Accelerating our growth strategy 14 November 2018
Agenda Originate Invest Operate 1. Overview Helen Gordon Chief Executive 2. FY18 Financial Results Vanessa Simms Chief Financial Officer 3. Financial impact of the transaction Vanessa Simms Chief Financial Officer Helen Gordon 4. Market and business updated Chief Executive Helen Gordon 5. Summary Chief Executive 2 www.graingerplc.co.uk
Accelerating our PRS Originate Invest Operate growth strategy Acquisition of A large, high quality, Grainger-managed, 100% GRIP JV tenanted PRS portfolio – c.1,700 units Growing Great progress to date with £943m secured pipeline Expanding pipeline to £1.37bn Strong financial Strong financial performance and results continued track record of delivery Raising equity c.£347m proposed rights issue for growth 3 www.graingerplc .co.uk
FY18 Results ^ - Strong performance Originate Invest Operate Adjusted Net rental Rental EPRA Total return earnings * income growth * NNNAV * ROSE * £94m £43.8m +4.0% 316pps 6.1% +26% +8% Like-for-like +4% Key highlights Secured pipeline increased to £943m to date (excl GRIP) Further £382m in planning and legals Strong operational performance across all metrics, at scale with over 8,200 units AUM Accelerated asset recycling with £157m sold in FY18 Strong sales performance Improved capital structure Investment in technology ^ All figures for year ended 30 September 2018 unless otherwise indicated. * Definitions of non-IFRS measures can be found on the final page of this document. 4 www.graingerplc .co.uk
Strong track record of delivery Originate Invest Operate We said… (in January 2016) We delivered… Target of £850m PRS investment by 2020 £943m secured to date Grow NRI 35% growth delivered from FY15 to FY18 Improve margins (gross to net) Gross to net reduced from 31% (FY15) to 26% (FY18) Reduce overheads * Reduced by 25% compared to FY15 to £27.9m (FY18) Lower LTV * Lowered from 45.5% (FY15) to 37.1% (FY18) Reduce cost of debt to 4% * Reduced to 3.2% (at period end, FY18) Net rental income to cover costs by 2020 NRI > costs, post pipeline NRI to equal sales profits by 2020 Pipeline secured to deliver NRI > sales Portfolio to be 50:50, PRS and Regulated Tenancies Pipeline secured to deliver PRS > 50% £450m of non-core businesses sold Simplify the business £157m of asset-hierarchy led recycling 4 JV’s brought to profitable conclusion *** * Non-IFRS definitions can be found in the Appendix. ** Targeted NRI growth is a target only and not a profit forecast. There can be no guarantee of future performance. *** Assumes successful completion of GRIP acquisition. 5 www.graingerplc .co.uk
Opportunity to accelerate growth Originate Invest Operate Raising equity (1) (2) for growth Acquiring c.1,700 tenanted Increasing our PRS PRS assets (GRIP) development pipeline Gross rents of c.£32.5m * £1,370m per annum targeted (FY18) Growth opportunity Funding our growth Acquisition of remaining 75% of the GRIP c.£347m rights issue, to be launched JV from APG for £396m 14 Nov 2018 Grainger-managed portfolio since 2013 Additional debt capacity and operational cashflow History of strong performance and resilient rent roll Strong rental locations Full flexibility to invest in London and South East post transaction * Forecast FY19 assuming 3.2% rental growth and normalised void rates. Targeted gross rents is a target only and not a profit forecast. There is no guarantee of future performance. 6 www.graingerplc .co.uk
Acquiring GRIP – Originate Invest Operate a large, high quality PRS portfolio GRIP Portfolio – Total GAV of £696m (c.1,700 PRS units) Large, high quality, tenanted PRS portfolio in attractive, target locations in London 92% and SE Managed by Grainger since 2013 Avg GRIP rent as a % of 4.9% * gross yield, c.£32.5m gross rents pa market avg (London) targeted ** Strong future rental growth locations 94% Value-add opportunities to drive further rental growth % of London assets within Mid-market rental price point 10 mins walk of Tube/Rail Network * Gross yield on stabilised portfolio only **Forecast FY19 assuming 3.2% rental growth and normalised void rates. Targeted gross rents is a target only and not a profit forecast. There is no guarantee of future performance. Argo Apartments, Canning Town, London Kew Bridge Court, Kew Bridge, London Silbury Blvd, Milton Keynes 7 www.graingerplc .co.uk
Acquisition rationale Originate Invest Operate Strategic, scale and synergies 1. Strategic fit 2. Portfolio scale 3. Operational synergies Aligned to our strategy Large, high quality tenanted Deep knowledge of the PRS portfolio portfolio – Grainger Immediate income and managed dividend growth Mid-market rental price points Alignment of portfolio Accelerates transition strategies into PRS Located in highest growth, target areas of UK Enhanced scale and Simplifies our business efficiencies £17m value add Improved returns opportunities * 4. Financial £32.5m ** increase in gross rents pa targeted Cost savings and financial synergies Supports improved credit profile Gross to net reduction from 32% to 26% *** Enhanced total returns, targeting > 8% **** Future NAV growth from pipeline * Estimate of NAV gain over four years based on ** Forecast FY19 assuming 3.2% rental growth and *** Forecast FY19, aligned to **** Targeted total return for Grainger is a target achieving c.£9m profit from asset recycling normalised void rates. Targeted gross rents is a target only Grainger’s group gross to net only and not a profit forecast. There can be no programme and c.£8m profit from capital works guarantee of future performance. and not a profit forecast. There is no guarantee of future performance. 8 www.graingerplc.co.uk
Increasing our PRS pipeline Originate Invest Operate Total Increased investment Original £850m pipeline PRS investment, £m £1,875m FY17: £651m target £1,370m New pipeline 943 45 382 505 Secured GRIP Pipeline (75% of Investment) Planning/legals GRIP Portfolio (75% of GAV) Breakdown of pipeline by acquisition type, £m Forward Funding 514 45 272 Direct Development 291 110 Tenanted 138 505 Acquisitions Secured Pipeline GRIP (75%) Planning / Legals Forward Funding includes GRIP pipeline (24.9%) and Vesta JV (20%) both formerly within co-investment category. Tenanted acquisitions includes 24.9% of GRIP tenanted acquisitions formerly within co-investment category, 9 www.graingerplc .co.uk
Investing in strong rental growth markets Originate Invest Operate Targeting the largest PRS locations with the best proven rental growth prospects Target locations Under review GRIP footprint Schemes secured Not under consideration New acquisition (FY18) Weak existing Strong existing tenant demand tenant demand London but strong growth & strong growth prospects prospects Manchester Bristol Birmingham Southampton Leeds Brighton Long-term growth potential Milton Keynes Portsmouth Portsmouth Sheffield Sheffield Liverpool Liverpool Strong existing tenant demand but weak growth Weak prospects existing tenant demand & weak growth prospects Current PRS demand 10 10 www.graingerplc.co.uk
Accelerating our transition to a Originate Invest Operate PRS investment business FY15 Pre Strategy (£, GAV) FY18 Before Acquisition (£, GAV) PRS PRS 35% 24% £70m £61m £44m £32m Regs Regs Resi Sales Profit Net Rent Resi Sales Profit Net Rent 65% 76% After Acquisition, Post Pipeline ^ FY18 After Acquisition* (£, GAV) (£, GAV) PRS 52% £128m ^^ Regs 32% £70m £68m** £70m Regs PRS 48% Resi Sales ProfitNet Rent^^^ Resi Sales Profit Net Rent*** 68% *Based on valuation of Grainger and GRIP as at 30.9.18. ^ Pipeline includes both secured and planning / legals schemes.. ** Grainger FY18 NRI plus forecast GRIP FY19 NRI assuming £32.5m gross rent less targeted 26% gross to net. ^ ^ Estimated net rent post pipeline completed and stabilised, as per NRI bridge. ^ ^ ^ Estimated NRI is a target only and not a profit forecast. There can be no guarantee of future performance. ****Estimated NRI is a target only and not a profit forecast. There can be no guarantee of future performance. 11 11 www.graingerplc .co.uk
2. FY18 Financial East Street, Southampton Results review Vanessa Simms Chief Financial Officer
Financial highlights Originate Invest Operate Strong financial performance and further improved capital structure Income FY17 FY18 Change Rental growth (like-for-like) 3.8% 4.0% +20 bps Net rental income £40.4m £43.8m +8% Adjusted earnings £74.4m £94.0m +26% Profit before tax £86.3m £100.7m +17% Proposed dividend per share 4.86p 5.26p +8% Capital FY17 FY18 Change EPRA NNNAV per share 303p 316p +4% Net debt £848m £866m +2% Group LTV 37.7% 37.1% (53) bps Cost of debt 3.5% 3.4% (13) bps 3.4% 3.2% Cost of debt (period end) (22) bps Reversionary surplus £310m £277m (11)% Total Return 7.3% 6.1% (120)bps 13 13 www.graingerplc.co.uk
Recommend
More recommend
