Strong performance and continued growth trajectory
· Adjusted Earnings up +11%
· Like-for-like rental growth of +1.7%
· Strong rent collection at 98%
· Dividend maintained
· Occupancy held at 89%
· Lettings enquires up +86% since beginning of January
· Pipeline delivery set to accelerate with 1,021 new homes this year
Helen Gordon, Chief Executive of Grainger, the UK's largest listed residential landlord with 9,109 operational rental homes and a £2.1bn pipeline of a further 8,851 rental homes, said:
“We have delivered a strong performance over the past six months despite the impact of Covid-19. It has been a period of intense operational activity, supporting our customers in their homes. Adjusted earnings grew 11% over the period and our strong sales performance more than offset a reduction in occupancy in our PRS portfolio (89%) caused by Covid-19 lockdown restrictions. Our rental income continued to prove resilient with very high levels of rent collection at 98% and continued rental growth of 1.7%. We are therefore maintaining our interim dividend at 1.83p1.
“We continue to progress our well-established growth strategy, with new acquisitions for 490 new rental homes, major planning approvals secured for a further 618 new rental homes, and over 1,000 new rental homes to be delivered this year.
“During the six-month period we have driven customer retention, lettings and rental growth ahead of the market, leveraging our in-house operating platform. There is positive market evidence, including the +86% rise in lettings enquiries we have generated since the beginning of the year, which suggests a strong lettings market to come as we enter the peak summer period and all remaining lockdown restrictions are lifted. This provides us with increasing confidence for an improved performance for the second half of the year subject to the UK economy reopening as currently expected.
“The many actions we have taken from the outset of our strategy in 2016, focusing the business to what it is today and setting us up for significant future growth and earnings potential, but also the actions we took in the past six months, gives us a high level of assurance that we are ready to capitalise on the UK's reopening over the coming months, and pursue our long term growth plans.”
Key highlights
§ +11% growth in Adjusted Earnings2, driven by +30% increase in sales profits
§ Robust rental performance and positive outlook, evidenced by +86% increase in enquiry levels since January
o Net rental income3 of £34.7m (HY20: £37.0m), reflecting planned asset recycling, lower occupancy and delays in pipeline completions
o +1.7% like-for-like rental growth4 in H1 across our total portfolio (HY20: 3.4%)
§ 1.0% like-for-like rental growth in our PRS portfolio (HY20: 3.0%), reflecting our focus on customer retention, with rental growth achieved across all regions, with a marginally stronger performance outside London
§ 4.0% like-for-like rental growth in our regulated tenancy portfolio (HY20: 4.5%), which contributes 27% of our total net rental income
o Strong rent collection of 98%
o 1,086 new lets and 1,244 renewals secured in the period, representing £12m and £15m of gross rent respectively, a strong performance in a challenging market
o 4,974 prospective customer enquiries in H1
o +86% increase in enquiries since January, with month on month growth
o Occupancy successfully maintained at 89% despite ongoing lockdown restrictions; our regional portfolio experienced marginally higher occupancy
§ Strong sales performance
o Sales profit up 30% to £29.6m (HY20: £22.8m)
§ Vacant sales from our regulated tenancy portfolio delivered 10% profit growth, with vacant sales achieving prices 0.6% ahead of valuations. Sales took c.4 months to complete, H1 sales prices achieved are typically more modest compared to H2.
§ The remainder of the growth in sales profit was delivered as a result of our successful asset recycling activity (sale of tenanted properties) to take advantage of strong market conditions
§ H2 vacant sales expected to be stronger than H1 based on current sales pipeline
§ Delivering growth with 1,021 new homes to be delivered this year (508 homes delivered in H1 and 513 in H2), totalling c.£12m of targeted net rental income once stabilised
o We have worked hard with our supply chain to overcome the challenges of Covid-19 and have minimised disruption to our pipeline delivery. Where delays are unrelated to Covid-19, Grainger benefits from receiving compensation for lost rent through our forward funding contract terms, totalling £0.8m for the period.
§ Expanding our c.£2.1bn pipeline with new acquisitions and planning contents secured, totalling 1,108 new homes
o Acquired Millwrights Place, Bristol – £63m, 231 homes
o Acquired Becketwell, Derby – £38m, 259 homes
o Planning secured at Nine Elms, London (TfL JV) – 479 homes
o Planning secured at Montford Place, Oval, London (TfL JV) – 139 homes
§ Achieved investment grade credit rating from Fitch for the corporate and reaffirmed investment grade rating for our bond
Key actions
Our leading operating platform and the recent actions we have taken to enhance it, ensure that we are well positioned to capitalise on the summer rental momentum and continue to successfully grow our portfolio and outperform the market.
§ Full roll out of Digital Leasing via our CONNECT technology platform
§ Creation of a centralised customer service team, supporting customer satisfaction and retention
§ Enhanced customer offering including doubled internet speed to 250MB for free for all eligible customers
§ Expansion of our direct lettings activity and enhanced digital marketing, increasing conversion rates and supporting lease up of new schemes:
o Solstice Apartments, Milton Keynes, fully let, having launched at the start of the pandemic
o Gatehouse Apartments, Southampton, 54 homes let / reserved (41%) in six weeks
o The Filaments, Manchester, 54 homes let / reserved (14%) in six weeks
§ ESG Leadership: We are continually building on Grainger's positive social impact business model of delivering good quality, mid-market rental homes with support for our customers and local communities. We are reducing our environmental impact toward net zero carbon and enhancing the diversity and inclusivity of our workforce. We retained our top ESG benchmark scores.
Financial Highlights
|
Income returns |
HY20 |
HY21 |
Change |
|
Rental growth (like-for-like) |
3.4% |
1.7% |
(170) bps |
|
– PRS |
3.0% |
1.0% |
(200) bps |
|
– Regulated tenancies (annualised) |
4.5% |
4.0% |
(50) bps |
|
Net rental income (Note 5) |
£37.0m |
£34.7m |
(6)% |
|
Adjusted earnings (Note 2) |
£33.7m |
£37.5m |
+11% |
|
Profit before tax (Note 2) |
£49.6m |
£50.3m |
+1% |
|
Earnings per share (diluted, after tax) (Note 9) |
6.4p |
6.0p |
(6)% |
|
Dividend per share (Note 10) |
1.83p |
1.83p |
+0% |
|
Capital returns |
FY20 |
HY21 |
Change |
|
EPRA NTA per share (Note 3) |
285p |
286p |
+0% |
|
Net debt |
£1,032m |
£1,098m |
+6% |
|
Group LTV |
33.4% |
34.5% |
+111 bps |
|
Cost of debt (average) |
3.1% |
3.1% |
+3 bps |
|
Reversionary surplus |
£301m |
£286m |
(5)% |
|
Secured pipeline |
|
|
Total investment value |
£1,078m |
|
Total homes |
4,293 |
|
Targeted net rental income |
c.£52m |
1 Dividend – The dividend of 1.83p per share (gross) amounting to £12.3m will be paid on 2 July 2021 to shareholders on the register at the close of business on 28 May 2021. Shareholders will again be offered the option to participate in a dividend re-investment plan and the last day for election is 11 June 2021 – refer also to Note 10.
2 Refer to Note 2 for profit before tax and adjusted earnings reconciliation.
3 Refer to Note 5 for net rental income calculation.
4 Rental growth is the average increase in rent charged across our portfolio on a like-for-like basis.
Future reporting dates
§ Trading update – September 2021
§ Full year results – 18 November 2021