Rental income rises as Grainger reports robust demand

(Sharecast News) - Listed residential landlord Grainger reported an 11% increase in first-half net rental income on Thursday, to £53.2m, continuing its upward trajectory since its 'strategic restart' in 2016. The FTSE 250 company said adjusted earnings slipped to £44.4m for the six months ended 31 March, down from £47.1m a year earlier, supported by strategic divestment and capital reinvestment into build-to-rent (BTR) and private rented sector (PRS) assets.

Its board hiked the interim dividend by 11% to 2.54p per share, as EPRA earnings saw 12% growth to £24.5m.

Operational performance remained strong, with 8.1% like-for-like rental growth in the PRS portfolio and occupancy rates at 97.7%, reflecting sustained demand for residential properties within the portfolio.

Strategically, Grainger said it maintained a committed pipeline of £0.5bn, as it was poised to deliver additional net rental income growth.

The company said it was aiming to achieve EBITDA margin accretion to over 60% in the next five years, and projected EPRA earnings to reach £55m by the 2026 financial year.

Grainger added that it remained on track for conversion to a real estate investment trust (REIT) by October next year.

Looking ahead, Grainger said it anticipated minimal regulatory risks amid the upcoming general election, supported by extensive dialogue with political parties.

With a strong balance sheet, successful disposals program, and a burgeoning build-to-rent market, Grainger said it was well-positioned for future growth, aiming to deliver value to shareholders while enhancing the rental experience for customers.

"Grainger has delivered another strong operating performance over the past six months," said chief executive officer Helen Gordon.

"Strong like-for-like rental growth and expansion from our successful pipeline delivery have driven further growth in net rental income and earnings and enable us to increase our dividend for the 17th consecutive time since our strategy reset began in 2016.

"Our portfolio occupancy remains high at 97.7% with customer affordability healthy, customer satisfaction and retention high, and rent arrears low."

Gordon said that, despite some further yield expansion, strong rental growth offset that with underlying property values broadly flat, demonstrating the performance of Grainger's platform and the resilience of its asset class.

"Our sector's positive market fundamentals and our strategic positioning mean that we expect rental growth to remain above the historical long-term average for the remainder of this year with scope for it to continue at elevated levels into 2025.

"Our strategic transformation to become the leading PRS build-to-rent player in the UK continues unabated with 80% of our portfolio now PRS assets and will culminate in our conversion to a REIT in October next year, enhancing returns for shareholders further.

"As we deliver our secured pipeline, benefitting from significant operational leverage as our portfolio grows and our cost base remains stable, we expect to deliver a sustainable total accounting return of 8%, which we believe is a very attractive return on a risk-adjusted basis."

At 0848 BST, Grainger shares were down 1.1% at 269p.

Reporting by Josh White for Sharecast.com.