Grainger H1 2025 Earnings Report

Grainger EPS Results

• Actual EPS: GBX 7.50
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Grainger Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Grainger Announcement Details

• Quarter: H1 2025
• Date: 5/15/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 4:00AM ET

Founded in Newcastle upon Tyne in 1912, Grainger (LON:GRI), a FTSE 250 business, is the UK’s largest listed residential landlord and leader in the fast-growing build-to-rent sector, providing c.11,100 rental homes to over 20,000 customers. With a pipeline of secured build-to-rent development projects totalling c.5,000 homes and £1.5bn, Grainger is creating thousands more rental homes by investing in cities across the UK. Grainger works in partnership with a large number of public sector organisations to deliver new homes to local communities, including Transport for London, Network Rail, the Ministry of Defence, Lewisham Borough Council and the Local Pensions Partnership. The Grainger team is dedicated to the common purpose of Renting Homes, Enriching Lives, backed by a set of core values. All Grainger’s build-to-rent developments provide a range of customer benefits and added value, from professional on-site resident services teams, resident amenities including gyms, residents’ lounges, roof terraces, meeting rooms and co-working space for those working from home, and superfast 250MB fibre optic broadband. Grainger also takes a leading approach to sustainability, specifically Environmental and Social issues (ESG) and has an ambitious target to be net zero carbon in the operations of its buildings by 2030, to have a diverse and inclusive workforce and to make a positive social impact in locations where it invests and operates.

Grainger H1 2025 Earnings Call Transcript

Key Takeaways

• Granger delivered 15% growth in net rental income and 23% growth in EPRA earnings with like-for-like rental growth of 4.4%, enabling a 12% dividend increase.
• The committed pipeline of over 4,500 homes coupled with secured and planning pipelines supports a forecasted 50% rise in EPRA earnings by FY2029 and 25% by FY2026.
• Conversion to a REIT is set for early September, unlocking around £15m of first-year tax savings and moving to an 80% EPRA earnings payout policy.
• Growth is self-funded through disciplined asset recycling, having divested £549m of non-core assets in the last 2½ years to reinvest in higher-yield build-to-rent.
• The build-to-rent sector enjoys strong structural tailwinds—rental demand is rising, supply remains constrained, and residential yields of about 4.5% offer attractive inflation-linked returns.

Presentation

[Helen Gordon, CEO at Grainger]

Thank you. Good morning, everybody, and welcome to Granges' Half Year Results. I'm pleased to be able to tell you that we've delivered another excellent set of results as we continue to accelerate our growth. We're adding to recent years of record delivery with another strong year. This is a resilient business in a structurally supported sector, and it's delivering growth immediately.

[Helen Gordon, CEO at Grainger]

And of course, this is a significant year for Granger as we plan to convert to a REIT before we present the next set of results, delivering on our long term promise to shareholders ahead of time. So the agenda this morning is I'll take you through the highlights, Rob will talk you through the financial results and then I'll come back and talk about Granger's shareholder value creation model, the market and the drivers of growth. Before I get to the results, I want to take a moment to remind people of just how resilient this business has been over this period of financial volatility and also how we're in a period of accelerated growth. We have delivered an outstanding performance in a structurally supported sector, and we're continuing to deliver growth. Now it's an outstanding performance because our performance has been sector beating.

[Helen Gordon, CEO at Grainger]

We've delivered top line growth in our income through portfolio expansion, excellent like for like rental growth and growing valuations. And there is a strong investment market in build to rent. Our sector is one that is structurally supported. We have a growing population, a growing demand for rental homes and supply is highly constrained and small landlords are leaving the market and there is an opportunity for us to increase our market share. And we're delivering growth now and into the future.

[Helen Gordon, CEO at Grainger]

We've once again generated strong year on year earnings growth and we're leveraging our central costs and overheads to deliver compounded earnings growth from what is a sector leading operational platform, which has the capacity to deliver further efficiencies as we grow further. Our accelerated earnings growth will deliver 50% growth in our EPRA earnings by financial year twenty twenty nine. So turning to the headlines of our performance. It's been an excellent 15% growth in our net rental income, in part supported by continued strong like for like rental growth at 4.4%. We've achieved 23% growth in our EPRA earnings as we leverage our sector leading operational platform, and we're delivering for shareholders a 12% dividend growth.

[Helen Gordon, CEO at Grainger]

Our valuations are continuing to grow with an NPA at GBP 3 per share. Now these financial results and our record growth in earnings have been delivered by our strong operational platform, delivering 96 occupancy, which we consider to be full, maintaining efficient gross to net at 25% despite rising costs and securing customer retention high at 62% and the customer affordability remaining healthy at 28% of income spent on rent. Now the resilience and performance of this asset class has been recognized by numerous investors, and it is attracting capital. In Q1 twenty twenty five, '1 point '1 billion was invested into the sector, and advisers predict that 2025 will be a record year of GBP 6,000,000,000 of investment. In 2024, residential was 10% of all real estate investment sales, and this is up from 3% in 2017.

[Helen Gordon, CEO at Grainger]

This is evidence of a maturing mainstream asset class, which is attracting strong investment interest. We have a significant portfolio growth to come. We have over 11,000 operational homes. Our regulated tenants is just over 1,300. We have grown our build to rent portfolio to over EUR 2,800,000,000.0 and that's EUR 9,689 homes.

[Helen Gordon, CEO at Grainger]

We have a healthy pipeline of EUR 4,565 homes, which will deliver a significant step up in our earnings. Our committed pipeline alone will see us deliver 50% growth in our EPRA earnings even after absorbing an increase in interest rates. We will deliver 25% growth by full year 2026. The growth in our portfolio will leverage our central costs and will drive EBITDA margin expansion, And the outer pipeline will deliver a further EUR 40,000,000 of potential net rental income. So we've secured significant growth to come.

[Helen Gordon, CEO at Grainger]

How do we fund it? Our committed, secured and planning and legals pipeline is funded by our asset recycling. This has been a constant driver of the growth in our portfolio. We're a highly cash generative business with over EUR 200,000,000 in operational cash flows each year. We have around CHF 1,000,000,000 of lower yielding noncore assets, which we are recycling to invest in higher yielding build to rent.

[Helen Gordon, CEO at Grainger]

And we have a great track record on asset recycling, delivering $549,000,000 over the last two point five years. We're efficient at matching cash flow with CapEx. Now this is a slide I showed in November, and I said it was my favorite, so I'm showing it to you again, but it's a slide I like so much because it tells you a lot about Granger. It demonstrates our track record of delivering. That's delivering our growth in our income, delivering our growth in our earnings and delivering a vast improvement in margin from our operational leverage.

[Helen Gordon, CEO at Grainger]

Now this growth is set to accelerate with a doubling of our net rental income from our pipeline, a 50% growth in our earnings by full year 2029, and that's just from our committed pipeline and much more EBITDA margin expansion to come as we drive operational leverage from our sector leading platform. We have a track record on building a bigger and more valuable business, and there is a lot more to come. So I'm now going to hand over to Rob, who will take you through the details of our excellent results.

[Robert Hudson, CFO at Grainger]

Thank you, Helen, and good morning, everybody. Today, I'm going to run through the financial performance for the half year and illustrate the exciting phase of growth that we have ahead of us. The first half has been another period of accelerating growth, demonstrating Granger's resilience and our market leading position. Like for like rental growth across our stabilized portfolio was 4.4%. Overall, total net rental income continued to grow strongly, up 15% in the half.

[Robert Hudson, CFO at Grainger]

And this top line growth drove even stronger earnings growth, which was up 23%, demonstrating the operational leverage in our business that delivers strong compounding earnings growth. Adjusted earnings were up 13% to GBP 50,100,000.0, with strong sales profits as we continue our success in disposing of our regulated portfolio. And our dividend per share increased by 12%, reinforcing our commitment to delivering robust, sustainable returns to our shareholders. EPRA NTA grew by 1% to GBP 3, continuing valuation growth and underscoring the quality of our portfolio. Now looking at the income statement in more detail.

[Robert Hudson, CFO at Grainger]

Our overall like for like rental growth of 4.4% was driven by strong performances in both BTR, which was 4.2%, and our regulated portfolio of 7%. Stabilized gross to net was in line with the full year at 25%, demonstrating our ongoing focus on cost efficiency. Overhead costs were up 4% in the half year, in line with wage inflation, with costs continuing to be tightly controlled as a result of the benefits of our Connect platform. Interest costs increased due to slightly higher average levels of debt in the first half. EPRA earnings saw very strong growth of 23%, demonstrating the strong compounding earnings growth that we're delivering.

[Robert Hudson, CFO at Grainger]

Sales profits were in line with prior years, with appetite and pricing for our sales remaining strong. Other adjustments include a derivative valuation movement of GBP 2,900,000.0 and an additional GBP 1,900,000.0 fire safety provision. Now looking at the moving parts of the 15% increase in our net rent for the period. Strong like for like rental growth of 4.4% contributed GBP 1,000,000 of this growth. And the successful lease up of our recent pipeline deliveries has been a large contributor, adding GBP 10,000,000 of net rent.

[Robert Hudson, CFO at Grainger]

Our asset recycling program offset this growth by GBP 3,000,000. Looking forward, we'd expect rental growth to continue to remain above long term averages in FY 2025, with second half net rent to be slightly higher than the first half due to pipeline lease up. This chart shows the key movements in NTA over the course of the year. And our upper NTA came in at three per share, which was up 1% for the half, which saw continued valuation growth. Net rents and fees added 9p, with overheads and finance costs offsetting this by 5p.

[Robert Hudson, CFO at Grainger]

And overall, our portfolio valuation for the period was up 0.8%. The BTR portfolio saw 1% valuation growth in the half, with ERV growth of 1.7% and largely flat yields. Valuations on the REGs portfolio were up 0.4%, demonstrating their resilience. And further details of the valuation can be seen in the appendices of this presentation. As a reminder, there are many elements of our business not captured in our NTA as we outline on this slide.

[Robert Hudson, CFO at Grainger]

Now turning to net debt. Net debt was broadly flat in the half with just a modest increase of GBP 22,000,000 to GBP 1,475,000,000.000. Operational cash flows remained very strong with GBP 95,000,000 generated, and that was ahead of the GBP 84,000,000 generated in the first half of the prior year. And we continue to invest in our build to rent pipeline with GBP 64,000,000 invested in the period. Our self funded growth, where we recycle out of our lower yielding and returning assets into our pipeline, enables us to continue to drive growth while managing our balance sheet in line with our plans.

[Robert Hudson, CFO at Grainger]

Going forward, we'd expect net debt to remain broadly flat in the near term, with a modest deleveraging to occur as we near the end of our remaining three point five year low rate fixed hedge maturity. Our balance sheet remains in excellent shape, providing a solid foundation for future growth. We maintain strong liquidity and robust hedging profile with rates in the mid 3% range for the next three point five years and no material refinancing requirements until 2029. Both net debt at GBP 1,475,000,000.000 and LTV at 38.5% broadly in line with last year end, demonstrating our ability to manage our capital structure by flexing sales of our highly liquid asset base. As previously highlighted, we plan to reduce our debt and LTV over the medium term.

[Robert Hudson, CFO at Grainger]

And this LTV reduction will be managed with reference to our three point five year hedge maturity. As LTV is brought down over the medium term, this will help mitigate the impact of rising finance costs as our low rate hedging rolls off. We'll manage the quantum of this deleveraging to ensure we continue to deliver the 50% earnings growth whilst fully absorbing the impact of the higher interest rate environment. REIT conversion has been a long term ambition since the start of our strategy, and I'm pleased to say we're now very close with conversion set for early September and preparations are largely complete. The benefits of the business of being a REIT are substantial as we'll no longer have to pay corporation tax on the profits of our build to rent business.

[Robert Hudson, CFO at Grainger]

And in the first year alone, this is expected to generate GBP 15,000,000 of savings, with this increasing as we deliver further growth. We see the resilient growth that our residential business delivering as arguably the perfect fit for the REIT structure with no impact on our business model or our strategy. The dividend distribution requirements of paying 90% of readable profits will also have no impact on our dividend given existing payout levels. And we believe that the dividend income stream we give to our shareholders should mirror that of our underlying asset class, which means long term compounding resilient growth. Post REIT conversion, we'll move from our current dividend policy of distributing 50% of net rents to a policy of distributing at least 80% of EPRA earnings as a dividend.

[Robert Hudson, CFO at Grainger]

And we're firmly committed to delivering a strong, progressive dividend across the short, medium and long term time horizons, and we'd therefore expect continued growth in FY 2026 and FY 2027 with a top up of REG's profits in these years. Beyond that, we'd expect the dividend to be fully covered by EPRA earnings. The first half was a period of strong net rental income growth, and we have very clear visibility of the substantial growth to come with pipeline completions, and that's going to drive significant year on year increases in our net rent. Rents will increase by GBP 43,000,000 to GBP 153,000,000 compared with FY 2024 as we deliver our committed pipeline. And beyond that, our secured and planning and legal schemes will deliver a further GBP 40,000,000 of net rent.

[Robert Hudson, CFO at Grainger]

Combined, the entire pipeline will see our net rents continue to accelerate to GBP 193,000,000. This strong top line growth delivers even stronger earnings growth as the operating leverage from our business model and our Connect technology platform continues to drive meaningful margin improvement. Near term, we're on track to deliver our guidance of GBP 60,000,000 of EPRA earnings by FY 2026. That's an increase of 25% when compared with FY 2024. We've also had the potential to grow our EPRA earnings by 50% by FY 2029, and that's from the delivery of our committed pipeline alone whilst also fully absorbing the impact of higher interest costs.

[Robert Hudson, CFO at Grainger]

The bridge on the slide breaks down the key drivers, and that includes the benefits of like for like rental growth assumed at our long run average of 3.5% the yield pickup from recycling out of our lower yielding REGS assets into our growing build to rent portfolio scale efficiencies, with EBITDA margins growing to over 60% and the mitigating impacts of reducing debt on higher interest rates, which are currently assumed to have fully rebased to 5.5% by the end of the period. We see this as conservative as it excludes any further accretive opportunities as outlined by Helen, and it's based only on the delivery of our committed pipeline. We see Grainger is delivering a medium term sustainable return of at least 8% with stable yields, and this comprises two components: our recurring earnings yield of 3.5% plus 4.5% capital growth, that's based off the long run rental growth assumption of 3.5% whilst adjusted for leverage. This total return is extremely robust given the predictable income element and rental growth assumption that's been backed up by decades of evidence. And it's also based on an NTA of GBP 3.

[Robert Hudson, CFO at Grainger]

And given the discount we're trading at today, this return would be over 11%. I've provided further details for you in the appendix. So to summarize, we've continued to deliver a very strong operational performance with rental income increasing by 15% and even stronger earnings growth with EPRA earnings up 23%. And this growth is being delivered from a position of real financial strength. Our liquidity and our balance sheet is strong, and that gives us the flexibility through disposals to manage our debt as we reinvest into our committed pipeline.

[Robert Hudson, CFO at Grainger]

And we're on track to deliver our FY '20 '20 '6 EPRA earnings guidance of GBP 60,000,000, and the delivery of just our committed pipeline alone gives us the potential to grow earnings by 50% from FY '20 '20 '4 levels whilst also fully absorbing the headwind of higher interest rates. This earnings growth is a major component of our medium term total returns target of 8%, and we see that as a low volatility return, and that remains unchanged, assuming constant yields. And with that, I'll now hand you back to Helen.

[Helen Gordon, CEO at Grainger]

Thank you, Rob. In this section, I'm going to cover the fundamentals of our sector, our business model and our operating platform, which is driving shareholder value. Now Grainger is focused on driving shareholder value. Our model is simple. We are investing in a great sector with structural market tailwinds.

[Helen Gordon, CEO at Grainger]

Our investment model has shown a strong correlation between inflation and particularly wage growth and rental growth. Our operating platform is accelerating EBITDA margin growth, and our growth is set to continue with a substantial pipeline of EUR 1,300,000,000.0. Our growth is funded from our asset recycling. Our regs and our noncore assets are Granger's growth funding engine. And as we recycle, we capture the reversionary potential.

[Helen Gordon, CEO at Grainger]

And all of this is based on a strong balance sheet and all of this is focused on driving shareholder value. So looking first at the structural market tailwinds. In The UK, there is a demand for housing of all types, but there's a particular growing demand for rental housing. And the English National Housing Survey and Savills predict rental demand is set to grow by 20% over the ten years to 02/1931. Now this is driven by the growth in population, but people renting for longer and the growth is strongest in the Granges core demographic of 25 to 34 year olds.

[Helen Gordon, CEO at Grainger]

In addition, there is a tremendous opportunity to gain market share. Although Granger is the market leader, build to rent still only represents 2.3% of The UK private rented market. And as renters rent for longer, they are increasingly looking for the quality, convenience and professionalism that Grainger delivers. Now at the same time as demand is growing, supply remains constrained. The UK faces a severe undersupply of housing, an estimated 4,300,000 shortfall across all tenures.

[Helen Gordon, CEO at Grainger]

Planning consents and housing starts have fallen. And just as an example, in The UK, London, The UK's largest rental city, 33 boroughs, 23 of them have recorded zero housing starts this year. This undersupply is exacerbated by small landlords exiting the sector. There has been a net reduction in small landlords since 2016 as small landlords have faced rising regulation and finance costs. And despite government policy to stimulate housing supply, we see housing shortages will continue.

[Helen Gordon, CEO at Grainger]

Now residential is a strong and attractive asset class. Residential yields, particularly in London, are the highest they've been since the early 2000s, and they're higher than most European cities. In an unregulated environment, residential will deliver highly attractive inflation linked returns. And whilst real estate is often compared to the ten year gilt, it's more appropriate to compare residential investment to the ten year inflation linked gilt, which is currently 1.4%. And our built to rent portfolio at 4.5% delivers a very healthy spread.

[Helen Gordon, CEO at Grainger]

Residential has outperformed CPI with more than double the rental growth of commercial real estate. And rental growth is underpinned by wage growth. And it is this quality of the risk adjusted returns that sometimes missed. And we have a strong rental growth outlook. We have excellent customer demographics with our customers' wages growing faster than average.

[Helen Gordon, CEO at Grainger]

89% of our customers are aged between twenty to forty four. Now I hate to break it to the over 45s, but the twenty to forty four year old is the group where pay increases fastest as people develop their careers. And we know our customers' affordability is strong and it's further supported by the fact that our buildings are energy efficient. They include gyms and WiFi in the rent. So rental growth is expected to stay above long term historic average for full year 2025.

[Helen Gordon, CEO at Grainger]

Now our research and carefully selected investment locations informs our capital allocations. Now London remains the best rental city. And in the first half, we added to the London portfolio with the second phase of windless apartments in North London. We also launched in February in Oxford, another strong rental city. Our cluster strategy, which drives our gross to net with operational efficiencies, buying power and customer retention is developing further.

[Helen Gordon, CEO at Grainger]

And we've reinforced our clusters and committed to secured acquisitions and secured acquisitions in key locations by investing in strategic adjacent site acquisitions to reinforce these clusters, for example, at Guildford, Sheffield and Cardiff. Another driver of performance is our leading operating platform, delivering excellent customer service. We have invested in technology and we're leveraging our data and we're using AI to drive customer experience and we're using sentiment analysis to drive actionable insights. In the first half, we upgraded our app to provide better customer service and more immediate responses. And all of this is delivering great service to customers and great insights and value to shareholders.

[Helen Gordon, CEO at Grainger]

What people sometimes don't realize is how supportive the regulatory and political backdrop is for Granger. The new government were quick to condemn rent controls and to support the growth in the build to rent sector. We now have visibility on the renters' rights bill, and we have clarity of what the government expects of the sector. Their requirement of improved rental standards are easily achieved by Granges. We have a high quality, modern, energy efficient portfolio.

[Helen Gordon, CEO at Grainger]

Now there will be operational changes, but we are adapting our policies and processes, training our people to the new requirements, which, in a customer centric business like Granger is business as usual. We at Granger see renters' rights as a positive evolution of our business model and essential to maintain the positive support that the build to rent sector has achieved from this government. Now Granger's growth has been achieved primarily by developing our own stock and our routes to growth are widening with stabilized acquisitions becoming increasingly available. There are also opportunities for asset repositioning and these exist in our portfolio, but our deep understanding and experience and customer insights tell us what customer wants. And we also bring that skill to stabilized acquisitions.

[Helen Gordon, CEO at Grainger]

We continue to see development opportunities by developing out our pipeline of sites and particularly efficient are the adjacent land ownerships, where we already have a deep understanding of the market and the submarket, and we continue sourcing opportunities, particularly sourcing opportunities through our strategic joint ventures and partnerships. So returning to our shareholder value creation model. In summary, we're in a great sector. We've got a strong structural market tailwinds, and we're in a sector that delivers real rental growth and offers great inflation linking characteristics. Our leading operating platform is delivering for customers and shareholders, and our EBITDA margin is accelerating.

[Helen Gordon, CEO at Grainger]

So we have an enviable pipeline for growth, and that is funded from our lower yielding historic assets. And all of this is creating shareholder value. 50% earnings growth by 2029, '20 '5 percent by 2026, an 8% plus of total accounting return with low volatility, and that's 8% of our GBP 3 NTA. And at current prices, that represents over 11%. A progressive dividend, which we are committed to maintaining, and we see this business as delivering excellent risk adjusted returns.

[Helen Gordon, CEO at Grainger]

So Granger's shareholder value creation model is delivering for shareholders. Thank you. Now I'm going to invite you to ask us some questions, and I'm going to be joined by Rob Hudson, our Chief Financial Officer, Mike Keveney, our Director of Land and Development, Eliza Paterson, our Director of Operations and Asset Management and I've got other senior leaders in the room. So, anyone listening in, you can submit questions through the webcast, but I'll take questions in the room first.

[Sam Knott, Equity Analyst at Kolytics]

Thanks for the presentation. Is Sam Knott from Colytics. If I can just dig into the 8% TAR that you quote and particularly how you get to the 3.5% income return because just doing some sort of back of the envelope, your adjusted net initial yield is 4.1%. After costs, you're probably already coming down below that 3.5%, then the effect of leverage is going to further impact that negatively. So just how do you get to that number?

[Robert Hudson, CFO at Grainger]

Yes. So it's based off our five year earnings bridge. So clearly, we've got 50% of growth in our EPRA earnings locked in. That's after rebasing to higher interest costs, but we do have some modest deleveraging, which is effectively then offsetting that impact of finance costs or certainly a very large impact of that. And the key reason that our earnings yield is being driven up so much is because the compounding benefits of scale on our platform.

[Robert Hudson, CFO at Grainger]

So we've got our committed pipeline, which is locked in and delivering. Our central costs are being tightly controlled. So we have this very beneficial operating leverage coming through. So really, it's an effect of that compounding impact on the earnings coming through.

[Sam Knott, Equity Analyst at Kolytics]

That makes sense. Thanks. And then just one extra point on that. Does that 8% include sort of maintenance CapEx that you're expecting to spend? Or should that be taken off that 8%?

[Robert Hudson, CFO at Grainger]

Yes, that's a great question, Sam, because for us, we actually do fully expense our ongoing maintenance and refreshment costs as we go. That's factored into our 25% gross to net that we have today. So we are a truly fully expensed net yield.

[Sam Knott, Equity Analyst at Kolytics]

Great. Thank you.

[Helen Gordon, CEO at Grainger]

Chris?

[Chris Millington, Equity Analyst at Deutsche Numis]

Good morning. Thanks for taking my question. I just ask about you're obviously talking about quite a lot of investment activity in the space at the moment. Are you seeing any change in the sources of capital there? Perhaps you could just talk around that subject.

[Chris Millington, Equity Analyst at Deutsche Numis]

I'll go one at a time because I've been told off for doing this in the past.

[Helen Gordon, CEO at Grainger]

We are seeing new entrants into the market, and that's obviously what's driving up the investment demand. A wide range, we've always seen the institutions and sovereign wealth because of the nice protective characteristics of the of our returns. But we are seeing a mixture of private equity and a whole range of people entering the market. There's been about eight major transactions this year, and it's a very broad area. And I think people are looking at how residential investment has delivered, particularly in times of volatility and have seen that compared to all other real estate asset classes, it has actually maintained its value.

[Chris Millington, Equity Analyst at Deutsche Numis]

Thank you for that. You've obviously done some work around the index linked gilt, which I think is quite a good point you made. How has that looked historically, that spread? I mean it's running a lot.

[Helen Gordon, CEO at Grainger]

Yes, the widest it's been I think I was sort of alluding to that in the slide about the market. It's probably the widest it's been for some time. Obviously, we almost got to negative rates, didn't we, at one But equally, sort of we have we've been as low as 3%, so we're up 50%, if you like, on yields. So yes, it's a long way.

[Chris Millington, Equity Analyst at Deutsche Numis]

And they were slightly leading questions into this one here about what you're thinking about the outlook for yields. Obviously, you have conversations regularly with the valuers. You see in the transactions better than us. I mean do you think we've had a period of stabilization now with lower rates kicking through?

[Helen Gordon, CEO at Grainger]

Be careful, my valuers are here, I think. The well, the one thing I would say is we're off very, very historic high values. And if you look at world cities, Paris, Berlin, New York, London, at sort of 4% plus 4%, four point two five %, four point five % is way off beam, especially as some of those cities have regulation in them. So actually, I think what's happened is we've been very much grouped with other real estate asset yields of moving out. And I think they have been incredibly stable now for a good couple of years.

[Chris Millington, Equity Analyst at Deutsche Numis]

Thanks, Helen. I did have one last one, if I can read my own writing. I'm sorry. It was it's just about when the secured pipeline is going to fall into the committed pipeline. You're putting a lot of focus on committed and perhaps a little less unsecured.

[Chris Millington, Equity Analyst at Deutsche Numis]

Just thinking about times and milestones to get us there.

[Helen Gordon, CEO at Grainger]

Yes. I think you make a good point, Chris. We do the committed because I think everybody wants certainty, certainty that things are going to be delivered. And just as a reminder what committed means. Committed means it's actually on-site at the moment.

[Helen Gordon, CEO at Grainger]

We've only got €166,000,000 of CapEx to go on that €400,000,000 So it's delivering immediately. The secured pipeline has got planning consent, and we control the land. And so in some cases, we're taking it through to improve in the improved planning environment. We're taking it through to improve consents and obviously taking it through all the necessary regulation to make a start on-site. But it's a very healthy pipeline.

[Chris Millington, Equity Analyst at Deutsche Numis]

You.

[Helen Gordon, CEO at Grainger]

Any other questions?

[Alastair Stewart, Construction and Property Analyst at Progressive Equity Research Limited]

Alastair Stuart from Progressive Equity Research. Two, three questions based really around the same subject, mainly London. Are you seeing any increased urgency to start to get development in general and BTR in particular going? How is the planning landscape moving? And it's interesting you've avoided some of the building safety regulator carnage that's been seen among other developers.

[Alastair Stewart, Construction and Property Analyst at Progressive Equity Research Limited]

Could you explain go through why that's been the case?

[Helen Gordon, CEO at Grainger]

Yes. So I think I it's a huge distress that it's an engine for our country. It's so annoying that we don't have more housing supply coming through in London with, as I say 23 of the 33 boroughs had seen no no starts at all. I think the the mayor will obviously wants it to happen. The boroughs are sometimes you know a little bit more difficult to deal with.

[Helen Gordon, CEO at Grainger]

We have been incredibly successful at getting consents in London. One of the things I should say is that housing for sale versus housing for rent. Housing for rent can deliver a lot quicker. And just as one example, not a London example, but we did eight point five years supply in one of our schemes in Manchester against sort of a normal private for sale housebuilder because the decision people make to rent rather than buy is very, very different. And so you can lease up much quicker than you can go through a sales process.

[Helen Gordon, CEO at Grainger]

And we are seeing a positive reception for build to rents in London and in London planning. So that's quite important. Alastair, I'd like to say we probably threaded the needle with the building safety regulation. I'm going to ask Mike to explain why why that is.

[Michael Keaveney, Director of Land & Development at Grainger]

I'd like to say

[Michael Keaveney, Director of Land & Development at Grainger]

it because

[Michael Keaveney, Director of Land & Development at Grainger]

we're brilliant. But the reality is, yeah, the building safety regulator, it's all bedding in. It just so happens that because of our timeline, when we redesigned schemes for the latest fire safety regulations, went back into planning, got more density, they don't land on the regulator's desk for a while. So I guess that was timely. And we fully expect by the time we're in front of them with our applications that things will have changed.

[Michael Keaveney, Director of Land & Development at Grainger]

They are already changing. There's an awful lot of work going on within the industry and with the MHCLG or Deluxe, sorry, to try and deal with that bottleneck. So by the time we get there, I suspect it will be a lot easier.

[Neil Green, Analyst at J.P.Morgan Cazenove]

Neil Green from JPMorgan. Just one question really. Given your ongoing development activity, can I just ask what you're seeing and hearing around construction cost inflation, please?

[Helen Gordon, CEO at Grainger]

I'm going to go back to Mike on

[Helen Gordon, CEO at Grainger]

that one.

[Michael Keaveney, Director of Land & Development at Grainger]

Yes. Thank you. So obviously, our scheme is on-site. We have fixed price contracts, so it doesn't really affect us. And we've got a couple of schemes starting in the next six, nine months, again, fixed price contracts.

[Michael Keaveney, Director of Land & Development at Grainger]

So that doesn't really affect that part. There is a lot of news about inflation generally comes from the house builders because they don't use fixed price contracts, and therefore, they experience inflation as they build. We don't we sign up fixed price contracts when we develop. In terms of the levels of inflation, so we rebase our cost plans a lot very regularly to make sure that we're not caught out. We're actually seeing tenders coming in at or below the estimates at the moment.

[Michael Keaveney, Director of Land & Development at Grainger]

I wouldn't say it's massively below, but it certainly has moderated and it's in and around where we expect it to be.

[Neil Green, Analyst at J.P.Morgan Cazenove]

Thank you.

[Helen Gordon, CEO at Grainger]

Other questions? Kurt?

[Kurt Mueller, Director of Corporate Affairs at Grainger]

I have a few from the webcast. The first one is from Kengsha Anand from Citi. It's a two parter. The first one is given the positive trends in transaction markets, what can we expect as an approximate timeline for the £1,100,000,000 of firepower that you have to materialize?

[Helen Gordon, CEO at Grainger]

It's a great question. I mean we have just to put this in context, we've done over 2,000,000,000 pounds of asset recycling from our old portfolio into our new portfolio, and we've done nearly five fifty million pounds over the last two point five years. We have not found it difficult to asset recycle, which is very different from other asset classes where people have had to take a haircut. So we've been actually recycling, maintaining values, not having to write down values on sales, etcetera. And I think I alluded to it in my commentary that actually what we do is we match CapEx with the recycling program.

[Helen Gordon, CEO at Grainger]

So it won't mean necessarily that we'll look to accelerate that. We will consistently sell to match our CapEx.

[Kurt Mueller, Director of Corporate Affairs at Grainger]

So the second part of the question, I think you may have probably just answered it. How do you think about the decision to allocate the firepower between the pipeline and stabilize acquisitions? And is there a yield threshold for acquisitions?

[Helen Gordon, CEO at Grainger]

Yes. So the obviously, we look at we're watching the markets all the time. I'd like to think that our acquisitions team is stalking every asset and know every asset in case the owner wants to sell it. The benefit of stabilized acquisitions is an immediate rental uplift rather than having to take the wait for the development. The benefit of the development is you get exactly the product that you want and you do get some development return.

[Helen Gordon, CEO at Grainger]

And so we look at the returns in relation to that on an IRR basis. I'm not going to reveal my our thresholds for my competition.

[Kurt Mueller, Director of Corporate Affairs at Grainger]

Andres Toome from Green Street had a few questions. He's next. Cost inflation is running high, is his comment. How do you expect to mitigate this as rent growth momentum is decelerating? Are you able to keep NOI margins flat?

[Helen Gordon, CEO at Grainger]

I think we've done a pretty good job. I mean if you think at everything that's been thrown at us from energy costs and construction costs historically, wage inflation, NI. We're absorbing all of that in our overheads and in our 25% gross net. But I'm going to ask Eliza just to talk about the ways that you do approach costs within buildings.

[Eliza Pattinson, Director of Operations & Asset Management at Grainger]

Yes. So definitely, it's our full in house operational platform means that we can deliver and manage our NOI, and that's around we're able to have our cluster efficiencies, procurement, really strong void management and all of that feeds into making sure that we can manage our gross to net.

[Kurt Mueller, Director of Corporate Affairs at Grainger]

Andre's second question, I think you sort of answered it with the cantias, but I wondered if you had any more comments because it's specific around the yield levels we're negotiating on forward funding projects when we're looking to replenish the pipeline. Are there any changes there? Or are they similar to the past?

[Helen Gordon, CEO at Grainger]

I mean all the way through the presentation, I talk about risk adjusted returns, and that's exactly how we look at our capital allocation. What risks are we taking on either counterparty risks or new location risks, etcetera? And obviously, stabilized acquisitions, we've got more visibility on how it's run at present, but we can add value to it. So it will depend very much on a project by project basis. And some of the projects we've done over recent years, we've been pioneering in a location and they've come through very well and that's driven really impressive in returns.

[Helen Gordon, CEO at Grainger]

So being the first build to rent in a location, for example. I don't know if anyone wants to add to that.

[Michael Keaveney, Director of Land & Development at Grainger]

Well, we highlight Derby, even Nottingham. We tend to be first in. And because of the quality of our research, we and we're prudent, they tend to overperform.

[Kurt Mueller, Director of Corporate Affairs at Grainger]

Final question from Andres Thoom. His final question is, EPRA earnings, the run rate for this first half, HY25 seems to be going at FY26 guided pace. Is the guidance super conservative? Or is there a cliffhanger that you are budgeting for in the next eighteen months that will drag on net earnings?

[Helen Gordon, CEO at Grainger]

I'll let Rob do that one.

[Robert Hudson, CFO at Grainger]

Yes, sure. So I guess the first point to make in the context of our guidance is that we've got strong growth over the short and medium term coming through. So 50% growth in our earnings by FY '20 '20 '9, '20 '5 percent by FY '20 '20 '6. So that growth is happening now and also in the future, and there's no change that guidance. When we look at the first half, there are a couple of factors that you can't just annualize the first half number to get to the full year.

[Robert Hudson, CFO at Grainger]

So we're maintaining our guidance on that basis. And that's because we've had some within our management fees, liquidated damages where we're fully compensated for project delays, and there's always a little bit of lumpiness in that. And then our costs are naturally seasonally weighted towards the second half of the year. So in terms of our guidance, it's based on what's locked in. It is just the committed pipeline alone and of course, after fully rebasing interest rates.

[Robert Hudson, CFO at Grainger]

And of course, we've got substantial growth ambitions, and we're always looking at ways that we can grow further. And it's a really exciting time for the business, but no changes in the trends there and continue to grow over short and medium term horizons.

[Helen Gordon, CEO at Grainger]

Any more questions? I

[Kurt Mueller, Director of Corporate Affairs at Grainger]

have one final question from online. It's from Mr. Mike Whittles, and he's asked a question about the optimistic commentary in today's statement and if management could comment on how this can be squared with net asset values, which have grown less than 10% over the last six years or 1% in this period.

[Helen Gordon, CEO at Grainger]

Okay, not in our slide deck but I think I started off by reminding people how resilient this business has been in any other real estate asset class, whether you're talking about retail being down over 40%, offices high 20s, industrial and logistics very, very low. Grainger, if you look at that chart, is up 1%. Now 1% doesn't sound fantastic, but bearing in mind what's been thrown at the sector over the last few years, think this is actually a very, very good result.

[Kurt Mueller, Director of Corporate Affairs at Grainger]

No further questions from the webcast.

[Helen Gordon, CEO at Grainger]

Any more in the room? Great. Thank you very much for joining us this morning. If you think of anything afterwards, contact me, Rob, Kurt, and we'll get back to you. And yes, thanks for getting up early and spending some time with us.

[Helen Gordon, CEO at Grainger]

Thanks.

Participants

Executives

• Helen Gordon, CEO
• Robert Hudson, CFO
• Michael Keaveney, Director of Land & Development
• Kurt Mueller, Director of Corporate Affairs
• Eliza Pattinson, Director of Operations & Asset Management

Analysts

• Sam Knott, Equity Analyst at Kolytics
• Chris Millington, Equity Analyst at Deutsche Numis
• Alastair Stewart, Construction and Property Analyst at Progressive Equity Research Limited
• Neil Green, Analyst at J.P.Morgan Cazenove