Grainger plc · LSE:GRI
Grainger — FY2009 Earnings Presentation
42 slides from Grainger's earnings presentation, Nov 5, 2009
Slide 1: Preliminary Results for the year ended 30 September 2009
Preliminary Results for the year ended 30 September 2009 5 November 2009 Page 1
Slide 2: Disclaimer
Disclaimer This presentation (the "Presentation") has been prepared by and in the sole responsibility of Grainger PLC ("Grainger" or the “Company”), whose registered office is at Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JE. Grainger plc is registered in England and Wales with registe
Slide 3: 2009 Highlights
2009 Highlights grainger plc am os H on G\\ ts act 0 BH | Page nat ae a\\ oe at BH ii c
Slide 4: Introduction
Introduction • Considerable self help implemented and achieved • Market deal flow has accelerated in core business areas with opportunities in regulated tenancies and selective opportunities in other business areas • Announced rights issue to raise gross proceeds of up to £250m • Opportunity to reca
Slide 5: 2009 Highlights
2009 Highlights • Maintained focus on cash conservation, covenant compliance, financial stability – Record Group turnover of £302m up 23% from £246m • Sales acceleration UK residential core regulated vacancy and investment sales – Total sale proceeds of £220m up 21.5%, with higher than £m normal lev
Slide 6: New Debt Package
New Debt Package • Signing in September of two new forward start credit facilities totalling £615m, significantly strengthening the Group's liquidity profile until December 2012 • The two new facilities comprise a £250m committed term loan available June 2010 and a £365m committed term loan availabl
Slide 7: Covenants and Headroom
Covenants and Headroom Loan to value (“LTV”) • The Group is subject to a number of restrictions if the LTV rises above 70% – LTV > 70% – purchases restricted to £2m per month, cash sweep comes into operation – LTV > 75% – no dividend can be paid – LTV covenant breach is 80% • Following rights issue
Slide 8: 2009 Results
2009 Results grainger plc an os H on G\\ ts act 0 BH | Page nat ae a\\ oe at BH ii c
Slide 9: Results Highlights (1)
Results Highlights (1) • Maintained focus on cash conservation, covenant compliance, financial stability • Record Group turnover increased by 23% from £246m to £302m • Total sale proceeds increased by 21.5% from £181m to £220m • Cash of £170m generated by operating activities • Successful sales prog
Slide 10: Results Highlights (2)
Results Highlights (2) Financial Summary 2009 2008 Change Property and related assets (£m) 2,200 2,405 (8.3%) Gross NAV per share (p) 411 535 (23.1%) Grainger NAV per share (p) (base case) 360 520 (31.1%) Earnings before interest and tax* (£m) 78.8 106.0 (25.7%) Dividends per share (p) 3.91p 6.18p (
Slide 11: Annual Financial Results: Market Value Balance Sheet
Annual Financial Results Market Value Balance Sheet 2009 2008 Before any deferred and contingent tax £m £m Property related assets - wholly owned 2,083 2,260 - jv/associates 117 139 Total property related assets 2,200 2,399 Other assets and cash 50 57 Gross assets 2,250 2,456 Debt (1,577) (1,661) Ot
Slide 12: Annual Financial Results: Movement in Gross NAV
Annual Financial Results Movement in Gross NAV • UK Core Portfolio has shown decrease in vacant possession values of -4% (Halifax HPI -7.4%, Nationwide -3.0%) • Discount to vacant possession on regulated properties (within Core Portfolio) has narrowed (2009: 72.5% of VPV, 2008: 71.3%) • German Portf
Slide 13: Portfolio Overview
Portfolio Overview Portfolio Analysis - Wholly Owned Gross Gross Vacant No of Market Possession Reversionary units Value £m Value £m Surplus £m VP% Regulated 6,327 871 1,197 326 73% Assured 495 78 89 11 88% Vacant 286 51 51 - 100% Other 50 59 74 15 80% Core UK portfolio 7,158 1,059 1,411 352 Home Re
Slide 14: Annual Financial Results: Net Asset Value per Share
Annual Financial Results Net Asset Value per Share Pence per Share 2009 2008 Gross net asset value 411 535 Add/(Deduct): Mark to market adjustments (61) (6) Deferred tax on revaluation surpluses (undiscounted) (99) (144) NNNAV 251 385 Grainger NAV (base case) 360 520 Page 14
Slide 15: Annual Financial Results: Income Statement
Annual Financial Results Income Statement 2009 2008 Non £m Trading Valuation Recurring Total Trading Valuation Total Net rents 53 - - 53 51 - 51 Trading profit 54 - - 54 73 - 73 (Loss)/profit on investment properties/subsidiaries (1) - - (1) 4 - 4 Fees from fund and asset management 6 - - 6 6 - 6 Ot
Slide 16: Annual Financial Results: Pre-Tax Earnings
Annual Financial Results Pre-Tax Earnings 2009 2008 Non £m Trading Valuation Recurring Total Trading Valuation Total Property income 79 (44) (3) 32 106 (55) 51 Joint ventures/associates (3) (5) - (8) (5) (48) (53) Goodwill and loan impairment - (22) - (22) - (10) (10) Derivatives - (39) - (39) - (11
Slide 17: Annual Financial Results: Impact of valuation and one-off items
Annual Financial Results Impact of valuation and one-off items £m Loss before taxation (170) Adjust for non-cash items : Property - valuation movements 49 : Financial - mark to market and one off items 118 : Other - cost of sales and other movements 173 Cashflow generated from operations 170 Page 17
Slide 18: Annual Financial Results: Cashflow
Annual Financial Results Cashflow £m 2009 2008 Income Rents and other income net of overheads 29 31 Property sales 215 176 Net proceeds from sale of equity in subsidiary - 4 Working capital movements (9) 2 235 213 Interest, tax and dividends (including inducement) (129) (91) Net operating income 106
Slide 19: Debt Analysis
Debt Analysis £m 2009 2008 Gross debt 1,589 1,664 Cash 28 43 Net debt (before deducting costs) 1,561 1,621 Available headroom 171 370 Average maturity (years) 4.4 4.5 Hedging level 93% 85% Blended interest rate 5.5% 6.2% LTV (Core banking facilities) 66% 66% LTV (Group basis) 71% 68% LTV based upon
Slide 20: Dividend Policy
Dividend Policy • For 2009, Directors have recommended a final dividend equivalent to 2008 final with a £5m payout on existing shares • For 2010, the Board expects the dividend payout including interim dividend to range between 2009 and 2008 level (i.e. £5-8m) • For 2011 onwards, progressive dividen
Slide 21: Outlook and Rights Issue
Outlook and Rights Issue Page 21
Slide 22: Current Trading
Current Trading • Portfolio liquidity - £45m of sales with contracts exchanged or ‘in solicitors hands’ • Residential property values in general appear to be stabilising across the UK with signs of particular improvement in Central and Greater London • Market deal flow in the UK has noticeably incre
Slide 23: Use of Proceeds
Use of Proceeds Proceeds from the rights issue to strengthen Grainger financial position and enable the group to make compelling acquisitions Optimise capital structure • £105m to repay permanently existing facilities under the terms of the forward start agreements • Mandatory prepayment to result i
Slide 24: Current Market Opportunities
Current Market Opportunities • Increased deal flow in the last 3 months for both single asset purchases as well as larger corporate/portfolio opportunities – Regulated / Reversionary single assets: advantageous pricing, balance sheet replenishment (core business), arbitrage opportunities – Larger ma
Slide 25: Rights Issue
Rights Issue Principal terms and headline timetable Grainger plc is announcing a 2 for 1 fully underwritten rights issue to raise gross proceeds of up to £250m Rights issue highlights Proposed timetable Net proceeds raised £238m Announcement of Rights Issue 5 Nov Basis 2 for 1 at the Ex-dividend dat
Slide 26: Proforma Financials Post Rights Issue
Proforma Financials Post Rights Issue • Strengthened financial position post rights issue bringing proforma Core LTV down to 53% • Provides ability to make compelling acquisitions • Annual interest savings of £5.7m expected post mandatory prepayment under the debt restructuring Proforma Actual 30 Se
Slide 27: Summary
Summary • Considerable self help implemented and achieved (e.g. accelerated sales and new banking deal) • Market deal flow has accelerated in core business areas with opportunities in regulated tenancies and selective opportunities in other business areas • Opportunity to recapitalise the business a
Slide 28: Appendices
Appendices grainger plc Page 28 nat ae a\\ oe at BH ii c
Slide 29: Group Overview
Group Overview • UK’s largest quoted specialist residential property owner Gross asset value per portfolio at 30 September 2009 • Substantial liquid portfolio valued at £2.1bn at 30 September 2009, mostly un-modernised properties of low average value 21% • Diversified business including regulated pr
Slide 30: Business Areas Overview: Core
Business Areas Overview Core • Properties typically acquired at discount to vacant possession value, reversionary surplus £352m • Primarily (90% by value) regulated properties or vacant ex-regulated • Diverse portfolio assembled over a number of years • Sustainable demand with average value of regul
Slide 31: Business Area Overview: Retirement Solutions
Business Area Overview Retirement Solutions • Grainger is UK market leader in home reversion with 31% market share as at 30 September 2009 (source: SHIP) • Bridgewater business winner of Best Home Reversions Provider in 2008 for the third consecutive year • Established distribution network • Portfol
Slide 32: Business Area Overview: Fund Management and Residential Investments
Business Area Overview Fund Management and Residential Investments • Major co-investment vehicle is G:res1, Grainger has £24m equity (21.6%) • Property and asset advisor to Schroders ResPUT: Grainger equity £9m (21.8%), liquidation currently in progress • Grainger GenInvest and Geninvest II : 50/50
Slide 33: Business Area Overview: Property and Asset Management Services
Business Area Overview Property and Asset Management Services • Combines long term asset management, day to day property management and specialist sales and acquisitions teams on nationwide basis • Provides services to JVs/associates as well as owned portfolio (total 24,414 units of which 7,180 are
Slide 34: Business Area Overview: Development
Business Area Overview Development • Market Value balance sheet at year end £71.4m • Committed spend up to 2013 of £10m (of which £6m in 2009-10) including £4m balance of purchase price on Newlands Common • Successful completion and sale of Hornsey Road development Strategy: Asset base not to exceed
Slide 35: Business Area Overview: Germany
Business Area Overview Germany Grainger Germany Portfolio as at 30 June 2009 • 6,807 residential units Wenningstedt • 373 commercial units (Sylt) Oldenburg i.H. Sereetz • 1 nursing home in Northern Germany Ratekau Schwanewede Emden Bremen • 482,624 sq. metres in total Oyten Rotenburg Fallingbostel L
Slide 36: Detailed Profit and Loss Account
Annual Financial Results Detailed Profit and Loss Account 2009 2008 UK Residential UK Development Europe Total UK Residential UK Development Europe Total £m £m £m £m £m £m £m £m Gross rents/other income 53.4 1.1 30.9 85.4 56.4 1.2 21.8 79.4 Property expenses (12.5) - (11.9) (24.4) (13.3) (0.2) (6.4)
Slide 37: Detailed UK Residential Income Account
Annual Financial Results Detailed UK Residential Income Account £m Retirem ent Fund Managem ent/ Core Solutions Residential Investm ents Total Gross rents/other income 41.7 6.0 5.7 53.4 Property expenses (10.6) (1.5) (0.4) (12.5) 31.1 4.5 5.3 40.9 Trading Profits 39.7 7.0 - 46.7 NRV provision agains
Slide 38: UK Portfolio Location
Portfolio Overview UK Portfolio Location Value Number Investment Value Vacant Possession Value reduction in year of units £m % £m % % 01 Central London 534 179 12% 242 11% 2.4% 12 01 Inner London 1,127 238 15% 309 15% (1.3%) 01 Outer London 1,200 167 11% 233 11% (3.3%) 02 South East 2,315 254 16% 35
Slide 39: Analysis of investment in JVs and Associates
Portfolio Overview Analysis of investment in JVs and Associates Total Gross Liabilities/ Net Grainger Grainger Grainger 2009 Assets Debt Assets Share Share Goodwill Loan Investment Designation £m £m £m % £m £m £m £m UK Residential - G:res1 Associate 365 (252) 113 21.6% 24 - - 24 - Schroder Associate
Slide 40: Development - Status of Major Projects
Portfolio Overview Development - Status of Major Projects Project Description Status Newlands Common 537 acre greenfield site, freehold with overage Outline Consent granted for 1635 residential units and 1 interest in Waterlooville, Hampshire. million sq. ft. B1-B8 space. 1000 further properties on
Slide 41: The Regulated Tenancy Market
The Regulated Tenancy Market Core Portfolio Regulated tenancy market • c. 120,000 units remaining in England (Source: Communities and Local Government) • Typically bought by Grainger at a discount to the Vacant Possession Value and therefore have an inherent Reversionary Surplus • With an average va
Slide 42: Track Record
Track Record • Outperformance over the last 10 years Dec-06 Launch of G:Res1 800p 700p Dec-03 Oct-09 Buy-out of Deutsche Announced £615m debt Bank’s share in BPT restructuring 600p Oct-09 May-01 Andrew Cunningham 500p Acquisition of BPT with appointed CEO Deutsche Bank 400p Jan-07 Acquisition of CHA