delivered at affordable homes pipeline (incl TfL, 1,200) Berewood and Wellesley, our strategic land sites Wellesley, Hampshire Strategic rat
Slide 47: ESG: Taking sustainability seriously
ESG: Taking sustainability seriously Originate Invest Operate People: Launched Live.Safe strategy: our best-in- class health and safety commitment Sustainability criteria e.g. EPC and flood risk Assets: integrated into asset investment strategy Continued energy efficiency improvements Environment: p
Slide 48: Income statement
Income statement Originate Invest Operate HY18 HY19 Change Grainger (excl GRIP) GRIP3 Combined total Net rental income £21.8m £22.6m £6.5m £29.1m +33% Profit from sales – residential £32.3m £25.0m £1.5m £26.5m (18)% Profit from sales – development £6.6m £4.8m - £4.8m (27)% Mortgage income (CHARM) £2
Slide 49: Segmental income statement
Segmental income statement Originate Invest Operate HY18 HY19 £m PRS Reg* Other Group PRS Reg* Other Group Net rental income 11.4 10.4 - 21.8 18.8 10.3 - 29.1 Profit from sales – trading property - 31.7 6.6 38.3 1.6 23.1 4.8 29.5 Profit from sales – investment 0.6 - - 0.6 1.8 - - 1.8 property Mortga
Slide 50: Balance sheet
Balance sheet Originate Invest Operate Market value balance sheet (£m) Grainger (excl GRIP) GRIP Combined total Residential – PRS 591 678 665 1,343 Residential – regulated tenancies 1,107 1,077 - 1,077 Residential – mortgages (CHARM) 82 80 - 80 Forward Funded – PRS work in progress 198 186 31 217 De
Slide 51: Segmental balance sheet
Segmental balance sheet Originate Invest Operate FY18 HY19 Market value balance sheet (£m) PRS Reg* Other Group PRS Reg* Other Group Investment property 564.4 25.3 - 589.7 1,431.9 24.5 - 1,456.4 Investment in joint ventures and 134.0 - 11.6 145.6 7.6 - 17.4 25.0 associates Financial interest in prop
Slide 52: EPRA Earnings
EPRA Earnings Originate Invest Operate HY18 HY19 Earnings Shares Pence per Earnings Shares Pence per £m millions^ share* £m millions^ share Earnings per IFRS income statement 50.6 463.1 10.9 54.3 548.5 9.9 Adjustments to calculate adjusted EPRA Earnings: Changes in value of investment properties, de
Slide 53: EPRA NAV & NNNAV
EPRA NAV & NNNAV Originate Invest Operate FY18 HY19 Net Shares Pence per Net assets Shares Pence per assets millions^ share* £m millions^ share £m NAV from the financial statements 815.6 463.5 176 1,179.1 613.6 192 Revaluation of other non-current investments 7.0 - 1 6.2 - 1 Revaluation of trading p
Slide 54: Net asset reconciliation
Net asset reconciliation Originate Invest Operate Adj IAS 39 Add back re fixed rate fair value of loan and Market derivative derivative Deferred Statutory Market value Add back financial financial and NNNAV balance value balance def tax on instruments Gross instruments contingent balance £m sheet ad
Slide 55: 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 £21m Aug 2023* Term Debt Nationwide £100m £100m Aug 2020 Term Debt HSBC, NatWest, Barclays, AIB £170m £170m
Slide 56: Per share restatements
Per share restatements Originate Invest Operate Bonus Originally adjustment Reported factor Restated HY18 Dividend per share 1.74 1.1066 1.57 Adjusted EPS fully diluted 7.92 1.1066 7.16 Statutory EPS fully diluted 10.04 1.1066 9.07 FY18 EPRA NAV per share 348 1.1066 314 EPRA NAV per share 316 1.1066
Slide 57: Future reporting dates
Future reporting dates Originate Invest Operate 2019 Trading update September Full year results 27 November Grainger Plc | www.graingerplc.co.uk | HY19 | May 2019 57
Slide 58: Disclaimer
Disclaimer Originate Invest Operate THE DISTRIBUTION OF THIS DOCUMENT IN JURISDICTIONS OTHER THAN THE UNITED KINGDOM MAY BE RESTRICTED BY LAW AND PERSONS INTO WHOSE POSSESSION THIS DOCUMENT COMES SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY RELEVANT RESTRICTIONS. IN PARTICULAR, THIS DOCUMENT MAY N