Slide 1: Accelerating growth and total returns
Accelerating growth and total returns Half Year Financial Results for the period ended 31 March 2022 12 May 2022
Slide 2: Agenda
Agenda Originate Invest Operate Accelerate 1. Overview Helen Gordon Chief Executive 2. Financial results Rob Hudson Chief Financial Officer 3. Market and business update Helen Gordon Chief Executive 4. Summary and Q&A Helen Gordon & Rob Hudson 5. Appendix Grainger plc | www.graingerplc.co.uk 2
Slide 3: Strong performance and growth momentum
Strong performance and growth Originate Invest Operate Accelerate momentum +23% NRI growth delivered Pin Yard, Leeds +3.5% Gilders Yard, Birmingham L4L rental growth 98% PRS occupancy (Mar ‘22) £3.1bn £2.4bn Operational portfolio PRS (build-to-rent) pipeline 9,793 9,962 Rental homes Homes in pipelin
Slide 4: Driving returns for shareholders
Driving returns for shareholders Originate Invest Operate Accelerate Adjusted Net rental Passing NRI from Rental EPRA NTA Interim dividend earnings income new launches in growth (L4L) a a last 12 mths £46.3m £42.8m +3.5% 305pps 2.08 pps +23% +23% £16m +183 bps +7% v HY21 +14% +3% v FY21 Financial hi
Slide 5: Driving responsible business
Driving responsible business Originate Invest Operate Accelerate Environment People and Social impact 87% 100% Launch of “Living a 938 447 PRS portfolio with Green energy operational community & EPC ratings A-C contracts for greener Affordable Homes** resident events (compliant with expected future
Slide 6: A strategy and operating model that drives performance and growth
A strategy and operating model that Originate Invest Operate Accelerate drives performance and growth Driving forward Investing for the construction and long term, through delivery of our cycles pipeline 11 schemes in planning and legals, now 12 schemes on site including TFL sites with (2,831 homes)
Slide 7: Pipeline delivering significant earnings growth
Pipeline delivering significant Originate Invest Operate Accelerate earnings growth OPERATIONAL PORTFOLIO* PRS (Build to Rent) PIPELINE 9,793 homes, £3.1bn 9,962 homes, £2.4bn £934m £2,191m £1,022m £746m £669m Regulated Secured Under Tenancies PRS Portfolio Planning/ 4,001 homes Legals** Considerati
Slide 8: PRS - a growth sector
PRS - a growth sector Originate Invest Operate Accelerate Five key drivers of structural growth 1 Strong Demand 2 Rental Growth Strong and Increased 5m PRS households increasing pricing tension rental demand and rental Only 1.4% purpose built, build-to-rent growth Significant opportunity to grow mar
Slide 9: Leadership in a growth sector
Leadership in a growth sector Originate Invest Operate Accelerate £4.6bn estimated £2.2bn £0.2bn PRS* FY15 Today Post- pipeline 1 Market leader Scalable national platform 2 ▪ Largest listed player ▪ Driving compounding earnings growth ▪ Longest track record ▪ Delivering material net margin growth ▪
Slide 10: HY22 Financial Results
2. HY22 Financial Results Rob Hudson Chief Financial Officer
Slide 11: Financial highlights
Financial highlights Originate Invest Operate Accelerate Net rental income increases by +23% as pipeline delivers Income performance Income HY21 HY22 Change Strong performance driven by rapid lettings Rental growth (like-for-like) 1.7% 3.5% +183 bps and pipeline delivery Net rental income £34.7m £42
Slide 12: Income statement
Income statement Originate Invest Operate Accelerate Pipeline delivering accelerated growth in income and earnings Key highlights: HY211 HY22 Change Strong occupancy & rental growth Net rental income £34.7m £42.8m +23% Like-for-like rental growth: 3.5% (HY21: 1.7%) Profit from residential sales £29.
Slide 13: Net rental income
Net rental income Originate Invest Operate Accelerate PRS pipeline delivery driving sizable NRI increase +23% +£2.0m £42.8m +£6.6m +£1.0m £34.7m £(1.5)m Total L4L +3.5% PRS L4L +3.5% Regs L4L +3.7% HY21 Net Disposals PRS Rental Occupancy HY22 Net Rental Income investment growth Rental Income Strong
Slide 14: Half Year Valuation Summary
Half Year Valuation Summary Originate Invest Operate Accelerate Capital Valuation Movement Total Valuation Portfolio Homes Value ERV / HPI Growth Yield and other Movement* £m £m % £m % £m % PRS Portfolio ERV Growth Yield and other London & SE 3,483 1,255 14 1.1% 5 0.4% 19 1.5% Regions 3,780 860 13 1
Slide 15: EPRA Net Asset Values
EPRA Net Asset Values Originate Invest Operate Accelerate EPRA NTA per share growth of 3% in 6 months £m pence per share Property assets (market value) 3,592 484 Net liabilities (1,189) (160) EPRA Net Reinstatement Value (NRV) 2,403 324 Tax – deferred & contingent – trading assets (139) (19) EPRA Ne
Slide 16: EPRA Net Tangible Assets (NTA)
EPRA Net Tangible Assets (NTA) Originate Invest Operate Accelerate Strong valuation and increasing net rents drives annual NAV growth of 7% +6.0% +3% +11p (2)p (3)p +4% 305p +6p (2)p (2)p 297p Total +2.3% 286p PRS +2.1% Regs +3.2% Dev +1.9% Grainger plc | www.graingerplc.co.uk 16
Slide 17: Net debt
Net debt Originate Invest Operate Accelerate Significant investment in pipeline delivery Operating cashflow Net investment £(54)m +£116m +£2m +£25m £1,131m +£151m £1,042m £(109)m £(35)m +£33m +£22m Net debt increasing to £1.1bn reflecting continued growth and investment in the pipeline Operating cas
Slide 18: Robust capital structure
Robust capital structure Originate Invest Operate Accelerate Low risk, flexible capital structure that supports growth HY22 Cost of debt LTV Net debt £1,131m 6.5% 60% 6.0% 55% Loan to value 31.4% 5.5% 50% 5.0% Cost of debt (average) 3.1% 4.5% 45% 40% 4.0% Fully drawn cost of debt 2.9% 35% 3.5% 30% H
Slide 19: Inflationary impacts
Inflationary impacts Originate Invest Operate Accelerate What does inflation mean for Grainger? Rental growth vs inflation and wages (Index, Jan-10=100) Operating income and cost 150 Rental growth historically has tracked general 130 cost inflation, benefiting the business 110 Staff costs grow in li
Slide 20: Passing net rent progression
Passing net rent progression Originate Invest Operate Accelerate Doubling of NRI already secured Planning / Legals Under Consideration Secured pipeline £1,022m £746m £669m +2.9x +£30m £204m +£34m +2.0x +£21m £140m +£14m +£14m £88m +£3m £71m Growth in passing net rent to £88m at HY22 following lease
Slide 21: Secured pipeline: Earnings and returns impact
Secured pipeline: Earnings and returns Originate Invest Operate Accelerate impact Fully funded secured pipeline drives growth in earnings and accelerates total returns FY21 total return of 5.5% with large capital Pro-forma Total Returns progression post component driven by ongoing property valuation
Slide 22: Financial summary
Financial summary Originate Invest Operate Accelerate Strong performance with good momentum for the full year Net rental income growth of 23% driven by new launches, strength of letting demand and rental growth Adjusted earnings growth of 23% Dividend per share up 14% as pipeline delivers Valuation
Slide 23: Market and business update
3. Market and business update Helen Gordon Chief Executive
Slide 24: Significant market opportunity underpinned by structural growth
Significant market opportunity Originate Invest Operate Accelerate underpinned by structural growth Vast opportunity to grow market share Demand broadening across age groups BTR only 1.4% of homes in 5m UK private-rented sector PRS households (‘000s) 1,600 +6% 2010/11 2020/21 1,200 +21% +50% Build-t
Slide 25: Rental market demand is continuing to accelerate
Rental market demand is continuing to Originate Invest Operate Accelerate accelerate Leasing market remains strong Room for growth – rents Rightmove – time-to-let - days Rental growth follows inflation, (Index, Jan-10=100) 40 35 140 30 25 20 120 15 10 100 Q4 2017 Q1 2021 Q1 2016 Q2 2016 Q3 2016 Q4 2
Slide 26: Private rents are affordable for most households
Private rents are affordable for most Originate Invest Operate Accelerate households Rents remain affordable on a historical basis Earnings to resume inflation correlation from 2024 Proportion of income spent on rent and bills Office for Budget Responsibility, March 2022 forecasts 42.0% 8.0 41.0% Fo
Slide 27: Data driven insight investment decisions
Data driven insight investment Originate Invest Operate Accelerate decisions High demand / supply High demand / supply Schemes secured fundamentals and fundamentals and low growth potential high growth potential Target locations Exeter Under review Southampton London Cardiff Not under consideration
Slide 28: Our national PRS portfolio
Our national PRS portfolio Originate Invest Operate Accelerate Building scale and creating clusters with management efficiencies NEWCASTLE 380 The Forge, Newcastle 283 LEEDS & SHEFFIELD 1,087 MANCHESTER 1,612 Other 97 The Headline, Leeds 242 Clippers Quay, Manchester 510 Pin Yard, Leeds 216 The Fila
Slide 29: Exceptional leasing performance
Exceptional leasing performance Originate Invest Operate Accelerate £16m passing net rental income built up and £23m of valuation gains over from new schemes delivered in the last 12 months Fully let Fully let Fully let 65% let Southampton London Leeds Birmingham Milton Keynes Newcastle 2021 +£16m 2
Slide 30: Customer insight & data
Customer insight & data Originate Invest Operate Accelerate Six customer typologies defined: Highly engaged - Grainger’s Customer Insight Actively interested in the property market decision makers Programme drives and informs our business decisions High Lifers Savvy & Steady Savvy & Driven - Annual
Slide 31: Our competitive advantage
Our competitive advantage Originate Invest Operate Accelerate Maximising the opportunity for growth More than £3bn Multiple routes to source opportunities sourced since providing greater flexibility than many 2015 competitors Forward Proven track record of sourcing success Fund Reliable and trusted
Slide 32: Acquisitions in H1 2022
Acquisitions in H1 2022 Originate Invest Operate Accelerate £14m potential annual net rental income acquired Forward funding acquisition Direct Development – site acquisition Merrick Place, Southall ‘Exmouth Junction’, Exeter 401 homes 230 homes Potential £6m net rental income Potential £3m net rent
Slide 33: Summary & conclusion
Originate Invest Operate Accelerate Summary & conclusion Accelerating growth and total returns Strong H1 performance Strategy delivering Attractive market conditions Transition to £0.2bn Upside opportunity in an inflationary PRS FY15 environment £2.2bn PRS a structural growth sector Now majority PRS
Slide 34: Thank you Q&A
Thank you Q&A Gilders Yard, Birmingham
Slide 35: Appendix
Originate Invest Operate Accelerate Appendix Contents Our investment case remains strong Page 36 1. Property information International market comparisons Page 37 Portfolio overview Page 38 Operating platform Page 39 Fully funded secured pipeline Page 40 Liquidity and capex Page 41 Portfolio summary
Slide 36: Our investment case remains strong
Our investment case remains strong Originate Invest Operate Accelerate Why PRS is strong as ever Why Grainger is poised to benefit Low risk, resilient returns First-mover and Market leader Significant growth potential Clear growth trajectory BTR potential to grow from 73k to 1.7m+ homes £2.4bn pipel
Slide 37: International market comparisons
International market comparisons Originate Invest Operate Accelerate UK Private Rented Sector (PRS) vs German Residential and US Multi-Family Housing UK – strong fundamentals, a vast opportunity US Multi-family housing Significant market share owned by large landlords Large market opportunity 5m PRS
Slide 38: Portfolio overview
Portfolio overview Originate Invest Operate Accelerate Regulated tenancies PRS Customer has the right to live in the property for the Leases with typical duration of 1-3 years rest of their life Market rents Sub-market rent set by Valuation Office Agency Returns based on Upon vacancy Grainger sells
Slide 39: Driving value through our Operating Platform
Driving value through our Originate Invest Operate Accelerate Operating Platform In-house operational platform - Complete supply chain control - Direct customer relationship - Direct input into development - Greater customer insight - Technology enhanced efficiency - Greater responsiveness to new tr
Slide 40: Fully funded secured pipeline
Fully funded secured pipeline Originate Invest Operate Accelerate Disciplined capital management underpinning growth Opening Headroom** Existing Committed Capex* Cash from operations*** Outer Pipeline Capacity £1,100m £1,100m £950m £950m £375m £800m £800m £225m £571m £725m £725m £75m £421m £271m £19
Slide 41: Liquidity and capex
Liquidity and capex Originate Invest Operate Accelerate £725m headroom to fund investment pipeline Strong liquidity Current liquidity position (£m) Strong headroom of £725m from cash and available facilities £196m of cash 529 725 £529m available facilities* 196 Committed capex funded Capital expendi
Slide 42: Portfolio summary
Portfolio summary Originate Invest Operate Accelerate Market value Net Rent Units £m £m Net yield Residential – PRS 7,263 2,115 73 3.7% Residential – regulated tenancies 1,965 863* 15 1.8% Residential – mortgages (CHARM) 411 71 n/a n/a Forward Funded – PRS work in progress - 294 - - Development work
Slide 43: Portfolio movements
Portfolio movements Originate Invest Operate Accelerate Sep 21 Additions Disposals Transfers Valuation Mar 22 £m £m £m £m £m £m PRS London & SE 1,228 12 (4) - 19 1,255 Regions 796 - (3) 43 24 860 Total PRS 2,024 12 (7) 43 43 2,115 Regs London & SE 726 2 (40) - 18 706 Regions 170 - (21) - 8 157 Total
Slide 44: Portfolio geographical breakdown
Portfolio geographical breakdown Originate Invest Operate Accelerate PRS & Regulated tenancies (HY22) PRS Regulated tenancies Region Units Market Change Net Units Market Change Net value vs FY21 yield value vs FY21 yield £m £m London & SE 3,483 1,255 +1.5% 3.3% 1,173 706 +2.6% 1.6% South West 510 20
Slide 45: PRS portfolio by geography
PRS portfolio by geography Originate Invest Operate Accelerate Portfolio by units Portfolio by Rent (£m) Key Central / Inner London 16% 11% 18% Outer London 25% 21% South East 13% South West 26% 2% 17% East and Midlands 18% 12% 2% 7% 12% North West Other Regions Portfolio by value (£m) Post secured
Slide 46: PRS portfolio
PRS portfolio Originate Invest Operate Accelerate Top assets by annual ERV (>£1.5m) Unit mix Asset City Postcode Units Studio/1 bed 2 bed 3 bed Area Sq feet Annual ERV Clippers Quay Manchester M50 3AF 510 162 290 58 371,622 £7.0m The Filaments Manchester M3 5PF 376 98 235 43* 246,416 £5.9m The Forge
Slide 47: PRS portfolio – rent levels
PRS portfolio – rent levels Originate Invest Operate Accelerate Rent per calendar month (% of units) £1500+ 18.5% 6.9% £1000-1500 10.0% 20.0% £750-£1000 8.0% 16.0% Under £750 11.5% 9.1% London & South East Regions Grainger plc | www.graingerplc.co.uk 47
Slide 48: Secured pipeline schedule
Secured pipeline schedule Originate Invest Operate Accelerate (1 of 2 pages) Gross No. Targeted Est. Grainger Spend yield Name units launch Status investment to date target Forward funding / acquisition The Copper Works, Capital Quarter, Cardiff 307 Early FY23 Onsite £57m £42m c.7% Enigma Square, Mi
Slide 49: Secured pipeline schedule (continued)
Secured pipeline schedule Originate Invest Operate Accelerate (Continued from previous page) Gross Targeted Est. Grainger Spend to yield Name No. units launch Status investment date target Direct development Gilders Yard, Birmingham 158 Mid FY22 On site £28m £27m c.7% Weavers Yard, Newbury, West Ber
Slide 50: Secured pipeline projects
Secured pipeline projects Originate Invest Operate Accelerate 16 high quality PRS schemes Secured Secured in H1 22 Forward funding / Acquisitions Enigma Square, Canning Town 2, The Copper Works The Barnum, The Tilt Works, Milton Keynes London Capital Qtr, Queens Rd, Well Meadow, Cardiff Nottingham S
Slide 51: ESG: Securing our long-term future
ESG: Securing our long-term future Originate Invest Operate Accelerate 4 long-term ESG Environment: 1 Net zero carbon of our operational buildings (aspiring to 2030) commitments Enhance investment decisions further by Assets: 2 integrating ESG considerations People: 3 Measure and deliver positive so
Slide 52: Delivering our ESG & Responsible Business ambitions
Delivering our ESG & Responsible Business Originate Invest Operate Accelerate ambitions Net carbon Sustainable Making a positive A diverse and reduction investing social impact inclusive business Net zero carbon for our Integrate ESG into all Deliver a positive social Ensure our workforce is commitm
Slide 53: Market value balance sheet
Market value balance sheet Originate Invest Operate Accelerate FY21 HY22 Market value balance sheet (£m) Residential – PRS 2,024 2,115 Residential – regulated tenancies 896 863 Residential – mortgages (CHARM) 72 71 Forward Funded – PRS work in progress 244 294 Development work in progress 146 202 In
Slide 54: Segmental EPRA NTA balance sheet
Segmental EPRA NTA balance Originate Invest Operate Accelerate sheet FY21 HY22 EPRA NTA market value PRS Reg* Other Group PRS Reg* Other Group balance sheet (£m) Investment property 2,156.2 23.0 - 2,179.2 2,311.5 23.2 - 2,334.7 Investment in JVs & associates 26.9 - 18.0 44.9 28.7 - 18.1 46.8 Financi
Slide 55: EPRA Earnings
EPRA Earnings Originate Invest Operate Accelerate HY21 HY22 Adjusted Adjusted Adjusted Adjusted £m Adjustments EPRA Adjustments EPRA Earnings Earnings earnings earnings Net rental income 34.7 - 34.7 42.8 - 42.8 Profit from sales – trading property 29.7 (28.2) 1.5 31.0 (28.9) 2.1 Profit from sales –
Slide 56: Segmental income statement
Segmental income statement Originate Invest Operate Accelerate HY21 HY22 £m PRS Reg* Other Group1 PRS Reg* Other Group Net rental income 25.3 9.3 0.1 34.7 34.9 7.7 0.2 42.8 Profit from sales – trading property (0.1) 29.6 0.2 29.7 - 31.0 - 31.0 Profit from sales – investment property (0.1) - - (0.1)
Slide 57: EPRA NRV, EPRA NTA and EPRA NDV
EPRA NRV, EPRA NTA and EPRA Originate Invest Operate Accelerate NDV FY21 HY22 EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV £m IFRS Equity attributable to shareholders 1,739.0 1,739.0 1,739.0 1,796.2 1,796.2 1,796.2 Diluted NAV 1,739.0 1,739.0 1,739.0 1,796.2 1,796.2 1,796.2 Include: Revalua
Slide 58: Restatement
Restatement Originate Invest Operate Accelerate Impact of accounting policy change following IFRIC interpretation of IAS38 relating to development costs on Software as a Service HY21 HY21 (previously Restatement Restated reported) £m £m £m Consolidated income statement impact Administration expenses
Slide 59: Debt facilities
Debt facilities Originate Invest Operate Accelerate Facility Lender Size Drawn Maturity Core Facilities: Corporate Bond Listed £350m £350m Apr 2028 Corporate Bond Listed £350m £350m Jul 2030 Revolving Credit Facility HSBC, NatWest, Barclays £330m £1m Aug 2024 Term Debt HSBC, NatWest, Barclays, AIB £
Slide 60: Future dates
Future dates Originate Invest Operate Accelerate 2022 Capital Markets Day 22 June Trading update September Full year results 17 November Grainger plc | www.graingerplc.co.uk 60
Slide 61: Pin Yard
Pin Yard Originate Invest Operate Accelerate Holbeck Village, Leeds Asset Overview Socially responsible investment Forward fund, completed March 22 Walk 216 high quality apartments score (130 x 1 beds; 70 x 2 beds, 16 x 3 beds) c. 2,500 sq ft of internal residents amenity 83 Onsite resident services
Slide 62: Weavers Yard
Weavers Yard Originate Invest Operate Accelerate Market Street, Newbury Asset Overview Socially responsible investment Direct development, first phase completed April 22 Walk 232 high quality apartments and townhouses score (1 x Studio, 78 x 1 beds; 129 x 2 beds, 24 x 3 beds) c.8,500 sq ft of commer