Grainger Plc · LSE:GRI
Grainger — H1 2012 Earnings Presentation
61 slides from Grainger's earnings presentation, May 17, 2012
Slide 1: Preliminary announcement of results for the half year as at 31 March 2012
Preliminary announcement of results for the half year as at 31 March 2012 17 May 2012 1
Slide 2: Disclaimer
Disclaimer This presentation contains certain forward-looking statements. Any statement in this presentation that is not DVWDWHPHQWRIKLVWRULFDOIDFWLQFOXGLQJZLWKRXWOLPLWDWLRQWKRVHUHJDUGLQJ*UDLQJHUSOF¶VIXWXUHILQDQFLDO condition, business, operations, financial performance and other future expectations
Slide 3: Executive Directors
Executive Directors Andrew Cunningham, Chief Executive Mark Greenwood, Finance Director Nick Jopling, Executive Director, Property Peter Couch, Chief Operating Officer and Director of Retirement Solutions 3
Slide 4: Agenda
Agenda 1. A strategy to deliver value 2. Financial highlights 3. Looking ahead 4. Appendices 4
Slide 5: Our business
Our business 7KH8.¶VODUJHVWOLVWHGUHVLGHQWLDOSURSHUW\RZQHUDQGPDQDJHU 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: Income streams
Income streams 1H 2012 operating profit* (£m) UK Residential; Retirement Sales Solutions; Germany; 39.9 Development Fund and third party Fees 5.0 management 36.8 Rents UK Residential; Germany 31.8 * Before valuation movements and non-recurring items 6
Slide 7: A strategy to deliver value
A strategy to deliver value Managing our Extracting Third party portfolio value offering 7
Slide 8: Delivering value: Managing our portfolio
Delivering value Managing our portfolio Geographical weighting Strategic sales Trading and valuations 8
Slide 9: Geographical weighting in UK portfolio
Geographical weighting in UK portfolio Two thirds of portfolio in London and the South East 65% 60% 55% 50% South East 45% London 40% 35% 30% 1H 2009 FY 2009 1H 2010 FY 2010 1H 2011 FY 2011 1H 2012 9
Slide 10: Delivering value: Extracting value
Delivering value Extracting value Bayswater, London (PSHURU¶V*DWH/RQGRQ 10
Slide 11: Bayswater, London
Bayswater, London Extracting value Ownership of freehold block Purchased March 2006 Construction of 5,821 sq.ft. penthouse Penthouse sold March 2012 11
Slide 12: Bayswater, London
Bayswater, London Extracting value 12
Slide 13: Empress Gate, London
(PSHURU¶V*DWH/RQGRQ Extracting value Refurbishment of five flats (3,868 sq ft) Two exchanged; two under offer; one for sale 13
Slide 14: Delivering value: Third party offering
Delivering value Third party offering RAMP Wellesley, Aldershot, Hampshire 14
Slide 15: RAMP
RAMP Third party offering Processed over 2,000 units since May 2011 345 assets sold for £35.7m over period 15
Slide 16: Wellesley, Aldershot, Hampshire
Wellesley, Aldershot, Hampshire Third party offering c4000 houses; development partner for DIO; c15 year; generating fees 16
Slide 17: Geographical weighting in German portfolio
Geographical weighting in German portfolio 82% of portfolio in economically strong areas Breakdown by federal state 1 Rhineland ± Other Palatinate 6% Baden ± 4% Württemberg Lower Saxony 27% 8% Bavaria 13% Northrhine ± Hesse Source: Note: Company information Westphalia 21% 1 Market value as of 31-Mar
Slide 18: German strategy
German strategy Extracting value Action so far Future potential Portfolio optimisation Disposal of assets in non- Further c.¼40m identified core regions. ¼24.3m in 2011, ¼21m to date 2012. Rent and value Value-accretive capex of Targeted improvements in improvements ¼1.4m, reducing void and arrears
Slide 19: Agenda
Agenda 1. A strategy to deliver value 2. Financial highlights 3. Looking ahead 4. Appendices 19
Slide 20: Financial highlights
Financial highlights March 2012 March 2011 Movement Operating profit* (£m) 64.1 59.4 7.9% Profit before tax (£m) 15.1 65.2 (76.8)% Dividends per share (p) 0.55 0.53*** 3.8% March 2012 September 2011 Gross NAV per share** 224p 216p 3.4% NNNAV per share** 161p 153p 4.7% Net debt (£m) 1,412 1,454 of wh
Slide 21: Profit summary
Profit summary Profit on sale of Fees/ other Overheads/ Six months to March 2012 assets Net Rents income Other* March 2012 March 2011 £m £m £m £m £m £m UK Residential Portfolio 33.1 21.0 - (3.9) 50.2 34.0 Retirement Solutions Portfolio 6.0 1.8 0.5 1.3 9.6 9.1 Fund and third party management - - 4.2
Slide 22: Movement in operating profit
Movement in operating profit* OPBVM up 7.9% 100.0 £1.9m £(12.6)m £9.5m £6.2m £(0.3)m £64.1m £59.4m £'m 50.0 0.0 Operating Increase in Increase in Increase in Decrease in Other Operating profit March gross rents residential fee income development profit March 2011 trading profit trading profit 2012 *
Slide 23: Movement in NNNAV
Movement in NNNAV NNNAV up 4.7% since 30 Sept 2011 and 15% since 30 Sept 2010 800 700 £19m £(5)m £4m £668m £638m £12m 600 500 £'m 400 300 200 100 NNNAV Sept Profit after tax Net valuation Dividend Hedge reserve, NNNAV March 2011 contingent tax 2012 and other 153p 3p 5p (1)p 1p 161p 23
Slide 24: Debt reduction programme
Debt reduction programme Net debt reduced by £42m* Portfolios naturally cash generative Highly selective acquisitions Sell off non-core and under- performing assets Further debt * Over the six month period to 31 March 2012 reduction 24
Slide 25: Debt
Debt Hedging Profile Mar 2012 Sep 2011 Average debt maturity 5.7 years 5.9 years Mar 2012 11 65 24 Proportion of debt at fixed rates or hedged 76% 73% Weighted average maturity of fixed rates or hedged 7.3 years 7.5 years Sep 2011 5 68 27 Current mark to market swap liability £152m £154m Weighted av
Slide 26: Agenda
Agenda 1. A strategy to deliver value 2. Financial highlights 3. Looking ahead 4. Appendices 26
Slide 27: Looking ahead
Looking ahead Continued focus on sales, rents and fees Managing our portfolio Extracting value Third party offering Longer term: Short to medium term: identifying driving value opportunities Amwell Street, Islington, Changes in the housing London market and private rented Macaulay Road, Clapha
Slide 28: Amwell Street, Islington, London
Amwell Street, Islington, London Extracting value Before After Purchased March 2010 10 AST/vacant units and 4 regulated tenancies 14 flats (11,700 sq.ft.) bought for £3.8m (£324 per sq.ft.) Expected value post work in excess of £800 per sq. ft. To be marketed Summer 2012 28
Slide 29: Macaulay Road, Clapham, London
Macaulay Road, Clapham, London Extracting value Redevelopment of 1.8 acre brownfield site ± owned freehold Prime south London 97 residential units ± 65 private, 32 affordable Commercial space of 30,000 sq. ft. Gross development value c.£45m 29
Slide 30: Berewood, Waterlooville, Hampshire
Berewood, Waterlooville, Hampshire Construction begun on-site; sales receipts commence Autumn 2012 2550 houses; 211 hectares; c13 years in phases sold to house builders 30
Slide 31: Suited to changing market
Suited to changing market Growing rental market Shortage of housing supply Mortgage illiquidity/ unaffordability Growing cultural acceptance of renting Significant political support Increasing international and institutional investor interest 31
Slide 32: Preliminary Announcement of Results for the half year ended 31 March 2012
Preliminary Announcement of Results for the half year ended 31 March 2012 17 May 2012 32
Slide 33: Appendices
Appendices Investing in homes since 1912 grainger plic_
Slide 34: Portfolio overview
A1 Portfolio overview Reversionary surplus of UK portfolio is £571m and annual gross rent roll is £63m for UK, £27m for Germany, totalling £90m Vacant No. of possession Market % of market UK (incl RS) units value (£m) value (£m) value London total 3,926 1,165 915 49% South East 2,106 335 243 13% Sou
Slide 35: Grainger UK portfolio
A2 Grainger UK portfolio Vacant Market possession Market value, value, UK No. of units value, £m £m % London 1 3,926 1,165 915 49% (Total) 2 South East 2,106 335 243 13% 3 South West 1,757 290 244 13% 4 East 1,268 163 118 6% East 5 540 59 42 2% Midlands West 6 1,008 146 107 6% Midlands 7 Wales 138 1
Slide 36: Grainger German portfolio
A3 Grainger German portfolio Market value % of market Germany No of Units ¼m value 1 Baden ± Württemberg 1,501 127 27% 2 Hesse 1,382 101 21% 3 Northrhine ± Westphalia 1,669 100 21% 4 Bavaria 560 60 13% 5 Lower Saxony 749 38 8% 6 Rhineland ± Palatinate 230 18 4% 7 Other 404 30 6% Total 6,495 474 100%
Slide 37: Wholly owned portfolio summary
A4 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 5,631 954 1,279 325 75 17 17 7 AST 1,276 247 276 29 89 7 3 - Vacant 230 53 53 - 100 - 49 23 Tricomm (MOD) 317 107 107 - 1
Slide 38: Property sales and margins
A5 Property sales and margins March 2012 Units Gross sales Sold value Profit Margin £m £m % Total Property Sales UKR 275 75.8 33.1 43.6 RS 149 17.7 6.0 34.1 Development - 1.1 0.8 69.9 Germany 225 17.7 - 0.2 649 112.3 39.9 35.5 UKR/RS: Sales on vacancy 321 58.4 24.8 42.4 Tenanted sales 56 6.2 2.3 36.
Slide 39: Portfolio overview - JV/Associates
A6 Portfolio overview ± JV/Associates Joint Ventures Associate Curzon Park Hammersmith Prague/ Zizkov Gebau Sovereign G:Res Total £m Property assets 37 - 27 - 63 370 497 Other assets - 4 2 - 6 25 37 Total assets 37 4 29 - 69 395 534 External debt (16) - (12) - (29) (201) (258) Other liabilities (26)
Slide 40: Purchases
A7 Purchases To 31 March 2012 To 31 March 2011 Total Total Tenure Units Market value Units Market value (£m) (£m) Regulated 17 3 487 96 AST 54 8 671 133 Assured 7 1 304 57 Leaseholders - - 157 1 RS reversions 88 7 107 7 Other - - 34 5 Tricomm/ MOD - - 317 105 Total 166 19 2,077 404 Figures to 31 M
Slide 41: Income statement
A8 Income statement March March £m 2012 2011 Movement Commentary Gross rental income 45 39 6 Increase primarily from Tricomm and Grainger Property expenses (13) (12) (1) Invest acquired February and March 2011 Net rental income 32 27 5 respectively Property sales net of sales fees 109 88 21 Developm
Slide 42: Regular, resilient cashflows
A9 Regular, resilient cashflows 6 months to Financial Years Ended 30 September 31 March 2012 (£m) 2012 2011 2010 2009 2008 2007 2006 Gross rents UK Residential 29 51 39 41 42 39 47 Retirement Solutions 2 5 6 6 6 2 - Development - - 1 1 1 2 1 Germany 14 30 30 30 22 10 5 Total 45 86 76 78 71 53 53 Pro
Slide 43: Gross NAV balance sheet
A10 Gross NAV balance sheet March September 2012 2011 £m £m Property related assets - wholly owned 2,345 2,371 - jv/associates 58 59 Total property related assets 2,403 2,430 Other assets 33 34 Cash 92 91 Gross assets 2,528 2,555 Debt (1,504) (1,545) Other net liabilities (93) (110) Net assets 931 9
Slide 44: Movement in gross NAV
A11 Movement in gross NAV £'m 1,000 £48m £(29)m £7m £(5)m £931m 950 £(2)m £900m £12m 900 850 800 750 700 650 600 Gross NAV Profit after Revaluation Elimination Fair value of Dividend Other Gross NAV Sept 2011 tax Surplus of valuation derivatives March 2012 surplus on net of tax disposal 216p 3p 12p
Slide 45: Net asset values per share
A12 Net asset values per share March 2012 September 2011 Number of shares for NAV 416,381,206 416,372,103 Statutory net assets per share 97 93 Increase to market value 88 83 Mark to market adjustment 28 29 Deferred tax on property valuations 11 11 Gross NAV per share 224 216 Mark to market adjustmen
Slide 46: Gross NAV and NNNAV Reconciliation to Statutory Balance Sheet
A13 Gross NAV and NNNAV Reconciliation to Statutory Balance Sheet Deferred tax Add back Add back Statutory Adjust Adjust on derivatives 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 Invest
Slide 47: NAV Reconciliation as at March 2012
A14 NAV Reconciliation as at 31 March 2012 400 300 Pence per share 11p 224p 28p (32p) 200 88p (31p) 161p 97p 100 0 Statutory Uplift stock to Adjust for Deferred tax Gross NAV Adjust for Deferred and NNNAV Balance sheet market value derivative on property derivative/ contingent tax at 31 March revalu
Slide 48: Summary cashflow
A15 Summary cashflow Six months ended £m March 2012 March 2011 Income Net rents and other income net of overheads 22 16 Property sales 109 88 Working capital movements (14) (1) Total cash generated 117 103 Interest, tax and dividends (55) (41) Net operating cash 62 62 Loan movements (33) (39) JV loa
Slide 49: Movement in net debt
A16 Movement in net debt 1,500 1,454 (45) (109) 2 1,412 27 55 1,400 28 1,300 £'m 1,200 1,100 1,000 Net debt September Gross rent Sales of property Property expenses/ Interest/ tax/ Residential Other Net debt March 2011 Overhead dividends purchases and 2012 capex 49
Slide 50: Group debt analysis
A17 Group debt analysis March September March 2012 2011 2011 £m £m £m Balance sheet debt 1,504 1,545 1,643 Cash 92 91 73 Net debt 1,412 1,454 1,570 Available cash and undrawn committed facilities 154 214 155 Average debt maturity (years) 5.7 5.9 4.2 Hedging level on gross debt 76% 73% 70% LTV - core
Slide 51: Summary terms of existing debt
A18 Summary terms of existing debt Position at 31 March 2012 Drawn Head Blended Blended Hedged / Cost of Quantum amount room margin swap rate fixed debt Maturity Up to 3 years 474 374 100 1.7% 4.4% 83% 5.5% 3 to 6 years 817 817 2.3% 4.5% 76% 6.0% 6 to 9 years 193 193 3.7% 4.8% 41% 6.4% > 9 years 141
Slide 52: Summary terms of existing debt
A19 Summary terms of existing debt Size: Current MOF bank facility totals £948m with headroom of £100m 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 D
Slide 53: Debt maturity
A20 Debt maturity Core Other UK and Europe 1600 1400 1200 1000 £m 800 600 400 200 0 53
Slide 54: Group debt maturity profile
A21 Group debt maturity profile Drawn at Total Sept March Sept March Sept March Sept March As at 31 March 2012 period end facility Undrawn 2012 2013 2013 2014 2014 2015 2015 2016 UK Core banking facility FSF - Facility A 333 333 - - - - - - 67 - - FSF - Facility B 100 100 - - - - - - 100 - - FSF - F
Slide 55: Group debt and interest costs
A22 Group debt and interest costs As at 31 March Blended rate 2012 Debt UK Germany Total £m % % % Fixed 162 6.4 1.1 5.7 Hedged by SWAPS 941 7.3 5.7 6.9 Hedged by CAPS 62 3.4 3.7 3.7 Variable 360 4.8 3.4 4.2 1,525 6.4 4.9 6.0 55
Slide 56: Net debt including JVs/associates
A23 Net debt including JVs/associates March September 2012 2011 Group JV/ Assoc* Total Group JV/ Assoc* Total £m £m £m £m £m £m Balance sheet debt 1,504 259 1,763 1,545 279 1,824 Cash 92 32 124 91 35 126 Net debt 1,412 227 1,639 1,454 244 1,698 *JV/ Associate is the full amount of debt and not just
Slide 57: Derivative liability runoff chart
A24 Derivative liability runoff chart Mark to Market Run off 160 140 120 100 80 £m 60 40 20 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Reserves 56 36 21 14 10 8 7 6 5 4 4 3 3 2 2 1 1 Income Statement 96 86 71 57 45 35 28 21 15 10 6 3 1 0 0 0 0 Movements Re
Slide 58: Tax
A25 Tax The tax charge for the six months ended 31 March 2012 is £2.6m. This represents an effective tax rate of 17.4% based on a profit before tax of £15.1m. The main CT rate for the UK changed from 26% to 24% with effect from 1 April $FFRUGLQJO\WKHJURXS¶VSURILWIRUWKHILQDQFLDO\HDUHQGLQJ6HSWHPEH
Slide 59: Glossary
A26 Glossary Property $VVXUHGSHULRGLFWHQDQF\ ³$37´ Market rented tenancy arising from succession from regulated. Tenant has security of tenure. $VVXUHGVKRUWKROGWHQDQF\ ³$67´ Market rented tenancy where landlord may obtain possession if appropriate notice served. $VVXUHGWHQDQF\ ³$7 ´ Market rented te
Slide 60: Glossary
A27 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
Slide 61: Preliminary Announcement of Results for the half year ended 31 March 2012
Preliminary Announcement of Results for the half year ended 31 March 2012 17 May 2012 61