Slide 1: Preliminary Announcement of Results for the year ended 30 September 2010
Preliminary Announcement of Results for the year ended 30 September 2010 25 November 2010
Slide 2: Disclaimer
Disclaimer This presentation contains certain forward-looking statements. Any statement in this presentation that is not a statement of historical fact including, without limitation, those regarding Grainger plc’s future financial condition, business, operations, financial performance and other futu
Slide 3: Executive team
Executive team • Andrew Cunningham Chief Executive Officer • Peter Couch Chief Operating Officer, Head of Retirement Solutions • Nick Jopling Executive Property Director • Mark Greenwood Finance Director Page 3
Slide 4: Agenda
Agenda • Overview Andrew Cunningham • Financial results Mark Greenwood • Business unit activities Nick Jopling • Outlook for the future Andrew Cunningham • Appendices Page 4
Slide 5: Overview
Overview grainger plc
Slide 6: Our business
Our business grainger = residential Grainger offers exposure to residential in the UK and Germany UK Residential Funds and JVs Retirement solutions Property services Germany Development Page 6
Slide 7: Market overview
Market overview Grainger offers a diversified spread of income streams across different residential asset investment classes and activities: UK residential market (£1,794m gross assets - 80%) • Long term capital appreciation • Occasional price corrections • Positive housing supply and demand imbalan
Slide 8: Our business
Our business Grainger is able to outperform in these different markets, achieving good levels of return, even with less stable house price growth • UK: rents, trading profits, residential investments, trading returns from fund management and development profits • Our UK businesses are generally low
Slide 9: 2010 Highlights
2010 Highlights • Rights issue raised £237m in December 2009 • Loan to value on core debt portfolio down to 54% (2009: 66%) • Committed facilities and cash of £260m • Significant improvement in operating profit – up 20% to £94m (2009: £79m) • Reversionary surplus increased to £604m (2009: £570m) • S
Slide 10: Financial results
Financial results grainger plc
Slide 11: Financial highlights
Financial highlights • Gross NAV per share increased by 3.1% to 200p (2009 : 194p) • Operating profit of £94.2m (2009 : £78.8m) • Improved sales margins 38.5% (2009 : 27.8%) • Adjusted profit* before tax £18.8m (2009: loss of £131.3m) • Loss before tax, after mark to market, £20.8m (2009 : £170.0m)
Slide 12: Results highlights - financial summary
Results highlights - financial summary Gross NAV per share (p) (NAV) 200 194 3.1% Triple NAV per share (p) (NNNAV) 140 141 (0.6)% Grainger NAV per share (p) (base case) (GNAV) 180 177 1.7% Operating profit* (£m) 94.2 78.8 19.5% Dividends per share (p) 1.70p 1.29p 31.8% Net Debt (£m) 1,360 1,561 (12.
Slide 13: Portfolio overview
Portfolio overview Wholly owned Gross Gross Vacant No. of Market Possession Reversionary units Value £m Value £m Surplus £m VP% Regulated 5,969 863 1,185 322 73% Assured Shorthold 571 98 112 14 88% Vacant 294 67 67 - 100% Other 50 40 53 13 75% UK Residential portfolio 6,884 1,068 1,417 349 Home Reve
Slide 14: Market value balance sheet
Market value balance sheet 2010 2009 £m £m Property related assets - wholly owned 2,127 2,083 - jv/associates 116 117 Total property related assets 2,243 2,200 Other assets 20 21 Cash 95 265* Gross assets 2,358 2,486 Debt (1,446) (1,577) Other net liabilities (80) (103) Net assets 832 806 Gross net
Slide 15: Movement in gross NAV
Movement in gross NAV £'m 1000 900 + £53m £20m £(32)m £(7)m £832m £237m £807m £(11)m a —_ i) — fam 800 4 => 700 + 600 | £570m 500 LI] T 7 T ; r r : : r Gross NAV Impactof Gross NAV Lossaftertax Revaluation Fair value of Eliminationof Dividend Other Gross NAV Sept 09 rights issue Sept 09 post surplus
Slide 16: Net asset value per share
Net asset value per share Pence per share 2010 2009 Gross net asset value 200 194 Deduct: Mark to market adjustments (26) (20) Deferred tax on revaluation surpluses (undiscounted) at 27% (2009: 28%) (34) (33) NNNAV 140 141 Add/(Deduct): Discounted reversionary surplus 55 50 Tax thereon at 27% (2009:
Slide 17: Income statement
Income statement 2010 2009 Valuation Valuation and non- and non- £m Trading recurring Total Trading recurring Total Net rents 53 - 53 53 - 53 Trading profit 60 - 60 54 - 54 Profit/ (loss) on sale of investment properties/ associates 2 - 2 (1) - (1) Fees from fund and asset management 5 - 5 6 - 6 Oth
Slide 18: Pre-tax earnings
Pre-tax earnings 2010 2009 Valuation Valuation and non- and non- £m Trading recurring Total Trading recurring Total Operating profit 94 - 94 79 (47) 32 Joint ventures/associates (2) 12 10 (3) (5) (8) Goodwill and loan impairment - (9) (9) - (22) (22) Derivatives - (40) (40) - (39) (39) Conversion of
Slide 19: Cashflow
Cashflow £m 2010 2009 Income Net rents and other income net of overheads 32 29 Property sales 170 215 Working capital movements 1 (9) Total cash generated 203 235 Interest, tax and dividends (118) (129) Net operating income 85 106 Loan movements (139) (74) Rights issue net proceeds 237 - Available f
Slide 20: Movement in net debt
Movement in net debt £'m 1700 + 1600 5 £1,561m £(237)m 1500 4 “400 £1,324m £(32)m £116m aus plu £1,360m 1300 4 Sp £(170)m estan | 1200 5 | | | 1100 4 1000 r r r T T T T T T Netdebt Rightsissue Net debt Net rents Property Interest,tax, Property Sovereignnet Forex Net debt before costs before costs sa
Slide 21: Debt analysis
Debt analysis £m 2010 2009 Gross debt 1,455 1,589 Cash 95 28 Net debt (before deducting costs) 1,360 1,561 Committed facilities and cash 260 171 Average maturity (years) 3.5 4.4 Hedging level on gross debt 75% 93% Average interest rate during the year 5.6% 5.5% Average interest rate at year end 5.0%
Slide 22: Business unit activities
Business unit activities Page 22
Slide 23: Our business units
Our business units UK residential Retirement Fund management and JVs solutions Property Germany Development services Page 23
Slide 24: Portfolio overview
Portfolio overview Vacant Number of Investment possession % of units Value £m value Grainger £m investment 1 London (total) 2,783 826 621 40% 2 South East 2,210 347 250 16% 3 South West 1,521 194 144 9% 4 East 1,389 178 129 8% 5 West Midlands 1,025 152 113 7% 6 North West 1,436 151 107 7% 7 East Mid
Slide 25: UK Residential
UK Residential • Strong cashflow • Total sales of £121m, gross rents of £39m per annum • Carefully selected and managed portfolio • Geographically diverse, but with higher concentrations in London and the South East (67% of UK Residential portfolio in London and SE) • Low average values and un-refur
Slide 26: Managing our portfolio
Managing our portfolio • Acquisition – three criteria • Capital appreciation – Concentration in London and the South East and stronger regional markets • Good discounts and/or yield – Related criteria with potential to enhance through active asset management • Development potential – Development opp
Slide 27: New acquisitions
New acquisitions Capital appreciation Yield / capital appreciation Development potential Harley House, NW1 Holland Place, W8 Charles Allen House, EC1R £2.7m, Two large flats £6.6m, 14 flats £3.8m, 14 flats Page 27
Slide 28: Retirement solutions
Retirement solutions • Largest portfolio in the UK – 6,981 properties with a market value of Sovereign asset £545m, vacant possession value of Lancaster, LA1 £800m • Highly reversionary assets • Predictable cash flow • 2010 sales proceeds amounting to £29m, generating profit of £10m • Acquisition of
Slide 29: Fund management and JVs
Fund management and JVs GenInvest – Dibdin House, NW6 • Co-investing manager in funds and JVs • Equity stake between 20-50% • Focus on London and South East • £109m current value of investments • Grainger GenInvest: JV with Genesis Housing (50:50) • Asset management income and capital growth G:res1
Slide 30: Property services
Property services • ‘Owner-manager’ mentality Bethnal Green, E2 • Managing a total of 19,263 units in the UK • Gross rent roll of £76m • Six offices across the UK • 110 staff • Services include: • Rent collection • Credit control • Repairs/maintenance • Lettings/renewals • Sales/acquisitions Page 30
Slide 31: Germany
Germany • Complementary to the risks and returns of the UK • 6.9% gross yield (€35m) • 7,148 units, largely in the south and west Munich • Portfolio value of €1,062 sqm • Average rent of €6.28/sqm/month (€75.36/sqm/pa) • Vacancy rate of 4.11% (excl for sale) • Building upon our operating platform of
Slide 32: Germany Strategy going forward
Germany • Strategy going forward • Active property and asset management, maximising net rental returns • Attracting third party investment into fund or JV structures to increase asset management income • Capital recycling to improve portfolio quality and enhance cashflow • 2010 – Sold €5m of investm
Slide 33: Development
Development Newlands, Hampshire Focus on value creation through assembly, planning or infrastructure • Strategic land King Street, Hammersmith • Ownership and development management • e.g. Newlands, Hampshire • Local Authority led regeneration • e.g. JV with Helical Bar plc, led by London Borough of
Slide 34: Outlook for the future
Outlook for the future Page 34
Slide 35: Outlook for the future
Outlook for the future • Board expects Grainger’s actively managed portfolio to outperform the challenging broader market conditions • Selective investment approach with clear criteria • Spread of activities (rental, trading, development and investment) provide a strong platform uniting a core skill
Slide 36: Outlook for the future: key initiatives
Outlook for the future Key initiatives • Portfolio refocus on selective areas of value or growth, through application of careful acquisition criteria • Reduction of capital employed in non-core assets and underperforming locations • Introduce third party capital into selected business units to impro
Slide 37: For further information
For further information: Grainger plc Andrew Cunningham/ Mark Greenwood/ Dave Butler Tel: +44 (0) 20 7795 4700 Tel: +44 (0) 191 261 1819 Financial Dynamics Stephanie Highett/Dido Laurimore/Will Henderson Tel: +44 (0) 20 7831 3113 Page 37
Slide 38: Appendices
Appendices grainger plc
Slide 39: Detailed Profit and Loss Account (Management Basis) September 2010
Detailed Profit and Loss Account (Management Basis) 30 September 2010 Segment results £m 30 September 2010 Fund Management/ UK and Retirement Property Residential European German UK Residential Solutions Services Investments Development Residential Total Reconciliation to Statutory Gross rents/other
Slide 40: Detailed Profit and Loss Account (Management Basis) September 2009
Detailed Profit and Loss Account (Management Basis) 30 September 2009 Segment results £m 30 September 2009 Fund Management/ UK and Retirement Property Residential European German UK Residential Solutions Services Investments Development Residential Total Gross rents/other income 41.7 6.0 0.4 5.3 1.1
Slide 41: Detailed Profit and Loss Account (Statutory Basis) September 2010
Detailed Profit and Loss Account (Statutory Basis) 30 September 2010 Segment revenue and result £m Fund Management/ UK and UK Retirement Property Residential European German All other Residential Solutions Services Investments Development Residential Segments Total Revenue - property 116.0 19.8 - -
Slide 42: Detailed Profit and Loss Account (Statutory Basis) September 2009
Detailed Profit and Loss Account (Statutory Basis) 30 September 2009 Segment revenue and result £m Fund Management/ UK and UK Retirement Property Residential European German All other Residential Solutions Services Investments Development Residential segments Total Revenue property 138.4 18.1 - - 47
Slide 43: Market value of wholly owned assets
Market value of wholly owned assets 30 September 30 September 2010 2009 Residential Development Total Total £m UK 1,613 72 1,685 1,610 Germany 442 - 442 473 2,055 72 2,127 2,083 The majority of the reduction in Germany asset values relates to a currency exchange movement and is matched by a correspo
Slide 44: Portfolio overview: investment in JVs and Associates
Portfolio overview Analysis of investment in JVs and Associates Total Gross Liabilities/ Net Grainger Grainger Grainger 2010 Assets Debt Assets Share Share Goodwill Loan Investment Designation £m £m £m % £m £m £m £m UK Residential - G:res1 Associate 392 (260) 132 21.6% 29 - - 29 - Schroder Associate
Slide 45: Portfolio analysis – UK residential JVs and associates
Portfolio analysis – UK residential JVs and associates Gross Gross Vacant Grainger Market Possession Share of No of Value Value Grainger Grainger Reversionary units £m £m Share % Equity £m Surplus £m G:res1 2,006 365 412 21.6% 29 10 Schroders - - - 21.8% - - GenInvest 1,443 286 354 50.0% (6) 34 Tota
Slide 46: Total UK residential property – sales and acquisitions summary
Total UK residential property – sales and acquisitions summary Sales Acquisitions Profit Number Proceeds £m Profit £m margin % Number Cost £m 476 86 40 46.2 Regulated 125 20 64 10 1 9.9 Assured/ Assured Shorthold 154 26 251 29 10 35.1 Retirement Solutions 1,132 76 18 25 7 27.6 Other 29 10 809 150 58
Slide 47: Germany residential key indicators
Germany residential • Key indicators – Average rent psm – 6.28 EUR/ sqm/ month – Vacancy rate – 4.11% by units (not including units for sale) – Maintenance psm – 11.43 EUR/sqm/ pa – Gross and net rental yields – 6.88 gross, 4.85% net excluding PM costs – Portfolio value psm – 1,062 EUR/sqm – Sales –
Slide 48: Portfolio overview – development status of major projects
Portfolio overview – development status of major projects Project Description Status Outline consent granted for 1,635 residential units and 1 million sq. ft B1- 537 acre Greenfield site, freehold with overage interest B8 space. New planning application for 2,550 new homes and a similar Newlands Com
Slide 49: Grainger NAV – sensitivity analysis
Grainger NAV – sensitivity analysis Without discounting tax Discount rate 8.66% 7.0% 5.66% Note 0% 180p 188p 195p • Grainger NAV brings in the present taxed value of reversionary surpluses in 2% 190p 199p 210p our long term portfolio HPI 4% 203p 215p 227p • Grainger WACC: 5.66% 5% 210p 224p 238p • F
Slide 50: Debt maturity profile
Debt maturity profile Page 50
Slide 51: Swap Fair Value Run off
Swap Fair Value Run off Page 51
Slide 52: Appendices - glossary of terms
Appendices - glossary of terms Property Assured periodic tenancy (“APT”) Market rented tenancy arising from succession from regulated. Tenant has security of tenure. Assured shorthold tenancy (“AST”) Market rented tenancy where landlord may obtain possession if appropriate notice served. Assured ten
Slide 53: Appendices - glossary of terms
Appendices - glossary of terms Financial (continued) Gearing The ratio of borrowings, net of cash, to market net asset value. Hedging The use of financial instruments to protect against interest rate movements. IFRS International Financial Reporting Standards. Interest cover Profit on ordinary activ
Slide 54: For further information
For further information: Grainger plc Andrew Cunningham/Mark Greenwood/ Dave Butler Tel: +44 (0) 20 7795 4700 Tel: +44 (0) 191 261 1819 Financial Dynamics Stephanie Highett/Dido Laurimore/Will Henderson Tel: +44 (0) 20 7831 3113