TIDMGRI

RNS Number : 8168I

Grainger PLC

06 April 2020

06 April 2020

Grainger plc

("Grainger", the "Group", or the "Company")

POST-CLOSE TRADING UPDATE

Strong financial position and resilient residential rental market in the first half

Grainger plc, the UK's largest listed provider of private rental housing, today provides a post-close trading update for the six-month period to 31 March 2020. The Company's half year financial results are scheduled to be reported on 14 May 2020.

Helen Gordon, Chief Executive, said:

"Grainger homes have never been so intensively used with the necessity of home working or self-isolation for many. Our customers' homes have also become offices, classrooms, social spaces and places of sanctuary. Demand for good quality homes supported by good service and leading technology, has become even more important when the priority has rightly been on protecting the health and safety of everyone. In response to Covid-19 Grainger employees are working remotely, supporting our customers and we are in regular contact with our older customers.

"Grainger is well placed to operate through an extended period of uncertainty. Our successful equity raise in February 2020 puts us in a strong position and our balance sheet is robust, with our LTV at a six-year low. We have significant cash reserves and available committed facilities that mean we can continue to make the right decisions for the business in these uncertain times from a position of financial strength."

Key Highlights

   -- Grainger is well capitalised with good liquidity and a strong balance sheet. 
 
   -- The rental housing market has remained resilient. 
 
   -- High occupancy levels of over 97%. 
 
   -- High rent collection rate of 95% in March, which is in line with historic trends. 
 
   -- Sales remained robust to the end of March. 
 
   -- Our investment in technology is enabling us to continue to serve our customers remotely, including on-going 
      leasing activity in our new buildings. Our strong in-house operational team is experienced in supporting 
      customers during challenging times.

Resilient rental portfolio

   -- High occupancy levels of over 97%. 
 
          -- Leasing activity expected to slow due to Coronavirus disruption, however churn in existing customers is 
             also likely to slow as people defer moves. 
 
   -- Strong overall rental growth of +3.4% for the period demonstrating continued demand and the resilience of our net 
      rental income stream: 
 
          -- +3.0% like-for-like rental growth on our PRS homes (renewals +2.7% and +3.5% new lets) ; and 
 
          -- Annualised rental growth of +4.5% on regulated tenancy rental reviews. 
 
   -- We expect to see lower rental growth in the second half, falling below 3%, due to lower turnover, with renewals a 
      greater proportion than new lets as people defer moves. 
 
   -- High rent collection rates of 95% in March, in line with historic trends. 
 
   -- We have made significant progress in our arrears position over recent months with our March position at 1.4% of 
      gross rent, compared to a historic range of 2.0 -- 2.5%. 
 
   -- We are committed to continuing to serve our customers and assist them where we can during these challenging 
      times.

Vacant sales in line but transactions expected to slow in the short term

   -- Vacant sales profit from our regulated tenancy portfolio remains robust and in line with H1 last year. 
 
          -- Strong sales performance with pricing  achieved 1.0% ahead of previous valuations (vacant possession 
             value)  and velocity   (keys to cash) at 113 days (HY19: 112 days). 
 
          -- Vacancy rate of 6.6 % in the first half. 
 
   -- Profit from asset recycling is below last year by GBP7.8m at GBP5.2m, as we reduce portfolio sales and GRIP 
      recycling. 
   -- Going into the second half of our financial year, we have a sales pipeline of GBP26.2m in solicitors' hands 
      (HY19: GBP19.6m) although we do expect to see some disruption due to the current situation. In addition, we have 
      a further GBP7.3m of ex-regulated tenancy properties which are vacant with the potential for sale or for 
      re-letting at open market rents in the short term during this period of market disruption. 
 
   -- The majority of our sales are of vacant properties and we expect the sales to continue in line with Government 
      guidelines, and we have continued to see some transactions progress in recent days. Nonetheless, current events 
      are expected to reduce housing transaction volumes overall in the short term and will potentially delay some 
      profit recognition. 
 
   -- We have also put some of our asset recycling on hold until we have more clarity on the market backdrop.

Well capitalised with a strong liquidity position

Grainger is in a strong liquidity position, with available cash and undrawn committed facilities to cover future costs and liabilities comfortably for an extended period.

   -- GBP527m of total headroom which is currently undrawn after repayment of all near-term debt maturities, with the 
      next facility maturity in September 2021 
 
   -- GBP198m of cash available and GBP329m of available committed undrawn facilities. 
 
   -- Committed capital expenditure for the next 12 months is c.GBP150m reflecting the most up to date status of sites 
      within our pipeline.

Strong balance sheet with low LTV

   -- Following our recent equity raise, our pro-forma loan to value is 33% based on FY19 valuations, at a six-year 
      low. 
 
   -- Significant headroom in our debt covenants. 
 
   -- Average debt maturity of 5.6 years.

Development pipeline flexibility

   -- Capital expenditure within our forward-funded development pipeline is aligned to construction progress on site. 
      We anticipate some delays in our pipeline due to social-distancing guidelines, with three of nine sites remaining 
      currently open and active, but with the position subject to change. 
 
   -- The remaining direct development schemes within our pipeline are fully within our control and therefore capital 
      expenditure can be managed if required. 
 
   -- Dependent on the length of the delays within the pipeline, this would have a subsequent impact by delaying both 
      our capital expenditure requirements and the future progression of our total net rental income which aligns to 
      site completions and lease up activity. 
 
   -- Our 12-month forward committed capital expenditure has therefore reduced from c.GBP220m to c.GBP150m and could 
      reduce further depending on site progress.

Results

   -- The Company's half year financial results are scheduled for 14 May 2020 and the Company does not feel a change of 
      reporting date is necessary or required at this time.

-ENDS-

For further information:

Grainger plc

Helen Gordon / Vanessa Simms / Kurt Mueller / David Prescott

London Office Tel: +44 (0) 20 7940 9500

Camarco (Financial PR adviser)

Ginny Pulbrook / Geoffrey Pelham-Lane

Tel: +44 (0) 20 3757 4992/4985

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END

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