Grainger earnings rise amid strong rental growth

(Sharecast News) - Grainger reported a 23% rise in EPRA earnings to £30.2m for the six months ended 31 March on Thursday, driven by strong rental growth, high occupancy and continued operational leverage. Net rental income rose 15% to £61.3m, supported by like-for-like rental growth of 4.4% across its portfolio.

The FTSE 250 residential landlord also increased its interim dividend by 12% to 2.85p, as earnings per share surged 350% to 7.5p on an IFRS basis.

It said demand remained strong with occupancy averaging 96%, while its customer base remained demographically robust, with nearly 90% aged between 20 and 44.

Property valuations continued to rise, lifting EPRA NTA by 1% to 300p per share.

Adjusted earnings, which include sales profits, grew 13% to £50.1m, and total accounting return improved by 419 basis points to 1.3%.

Grainger said it was well-positioned to self-fund future growth, with £1.1bn of non-core assets available and no major refinancing required until 2029.

The company reaffirmed its intention to convert to a real estate investment trust by the 2026 financial year, which was expected to enhance returns and yield tax savings.

With supportive market dynamics, a constrained rental supply and strong build-to-rent sector momentum, Grainger said it expected continued compounding earnings growth and further margin expansion.

"Grainger has delivered another period of outstanding performance and we are continuing to deliver growth year-on-year," said chief executive officer Helen Gordon.

"Earnings are up 23% whilst net rental income grew 15% compared to this period last year, driven by our new openings, growth in underlying rents and our ability to leverage our central costs and operational platform.

"Our properties are in high demand and our portfolio remains fully let with occupancy at 96% with a strong customer demographic base and stable and healthy levels of affordability."

Gordon said the expansion of the company's build-to-rent portfolio was accelerating its earnings growth.

"Residential, specifically private rented residential, has proven its resilience through the cycle compared to other real estate asset classes with excellent rental growth protecting valuations and we are seeing continued valuation growth.

"Investment activity in the build-to-rent sector is very buoyant with reports of more than £1bn of investment activity in the first quarter of this year.

"Our market is characterised by structural demand drivers, supply-constrained markets, strong customer demographics and a supportive regulatory and political backdrop which is aimed at stimulating investment activity."

Through the delivery of its committed pipeline, Helen Gordon said Grainger expected to deliver strong like-for-like rental growth and 50% earnings growth from the 2024 to 2029 financial years after fully absorbing the impact of higher interest costs.

She added that it had significant firepower from its non-core portfolio to fund growth beyond that for its remaining pipeline or additional stabilised acquisitions.

"Our business is designed to create shareholder value; we operate in a sector with strong structural tailwinds.

"Our asset class and specifically our portfolio and platform, deliver inflation-backed rental growth; our sector leading operating platform is scalable and our EBITDA margins are growing substantially as we deliver our large pipeline.

"This shareholder value creation model creates excellent, risk-adjusted returns, with a commitment to delivering a continued progressive dividend."

At 0936 BST, shares in Grainger were down 0.7% at 212p.

Reporting by Josh White for Sharecast.com.