Slide 1: Consistent strong performance and excellent outlook
Consistent strong performance and Change excellent outlook photo Half Year Financial Results for the period ended 31 March 2023 11 May 2023
Slide 2: Agenda
Agenda Originate Invest Operate 1. Highlights 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 Chief Executive 5. Appendix Grainger plc | www.graingerplc.co.uk 2
Slide 3: Continuing strong performance
Continuing strong performance Originate Invest Operate +12% Net rental income +6.8% L4L rental growth 98.5% Enigma Square, Milton Keynes The Pin Yard, Leeds Occupancy* 25.5% 62.3% Stabilised GtN Retention £3.1bn £1.4bn Operational portfolio Secured pipeline 9,737 5,406 Operational rental Homes in se
Slide 4: Strong performance and valuations
Strong performance and valuations Originate Invest Operate Net rental income Dividend a Rental growth Adjusted earnings EPRA NTA a +12% +10% +6.8% +2% -2% (L4L, HY) £48.0m 2.28pps £47.1m 310pps Financial highlights: Strategic highlights: Net rental income up +12% to £48.0m on Strong leasing performa
Slide 5: A growth business in a resilient sector
A growth business in a resilient sector Originate Invest Operate Exceptional Good pipeline Maintaining sales 1 2 3 leasing progress momentum PRS New Lets: 8.2% like-for- EPRA earnings to double Resilient prices within -2.2% of like rental growth with delivery of committed vacant possession val
Slide 6: Growth de-risked and locked-in
Growth de-risked and locked-in Originate Invest Operate Earnings to double with 4 years of growth de-risked, funded and locked-in via committed pipeline with optionality over timing of future development pipeline OPERATIONAL PORTFOLIO* PRS (Build to Rent) PIPELINE 9,737 homes, £3.1bn 6,030 homes, £1
Slide 7: An excellent outlook
An excellent outlook Originate Invest Operate Managing risks and maximising opportunities Rising interest rates Debt costs fixed in mid-3%’s for c.6 years Rental growth Strong customer affordability levels Rents aligned to wage growth Mid-market price point Housing an essential expenditure; rent pri
Slide 8: Summary of highlights
Summary of highlights Originate Invest Operate Continuing strong performance 1 Strong operational Strong and flexible 2 performance balance sheet +12% net rental income growth Committed pipeline fully +10% dividend increase funded 98.5% occupancy Cost of debt fixed for 6 years 62.3% cust
Slide 9: 2. HY23 Financial Results
2. HY23 Financial Results Rob Hudson Chief Financial Officer
Slide 10: Introduction
Introduction Originate Invest Operate Strong performance, resilient valuations, and transformative rent and earnings outlook Net rental income growth of +12% Dividend per share up +10% Resilient valuation with EPRA NTA at 310p as ERV growth of 4.1% largely offsets yield movement Fully funded committ
Slide 11: Financial highlights
Financial highlights Originate Invest Operate Like-for-like rental growth accelerates to 6.8% Income performance Income HY22 HY23 Change Excellent operational performance driven Rental growth (like-for-like) 3.5% 6.8% +322 bps by demand for our product Net rental income £42.8m £48.0m +12% Net rent u
Slide 12: Income statement
Income statement Originate Invest Operate Excellent operational performance drives NRI growth Key highlights: HY22 HY23 Change Strong occupancy and rental growth Net rental income £42.8m £48.0m +12% momentum Profit from sales £31.6m £25.2m (20)% Record occupancy continues at 98.5% Like-for-like rent
Slide 13: Net rental income
Net rental income Originate Invest Operate Strong operational performance driven by new openings and 6.8% LfL rental growth, with lettings outlook positive for FY23 +12% +£3.9m £48.0m +£2.5m £42.8m £(1.2)m Total L4L +6.8% PRS L4L +6.9% - New lets +8.2% - Renewals +6.1% Regs L4L +5.8% HY22 Net Rental
Slide 14: Valuation Summary
Valuation Summary Originate Invest Operate Resilient valuation performance down 1.3% despite wider macro uncertainty Capital Total Valuation PRS grown to 74% of the total Portfolio Homes Value movement operational portfolio, from 23% in 2016 £m £m % PRS portfolio valued on a rent / yield basis and R
Slide 15: EPRA Net Asset Values
EPRA Net Asset Values Originate Invest Operate EPRA NTA resilient £m pence per share Property assets (market value) 3,862 520 Net liabilities (1,453) (196) EPRA Net Reinstatement Value (NRV) 2,409 324 Tax – deferred & contingent – trading assets (104) (14) EPRA Net Tangible Assets (NTA) 2,305 310 Ta
Slide 16: EPRA Net Tangible Assets (NTA)
EPRA Net Tangible Assets (NTA) Originate Invest Operate Increasing net rent and resilient valuation results in NTA of 310p -2% 6 months +2%+X% 12 months +7p (2)p (2)p (6)p +0p (0)p (4)p Total -1.3% PRS -1.6% Regs -0.5% Dev -0.8% 310p 305p 317p Grainger plc | www.graingerplc.co.uk 16
Slide 17: Net debt
Net debt Originate Invest Operate Significant investment in pipeline delivery, with £74m of disposals in line with plan Operating cashflow Net investment £(38)m +£143m +£187m £(2)m +£29m £1,394m £1,262m £(67)m +£36m +£23m £(30)m £(44)m Disposals £(74)m^ Net debt increased to £1.4bn reflecting invest
Slide 18: Strong, secured and de-risked balance sheet
Strong, secured and de-risked Originate Invest Operate balance sheet No significant Cost of debt fixed in refinancing until 2027 mid 3%’s for c.6 years HY23 £300m of facilities successfully 96% hedged with a hedge Net debt £1,394m extended maturity of c.6 years Loan to value 36.1% Expected marginal
Slide 19: Liquidity and capex
Liquidity and capex Originate Invest Operate £527m headroom fully funding our committed pipeline Strong liquidity Current liquidity position (£m) Strong headroom of £527m from cash and available facilities Committed capex fully funded Capital expenditure plans more than covered by headroom 527 343 T
Slide 20: Passing net rent and earnings progression
Passing net rent and earnings progression Originate Invest Operate Transformative growth in NRI and doubling of earnings Secured not Planning / Legals Committed pipeline £890m Committed** £541m £202m +2.0x £165m +£9m £174m +£23m +1.9x +£10m +£12m £142m FY22: +£16m FY22: £175m +1.7x +£7m £148m FY22:
Slide 21: REIT conversion
REIT conversion Originate Invest Operate Anticipated in 2.5 years Drivers of REIT Conversion criteria & timing Corporation tax saving Balance of business tests, 75% of profits and assets from the Enhances returns by c.50bps p.a. property rental business (PRS/BTR) No conversion charge Chang
Slide 22: ESG reporting and financial integration
ESG reporting and financial integration Originate Invest Operate Data-driven approach to ESG 89% PRS portfolio A focus on measurement and reporting: Awards and benchmarks with EPC ratings A-C Scope 3 baseline measurement well underway FTSE4Good Since 2010 Customer emissions measurement strategy EPRA
Slide 23: Financial summary
Financial summary Originate Invest Operate Strong operational performance, resilient valuations and earnings outlook unchanged Strong balance sheet, fully funded pipeline and fixed cost debt gives strength to capital structure, with flexibility over disposals Net rental income growth of +12% driven
Slide 24: 3. Market and business update
3. Market and business update Helen Gordon Chief Executive
Slide 25: Market outlook
Market outlook Originate Invest Operate A growth business in a resilient sector A resilient sector Excellent market GraingerFY21 is well outlook positioned Long-term structural Acute supply & High quality, modern supply constraints demand imbalance properties, with lower Very strong running costs an
Slide 26: A resilient sector
A resilient sector Originate Invest Operate Declining permissions result in a fall in completions Employment less volatile than business investment Major residential development decisions granted Business Investment vs People in Employment, Index – Q1 2007=100 7,000 140 6,000 120 5,000 4,000 100 3,0
Slide 27: Excellent market outlook
Excellent market outlook Originate Invest Operate Demand and supply are out of balance And rents have room to grow Zoopla rental demand and supply* Rental growth follows inflation, (Index, Jan-10=100) 150 60% 51% 140 40% 130 20% 120 0% 110 -20% -9% -33% 100 -40% Jan-20 Jan-21 Jan-22 Jan-23 Jan-10 Ja
Slide 28: Grainger well-positioned
Grainger well-positioned Originate Invest Operate Grainger focused on young professional demographic Whom we know have the best affordability position Proportion of residents by age in Grainger’s PRS portfolio Proportion of household income spent on rent – English Housing Survey 40% 34% 35% 37% 38%
Slide 29: Disciplined research-led investment decisions
Disciplined research-led investment Originate Invest Operate decisions High demand / supply High demand / supply Schemes secured fundamentals and fundamentals and low growth potential high growth potential Target locations Oxford Exeter Under review Southampton London Cardiff Not under consideration
Slide 30: Building scale in key cities
Building scale in key cities Originate Invest Operate £890m committed pipeline Cluster Strategy Drives operational efficiencies and enables leveraging our brand nationally Investment (since 2016) Investment now delivering 18 operational BTR assets 9 cities & 3 towns De-risked pipeline Full
Slide 31: Our TFL partnership
Our TFL partnership Originate Invest Operate ‘Connected Living London’ our build-to-rent JV with TFL Structure Progress to date Long-term partnership with TFL Five schemes granted planning consent 51% Grainger, 49% TFL (1,591 homes) Ambition for 3,000+ rental homes Of which four schemes se
Slide 32: Secured pipeline projects
Secured pipeline projects Originate Invest Operate 20 high quality build-to-rent schemes Secured Secured in H1 23 Forward funding Direct Development The Mint, Nautilus Apts, The Barnum, Weavers Yard, Waterloo, Guildford Station, Fortunes Dock, Queens Rd, Newbury, West London Surrey Canning Town, Not
Slide 33: Our decision analytics program
Our decision analytics program Originate Invest Operate Using data and insights to drive our decision making Finalist Customers Product & Service Design Ambition: to maximise customer lifetime value Ambition: to deliver customer centric design and service in our best-in-class rental homes Current in
Slide 34: Building Grainger's consumer brand
Building Grainger’s consumer brand Originate Invest Operate Scale enabling our brand to better engage with our residents Engaging customers to attract and retain Promoting Grainger’s values and commitment to delivering great rental homes Building long-term communities which strengthen customer loyal
Slide 35: A leading responsible business
A leading responsible business Originate Invest Operate Creating Improving Supporting High Regional new supply housing affordability customer growth Alleviating the UK’s standards Energy efficient, satisfaction Supporting housing shortage Safe & secure mid-market homes Top rated customer Levelling U
Slide 36: Grainger is strongly positioned
Grainger is strongly positioned Originate Invest Operate 1 Secured growth EPRA earnings to double with committed pipeline 2 Strong balance sheet Low cost of debt fixed for 6 years Resilient valuations 3 Strong rental growth offsetting yield expansion Robust transactional evidence and strong investor
Slide 37: Thank you Q&A
Thank you Q&A Enigma Square, Milton Keynes
Slide 38: Appendix
Originate Invest Operate Appendix Contents Portfolio overview Page 39 1. Property information Fully funded committed pipeline Page 40 Portfolio summary and movements Page 41-42 Portfolio geographical breakdown Page 43-44 PRS Portfolio Pages 45-47 Secured pipeline schedule Pages 48-49 Investment sour
Slide 39: Portfolio overview
Portfolio overview Originate Invest Operate 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 the propert
Slide 40: Fully funded committed pipeline
Fully funded committed pipeline Originate Invest Operate Disciplined capital management underpinning growth Opening Headroom** Existing Committed Capex* Cash from operations*** Outer Pipeline Capacity £977m £977m £827m £827m £677m £677m £450m £300m £634m £527m £527m £150m £484m £334m £184m £527m £52
Slide 41: Portfolio summary
Portfolio summary Originate Invest Operate Market value Net Rent Units £m £m Net yield^ Residential – PRS 7,608 2,227 84 4.0% Residential – regulated tenancies 1,598 767* 13 1.8% Residential – mortgages (CHARM) 377 68 n/a n/a Forward Funded – PRS work in progress - 539 - - Development work in progre
Slide 42: Portfolio movements
Portfolio movements Originate Invest Operate Sep22 Additions Disposals Transfers Valuation Mar23 £m £m £m £m £m £m PRS London & SE 1,262 12 (12) 1 (32) 1,231 Regions 927 3 (4) 75 (5) 996 Total PRS 2,189 15 (16) 76 (37) 2,227 Regs London & SE 680 1 (28) - (5) 648 Regions 132 - (14) - 1 119 Total Reg
Slide 43: Portfolio geographical breakdown
Portfolio geographical breakdown Originate Invest Operate PRS & Regulated tenancies (HY23) PRS Regulated tenancies Region Units Market Change Net Units Market Change Net value vs FY22 yield^ value vs FY22 yield^ £m £m London & SE 3,469 1,231 (2.6)% 3.6% 1,060 648 (0.7)% 1.6% South West 514 209 (1.9)
Slide 44: PRS portfolio by geography
PRS portfolio by geography Originate Invest Operate Portfolio by units Portfolio by rent (£m) Key Central / Inner London 16% 16% 13% 22% Outer London South East 12% 20% 24% South West 17% 18% 7% East and Midlands 7% 7% 10% 11% North West Other Regions Portfolio by value (£m) Post secured pipeline by
Slide 45: Building our PRS portfolio across the UK
Building our PRS portfolio across the UK Originate Invest Operate Research led investment strategy and asset clustering to LEEDS & SHEFFIELD 1,0 8 7 deliver operational efficiencies NEWCASTLE 380 Operational 803 MANCHESTER 1,584 Operational 380 (inc Brook Place and The Headline) (inc The Forge) Pipe
Slide 46: PRS portfolio
PRS portfolio Originate Invest Operate Top 20 assets Unit mix Studio / Area # Asset City Postcode Units 1 bed 2 bed 3 bed Sq ft 1 Clippers Quay Manchester M50 3AF 510 162 290 58 371,622 2 The Filaments Manchester M3 5PF 376 98 235 43* 246,416 3 Enigma Square Milton Keynes MK9 2FU 261 195 54 12 148,8
Slide 47: PRS portfolio – rent levels
PRS portfolio – rent levels Originate Invest Operate Rent per calendar month (% of units) £1,500+ 17.7% 8.8% £1,000-£1,500 14.3% 25.3% £750-£1,000 6.8% 17.1% Under £750 3.1% 6.9% 74% below £1,500 pcm London & South East Regions Grainger plc | www.graingerplc.co.uk 47
Slide 48: 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 The Mint, Guildford Station, Surrey 98 Mid FY23 On site £37m £31m c.5.5% Fortunes Dock, Nautilus Apartments
Slide 49: Secured pipeline schedule
Secured pipeline schedule Originate Invest Operate (Continued from previous page) Est. Gross No. Targeted Grainger Spend to yield Name units launch Status investment date target Direct development** Weavers Yard, Newbury, West Berks* 198 Early phases Part complete £52m* £51m* c.6.25% launched Direct
Slide 50: Routes for future growth
Routes for future growth Originate Invest Operate Disciplined yet flexible approach to sourcing Continuing to track investment opportunities Creating optionality to enable us to Forward Fund continue our growth trajectory at the appropriate time De-risking delivery through careful Public Sector Dire
Slide 51: Market value balance sheet
Market value balance sheet Originate Invest Operate FY22 HY23 Market value balance sheet (£m) Residential – PRS 2,189 2,227 Residential – regulated tenancies 812 767 Residential – mortgages (CHARM) 69 68 Forward Funded – PRS work in progress 466 539 Development work in progress 182 172 Investment in
Slide 52: Segmental EPRA NTA balance sheet
Segmental EPRA NTA balance sheet Originate Invest Operate FY22 HY23 EPRA NTA market value PRS Reg* Other Group PRS Reg* Other Group balance sheet (£m) Investment property 2,753.5 22.4 - 2,775.9 2,853.0 21.7 - 2,874.7 Investment in joint ventures and 37.1 - 18.1 55.2 71.3 - 18.1 89.4 associates Finan
Slide 53: EPRA Earnings
EPRA Earnings Originate Invest Operate HY22 HY23 Adjusted EPRA Adjusted EPRA £m Adjustments Adjustments Earnings earnings Earnings earnings Net rental income 42.8 - 42.8 48.0 - 48.0 Profit from sales – trading property 31.0 (31.0) - 21.2 (21.2) - Profit from sales – investment property 0.6 (0.6) - 4
Slide 54: Segmental income statement
Segmental income statement Originate Invest Operate HY22 HY23 £m PRS Reg* Other Group PRS Reg* Other Group Net rental income 34.9 7.7 0.2 42.8 4 0 .7 6 .9 0 .4 4 8 .0 Profit from sales – trading property - 31.0 - 31.0 (0 .4 ) 21.6 - 21.2 Profit from sales – investment 0.6 - - 0.6 4 .1 (0 .1) - 4 .0
Slide 55: EPRA NRV, EPRA NTA and EPRA NDV
EPRA NRV, EPRA NTA and EPRA Originate Invest Operate NDV FY22 HY23 EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV £m IFRS Equity attributable to shareholders 1,966.8 1,966.8 1,966.8 1,923.8 1,923.8 1,923.8 Diluted NAV 1,966.8 1,966.8 1,966.8 1,923.8 1,923.8 1,923.8 Include: Revaluation of oth
Slide 56: Debt facilities
Debt facilities Originate Invest Operate Balance sheet, funding and hedging: strong, secured and de-risked 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 £392
Slide 57: Enigma Square
Enigma Square Originate Invest Operate Milton Keynes Asset Overview Socially responsible investment Forward fund, launched Nov 2022 Walk 261 high quality apartments score (13 x Studios, 182 x 1 beds; 54 x 2 beds, 12 x 3 beds) c.8,000 sq ft of commercial space 78 c.5,500 sq ft of internal residents a
Slide 58: Weavers Yard
Weavers Yard Originate Invest Operate Newbury, Berkshire 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 commercial space 96
Slide 59: Future reporting dates
Future reporting dates Originate Invest Operate 2023 Capital Markets Day 27 June Trading update September Full year results 22 November Grainger Plc | www.graingerplc.co.uk 59