Outstanding year of delivery and excellent outlook for Grainger

Grainger plc announces an outstanding year of record delivery and an excellent outlook for its PRS portfolio.

Grainger's The Mint development in Guilford | BTR News
Grainger's The Mint development in Guilford.

Build to Rent landlord Grainger plc announces today that it has had an outstanding year of record delivery and a strong performance for the 12 months ended 30 September 2023.

Grainger has a £3.3bn operational portfolio of 10,208 private rental homes and a £1.6bn, 5,634-home Build to Rent pipeline that is fully funded and will deliver a doubling of EPRA earnings within the next three years.

Financial highlights include:

  • Net Rental Income up +12% to £96.5m (FY22: £86.3m).
  • EPRA Earnings up +41% to £39.8m (FY22: £28.2m).
  • Total dividend up +11% to 6.65p per share (FY22: 5.97p per share).
  • Adjusted Earningsup +4% to £97.6m (FY22: £93.5m).
  • +8% like-for-like rental growth in the company’s PRS portfolio (FY22: 4.8%):
    • +9.2% like-for-like rental growth on new lets (FY22: 5.6%).
    • +7.2% like-for-like rental growth on renewals (FY22: 4.1%).
    • 5.9% like-for-like rental growth in Grainger’s Regulated Tenancy Portfolio (FY22: 4.6%).
    • Total, blended like-for-like rental growth of +7.7% across the whole portfolio (FY22: 4.7%).
  • Occupancy of 98.6% in the PRS portfolio.
  • IFRS Profit before tax of £27.4m (FY22: £298.6m) due to the prior year one-off £81.2m valuation gain from the transfer of trading assets along with a lower valuation performance in FY23.
  • Strong sales performance with £194m of sales proceeds including accelerated asset recycling.
  • EPRA NTA proving resilient at 305pps (FY22: 317pps).
  • Strong balance sheet and funding position, debt costs fixed in mid 3% for five years.
  • New partnership announced with Network Rail to forward fund and acquire Build to Rent schemes on sites adjacent to major rail hubs in line with the company’s investment and cluster strategy.
  • A new acquisition of a 65-home Build to Rent scheme in Tottenham Hale from Waterside Places, a JV between Canal & River Trust and Muse Places, adjacent to the company’s existing operational asset, Windlass Apartments.

Excellent outlook with earnings growth accelerating

Grainger reports another strong performance with a confident outlook:

  • The company is on track to deliver on strategic growth plans and double post-tax EPRA earnings in the next three years (from last year.)
  • PRS pipeline: £1.6bn, 5,634 Build to Rent homes of which £722m is committed: 2,609; £541m secured: 2,009 homes and £316m in planning and legals: 1,016 homes.
  • Operational cash flow of £150m to 200m.
  • £519m existing headroom.
  • Fixed cost of debt at mid 3% for next five years.
  • Increased asset recycling programme.
  • Optionality of investment in secured/planning and legals pipeline

“It is with great pleasure that I can report an outstanding year of record delivery and a strong performance for Grainger, growing net rental income strongly and enabling us to increase our dividend to our shareholders by 11%, while improving the rental experience for our growing number of customers. 

“We are now delivering our pipeline at pace and are set to deliver market-leading earnings growth, a culmination of years of planning and implementation since setting out the Company strategy in 2016. We have delivered c.1,200 new Build to Rent homes in our financial year and are scheduled to deliver a further c.400 by the end of the calendar year.

“This year, we have exceeded more than £100m of annual net rental income on a passing basis, which is more than three times what it was at the start of the strategy. We now own and operate more than 10,000 rental homes nationally and this is set to grow significantly over the coming years. Our PRS portfolio now represents 76% of our operational portfolio by value.  

“In the next three years, post-tax EPRA earnings will double compared to last year, as we deliver our pipeline.

“Despite the macro-economic turbulence which marked the beginning of our financial year, the Grainger business has performed exceptionally well. This performance has been delivered by our market-leading operating platform, robust balance sheet and disciplined approach to capital allocation. Our property valuations held up well, underpinned by strong rental growth. Our capital discipline puts us in a strong position from a balance sheet perspective too, with our cost of debt fixed in the mid 3% for the next five years, enabling us to deliver on our committed pipeline and continue our growth trajectory.

“Our market-leading operating platform continues to drive value both for shareholders and residents. Occupancy in our PRS portfolio remains at an all-time high of 98.6%. Like-for-like rental growth is also strong at 8.0% for our PRS portfolio, in line with wage inflation. Like-for-like rental growth on new lets in our PRS portfolio was 9.2% for the year and 7.2% on renewals, demonstrating our commitment to customer loyalty. 

“Our focus on customer service is proving successful, with customer satisfaction levels continuing to rise. We are achieving industry-leading customer satisfaction levels, with our Net Promoter Score now +43, ahead of many well-known consumer brands.

“We remain very conscious of the affordability challenges facing many renters, and therefore closely monitor rent affordability in our rental communities across the UK, seeking to closely align rental increases with wage inflation. Our average customer rental affordability is c.28% of gross income, well below the widely accepted one-third threshold. “In addition, our homes are highly energy efficient, providing our customers with lower energy bills, and many customers benefit from free Wifi, free on-site gyms, free resident lounges and co-working spaces, on-site Resident Services teams and much more.

“Our PRS strategy focuses on the mid-market, and in addition our in-house provider of affordable homes, Grainger Trust, has grown to provide nearly 1,000 homes to lower income households within our existing communities.

“We are pleased today to announce a new partnership with Network Rail and bloc group, through their joint venture, blocwork, which will provide Grainger a new route for growth giving us optionality to forward fund and acquire a number of Build to Rent schemes across Network Rails’ expansive land holdings.

“We remain in a very strong position to continue to deliver great performance and a great rental experience to our customers, with everyone at Grainger committed to our collective purpose of ‘Renting homes and Enriching lives’.”

Helen Gordon, Chief Executive, Grainger