Grainger sees strong growth as demand for housing continues to climb

Residential property business Grainger reported a set of “strong” full-year results on Wednesday, with its adjusted earnings rising 26% to £94.0m.

The FTSE 250 company said profit before tax increased 17% to £100.7m in the 12 months ended 30 September, with net rental income ahead 8% at £43.8m.

Its EPRA triple net asset value was up 4% to 316p per share, with the board also reporting 4.0% like-for-like rental growth across the firm’s entire portfolio, up from 3.8% year-on-year.

The company’s investment value increased 1.6% on its total property portfolio.

At the same time on Wednesday morning, Grainger also announced that it had conditionally agreed to acquire the entire share capital and shareholder loans in GRIP REIT from its joint venture partner APG for £396m.

Grainger reported a “strong” overall sales performance, with sales profit of £81.8m up 9% on the year.

The board recommended a dividend per share of 5.26p, up 8% on that paid at the end of the 2017 financial year, and confirmed net debt had widened to £866m from £848m, which it said reflected its continuing investment into private rented sector assets.

Its loan-to-value ratio stood at 37.1%, narrowing slightly from 37.7%, with the company's target range remaining between 40% and 45%.

Grainger’s cost of debt reduced to 3.2% at period end, supported by the successful refinancing of its corporate bond, which totalled £350m, was rated BBB-, and carried an interest rate of 3.375% for 10 years.

On the operational front, Grainger said it completed £157m of asset recycling within the year.

It highlighted the successful lease-up of Argo Apartments, totalling 134 residential units, which were 97% let within four months of launch, achieving 8% gross yield on cost, ahead of underwriting.

The company also pointed to the successful launch of 104 private rented sector homes at Berewood in Hampshire, with rents achieved 2.4% ahead of estimated recovery value, and more than 60% take-up of longer term leases.

Grainger successfully pre-leased the first phase of Clippers Quay, consisting of 135 units of the total of 614, with 54% let within six weeks of marketing, prior to completion of construction.

Significant investments were said to have been made during the year in driving operational performance, including customer insight and research, and technology to enhance efficiencies and customer experience.

Those investments apparently delivered an 84% improvement in response time for repairs, high occupancy at 97%, and 4.0% like-for-like rental growth.

Looking ahead, Grainger said it had a “positive” outlook for market performance in the private rented sector, with a “fundamental undersupply” of housing remaining, and further compounding factors including a reduction in buy-to-let supply.

Demand for rental housing was set for continued growth, the board said, with “strong” rental growth prospects in target locations.

The company said the private rented sector remained a “resilient” asset class, and added that “improved favourability” in the planning system for private rented sector development underpinned pipeline and ongoing investment.

“We have a well-established strategy for growth supported by an excellent operational platform to successfully manage the enlarged private rented sector portfolio, ensuring that we can deliver strong returns and great homes for our customers,” said Grainger chief executive Helen Gordon.

“These actions will reinforce Grainger's position as the UK market leader in the private rented sector and will deliver enhanced shareholder returns going forward as we deliver our pipeline of PRS investments.

“Today's announcements, highlighting our acceleration of our PRS strategy, coupled with our consistently strong financial performance gives us confidence in the continued future success of the group.”