Private rents deliver 'particularly strong' quarter for Grainger

Residential landlord Grainger reported 23% growth in first-half adjusted earnings on Thursday, to £46.3m, amid rising rents and strong occupancy levels.

The FTSE 250 company said net rental income was also up 23% year-on-year in the six months ended 31 March, to £42.8m, as like-for-like rental growth across its portfolio came in at 3.5%, compared to 1.7% at the same time last year.

Its private rented sector portfolio saw rental growth of 3.5%, up from 1% in the first half of the 2021 financial year, while its regulated tenancy portfolio’s rental growth slipped to 3.7% from 4% year-on-year.

Grainger noted that its regulated portfolio contributes 18% of its total net rental income.

The firm’s private rented sector portfolio had occupancy of 98% at the end of March, ahead of pre-pandemic levels, which the board put down to the “strength” of its operating platform and the “attractiveness” of its portfolio.

Residential sales profit was up 7% to £31.6m, with the prices achieved described as “strong”, at an average of 3.6% ahead of valuations.

The company’s total property return for the half-year was 3.8%, which Grainger put down to valuation gains of £79m, with the market value of its total property portfolio up 2.3% in the first half, and EPRA net tangible assets up 3% to 305p since the end of the 2021 financial year and up 7% year-on-year.

That was attributed to the completion and leasing performance of new assets, as well as yield compression.

“We have delivered a particularly strong performance for the first half of the year with adjusted earnings up 23%, largely driven by our acceleration of growth in net rental income of 23%,” said chief executive Helen Gordon.

“This is a result of an exceptional lettings performance by the team, which also drove occupancy in our private rented sector portfolio to 98% combined with like-for-like rental growth of 3.5% and a record rate of lease up of our recent launches.

“The market has strengthened swiftly over the past six months and we have successfully capitalised on this opportunity.”

Gordon said Grainger was delivering on its growth plans, which would see it “double in size” in the coming years, providing “exceptional” earnings growth and “attractive” high single-digit total returns to shareholders.

“The UK rental market continues to have a hugely attractive outlook with significant demand, rental growth, yield compression, and structural drivers that favour the professional, large-scale landlord.

“At the same time, Grainger is in a strong position as market leader with a scalable national operating platform, fully-funded secured pipeline and fully integrated business model.”

Grainger was “well-prepared” for the economic challenges facing the UK, Helen Gordon said, of inflation and cost-of-living rises.

“With a resilient customer base, high quality energy efficient homes, fixed debt costs, fixed delivery costs across the majority of our secured pipeline and limited direct exposure to other inflationary pressures, we are confident in the outlook for our business.”

At 0939 BST, shares in Grainger were up 0.36% at 282p.

Reporting by Josh White at Sharecast.com.