Grainger Plc · LSE:GRI
Grainger — FY2011 Earnings Presentation
52 slides from Grainger's earnings presentation, Nov 24, 2011
Slide 1: Preliminary Announcement of Results for the year ended 30 September 2011
Preliminary Announcement of Results for the year ended 30 September 2011 24 November 2011 1
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 Officer • Mark Greenwood Finance Director • Nick Jopling Executive Property Director • Peter Couch Chief Operating Officer, Head of Retirement Solutions 3
Slide 4: Agenda
Agenda 1. Our business 2. Strategy in action 3. Financial highlights 4. Looking ahead 5. Appendices 4
Slide 5: Our business
Our business A trader, investor and manager of residential properties Offering investors an exposure to residential returns from three main sources of income: Sales Rents Fees 5
Slide 6: Three income streams
Three income streams 2011 operating profit* (£m) UK Residential; Retirement Sales £81.0m Solutions; Development; Germany UK Residential; Germany; Rents £62.4m Retirement Solutions UK Residential; Retirement Solutions; Fund Management and Fees £8.0m Residential Investments; Development; Germany * Bef
Slide 7: KPIs
KPIs Operating profit before Gross net asset value Triple net asset value Return on capital valuation and non- per share (p) per share (p) employed (%) 153 recurring items (£m) 126.2 216 94.2 6.5 78.8 200 5.3 141 140 194 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 -4.3 Profit/loss be
Slide 8: Portfolio overview
Portfolio overview Substantial asset value and future revenue potential embedded in Grainger’s large, mature and geographically diverse portfolio Reversionary surplus of UK portfolio is £571m and gross rent roll is £56m for UK, £30m for Germany, totalling £86m Vacant No. of possession Investment % o
Slide 9: Agenda
Agenda 1. Our business 2. Strategy in action 3. Financial highlights 4. Looking ahead 5. Appendices 9
Slide 10: Strategy in action
Strategy in action Rebalancing residential • Acquisitions of high yielding HI Tricomm portfolio 1 portfolios to selective areas of value or growth • and Grainger GenInvest Some 62% of portfolio in London and the South East (56% at 30 Sept 2010) • Increase in gross rental income of 14% over twelve mo
Slide 11: Transactional highlights
Transactional highlights Sovereign joint venture • Increases scale of Grainger’s own home reversion business, and (Sales and fees) provides fee income, leveraging our existing platform HI Tricomm • Adds c.£9m to gross rent roll (Rents) • Brings in new lender to the group and extends overall debt mat
Slide 12: Agenda
Agenda 1. Our business 2. Strategy in action 3. Financial highlights 4. Looking ahead 5. Appendices 12
Slide 13: Financial highlights
Financial highlights September 2011 September 2010 Movement Operating profit* (£m) 126.2 94.2 +34% Profit before tax and derivatives (£m) 54.1 18.8 +288% Profit/ (loss) before tax (£m) 26.1 (20.8) Dividends per share (p) ***1.83p 1.70p +8% Gross NAV per share** 216p 200p +8.2% NNNAV per share** 153p
Slide 14: Profit summary
Profit summary Profit on sale of Fees/ Overheads/ Total Total Net Rents assets returns Other* 2011 2010 £m £m £m £m £m £m UK Residential Portfolio 38.4 55.0 0.5 (9.7) 84.2 69.4 Retirement Solutions Portfolio 3.8 10.0 0.5 4.4 18.7 12.2 Fund Management and Residential Investments - - 6.3 (2.7) 3.6 2.7
Slide 15: Movement in operating profit
Movement in operating profit* 150.0 £12.9m £(4.8)m £5.4m £(0.4)m £126.2m £12.9m £6.0m 100.0 £94.2m £'m 50.0 0.0 Operating Increase in Increase in Increase in Increase in Increase in Other Operating profit residential development gross rents property CHARM profit September trading profits trading pro
Slide 16: Property sales and margins
Property sales and margins September 2011 Units Gross sales Sold value Profit Margin £m £m % Total Property Sales UKR 1,030 152.5 55.0 36.1 RS 217 27.6 10.0 36.0 Development - 22.1 15.1 68.2 Germany 438 21.1 0.9 4.4 1,685 223.3 81.0 36.3 UKR/RS: Sales on vacancy 640 116.2 47.8 41.2 Investment sales
Slide 17: Valuation movements
Valuation movements Vacant Vacant possession possession Market Market value (VP) value (VP) value (IV) value (IV) before after before after revaluation revaluation Movement revaluation revaluation Movement Portfolio £m £m % £m £m % Total UKR 1,721 1,770 2.9 1,351 1,402 3.8 Total RS 582 570 (2.0) 371
Slide 18: NAV Reconciliation as at September 2011
NAV Reconciliation as at 30 Sept 2011 400 300 Pence per share 11p (31p) 29p 216p 200 83p (32p) 153p 93p 100 0 Statutory Uplift stock to Adjust for Deferred tax Gross NAV Adjust for Deferred and NNNAV Balance sheet market value derivative on property (EPRA) derivative/ contingent tax (EPRA) at 30 rev
Slide 19: Movement in gross NAV
Movement in gross NAV £'m 1,000 950 £57m £(45)m £29m £(5)m £(7)m £900m 900 £39m 850 £832m 800 750 700 650 600 Gross NAV Profit after Revaluation Elimination Fair value of Dividend Other Gross NAV Sept 2010 tax Surplus of valuation derivatives Sept 2011 surplus on net of tax disposal 200p 9p 14p (11)
Slide 20: Debt objectives
Debt objectives Achieved Early action to consider and Approximately £1.2bn of debt arranged. implement debt financing options Improve our debt profile More diverse lender base with extended maturity. Looking ahead We have the flexibility through cash generation and new debt facilities to ensure the
Slide 21: Group debt analysis
Group debt analysis September March September 2011 2011 2010 £m £m £m Balance sheet debt 1,545 1,643 1,445 Cash 91 73 95 Net debt 1,454 1,570 1,350 Available cash and undrawn committed facilities 214 155 260 Average debt maturity (years) 5.9 4.2 3.6 Hedging level on gross debt 73% 70% 75% LTV - core
Slide 22: Movement in composition of lenders
Movement in composition of lenders Facility £m 450.0 400.0 350.0 300.0 250.0 200.0 30.09.2010 150.0 30.09.2011 100.0 50.0 0.0 ‘Strong and diverse group of lenders.’ 22
Slide 23: Movement in net debt
Movement in net debt 1,500 255 1,454 1,400 1,350 (25) (86) 1,300 (218) £'m (2) 23 1,200 36 1,176 81 (17) 1,100 57 1,000 Net debt Sovereign Gross rent Sales of Property Interest/ Sale of UK Other Net debt Net cash to Debt Net debt September debt to JV property expenses/ tax/ 50% in residential before
Slide 24: Debt maturity
0 200 400 600 £m 800 1000 1200 1400 1600 Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Core Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Mar 17 Sep 17 Mar 18 Other UK and Europe Sep 18 Mar 19 Sep 19 Mar 20 Sep 20 Mar 21 Sep 21 Debt maturity 24
Slide 25: Group debt and interest costs
Group debt and interest costs As at September Blended rate 2011 Debt UK Germany Total £m % % % Fixed 81 5.4 1.1 4.2 Hedged by SWAPS 987 7.2 5.7 6.8 Hedged by CAPS 76 3.3 3.7 3.6 Variable 425 4.4 3.8 4.3 1,569 6.1 5.0 5.8 25
Slide 26: Regular, resilient cashflows
Regular, resilient cashflows Financial Years Ended 30 September 2011 2010 2009 2008 2007 2006 Gross rents (£m) UK Residential 51 39 41 42 39 47 Retirement Solutions 5 6 6 6 2 - Development - 1 1 1 2 1 Germany 30 30 30 22 10 5 Total 86 76 78 71 53 53 Total Property Sales (£m) UK Residential 148 118 1
Slide 27: Agenda
Agenda 1. Our business 2. Strategy in action 3. Financial highlights 4. Looking ahead 5. Appendices 27
Slide 28: Market review
Market review UK • Values driven by supply and demand, but with distortion from locally driven economics • Low mortgage approval levels • Weak confidence in the economy and housing market • Rental market growing • Government support • Blurred lines between social and private rented 28
Slide 29: Well positioned for the future
Well positioned for the future Strong fit between Grainger, economic conditions and Govt. Housing Strategy Sales: • Land for construction of new homes • BAU – Selective acquisitions, Asset Management, Sales Programme Rental: • Bouygues and Grainger Build to Rent Fund • BAU – Strong rental growth in
Slide 30: Looking ahead
Looking ahead • Building on our track record Grainger will continue to outperform because of our good quality, well located assets and in-house expertise. • Build further on our three main income streams: Sales Rents Fees • A decrease in our directly owned asset base and debt levels, although our pr
Slide 31: Grainger's Centenary years...and counting
Grainger’s Centenary 100 years …and counting 31
Slide 32: Preliminary Announcement of Results for the year ended September 2011
Preliminary Announcement of Results for the year ended 30 September 2011 24 November 2011 32
Slide 33: Appendices
Appendices Investing in homes since 1912 grainger plc.
Slide 34: Grainger UK portfolio
A1 Grainger UK portfolio UK No. of units Vacant possession value, £m Investment Value, £m % 1 London (Total) 4,006 1,160 915 49% 2 South East 2,134 333 240 13% 3 South West 1,786 291 244 13% 4 East 1,299 165 120 6% 5 East Midlands 562 62 43 2% 6 West Midlands 970 145 107 6% 7 Wales 138 15 9 0% 8 Yor
Slide 35: Wholly owned portfolio summary
A2 Wholly owned portfolio summary Portfolio No of Market VP Reversionary Gross Gross sales Profit on units value value surplus VP rent proceeds sale £m £m £m % £m £m £m Regulated 5,853 954 1,280 326 75 35 99 36 AST 1,220 233 257 24 90 8 6 1 Vacant 220 57 57 - 100 - 44 16 Tricomm (MOD) 317 106 106 -
Slide 36: Portfolio overview – JV/Associates
A3 Portfolio overview – JV/Associates Joint Ventures Associate Curzon Park Hammersmith Prague/ Zizkov Gebau Sovereign G:Res Total £m Property assets 37 - 28 - 64 382 511 Other assets - 4 2 - 9 25 40 Total assets 37 4 30 - 73 407 551 External debt (16) - (11) - (30) (222) (279) Other liabilities (26)
Slide 37: Corporate and property transactions
A4 Corporate and property transactions Corporate acquisition Individual units Total Grainger GenInvest Tricomm (MOD) Tenure Units Market value (£m) Units Market value (£m) Units Market value (£m) Units Market value (£m) Regulated 467 93 44 8 511 101 AST 671 129 671 129 Assured 304 57 304 57 Leasehol
Slide 38: Income statement
A5 Income statement September September £m 2011 2010 Movement Commentary Gross rental income 86 76 10 Rent reduction from sales outweighed by impact Property expenses (24) (23) (1) of Tricomm and Grainger Invest acquired in the Net rental income 62 53 9 year Property sales net of sales fees 218 169
Slide 39: Gross NAV balance sheet
A6 Gross NAV balance sheet September September 2011 2010 £m £m Property related assets - wholly owned 2,371 2,127 - jv/associates 59 116 Total property related assets 2,430 2,243 Other assets 34 20 Cash 91 95 Gross assets 2,555 2,358 Debt (1,545) (1,446) Other net liabilities (110) (80) Net assets 9
Slide 40: Net asset values per share
A7 Net asset values per share September September 2011 2010 Number of shares for NAV 416,372,103 416,362,420 Statutory net assets per share 93 83 Increase to market value 83 80 Mark to market adjustment 29 24 Deferred tax on property valuations 11 13 Gross NAV per share 216 200 Mark to market adjust
Slide 41: Gross NAV and NNNAV Reconciliation to Statutory Balance Sheet
A8 Gross NAV and NNNAV Reconciliation to Statutory Balance Sheet Deferred tax Statutory Adjust Adjust on Add back derivatives Add back deferred balance to market for property Gross adjust for fixed tax and adjust for £m sheet value derivatives revaluations NAV rate loans contingent tax NNNAV Investm
Slide 42: Movement in NNNAV
A9 Movement in NNNAV 800 700 £57m £(45)m £8m £3m £(5)m £(1)m £638m £39m 600 £582m 500 £'m 400 300 200 100 NNNAV Profit after Revaluation Elimination Hedge Contingent Dividend Other NNNAV Sept 2010 tax Surplus of valuation reserve tax Sept 2011 surplus on disposal 140p 9p 14p (11)p 2p 1p (1)p (1)p 15
Slide 43: Summary cashflow
A10 Summary cashflow £m September 2011 September 2010 Income Net rents and other income net of overheads 37 32 Property sales 218 170 Working capital movements (1) 1 Total cash generated 254 203 Interest, tax and dividends (81) (118) Net operating cash 173 85 Loan movements (115) (139) Net proceeds
Slide 44: Summary terms of existing debt
A11 Summary terms of existing debt Position as at 30 September 2011 Drawn Head- Blended LIBOR / Blended Hedged / Cost of Maturity Quantum Amount room Margin EURIBOR Swap Rate Fixed Debt £m £m £m % % % % % Up to 3 years 474 303 171 1.6% 1.0% 4.5% 84.5% 5.6% 3 to 6 years 974 974 2.3% 1.0% 5.0% 67.1% 6
Slide 45: Summary terms of existing debt
A12 Summary terms of existing debt Size: • Current MOF bank facility totals £1,093m with headroom of £166m • Following signing of new FSF on 30 September 2011, this will drop to £840m by 30 September 2012 Maturity: • Term A, £332.5m, 20% in December 2014 balance July 2016 • Term B, £100m, matures in
Slide 46: Group debt maturity profile
A13 Group debt maturity profile Maturing in the 6 months to Drawn at Total March Sept March Sept March Sept March Sept As at 30 September 2011 period end facility Undrawn 2012 2012 2013 2013 2014 2014 2015 2015 UK Core banking facility FSF - Facility A 333 333 - - - - - - - 67 - FSF - Facility B 100
Slide 47: Net debt including JVs/associates
A14 Net debt including JVs/associates September September 2011 2010 Group JV/ Assoc* Total Group JV/ Assoc* Total £m £m £m £m £m £m Balance sheet debt 1,545 279 1,824 1,445 440 1,885 Cash 91 35 126 95 35 130 Net debt 1,454 244 1,698 1,350 405 1,755 *JV/ Associate is the full amount of debt and not j
Slide 48: Derivative liability runoff chart
A15 Derivative liability runoff chart Mark to Market Run off Reserves Income statement 180 160 140 120 £'m 100 80 60 40 20 0 2011 2012 2014 2015 2017 2018 2020 2021 2023 2024 2026 48
Slide 49: Tax
A16 Tax • The tax credit for the period is £13.0m. An effective tax rate of -49.8% based on a profit before tax of £26.1m. • Prior year tax credit of £16.5m includes a non-recurring, exceptional tax credit of £10.2m in relation to settlement of historic tax matters. 2011 £m Profit (loss) before tax
Slide 50: Development schedule
A17 Key project name Development schedule Description, planning status and strategy Progress Committed expenditure £m Aldershot 400 acre brownfield site in Hampshire; Development partner role with Defence Development agreement signed 2 March 2011. Commenced work in masterplanning the 4.9 Estates.The
Slide 51: Glossary
A18 Glossary Property Assured periodic tenancy (“APT”) Market rented tenancy arising from succession from regulated. Tenant has security of tenure. Assured shorthold tenancy (“AST”) Market rented tenancy where landlord may obtain possession if appropriate notice served. Assured tenancy (“AT)” Market
Slide 52: Glossary
A19 Glossary Financial (continued) Gearing The ratio of borrowings, net of cash, to market net asset value. Hedging The use of financial instruments to protect against interest rate movements. IFRS International Financial Reporting Standards. Interest cover Profit on ordinary activities before inter