Market leader with a strong growth trajectory 2018 Half year results Helen Gordon, Chief Executive Vanessa Simms, Chief Financial Officer 17 May 2018 Grainger Plc | www.graingerplc.co.uk | Half year results for the six months ended 31 March 2018 | 17 May 2018
Agenda Originate Invest Operate 1. Highlights and Helen Gordon Chief Executive strategic update 2. Financial review Vanessa Simms Chief Financial Officer 3. Market, business Helen Gordon Chief Executive update and outlook 4. Q&A Helen Gordon , Chief Executive Vanessa Simms , Chief Financial Officer John Kenny , Chief Operating Officer Andrew Saunderson , Director of Investments Mike Keaveney , Director of Land and Development 2 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
Strong performance Originate Invest Operate Adjusted earnings Net rental income Rental EPRA growth NNNAV +20% +9% +4.1% +1% £40.9m £21.8m Like-for-like 306pps Key highlights Secured pipeline now up to £756m (FY17: £651m, HY17: £439m) Good visibility on investment opportunities beyond £850m Improved design, purpose built PRS product now operational (Argo Apartments) Accelerated asset recycling Strong sales performance Improved capital structure Investment in technology 3 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
A fully integrated business model Originate Invest Operate How we create value Planning process Capital allocation Design Geographical targeting Investment management Layout Specifications Acquisitions Delivery management Asset recycling Valuation ▪ Overseeing delivery of c.3,200 ▪ £236m secured Grow rents new PRS homes since 1 Oct ▪ Completing 4 ▪ £120m asset Simplify schemes in FY18 recycling completed (Argo, Berewood, including Walworth and focus Gunhill and Phase 1 JV sale of Clippers Quay) Build on our experience Lettings Technology On boarding Management efficiencies ▪ 4 new schemes operational Customer experience Repairs & maintenance ▪ Investment in technology 4 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
Delivering on our strategy Originate Invest Operate Since FY15 Strategic priority 1: Grow rents Net rental income increased by 35% £756m of PRS investment secured PRS investment plan beyond £850m to deliver significant growth in net rental income Property operating costs (gross to net) improved from 31% to 26% Strategic priority 2: Simplify and focus Restructured the business to enhance efficiency, overheads reduced by 25% c.£450m cash from sale of non core businesses Cost of debt reduced from 5.3% to 3.1%* Debt maturities extended to 6.6 years* Continued asset recycling with £250m targeted over 3 years Strategic priority 3: Build on our experience as the UK’s leading residential landlord c.8,500 operational rental homes** (c.5,100 PRS) c.3,200 new PRS homes under development (5,000 in the pipeline) Increased scalability through organisation and technology Improved customer service delivery and building design * Proforma ** After the sale of the Walworth JV 5 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
Further investment progress Originate Invest Operate Potential funding capacity over next PRS investment, £m 3 years 756 258 519 PRS Pipeline 0 200 400 600 800 1,000 1,200 1,400 SECURED PLANNING / LEGAL UNDER CONSIDERATION Breakdown of pipeline by acquisition type, £m 411 41 326 Forward Funding 179 170 141 Direct Development 111 Tenanted Acquisitions Co-investment 55 47 52 (GRI Share) - 200 400 600 6 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
Where we are investing Originate Invest Operate Our investible cities strategy, utilising our in-house research capability Target locations Schemes secured Under review Not under consideration PRS Operational & Weak existing Strong existing Top cities secured units tenant demand tenant demand London but strong growth & strong growth London 3,269 prospects prospects Manchester 1,717 Bristol 511 Bristol Manchester Milton Keynes 400 Southampton Birmingham Leeds 351 Long-term growth potential Milton Keynes Leeds Sheffield 283 Portsmouth Birmingham 220 Liverpool Sheffield Brighton Strong existing Planning / legals tenant demand c.950 further units Weak but weak growth existing prospects Direct development tenant demand & schemes including weak growth Newbury, Waterloo and prospects Besson St JV in Lewisham Current PRS demand 7 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
Summary of highlights Originate Invest Operate SilburyBoulevard, Milton Keynes Good financial & operational performance Leading the market Further investment success Improved capital structure Accelerated asset recycling Well positioned for future growth 8 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
Financial review East Street, Southampton Vanessa Simms Chief Financial Officer
Financial highlights Originate Invest Operate Strong financial performance and improved capital structure Income HY17 HY18 Change Rental growth (like-for-like) 3.5% 4.1% +60 bps Net rental income £20.0m £21.8m +9% Adjusted earnings £34.1m £40.9m +20% Profit before tax £41.2m £50.6m +23% Operating cashflow £63.5m £77.5m +22% Interim dividend per share 1.60p 1.74p +9% Capital FY17 HY18 Change EPRA NAV per share 343p 345p +1% EPRA NNNAV per share 303p 306p +1% Net debt £848m £912m +8% Group LTV 37.7% 39.0% +130 bps Cost of debt (average) 3.5% 3.5% - Reversionary surplus £310m £305m (2)% 10 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
Income statement Originate Invest Operate +20% growth in adjusted earnings Growth in adjusted earnings HY17 HY18 Change ‒ Increased net rental income Net rental income £20.0m £21.8m +9% Profit from sales – residential £28.7m £32.3m +13% ‒ Residential sales Profit from sales – development £6.3m £6.6m +5% ‒ Effective cost management Mortgage income (CHARM) £3.1m £2.9m (6)% ‒ High rental margins maintained, Management fees £2.3m £2.8m +22% gross to net 25.9% (HY17: 25.8%) Overheads & other expenses £(13.8)m £(13.8)m 0% Strong sales pipeline for H2 Joint ventures £1.2m £1.5m +25% Finance costs £(13.7)m £(13.2)m (4)% Post period end Adjusted earnings £34.1m £40.9m +20% ‒ Walworth JV sale generating £7m profit Adjusted EPS (diluted, after tax) 6.6p 7.9p +20% ‒ Corporate bond refinancing, saving c.£1.5m in H2 Profit before tax £41.2m £50.6m +23% Earnings per share 8.0p 10.0p +25% (diluted, after tax) 11 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
Net rental income growth Originate Invest Operate Underpinning interim dividend growth of 9% £0.8m £21.8m +9% £1.7m PRS L4L 3.2% Regs L4L 5.5% £20.0m £(0.7)m Total L4L 4.1% HY18 HY17 Disposals Acquisitions Rental growth 12 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
Sales Originate Invest Operate +11% profit growth driven by strong residential sales Residential sales revenue HY17 HY18 and profit up +13% Revenue £m £m Strong performance from tenanted and other sales Residential sales on vacancy 49.5 38.3 providing capital for recycling into PRS Tenanted and other sales 7.3 25.6 Vacant sales Residential sales total 56.8 63.9 Maintaining sales values at 1.7% above previous valuations Development activity 34.6 41.5 H1 tempered by high volume of completions at the end of Total sales revenue 91.4 105.4 FY17, where £8.9m of profit was delivered in September (18% of total for the year) ‘Keys to cash’ metric of 107 days (HY17: 103) Profit £m £m Strong sales pipeline Residential sales on vacancy 24.7 18.8 Tenanted and other sales 4.0 13.5 Total residential sales pipeline* of £127m at 30 April 2018 (30 April 2017: £115m) Residential sales total 28.7 32.3 Development profit up +5% Development activity 6.3 6.6 Sales at Berewood, Hampshire Total sales profit 35.0 38.9 Development activity relating to RBKC due to complete this year * Includes completed sales, contracts exchanged, with solicitors and for sale. 13 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
EPRA NNNAV Originate Invest Operate £1,350m 5p (7)p £1,325m 10p (1)p (1)p 309p (3)p £1,300m HY18 market value movement* 306p Central & Inner London 0.0% £1,275m Outer London 1.0% 303p South East 3.1% South West 2.3% East and Midlands 3.0% £1,250m North West 1.0% Other regions 0.1% Total 0.9% £1,225m FY17 Adjusted Revaluations** Disposals Tax Derivatives / Total Dividends HY18 earnings (trading (deferred other assets) & contingent) * Wholly owned PRS and regulated tenancies ** Revaluations of trading property, investment property and co-investments 14 Grainger plc | www.graingerplc.co.uk | Half Year Results | 17 May 2018
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