Slide 1: Preliminary Annual Results
Preliminary Annual Results November 2012 * * Updated 1032 GMT, 09/01/2013
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 Directors
Executive Directors • Andrew Cunningham, Chief Executive • Mark Greenwood, Finance Director • Nick Jopling, Executive Director, Property • Peter Couch, Chief Operating Officer and Director of Retirement Solutions 3
Slide 4: Agenda
Agenda 1. Introduction Andrew Cunningham 2. Key transactions Nick Jopling 3. Financial highlights Mark Greenwood 4. Summary and outlook Andrew Cunningham 5. Appendices 4
Slide 5: Grainger at a glance
Grainger at a glance The UK’s largest listed residential property owner and manager * Operating profit before valuation movements, ** Includes other income of £1.0m overheads and CHARM Reversionary £m Market Value Rent per annum surplus Reversionary assets (Regulated tenancies, Retirement Solutions,
Slide 6: The UK housing market 2012
The UK housing market 2012 • Nationwide and Halifax: • Changes to political landscape house prices fell (1.3)% for the influencing housing market year and by (1.3)% the − Montague Review previous year − Planning reform • House prices continued to − Welfare Reform Act show regional variations − Fundi
Slide 7: Strategic objectives
Strategic objectives Location Active management to rebalance portfolio to economically strong areas Increase our exposure to the growing rental market through innovative Rents and value added transactions Fees Improve returns through leveraging operational platform Align operational and financial ge
Slide 8: Strategy in action
Strategy in action Result 62% of UK portfolio in London and SE Outperformance in valuation and Location 90% of German portfolio in four most sales affluent regions Innovative transactions to increase HI Tricomm, Royal Borough of K&C, Rents exposure to the rental market such as and For Profit Registe
Slide 9: Outperforming the market
Outperforming the market 125.0 20.5% 120.0 115.0 14.5% Grainger UKR 110.0 6.9% Grainger UKR 105.0 and RS Nationwide 100.0 Halifax (1.8)% 95.0 90.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 * Based on vacant possession values 9
Slide 10: Finding opportunities
Finding opportunities Amwell Street, Islington Caroline House, Bayswater • Bought for £3.8m in March 2010 • Bought for £9.3m in March 2006 • Spent £3.2m • Spent £10.3m • Sales and rental income of £0.9m to date • Sales and rental income of £28.4m to date • Remaining value of £9.5m (VP) • Remaining v
Slide 11: Increased fee income and new partners
Increased fee income and new partners • Fee income increased by 45% in the year 11
Slide 12: Reduced debt
Reduced debt • Debt reduced by £260m in the year • LTV down to 55% Net debt (£m) 1700 1600 1500 1400 1300 1200 1100 1000 900 2013 12
Slide 13: Growth in net assets
Growth in net assets • Growth in net assets of 3.2% for the year, 15% since 2009 Gross NAV 225 220 215 210 205 200 195 190 185 2009 2010 2011 2012 13
Slide 14: Agenda
Agenda 1. Overview of the business Andrew Cunningham 2. Key transactions Nick Jopling 3. Financial highlights Mark Greenwood 4. Summary and outlook Andrew Cunningham 5. Appendices
Slide 15: Key transaction 1
Key transaction 1 125 year lease on two high profile sites in the UK’s highest value Local Authority, Royal Borough of Kensington & Chelsea Young Street Hortensia Road 15
Slide 16: Key transaction 1: Delivering on the Group's strategy
Key transaction 1 Delivering on the Group’s strategy SALES FEES RENTS • Sales of high end • Grainger will asset and • Remaining stock rented apartments to repay property manage both out at either market or cost of development, as sites, earning fees on affordable rent levels well as providing top of
Slide 17: Key transaction 2: Heitman invests in Germany with Grainger
Key transaction 2 Heitman invests in Germany with Grainger* • Delivers on our long stated • Sales receipt reduces debt strategy for Germany • World class partner • Fee revenue meets Group strategy • Leveraging our hard and soft asset base • Platform for future *Grainger takes a 25% share ownership o
Slide 18: Strategy in Germany
Strategy in Germany • Germany is an attractive investment − attractive gross and net yield − stable capital values − low cost of debt • Asset managing remaining portfolio including a sales programme with a target of c€25m • Focus on bedding Heitman partnership down • Would consider further investmen
Slide 19: Key transaction 3
Key transaction 3 • Formal registration of our For Profit Registered Provider of social housing by the Homes and Communities Agency • Takes advantage of the increasingly blurred lines between private renting and social housing • Grainger Trust is a ring fenced subsidiary that provides access to new
Slide 20: Key transaction 3
Key transaction 3 • Long term income returns targeted at an ungeared IRR of 7.5 – 8% • Additional value to Grainger through fee income at asset and property management level • Value enhancing to strategic sites and development land in our ownership or control • Closes the circle of Grainger = Reside
Slide 21: Agenda
Agenda 1. Overview of the business Andrew Cunningham 2. Case studies and the market Nick Jopling 3. Financial highlights Mark Greenwood 4. Summary and outlook Andrew Cunningham 5. Appendices 21
Slide 22: Financial highlights
Financial highlights September September Movement Income statement 2012 2011 Operating profit (£m)* 126.4 126.2 0.2% Recurring profit (£m) 34.6 48.3 (28.4%) (Loss)/Profit before tax (£m)** (1.7) 26.1 Dividends per share (p)*** 1.92 1.83 4.9% Balance Sheet Gross NAV per share**** 223p 216p 3.2% NNNAV
Slide 23: Profit summary
Profit summary 2012 2011 £m £m Profit on sale of assets 77.6 81.0 Net Rents 63.5 62.4 Fees/ other income 11.0 8.0 Charm 7.1 7.1 Overheads/ other expenses (32.8) (32.3) OPBVM* 126.4 126.2 Finance costs, net (90.7) (76.3) JV’s and associates (1.1) (1.6) Recurring profit before tax 34.6 48.3 Valuation
Slide 24: Movement in gross NAV
Movement in gross NAV 1,000 £67m £(47)m £25m £(8)m 950 £(8)m £929m £900m 900 +3.2% 850 £m 800 750 700 650 600 Gross NAV Revaluation Elimination of Fair value of Dividend Other Gross NAV September Surplus valuation derivatives net September 2011 surplus on of tax 2012 disposal 216p 16p (11)p 6p (2)p
Slide 25: Movement in net debt
Movement in net debt £m 1,500 1,454 (35) (205) 1,400 1,312 98 (118) 1,300 1,200 1,194 1,100 1,000 900 September Net rent Net sales Interest/ September Heitman September 2011 tax/ 2012, Pre- transaction 2012, 2013 dividends Heitman Post- Heitman 25
Slide 26: Group debt analysis
Group debt analysis September September 2012 2011 £m £m Balance sheet debt 1,267 1,545 Cash 73 91 Net debt 1,194 1,454 Available cash and undrawn committed facilities 148 214 Average debt maturity (years) 5.5 5.9 Hedging level on gross debt 84% 73% LTV - core facility 48% 52% Interest cover - core f
Slide 27: Historical cashflows
Historical cashflows Cashflow from sales, rents and fees £m 380 360 340 320 300 280 260 240 220 200 2006 2007 2008 2009 2010 2011 2012 27
Slide 28: Sales on vacancy
Sales on vacancy • Normal sales on vacancy • Strong and stable cashflows • Does not include rents or fees 28
Slide 29: Agenda
Agenda 1. Overview of the business Andrew Cunningham 2. Key transactions Nick Jopling 3. Financial highlights Mark Greenwood 4. Summary and outlook Andrew Cunningham 5. Appendices 29
Slide 30: Summary and outlook
Summary and outlook Reshape the business to reflect long term changes in the housing market We have a well located, highly reversionary portfolio which provides Location good cashflow and opportunities to add value The Grainger of the future will have a higher proportion of rental income Rents and w
Slide 31: END
@ Investing in in homes since 1912 grainger plc
Slide 32: Appendices
Appendices Investing in homes since 1912 grainger pic
Slide 33: Portfolio summary
Portfolio summary No. of Market VP Reversionary Gross Gross sales Profit on units value Value surplus VP rent proceeds sale £m £m £m % £m £m £m Reversionary Assets Regulated 5,094 903 1,210 307 75% 34 44 9 Vacant 205 55 55 - 100% - 108 46 RS Reversion 4,754 360 553 193 65% 5 31 12 CHARM 938 99 99 -
Slide 34: Grainger UK portfolio
Grainger UK portfolio Vacant Market possession Market value, value, UK No. of units value, £m £m % London 1 3,741 1,150 903 50% (Total) 2 South East 1,850 293 212 12% 3 South West 1,723 283 239 13% 4 East 1,208 154 112 6% East 5 504 55 39 2% Midlands West 6 948 137 101 6% Midlands 7 Wales 133 14 9 0
Slide 35: Grainger German portfolio
Grainger German portfolio PRE-HEITMAN Market value % of market Germany No of Units €m value 1 Baden – Württemberg 1,489 119 26% 2 Hesse 1,329 100 22% 82% 3 Northrhine – Westphalia 1,655 100 22% 4 Bavaria 560 56 12% 5 Lower Saxony 749 36 8% 6 Rhineland – Palatinate 230 18 4% 7 Other 384 27 6% Total 6
Slide 36: Gross NAV balance sheet
Gross NAV balance sheet September September 2012 2011 £m £m Property related assets - wholly owned 2,012 2,371 - jv/associates 59 59 Total property related assets 2,071 2,430 Other assets 275 34 Cash 73 91 Gross assets 2,419 2,555 Debt (1,267) (1,545) Other net liabilities (223) (110) Net assets 929
Slide 37: Movement in NNNAV
Movement in NNNAV NNNAV up 2.5% since 30 Sept 2011 and 12.5% since 30 Sept 2010 £638m £8m £20m £20m £(8)m £(8)m £4m£4m £654m £654m 153p 5p (2)p 1p 157p 37
Slide 38: NAV Reconciliation as at September 2012
NAV Reconciliation as at 30 September 2012 400 300 Pence per share 9p 223p (37p) 32p 88p (29p) 200 157p 94p 100 0 Statutory Uplift stock to Adjust for Deferred tax Gross NAV Adjust for Deferred and NNNAV Balance market value derivative on property derivative/ contingent tax Sheet at 31 revaluation f
Slide 39: Effect of Heitman JV
Effect of Heitman JV Grainger plc pro forma statutory balance sheet Annualised 30.9.12 30.9.12 Adjustment Profit Prior to Adjustment After on Sold £ Heitman for Heitman Heitman completion Pro forma At Sept FX rate Net rental income 10.4 Property related assets - wholly owned 1,833 (185) 1,648 - 1,64
Slide 40: Movement in operating profit
Movement in operating profit* 150.0 £6.5m £3.0m £(11.7)m £126.2m £3.5m £(1.1)m £126.4m 100.0 50.0 0.0 Operating Increase in Increase in Increase in fee Decrease in Other Operating profit gross rents residential and other development profit September trading profit income trading profit September 201
Slide 41: Property sales and margins
Property sales and margins Full Year 2012 Full Year 2011 Units sold Sales Profit Margin Units sold Sales Profit Margin Trading Stock - Sales on vacancy 605 113.9 49.6 44% 561 106.5 46.8 44% Development - 18.9 3.4 - 22.1 15.1 Sales of tenanted and other 395 68.8 21.0 607 63.2 17.2 Investment Property
Slide 42: Regular, resilient cashflows
Regular, resilient cashflows Financial Years Ended 30 September (£m) 2012 2011 2010 2009 2008 2007 2006 Gross rents UK Residential 58 51 39 41 42 39 47 Retirement Solutions 5 5 6 6 6 2 - Development - - 1 1 1 2 1 Germany 27 30 30 30 22 10 5 Total 90 86 76 78 71 53 53 Property Sales net of sales fees
Slide 43: Debt maturity
Debt maturity Average maturity of all debt: 5.5 years 43
Slide 44: Derivative liability runoff chart
Derivative liability runoff chart 44
Slide 45: Tax
Tax • The tax credit for the year ended 30 September 2012 is £2.1m • The main CT rate for the UK changed from 26% to 24% with effect from 1 April 2012. Accordingly, the Group’s profit for the financial year ending 30 September 2012 is taxed at a corporation tax rate of 25% 30 September 2012 £m Loss/
Slide 46: Portfolio overview – JV/Associates
Portfolio overview – JV/Associates Joint Ventures Associate Curzon Hammersmith Prague/ Gebau Sovereign G:Res Total £m Park Zizkov Property assets 37 - 26 - 60 372 495 Other assets - 4 1 - 3 21 29 Total assets 37 4 27 - 63 393 524 External debt (16) - (11) - (25) (187) (239) Other liabilities (27) (4
Slide 47: Assets under management
Assets under management Total units under management on which we earn fees Units 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2007 2008 2009 2010 2011 2012 47
Slide 48: Principal development schedule
Principal development schedule Key project name Description, planning status and strategy Progress GDV GDV (with Book value (with out planning planning) permission) Aldershot 400 acre brownfield site in Hampshire; Development partner Development agreement signed 2 March 2011. role with Defence Estat