A year of major transformation, delivering strong, sustainable returns, well ahead of plan 2019 Full Year Results 27 November 2019
Agenda Originate Invest Operate 1. Overview Helen Gordon Chief Executive 2. Financial Results Vanessa Simms Chief Financial Officer Vanessa Simms 3. CONNECT Chief Financial Officer Helen Gordon 4. Market and business update Chief Executive Helen Gordon 5. Summary and Q&A Chief Executive 6. Appendix 2 Grainger Plc | www.graingerplc.co.uk
Originate Invest Operate Renting homes, enriching lives Serving over 20k customers The Grainger Collection at Wellesley, Hampshire 3 Grainger Plc | www.graingerplc.co.uk
The market leader in a compelling sector Originate Invest Operate Why Grainger Why PRS Market leader with the largest Compelling long-term returns operational PRS portfolio Strong inflation linked rent growth £2.0bn pipeline to come Underpinned by structural supply Fully integrated business model demand imbalance We originate, invest and operate all in house PRS demand growing Excellent customer service 4.5m to 7.2m by 2025 Supported by technology Supply reducing Research led capital allocation Competition’s progress limited Depth of experience 3% market share of large-scale corporate landlords Professionalisation Partner of choice Policy changes encouraging professional operators and discouraging private, amateur landlords Strong balance sheet 4 Grainger Plc | www.graingerplc.co.uk
Strong performance Originate Invest Operate Profit before tax Adjusted earnings Net rental income Rental Total property growth (L4L) return £ 131.3m £ 82.5m £63.5m 5.0% +3.6% +30% (12)% +45% (100) bps (38) bps Key highlights: ESG achievements: Significant income growth, both underlying and through investment Pipeline of new buildings now delivering at pace – 1,152 homes in FY19 GRIP fully integrated and delivering shareholder value TfL & other partnerships to boost pipeline from FY21 Reversionary surplus of £302m with £23m delivered in FY19 #2 in peer group Operational platform delivering outperformance, with GtN down to 25.2% CONNECT: technology to further enhance operational platform Excellent ESG achievement 5 Grainger Plc | www.graingerplc.co.uk
A transformational year Originate Invest Operate Delivering today and building for tomorrow Delivering value today Building value for tomorrow Transitioned to a predominantly PRS £2bn PRS pipeline – representing c.9k business – Balance sheet and earnings now homes aligned to PRS TfL partnership – secured partnership for Transformational GRIP transaction – fully c.3,000 homes integrated & delivering strong results with c.1,000 homes to be delivered next year £13.6m captured since acquisition Leading sector engagement 1,152 PRS homes delivered – 4 schemes representing c.£ 10m of net rent completed in the year Developing our platform and maximising efficiency Optimising capital structure Building our CONNECT platform Exploiting scalability and operational Continually enhancing process leverage Cost focus; gross to net and overheads 6 Grainger Plc | www.graingerplc.co.uk
Successfully delivering returns Originate Invest Operate from the GRIP acquisition Strategic Portfolio Operational Financial fit scale synergies benefits We said… We delivered… Immediate income growth £17.7m additional net rent in 9 months Accelerates PRS transition PRS now majority of portfolio & income Simplify structure GRIP now fully integrated Gross to net reduced from 32% to 25% Align operations London demand fuelling rental growth Located in highest grow area £13.6m already delivered £17m of value add £103m secured post acq in addition to Enable investment in London & South TfL partnership East on balance sheet S&P upgrade in Dec 18 Improve credit rating Debt cost reduced by 1/3 Lower debt cost 7 Grainger Plc | www.graingerplc.co.uk
A clear growth trajectory Originate Invest Operate Delivery of the fully funded pipeline will create a PRS dominated business OPERATIONAL PORTFOLIO PIPELINE 8,940 homes , £2.6bn 9,104 homes, £ 2.0bn £1,093m c.£600m £683m £1,526m £732m Regulated TfL* Planning/ PRS Secured pipeline tenancies c.3,000 Legals 5,597 homes 3,209 homes 2,895 homes homes 3,343 homes * TfL Partnership – indicative estimate of Grainger’s unlevered 51% share based on c.3,000 units at an assumed £400k per unit. Future portfolio (GAV) Current portfolio (GAV) (post-pipeline completions) 74% 51% Regulated 49% Regulated 42% 24% 26% PRS PRS 76% 1 2 58% Resi Sales Profit Net Rent Resi Sales Profit Net Rent 1 FY19 figure, used for illustrative purposes. 2 Estimated NRI is a target only and not a forecast. There can be no guarantee of future performance. 8 Grainger Plc | www.graingerplc.co.uk
2. FY19 Financial Results Vanessa Simms Chief Financial Officer
Financial highlights Originate Invest Operate Transformational year; PRS and net rent now the key drivers Income FY18 FY19 Change Rental growth (like-for-like) 4.0% 3.6% (38) bps Net rental income £43.8m £63.5m +45% Adjusted earnings £94.0m £82.5m (12)% Profit before tax £100.7m £131.3m +30% Dividend per share* 4.75p 5.19p +9% Capital FY18 FY19 Change EPRA NTA per share 274p 278p +1% EPRA NNNAV per share - post rights issue* 270p 272p +1% Total Property Return 6.0% 5.0% (100) bps Total Accounting Return (ROSE)** 6.1% 4.4% (174) bps Reversionary surplus £277m £302m +9% Net debt £866m £1,097m +27% Group LTV 37.1% 37.1% - Cost of debt (year end) 3.2% 3.0% (17) bps *Pence per share comparatives for FY18 have been adjusted for the impact of the rights issue. Pre rights issue FY18 NNNAV restated for bonus adjustment only stood at 286p **Excludes 5p mark to market movement in FY19 10 Grainger Plc | www.graingerplc.co.uk
Income statement Originate Invest Operate Greater reliance on recurring net rental income Key highlights: FY18 FY19 Change Net rental income £43.8m £63.5m +45% Significant growth in NRI Profit from residential sales £70.1m £60.4m (14)% Gross to net = 26.1% Stabilised GtN = 25.2% Profit from development £11.7m £7.4m (37)% Passing net rent = £70m pa Mortgage income (CHARM) £5.8m £5.5m (5)% Management fees £7.1m £4.4m (38)% Sales performance Overheads £(27.9)m £(28.0)m +0% Sales velocity maintained at 111 days Pre-contract costs £(1.1)m £(0.6m) (45)% Selling at 0.4% ahead of valuations Joint ventures £9.6m £2.0m (79)% Lower volumes of vacant properties due to strong close to FY18 and lower Net finance costs £(25.1)m £(32.1)m +28% vacancy rate at 5.9% (FY18: 6.7%) Adjusted earnings £94.0m £82.5m (12)% Development for sale concluded Adjusted EPS* (diluted, after tax) 16.4p 11.5p (30)% Cost control Flat overheads with larger portfolio Profit before tax £100.7m £131.3m +30% Earnings per share* Interest cost lowered by 30bps 18.9p 19.8p +5% (diluted, after tax) Joint Ventures : : FY18 includes one off Adjusted EPRA Earnings £26.1m £28.8m +10% £7m profit from WIP sale * Pence per share comparatives for FY18 have been restated for the bonus adjustment of the rights issue in December 2018. 11 Grainger Plc | www.graingerplc.co.uk
Net rental income growth Originate Invest Operate Step change in net rent during the year +45% +£19.3m + £2.3m £63.5m PRS L4L +3.4% Regs L4L +4.4% Total L4L +3.6% £43.8m £( 1.9)m FY18 Net Disposals PRS Rental FY19 Net Rental Income investment growth Rental Income 12 Grainger Plc | www.graingerplc.co.uk
EPRA Net Asset Values Originate Invest Operate Revised EPRA measures provide a more appropriate measure £m pence per share Property assets (market value) 2,932 478 Net liabilities (1,111) (181) EPRA NAV / EPRA Net Reinstatement Value (NRV) 1,821 297 Tax – deferred & contingent – trading assets (102) (17) Exclude: Intangible assets (11) (2) EPRA Net Tangible Assets (NTA) 1,708 278 Add back: Intangible assets 11 2 Tax – deferred & contingent – investment assets (19) (3) Mark to market fixed rate debt and derivatives (34) (5) EPRA NNNAV / EPRA Net Disposal Value (NDV) 1,666 272 Reversionary surplus – excluded from NAV metrics 302 49 EPRA Net Tangible New EPRA measures Reversionary surplus Assets (NTA) EPRA NTA is the most £302m of reversionary appropriate NAV measure. surplus to crystallise, after 278pps £ 23m realised in FY19 277p Excludes the value of intangibles (technology +49pps investment). 13 Grainger Plc | www.graingerplc.co.uk
EPRA Net Tangible Assets (NTA) Originate Invest Operate Net rent and PRS valuation gains now key components +3p +10p (5)p +11p (8)p (4)p +7p (5)p +12p (4)p (3)p 278p PRS +3.3% 274p Regs (0.3)% Total +1.9% * Breakdown of valuation growth by region available in the Appendix. 14 Grainger Plc | www.graingerplc.co.uk
Net debt Originate Invest Operate Strong operational cashflow supports our growth plans GRIP Transaction + £239m + £400m £(335) m Operating cashflow £(184)m £(88) m +£235 m £1,097m £(292) m +£25 m +£4 m + £174m +£38 m +£70 m £866m 15 Grainger Plc | www.graingerplc.co.uk
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