Grainger Plc - Full-year audited financial results
("Grainger", the "Group", or the "Company")
Full-year audited financial results
Year of major transformation delivering strong, sustainable returns, well ahead of plan
- +45% growth in net rental income
- +3.6% like-for-like rental growth
- +30% growth in profit before tax
Grainger plc, the UK's largest listed provider of private rental housing, today announces its financial results for the year to 30 September 2019.
Helen Gordon, Chief Executive, said:
"I am pleased to report a year of exceptional growth and strong performance. We have transformed Grainger into a predominantly PRS business with greater and more resilient recurring rental income that delivers consistent growth. Our acquisition of the 1,700 home GRIP portfolio together with the delivery of 1,152 new PRS homes has delivered a step change for the business.
"Over the year, we grew net rental income by 45% to £63.5m. We consistently deliver strong rental growth with underlying like-for-like rental growth of 3.6% for the year. We delivered a strong profit before tax of £131.3m, up 30% in the year, while the valuation of our portfolio proved resilient, up 1.9%, and a Total Property Return of 5%.
"We have more than doubled the size of our PRS portfolio and the net rental income of the business since setting out our strategy in 2016. Our £2.6bn residential portfolio and £2.0bn PRS pipeline is well ahead of our 2020 target. We are delivering our pipeline schemes at pace and will see our net rental income more than double again in the coming years.
"Our strong financial performance and the growth in net rental income underpins the proposed increase in our final dividend to shareholders, which will bring dividend per share for the year to 5.19p per share, up 9%.
"We continue to successfully secure long-term partnerships, aligned to our PRS strategy, most recently with TfL and Lewisham Borough Council. These partnerships will support Grainger's long-term strategy.
"I am also pleased to report a strong set of ESG benchmark results, which reflects our commitment to securing the long-term sustainability of our business. Building on this success, today we set out four long-term ESG commitments, which will secure the future sustainability of the business and support resilient rental growth, including our aspiration to transition our operational portfolio to net zero carbon by 2030.
"We remain in a strong position for the future with a market-leading operational platform, which we continue to strengthen through our investment in technology through our CONNECT platform."
GRIP acquisition: delivering strong results in nine months of ownership
- Major contributor to growth in net rental income, £17.7m
- £13.6m of value add captured in the nine months since acquisition
- Strong underlying rental performance with like for like rental growth of 3.0%
- Immediate savings through operational efficiencies with gross to net improved from 32% to 25.1%
- Simplified structure delivered overheads savings of c.£4m
- Corporate credit rating upgraded following GRIP acquisition
- £275m GRIP debt refinance at an attractive blended rate of 2.3% with longer maturities
- Secured an additional £103m of PRS investment in London and the SE post-acquisition
Pipeline bolstered by TfL PRS Partnership
- Our selection by Transport for London as their PRS partner will expand our future PRS pipeline with more than 3,000 new homes to be delivered through the partnership's initial seven seed sites
- Swift progress underway, with the JV formally established within 100 days of selection, pre-planning consultation underway across all sites
PRS pipeline completing at pace
- 1,152 PRS homes delivered in the year
- 1,045 more PRS homes expected to be delivered in FY20
- Pipeline to deliver c.9,104 PRS homes in total
Strong leasing performance
- Hawkins & George, Bristol (194 homes) fully let in 3.5 months, ahead of underwriting and expectations, representing a gross yield on cost of 7.0% achieved, benefitting from CONNECT's digital leasing and marketing solution
- Positive leasing momentum at Clippers Quay, Manchester with over 50% of the 614 PRS home scheme now let at rents ahead of underwriting and ERV, representing 81% of homes released to the market to date
- Brook Place, Sheffield (237 homes) has had a strong start to lettings since launch with 10% of the scheme pre-let, with 26% let to date, ahead of underwriting and expectations
Strong operational performance
- 45% growth in net rental income to £63.5m
- Strong underlying like-for-like rental growth of 3.6%
- Occupancy in our PRS portfolio remains high at 97.2%, a reflection of the attractiveness of our rental homes
- Gross to net on our stabilised portfolio has been further improved to 25.2% from 26.0% in FY18
Resilient residential sales performance
- Sales activity during the year has been resilient delivering £67.8m of profits (FY18: £81.8m).
- Following the strong performance at the end of FY18, we started the year with a lower opening pipeline, which combined with a slightly lower vacancy rate averaging 5.9% throughout FY19 resulted in overall lower volumes of vacant properties available for sale.
- Prices achieved were ahead of valuations by 0.4% and sales velocity stable at 111 days.
Strengthening our operational platform further
- We continue to invest in our operational platform to capture the benefits of operational leverage as we grow, including investing in our new technology platform, CONNECT, which will support gross to net efficiencies and overheads savings while enhancing the customer experience to optimise our rental income.
Continued disciplined acquisitions & strong pipeline
- Canning Town 2, London - Agreed to forward fund a 146-home PRS development scheme in the Hallsville Quarter Development at Canning Town, London positioned just 200 metres from Argo Apartments. The developer is Linkcity and the building contractor is Bouygues UK.
- Millwrights Place, Bristol - Agreed to acquire a 231-home PRS development scheme in Bristol, across the street from our Hawkins & George scheme, from the same vendor, Cubex, demonstrating strong repeat business. When contracts exchange, this will move from 'planning and legal status' to our secured pipeline.
- Well Meadow, Sheffield - Agreed to forward fund a 284-home PRS development scheme at Well Meadow in Sheffield for c.£42m. This project builds on Grainger's existing portfolio of PRS investments in Sheffield, with Brook Place.