Grainger Stock

Good afternoon, ladies and gentlemen, and welcome to the Grainger plc Half Year Results Investor Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'm sure the company would be most grateful for your participation. I'd now like to hand over to CEO, Helen Gordon. Helen, good afternoon.

Good afternoon, everyone, and thank you for joining. I'm joined here by Rob Hudson, our CFO; and Kurt Mueller, our Head of Corporate Affairs. Grainger delivered a strong set of results last week, really strong performance, excellent earnings outlook. And this is really driven from the fact that in a time of global uncertainty, we are a needs-based asset class. We are actually everyone needs somewhere to live.

So I'm going to start by just talking about how we're on track for our GBP 60 million of earnings this year. And that will be a 12% increase and then on track for a 35% increase to full year '29. So we're delivering compounding earnings growth. And it's really around the 3 elements -- 3 strong elements to our business. It's a resilient business. In a country with a housing shortage, we have very high occupancy. We have rental growth, which is underpinned by wage inflation, a large and diverse customer base and really good rent-to-income affordability ratios.

We've also got locked in growth. We've got a committed pipeline, which is on site, construction cost fixed, and that's going to be delivering another GBP 14 million of rent. And we're leasing into an undersupplied market, and that undersupply is growing as more people rent for longer. So we've got strong growth in both our margin and our earnings. The business is deleveraging at the moment. One of the things that people don't realize about Grainger is that we have GBP 850 million of noncore assets that we're recycling through. And actually, we're using that prioritizing deleveraging of GBP 300 million to GBP 350 million, which will mean that we're around 8x net debt to EBITDA. So really strong position supported by these 3 pillars of activity. I'll just take you through now the headlines. So the -- our rental income was up 7.8%. Our like-for-like rental growth was up 3.1%, earnings up 4% and dividend up 3%. Our NTA or our underlying value was just slightly lower than full year '25, but this value has been incredibly resilient because although we've seen a very large outward yield movement of 100 bps, we've seen great rental growth more than supporting the value of our properties. And then operationally, we're also strong, 96% occupancy, which is high. We run the business between 95% and 97%. Really strong customer retention.

Our customers are staying with us for longer, but they're also 61% of them are renewing with us each year. And then a really healthy income to rent ratio. And then our costs, although we've seen headwinds in cost this year, we've managed to keep our cost base so that it's 25% of our gross rents is spent on our operational costs. And just as a reminder, we put all of our refresh costs, et cetera, through that figure.

I mentioned that we're a resilient business. We're also a growing business. We're a needs-based asset class, meaning that there's very little downside in terms of our occupational market, very low obsolescence. And we're inflation-linked. Our income is underpinned by wage inflation, and you can -- I'll show you some slides later that shows how closely we track that. We're very diversified in our customer base. We've got limited cost inflation, and we've got an embedded margin expansion because each time we add to our portfolio of 11,000 homes, actually, we increase that margin. Moving on to talk a little bit about our disposals.

The Grainger as a business has been transformed over the last 10 years. We've recycled through GBP 2 billion of assets and invested almost GBP 3 billion into new build, purpose-built, build-to-rent. We've sold GBP 700 million since September 2022. Now the first half of our first half was overshadowed really by the 2-month wait for a budget that at times speculated about whether or not we'd see the removal of stamp duty. So sales were affected slightly at the beginning, but they've now picked up.

We've done GBP 82 million of sales of our non-core assets and that's either completed or exchanged in the year-to-date. So we're on track for GBP 175 million to GBP 200 million, which you can see even through the most difficult times, we've managed to achieve. We're recycling out of our regulated tenancies. Those are our older tenancies in our non-core portfolio and some strategic land, and that is what is funding our growth.

So moving forward, we've been very clear this time on our capital allocation strategy. I put a similar slide in a year ago and at the year-end. But our first priority is to complete our schemes on site. The next priority is to deleverage. And then after that, with the share price where it is, our next priority, probably it would be very compelling to do share buybacks rather than grow our outer pipeline. But obviously, we've been very clear this time about our disciplined capital allocation and that we will be delivering for shareholders in the short, medium and the long term.

So this is our portfolio, almost GBP 3 billion in our build-to-rent portfolio, our regulated tenancies, the black bar on this pipeline is what we have on site and the paler bars are actually our optionality for the future. And it's the black bar that's delivering that GBP 72 million of earnings, 35% increase. So moving forward, we have got a very good track record of consistent delivery of growing rents, growing earnings and improving our operational leverage and -- but there's a lot more to come. And with that, I'm going to hand over to Rob.

Thank you, Helen. So as Helen said, we've just delivered a strong set of results. So total rents up nearly 8% over the course of the first half. Underlying organic like-for-like rental growth up 3.1%, in line with our expectations. Occupancy remaining high at just under 96% and EPRA earnings up 4% -- and dividend per share also up 3% in line with that. And NTA continues to be resilient when you consider the context of everything that's been happening in the macro economy over this period.

So what's been driving this very strong growth in rents that we've seen over the period. I just move on a couple of slides. And we can see here the key reasons of what's driving this rapid acceleration in the top line. So our underlying rate of rental growth and our occupancy have driven our rents up 3%. And then because we've continued to invest in terms of our pipeline deliveries, these are coming on stream and they're leasing up very well, which is adding a further GBP 5.7 million.

And at the same time, we're disposing out of our older non-core assets, land, regulated tenancies. These are assets with a low yield, either no yield in the case of land, 2% in the case of the regulated tenancies. So the income we're selling out of is less of a reduction and that compared to the increase that we're investing in. And then therefore, 8% increase overall in our rents. So if we look at the earnings trajectory that we've got ahead of us, it's very strong, and Helen touched on some of the key headlines here. Here it is in a little bit more detail. So you can see this continued track record of accelerating and strong growth in our EPRA earnings. We are very much on track with the guidance we put out a couple of years ago. And the 2 key points here are GBP 60 million EPRA earnings for this financial year, which would represent a 12% increase on the GBP 54 million we delivered last year and then GBP 72 million, which is 35% growth going through to FY '29.

So if we just look behind one of the key drivers, which we have a good degree of visibility over, I'll just talk through those key components. The first one is like-for-like rental growth, which we assume the long run average, which goes back over a very long period of time of 3% to 3.5%.

The second piece is that this guidance is based purely on the committed pipeline alone, so it excludes all the other elements of the pipeline, which Helen just referred to earlier. It's just where we're on the ground. And in fact, we're largely through the delivery of this And that's net of recycling to fund the remaining GBP 120 million of CapEx out of our lower-yielding assets. So that's the income accretion that we have from that.

The next element is our EBITDA efficiencies. Because we've designed the business around the use of technology, it's incredibly efficient for us to scale this platform. And what that means in practice is that we're not having to add new heads in order to deliver this growth centrally. And so that's making it very efficient. Each new home lending onto our platform comes at an incremental margin of 75%. And we're also very tightly controlling the central costs. So on a 10-year view, our costs have actually remained static at GBP 36 million. We've just taken a further GBP 2 million of cost out of the business as we continue to implement technology and use of AI and drive efficiency. And what that means is there's a further couple of years now locked in where our overheads will be completely flat. So with this focus on efficiency, our EBITDA margins are growing from what was 54% in FY '24 to a guided 60% plus by FY '29, and we see continued scope thereafter to continue to grow our margins. And we've made very good progress in the first year FY '25, growing margins to 56% from 54%. So we remain on track with this. And actually, when you look at the large U.S. players, who are operating typically at 10x plus scale compared to our platform in the States. They're actually operating at EBITDA margins in the mid-60s. So at this point in our journey and level of scale, we're actually driving a high level of efficiency relatively, and that's really through the use of technology that we have. The final piece is rebasing fully to higher interest -- so we -- when the Ukraine war broke out, we put in place fixes on our debt and did extensive refinancing, which meant that we're locked into rates in the mid-3s, and we did that for 7 years. So there's just over a couple of years of that left to run.

Because this guidance period goes through to FY '29, this contemplates the period in which those fixes roll off and will roll on to higher rates. So we've assumed a full rebasing to higher interest costs, which we modeled here at 5.5%. And then that's partly offset by the mitigating impacts of deleveraging by GBP 300 million to GBP 350 million, taking our debt down to GBP 1.1 billion. So even after fully absorbing all of those higher interest costs, there's no further big step-up in interest costs or rebasing to happen after this period. We're growing our earnings by 35% even after that impact, which I think puts us in good stead. So if we just flip back a slide, where this takes our debt levels, you can see our target guidance ranges at the bottom right. We're thinking very much in this higher interest environment around debt metrics in relation to the income impacts and therefore, calibrating that according to the level of -- high level of interest rates.

So we're bringing it down to GBP 1.1 billion. With that, our loan-to-value would be 30% and net debt to EBITDA of around 8x. During the first half as well, we also did some extensive refinancing of the business, GBP 540 million of facilities, which were extended out to 2033. And during that process, we actually shaved some reduction of in terms of the banking margins that we pay.

So reducing the cost of debt by around GBP 1 million per annum. And that's really reflecting the fact that lenders really like our story, the growth in build-to-rent, the low volatility, the secure income that this provides, which I think provides us in very good stead. Worth just mentioning as well from a dividend point of view, over the -- we converted to a REIT at the end of last financial year. This means that we are on a path to paying out at least 90% of our property-related profits, which approximates to our EPRA earnings. And within the next 2 years, we will be fully covered out of our EPRA earnings. The next couple of years, there'll be a top of our dividend coming from our legacy regulated sales profits and then we need to be fully covered by FY '28. So we have a progressive growing dividend over this period, and we'll continue to deliver that for our shareholders.

Thanks, Rob. I thought what I'd do now is just take you through the steps that really underpin our investment case and the market we operate in. So why is build-to-rent our target sector, not just our target sector lots of global capital all over the world wants to enter the U.K. build-to-rent market. And it really has 2 main reasons. It has positive growth drivers, but it is also low risk.

So the first one is that we're in a country with a housing shortage. We have 5.6 million rental households, but 97.5% of those are actually small buy-to-let landlords, whereas -- and only 2.6% are larger scale professional build-to-rent landlords. We've got great market fundamentals. We're very resilient. We've got this structural undersupply, but we've also got a growing demand. And the returns that we're delivering are compounding, so 3% plus rental growth over the very long term, and that's inflation linking through the cycle as well. And then we deliver a true net yield. And I've heard some people say, "Well, is Grainger and residential lower yielding?". I think the thing to remember is that through that net yield, we have actually deducted all of the maintenance repairs and everything that's expensed through that gross to net. So what's actually delivered at the end is a true net yield. So we've got no big dilapidations costs or end of lease redundancy. And then the low risk factors, there's virtually no obsolescence.

We still have a few buildings in our portfolio from the 1950s purpose-built apartments and they still rent as well. We've got very low volatility, high occupancy even during COVID, we kept 90% plus occupancy. We have very low depreciation, no end of lease write-downs or big refurbishments needed. And finally, we've got this growing low-risk tenant base. So people deferring the point at which they buy houses. And actually in our core cities, we're seeing a very wide customer base. And because our homes are aimed at the mid-market, they are affordable.

I'll just give you some stats that back up these points. So top left here, you can see that the orange line is showing the ONS rental index and the blue is actually showing the commercial rental index. So over the longer term, residential will outperform commercial real estate and has proven to do so. Very resilient in the sense of matching wage inflation and the higher interest rate environment, we've seen a stronger rental growth.

Grainger is the largest of the professional build-to-rent landlord. So we've got a significant opportunity to grow. And then, of course, we've got our customer base, which on the bottom right here, you can see the over 25s have lower unemployment and less volatility around their incomes. And just moving on to the next slide. This is probably one of the supporting factors. Really, the amount of regulation that's come in for smaller landlords to less investment has meant that between August '21 and July '25, we've seen over 200,000 landlords come out of the market or homes from landlords coming out of the market.

The blue lines here are the new investment. The orange lines are people exiting from the market. And during the run-up to the Renters Rights Act being initiated, actually, we saw 700 homes a day coming out of the sector. And then on the right here, you can see the steady decline in buy-to-let mortgages. And Grainger is in a great position to really operate because we operate at scale. And so we have this leading operational platform. We do everything ourselves from leasing right the way through to organizing all the repairs of the property.

Our Grainger people are in the building. We delivered this scale, as Rob identified earlier, we've delivered this tripling of our income at the same time as we've kept our overhead stable by our investment in technology. We have our own proprietary platform, which is Connect -- but we're also -- because we have -- do capture all this data ourselves, we're able to really have a deep understanding of our customer, and we can talk to them in real time through our apps. And we're also using AI agents to help with our leasing, which means that no leasing call is dropped.

So a really strong sector-leading operational platform. A little bit more about our customer base, 85% of them are over 25%, as I said earlier, but we're seeing the growth coming in that later age range of people diferring the point at which they buy a home and living well with us. And you can see on the right-hand side, top right-hand side, that customer affordability and the dark bars are the general market for renting based on the English National Housing Survey and the orange bars are Grainger's customers. And you can see that on average, they are 39,000 per annum. We have lots of key workers in there from a very diversified background and diversified in geographies as well.

One of the things we've tried to do, the majority of our portfolio is 4.5 years old on average. It's very modern and very well insulated. So on average, our customers pay a lot less for their energy because 99.9% of them are in energy efficiency certificates, A to C, 85% are A and B. And you can see on the bottom right here, the difference that makes in terms of your energy bills. Our customers pay their own energy bills. Grainger's direct energy bill is GBP 2 million. It's one of the reasons I say that we're actually keeping our costs very tight. And our city strategy, which is identified here, you could say that you could build rental homes anywhere in the U.K. and you probably wouldn't lease them.

Where we concentrate in is the cities with the highest growth potential, that's economic and demographic growth. And that's shown in the horizontal axis and then the vertical axis is actually supply and demand. And it won't surprise you that London is the best rental city, but you can see other major cities there where we have representation, Bristol, Oxford, Manchester, et cetera. The yellow stars are where we're currently on site. So 2 schemes in London and 1 scheme in Guildford. -- and these are them. So the Merrick in Southhall, right next to the Elizabeth line, it will come online early next year, GBP 9 million of additional rental income. And then we've got the Mint at Guildford immediately next to the station.

You might just be able to see a picture of the train in the foreground there. And that is an additional GBP 3 million per annum of net rental income. And then one that I'm very excited, our joint venture with Transport for London and our first scheme built with -- using a major housebuilder, and that will deliver another GBP 2 million of income. So -- and all the construction costs on these schemes are fixed.

So I thought I'd just touch a little bit on what's happening in our sector. For the last 2 years, we were talking to the previous government and then the new Labor Government about the Renters Rights Act. It actually came into power on the 1st of May.

It was really designed to improve the standards of leasing, but we're very proud of our standards, and we have nothing to fear by the introduction of this act.

Pet-friendly policies, we already implemented. The abolition of no-fault evictions. Our business model was always that we wanted people to stay with us. Open-ended periodic tenancies is probably the main change. And that means that instead of doing an annual renewal of a lease, we will do an annual rent review. But Grainger is well equipped to deal with this.

I know we heard the specter of potential for rent controls. The government have completely ruled that out and many aspects of the government, not just Number 10. One of the things that they all recognize, in fact, all political parties recognize that rent controls are inflationary. They reduce supply and push up rents. And the moment to introduce them was as part of this act, and they didn't take that opportunity because they saw how damaging it would be to the rental sector.

So we -- occasionally, we get people advocating for them, but our reassurance from all the work that we do is that most of the people across all parties understand that they're not good for renters. And so I'm going to return to this slide about our earnings growth.

And the fact that our business is so resilient, it's got locked in growth, a lot more growth to come. And through deleveraging, I think we're being very strong in terms of our capital allocation. So a lot more growth and real optionality for the future. And I'm going to pause there and hope that we've got some questions.

That's great, Helen. Thank you very much indeed and Rob, for updating investors.[Operator Instructions] I would like to remind you we're recording this presentation along with copy of the slides and the published Q&A will be available by your Investor Meet Company dashboard.

Kurt, if I may hand back to you. You've had a number of questions from investors today. Thank you to everybody for your engagement. If I may ask you, please, just to read out the questions and where appropriate to hand them over to a member of the team.

That's it. Thank you, Mark. So the first question here, I think, is one for Rob. I'll read it out loud. What is the debt profile and current interest rates? You sort of covered that in the presentation, Rob, but the subsequent question was will interest rates put the dividend at risk?

Right. Well, certainly, interest rates will not put the dividend at risk. And that's going back to the slide which I talked to earlier, which shows 35% growth in our profits even after fully rebasing to higher interest rates over that period with no further impact to come.

So because our debt is fixed for the next couple of years, both through the underlying instruments themselves and hedging, which we put on top, then effectively, we rebased towards the end of this period, but that's fully factored into our guidance. So I think this makes us -- puts us quite a distinction actually in terms of that level of profit growth that we have compared to some others that were obviously having the impact of higher interest rates without all the other growth impacts that we have to offset it could obviously impact profitability, but it doesn't for us. So that means that we continue to maintain a progressive growing dividend.

Thanks, Rob. We had a couple of questions around net debt and dividend, but I won't ask those again because I think you've covered them now. The next topic, again, a few questions on this is around capital allocation and buybacks versus the prioritization over deleveraging, sort of understanding the math there and when we might start beginning to think about buybacks and why deleveraging we think is the right current priority.

Yes. So I'll deal with the priorities first. The first one is obviously as we recycle out of our lower-yielding non-core assets, we will be completing our committed pipeline. That's the pipeline that's on site. As Rob said, explained, we've got this lovely fixed debt that we fixed at the outbreak of the Ukraine war.

That doesn't run off for another year or so, which fits nicely with our committed pipeline. But it's still more accretive to shareholders to actually pay down that debt than it is to do share buybacks. And Rob, why don't you explain that?

Yes. So when we look at the incremental cost of debt, we've guided to 5.5%. Actually, today, things will probably be a little bit closer to 6%, although obviously, we've got the ability to deleverage more. Nobody ultimately knows where things will settle down to.

But at these kinds of levels of rates, the incremental earnings impact of buying back our shares on an EPS basis are actually a touch below deleveraging. So as well as, of course, reducing the financial risk in the business, which we believe is the right course of action. But both numerically relatively and also from a risk profile, deleveraging actually remains the most attractive option when you consider it from all angles.

Great. Thanks both. The next question here is around Mike Ashley. Do you see Mike Ashley as a long-term value investor? May he have other ideas? Perhaps a bit of context and background for those that don't know.

So earlier this year, we had a notification that Mike Ashley, in his personal capacity, so not in Frasers, had actually crossed the 3.1% threshold in the business via a spread. So no interest in the shares, if you like, other than the economic interest in the spread. And we subsequently found out he does have a small direct shareholding.

As you would imagine, that's a large shareholding for an investor. And so we reached out to have a conversation. We talked to his team, incredibly supportive of the business. And in that conversation, we established that he had been buying for a while and just really saw Grainger's offering terrific value with low risk. So he's continued to buy. And more recently, that 3% has gone over 4% now. But no sign of wanting us to change anything in the business other than, of course, the share price.

There's a question here around potential impact on regulatory changes, rent controls, tenant protections following the rent reform agenda. I know you touched on that earlier. Was there anything further you wanted to add to that?

It's really that distinction between those that run a really good operation that have all of the levers, the information, the operational capability, the technology. It's much, much easier for a larger landlord to respond to the new Renters Rights Act. It's early days. We'll see it sort of we'll see it bedding in, but it completely aligns to our business. And we have had reassurances that if it's not working and it's leading to congestion in the system that the government will put additional measures in to make sure that it can support the whole sector.

Great. Thank you. I'm going to group a few questions together here, and it's really around share price performance and the discount to NTA, which is in contrast to the strong underlying business performance. So questions around, does the Board share that frustration? What is the Board and yourself and Rob thinking about? What actions are you doing? We've touched on buybacks. But really, what else is there from a shareholder perspective that you're thinking about?

You can't see that real sort of resilience and thesis around our investment case and a track record of 21 consecutive periods of reporting and delivering on all of that and not be disappointed that the share price is disconnected from the underlying performance of the business.

I think there's a few things that people are perhaps not recognizing. And I think for a lot of real estate, they coalesce around the movements in the 10-year gilt and the 5-year swap. But I would say that because we're providing index-linked compounding growth, actually, we are closer to an index-linked bond rather than a 10-year. I think that's been challenging to recognize. The Board, obviously, I'm and Rob are heavily invested in the business. So are the majority of the workforce.

So you can imagine that this weighs heavily. It's constantly a discussion that we have within the business. For me, the -- we're pulling all the levers that we can. And obviously, I had hoped that immediately following the introduction of renters rights, the political noise that was around renting and what would this mean will dissipate. So I think that's a good point. And then, of course, I think that the fact that we have been so consistent on delivering that earnings growth, and that will endure even in a higher interest rate environment.

I think it's just a case of long-term versus short term and perhaps people seeing concerns that we know are under control. The share buybacks debate really comes back to what we were talking about earlier, which is the prioritization of our capital allocation and making sure that actually we're doing the best for shareholders. And that's why we think that the first and second priorities are the best thing we could do for shareholders.

Thank you, Helen. There's a question here around our Connect technology platform, use of AI, driving efficiency.

Could you just add a bit more color and detail about how we're using this and the scope of that going forward?

Do you want to have a go at that one?

So we implemented Connect around 5 years ago, and this is basically digitized the whole of the customer journey. And what that's enabled us to do is actually bring a lot of our operations in-house, therefore, not having to pay away the margins to the third parties and improve the customer experience and have everything within our direct control. So it's very efficient for us to do it this way.

So -- and it's everything from onboarding and customer acquisition. So for example, we have Salesforce, and that's meant that we took all our leasing in-house away from the agents, and that's given us great forward-looking KPIs so we can see how demand is coming through. And obviously, then that can feed through into decisions in how we run the business.

This has also given us a huge amount of rich data in every aspect of how we run the business from customers to operations and so on. And even our ESG environmental agenda as well. So for example, with respect to our customers, our data and analytics team can look at all of our customer data, and we can predict now having used machine learning on it with 85% accuracy when a customer will -- how likely a customer is to remain with us at that particular length of stay with us. So you can imagine how we can start to use these kinds of analytics ultimately to drive customer lifetime value and improve the customer experience as well.

Great. Thanks. A few more questions here, topics that we haven't covered. A question about timing, it sort of touches on the capital allocation strategy, but the question was on the timing of that. So following the completion of the Bollo Lane Chiswick Reach development, which is in our committed pipeline, following that, is that the point at which the capital allocation framework will be revisited?

No, I think we -- I mean, we will start deleveraging before then because that scheme finishes in 2029, we will start deleveraging '27, '28. We don't need to because we've got a lot of fixed-term debt, but the first major maturity on that fixed term debt is 2028. So you'd expect us to start getting ready to delever from that beforehand.

Great. And a question on dividend and sort of future outlook. Is there a possibility that the dividend yield could grow to the 7% to 8% range currently available from other commercial property REITs?

Well, in terms of our dividend, I think what we offer is obviously a low-risk, low volatility earnings stream. And if you think back to some of the major events that we've had, whether that's the GFC, whether that's COVID, and our income profile has been incredibly resilient. And our balance sheet has also remained incredibly resilient over that period as well. In fact, our NTA has only moved by 2% over the last 5 years, whereas when you look across the commercial sector, typically, they've seen falls of 20% to 40%.

So I think we've been -- what we offer is a low-risk, low volatility inflation-linked ultimately income stream because of that linked through inflation leading to wage inflation and then the affordability and the ability to grow rents. So obviously, with the share price as it is, our dividend is relatively high yielding. But really, ultimately, we are a total returns business -- and the return that we deliver is targeted at around 8% a year, which on an NTA underlying accounting asset valuation basis, which is the growth in the valuations plus the income element. However, of course, on today's current share price, that will be well into the teens.

Great. Thank you both. I believe we've covered all the topics and questions have come through. So Helen, are there any concluding remarks that you'd like to make?

I just want to thank everybody for tuning in and also to say that our full year results at the end of this year, we are on track to deliver that 12% earnings growth, and we're leasing into a strong market. So I think there's great growth so far, but a lot more to come.

That's great. Helen, Rob, Kurt, thank you very much indeed for updating investors. If I please ask investors not to close the session as we'll now automatically redirect you so you can provide your feedback in order the company can better understand your views and expectations. This will only take a few moments to complete. I'm sure it will be greatly valued by the management team. On behalf of the team from Grainger plc, we'd like to thank you for attending today's presentation, and good afternoon.

So good morning, everyone, and welcome to Grainger's Half Year Results. In a time of global uncertainty, our business continues to deliver strong results, growth in earnings and an excellent outlook. Now this shouldn't be a surprise. We are in a needs-based real estate sector. We are a resilient business in a structurally supportive sector and we continue to deliver strong growth. The agenda this morning is I will take you through the highlights and Rob will take you through the financial results and then I'll talk about our market and the drivers of growth and we'll have time for Q&A.

In the first half, we have delivered a strong performance and we are delivering compounding earnings growth. Our guidance is to deliver GBP 60 million of EPRA earnings this year and that's a 12% uplift on 2025 and GBP 72 million, a 35% increase by full year '29 and that's after rebasing our finance costs. We are on track. This is a resilient business with a high demand for our product, high occupancy and a large and diverse customer base. Our growth is underpinned by wage inflation and our strong customer affordability. Our growth is locked in with a committed pipeline on site and we are leasing into an undersupplied market. This with improved margins.

Deleveraging is a priority and will see us reducing net debt targeting a GBP 300 million to GBP 350 million reduction and targeting a net debt to EBITDA of 8x. We have a great track record of asset recycling with disposals in line with valuation and our GBP 850 million of noncore assets support our committed pipeline and our deleveraging. So we delivered another strong financial performance in line with expectations. Our rental income was up 7.8%, our like-for-like was 3.1% and our earnings growth was 4%. We have increased our dividend 3% and our NTA is 290p per share.

Now this is slightly lower than full year '25 and it reflects the value of sentiment about the sector rather than concrete deals in our geographies. And as a reminder, our NTA has been resilient as outward yield movement has been substantially mitigated by rental growth. Our operational platform continues to deliver ahead of the market. As a reminder, we underwrite at between 95% and 97% occupancy and we've maintained high occupancy at 96%. We've achieved strong retention at 61%, healthy customer affordability at 27% of our customers' income spent on rent and this is very healthy because on average mid-30s is seen as affordable.

We have strong operational efficiency still at 25% even after absorbing higher cost. And as a reminder, our gross to net includes all maintenance and refresh cost. Grainger is a resilient and growing business and here are 5 key reasons. One, we are a needs-based asset class. Everyone needs somewhere to live and there is a shortage of good quality rental homes and this is getting more challenging. We have low obsolescence. We are AI resilient. And indeed, we are more likely to be a beneficiary of AI in our operations because of our data and insights. Two, we deliver inflation-linked growth underpinned by wage inflation and a trend for renting for longer.

Three, we have a very diversified customer base and that's diversified in employment, diversified in geography and less than 10% of our customers are students and that's a self-imposed cap. Four, we have limited cost inflation exposure. In our developments, our construction costs are fixed. In our operations, our energy costs are around GBP 2 million per annum. And of course our homes are significantly more energy efficient than the wider market helping our customers in their overall occupation costs. Five, we have embedded margin expansion and earnings growth. Our stable tech-enabled platform is scalable for growth.

And as we add more homes through our committed pipeline, this will increase earnings growth and deliver margin expansion. The strong pace of our disposals continues and it is this that is funding our deleveraging and future growth. And as a reminder, we have done over GBP 2 billion of recycling since the start of our strategy and GBP 700 million since 2022. There was a degree of market stagnation in our Q1 and the long-awaited and delayed budget caused many buyers to pause, but we've achieved GBP 82 million of sales completed or exchanged year-to-date.

And we are seeing strong demand for our ex-regulated properties and our noncore PRS and we haven't seen any slowdown in momentum in recent weeks. We still have GBP 850 million of noncore disposals to support our strategy. Now we included a similar slide to this a year ago, but it's important to revisit. Our disciplined capital allocation will drive returns. Our current priorities are the completion of our committed pipeline of schemes on site and deleveraging. Our committed pipeline of 775 homes will cost GBP 120 million to complete and it is this that will drive our uplift in earnings.

Our second priority will be to reduce our net debt to bring LTV to around 30% and net debt to EBITDA to 8x and this is supported by our noncore disposal program. These first 2 priorities facilitate the growth in our earnings and they optimize our capital structure. We have been clear that following our 2 priorities, we will consider other options to drive future returns for shareholders. And at our current share price, share buybacks are a strong contender for capital allocation following our key priorities of deleveraging and completion of our schemes on site. We will allocate capital into whichever is most accretive to shareholder returns.

We are focused on delivering shareholder value in the short, medium and long term. So turning to our portfolio. We have a high quality build-to-rent portfolio of just under GBP 3 billion and a pipeline delivering significant earnings growth. Our regulated tenancies continue to sell well that are now around GBP 530 million and they are a source to fund our future growth. Our onsite committed pipeline seen here shaded in black will deliver 775 homes and GBP 14 million of net rents, which is a key driver of our 35% earnings growth and there's just GBP 120 million to spend remaining.

We have over 2,000 homes secured and an outer pipeline of 1,200 homes in planning and legals. We have strong partnerships and optionality for the future. The growth in our portfolio will leverage our central costs and drive our EBITDA margin expansion. At our current share price, share buybacks look more accretive than our secured pipeline. This pipeline though provides a valuable store of future growth. This slide demonstrates the consistent delivery of our business and the vast increase in our income and margin.

We have consistently grown our income, our earnings and our margin and our growth is continuing. Our strong growth in our rents, in our EPRA earnings and as we drive operational leverage, we will deliver more EBITDA margin expansion. We have a track record of delivering growth, but there is a lot more to come.

And with that, I'll hand over to Rob.

Thank you, Helen, and good morning, everybody. Today, I'm going to run through the financial performance for the half year and outline the strong earnings growth that we have to come. The first half has been another period of strong growth with rents up 8% demonstrating Grainger's resilience and our market-leading position. We have again delivered a strong operational performance with like-for-like rental growth of 3.1% and occupancy at 96%. EPRA earnings grew by 4% and we're on track to deliver our guidance of 12% growth to GBP 60 million for the full year.

Our dividend per share increased by 3% and EPRA NTA was down 2.7% to 290p due to valuations and I'll cover this in more detail later. So turning to the income statement in more detail. Our overall like-for-like rental growth was strong at 3.1%, in line with long-term averages. Stabilized gross to net remained at 25% demonstrating our ongoing focus on cost efficiency. Our overheads were flat in the half having implemented a GBP 2 million annualized cost saving in the period and this will keep overheads flat for the next 2 years.

Interest costs increased during the half due to one-off costs relating to refinancing our bank debt with the benefits of this to be delivered in the second half and beyond. We continue to see EPRA earnings growth up 4% in the half, in line with our plan to deliver our guidance of GBP 60 million for the full year. As expected, sales profits were lower at GBP 5.2 million in the first half reflecting phasing of regulated sales with a strong pipeline for the second half. Other adjustments include derivative valuation movements and restructuring costs associated with our cost saving initiatives.

So looking at the moving parts of the 8% increase in our net rent for the period, Strong occupancy and like-for-like rental growth of 3.1% contributed GBP 1.5 million and this was driven by good rental growth in BTR in line with guidance at 2.9% with new lets delivering 2% and renewal 3.3%. Our regulated portfolio delivered 5.9%. The strong lease-up performance of our recent pipeline deliveries has contributed an additional GBP 5.7 million of net rent and our asset recycling program offset this growth by GBP 2.4 million. Looking forwards, we'd expect full year build-to-rent rental growth to be in line with the long-term average of 3% to 3.5%.

This chart shows the key movements in NTA over the period and our NTA was down 8p at 290p per share. Net rents and fees added 9p with overheads and finance costs offsetting this by 5p. Overall, our portfolio valuation for the period was down 1.1% and the PRS portfolio saw 1.4% valuation decline with ERV growth of 1.1% offset by around 25 basis points of outward yield shift reflecting macro sentiment. Valuations on the regs portfolio were up 0.6% demonstrating their resilience and further details of the valuation can be seen in the appendices of this presentation.

Now looking at net debt. Net debt increased in the half to GBP 1.5 billion, in line with our plans. Operational cash flows remained strong with GBP 85 million generated with disposals contributing GBP 61 million net of fees. We're targeting GBP 200 million of operational cash flows for the full year. As mentioned at the full year, investments in our build-to-rent portfolio has continued to moderate as we work our way through the committed pipeline. There was GBP 80 million invested during the period with a further GBP 120 million to spend on the pipeline and the majority of this falling into FY '27.

As Helen explained, in line with our capital allocation strategy, we'll continue to generate high levels of sales. These proceeds will be used to fund the remaining committed pipeline and also to lower leverage by GBP 300 million to GBP 350 million by FY '29. Going forwards we, therefore, expect net debt to be broadly flat on FY '25 by the FY '26 year-end before starting to delever from FY '27. And our balance sheet remains in good shape. Both net debt at GBP 1.5 billion and LTV at 40.2% were up slightly over the period in line with our plans. We maintained strong liquidity and a robust hedging profile with rates fixed in the mid-3% range.

In the half, we successfully extended our GBP 540 million bank facilities to 2033 and reduced margins further derisking our balance sheet and this will give an annualized saving of GBP 1 million. As previously highlighted, we plan to reduce our debt by around GBP 300 million to GBP 350 million by FY '29 as we continue to sell through our lower yielding noncore assets. And this will see our net debt at around GBP 1.1 billion, which will equate to around an 8x net debt to EBITDA and LTV of around 30%, which we see as the right capital structure for the long term.

As net debt is brought down, this will help mitigate the impact of rising finance costs as our low rate hedging rolls off ensuring continued strong earnings growth. And we remain confident of delivering our previously communicated guidance. We are on track to deliver our EPRA earnings guidance of GBP 60 million this year and the 35% increase to GBP 72 million by FY '29. And we see this growth as exceptionally strong particularly as it's delivered through a period in which we'll absorb the full rebasing of our interest costs to market levels.

We've modeled interest at 5.5%, which a number of people thought was prudent last time, but of course is now looking more realistic. And the bridge on this slide breaks down the key drivers of delivering this, which are unchanged and they include the benefits of like-for-like rental growth assumed at 3% to 3.5%, the yield pickup from recycling out of our lower-yielding rental assets into our build-to-rent portfolio, scale efficiencies with EBITDA margins growing to over 60% and the mitigating impacts of reducing debt on higher interest rates.

So to summarize. We've continued to deliver a very strong operational performance with rental income increasing by 8%. We continue to derisk the balance sheet through refinancings. We're focused on deleveraging using disposals to reduce our debt by GBP 300 million to GBP 350 million. We maintain our EPRA earnings guidance of GBP 60 million for the full year and GBP 72 million by FY '29 from the delivery of just our committed pipeline alone whilst also fully absorbing the headwind of higher interest rates. Despite the current macroeconomic uncertainty, our underlying business continues to demonstrate its compelling resilience and compounding growth both now and for the years to come.

And with that, I'll now hand you back to Helen.

Thanks, Rob. In this section, I'm going to provide evidence to support why we and many others think build-to-rent is a great real estate sector to be in and why living and build-to-rent screams as one of the most wanted asset classes. Our investment case is that investing in residential provides low risk compounding growth with diversified customers and this provides resilience and growth. The attraction of build-to-rent comes from 2 main features: its positive growth drivers and its low risk nature. So looking at just 4 features of its growth and 4 reasons why the sector is low risk.

One, it has real scale and liquidity. There are 5.6 million rental households and build-to-rent is just 2.6%. Two, there are market fundamentals of a needs-based asset class with a structural undersupply and growing demand. Three, it has a compounding effect, 3% plus rental growth over the long term and inflation linking through the cycle. And four, build-to-rent delivers a true net yield. All refresh costs are delivered through the gross to net, no dilapidations and that's in stark contrast to commercial property.

And then there are the 4 low risk factors. So linked to that previous point, designs of homes endure. There's no obsolescence as we've seen in other real estate sectors. Two, there is low volatility. Even during COVID, our occupancy was averaging 90% plus. Three, low depreciation. There are no end of lease write-downs. And four, we have a growing low risk diverse customer base with strong affordability and more customers renting for longer. So we are an attractive asset class with growth fundamentals and low risk. So just looking at these supportive attributes.

The compounding effect means that private residential rents have significantly outperformed commercial. This growth has been resilient and affordable. It is underpinned by wage growth and that's people's ability to pay and that is providing inflation linkage and growth through the cycle. There's an opportunity to scale. Now Grainger is the largest player, but there are 5.6 million rental homes and only 150,000 purpose-built built-to-rent homes. So there's a long way to go. And Grainger's core customer demographic is 25 to 34 and it does not see the higher levels of unemployment or volatility in employment rates that are experienced by those below 25.

So residential's resilient and growing demand base has helped rents to grow year-on-year without pricing corrections seen in the commercial sector and this combined with a net yield that explicitly captures all ongoing maintenance, lettings, voids and refresh cost justifies its lower yield. Sadly, there is a continued reduction in private landlords and buy to let investors. Increasing regulation and fears of it together with increased finance cost has seen a net loss of over 200,000 rental properties from small private landlords between July 2022 and August 2025.

So the blue bars here are the inflows and the orange bars are landlords selling and leaving the sector and the black line shows the reducing supply from small landlords. The introduction of the Renters' Rights Act led to a significant acceleration of this. The slide on the right is showing the steady decline of buy to let mortgages amongst individuals. And anecdotally, reports of accelerated sales by landlords reaching 700 homes a day in the run-up to the introduction of the Renters' Rights Act and these will exacerbate these numbers.

But as a large investor with the leading operational platform, we deliver efficient management and stronger earnings growth and we can comply much more easily with the new regulations. We have a sector-leading operating platform. This platform is leading to our EBITDA margin expansion, which has grown rapidly and we're on track to deliver 60%. And since the start of our strategy, we have a very disciplined approach to cost control. Our overheads now are broadly the same as they were 10 years ago whilst our net rental income has more than tripled.

As Rob mentioned, we've taken a further GBP 2 million out of our cost base and we've done this through our investment in our processes and technology. Our investment in our proprietary technology platform CONNECT and in data and AI to make our operations more efficient and more customer focused. We are leveraging data and AI to attract and retain customers and run our business more efficiently. It is also providing us with customer and asset level insights in real time. So this is a very valuable platform to attract, retain and serve our residents.

And our customer base is reflective of the quality and the positioning of our portfolio, modern efficient assets aimed at a diverse mid-market customer. 85% of our residents are over 25 and the majority are in that 25 to 48 range and they have good customer affordability. 27% of their income is spent on rent, which is below the U.K. average. They work in diverse sectors of health care, financial, IT, education and many are key workers. And this together with our diverse geography gives us a great high quality customer and asset base providing resilient and growing income.

Our homes are designed to insulate customers from energy cost inflation. Grainger's customers pay for their own energy and Grainger's build-to-rent properties are the most efficient, 99.9% are A to C and over 85% are A or B. And the chart shows the average energy bill for an apartment across EPC A to C and the comparison to the wider rental market. So our customers pay significantly lower energy bills as a result of our energy efficient portfolio and Grainger's direct energy bill is only GBP 2 million per annum.

Our strategy is to invest in cities with long-term growth fundamentals and supply and demand fundamentals and it is the result of rigorous research, city champions driving local knowledge and insights. London remains our best city for long-term growth. We have a strong track record of sourcing across the U.K. and the gold stars represent where we have schemes under construction now. So our committed pipeline is in exactly the best places. Three schemes illustrated here are on site. The Merrick in Southall next to the Elizabeth line will be delivered early next year and that's over GBP 9 million in net rental income when stabilized.

Alloy Apartments in Guildford, 179 homes, Phase 2 of The Mint; will deliver GBP 3 million of income when stabilized. And our Connected Living London JV with TFL at Chiswick Reach represents a real milestone. It is also our first scheme delivered by a housebuilder and at this scheme, our income of GBP 2 million will be enhanced by fees. Now this month marked a major milestone in England's private rented sector. On the 1st of May, the Renters' Rights Act came into force giving a clear and certain environment to the build-to-rent investor.

We have invested in processes, training and technology to prepare our business for the changes. But for small landlords, these may be seen as difficult to manage. But our scale and our technology puts us in a good position to embrace and adopt these changes. Reassuringly, the government chose not to implement rent control or caps when it had the opportunity to do so in this Act. They have repeatedly confirmed it is not their policy and this is not the policy of the main opposition. So we can now move forward with certainty.

There is broad support across political parties for build-to-rent and recognition that build-to-rent can help raise standards, professionalize the rental sector and increase housing supply. So we are a business that delivers a high quality income stream with compounded earnings and embedded growth. We are a resilient business and vastly underestimated is the value of our operational platform vertically integrated enabled by a tech-first approach and a sector-leading gross to net efficiency. This is enabling high occupancy and attracting a wide customer base.

We have locked in growth from our committed pipeline. Our headline growth is delivered by our committed pipeline, but we have a secured pipeline of great sites, which gives us optionality for the future. We have a track record of delivering on sales even in difficult markets and we will use our GBP 850 million of noncore assets to support one of our key priorities of deleveraging. We will deliver GBP 60 million of earnings this year, a 12% increase and we're on track to deliver GBP 72 million by 2029 after refinancing. So we're a resilient growth business.

As the U.K.'s only listed build-to-rent platform, we continue to benefit from a structurally undersupplied rental market and long duration inflation-linked income. So the earnings outlook for Grainger is excellent.

Thank you. I'll now invite you to ask questions.

I'm going to be joined by Rob, but we have got senior people in the room that can help with questions. Tom?

It's Tom Musson at Berenberg. Just a question on your long-term leverage targets. Since you announced them, we've obviously seen swap rates increase quite meaningfully. We also had that noise from the government about potential rent freezes, which I know they retracted. But if there is arguably a bit more sort of long-term uncertainty both on future rental growth and also interest costs, then why are those future debt targets the right ones? And could they not in fact be materially lower to help satisfy what seems to be a quite conservatively minded equity investor?

Right. There's quite a lot in there. I'm going to ask Rob to deal with the why is the number the right number. But before we do that, I'll just pick up on why we have had reassurance. And of course we might be going through a leadership change, I haven't looked in the last 10 minutes. But consistently rent caps and rent freezes have been rolled out by this government by the Housing Minister, by Angela Rayner as it happens when she was Housing Minister. So we've had consistent reassurance. And the reason that a lot of people who understand this rent caps and rent freezes up is they know it has the opposite effect, which is it actually drives rents up. And bearing in mind the size of our portfolio and the churn, actually a temporary cap or a temporary freeze would actually lead to a lot more growth. But Rob, why don't you answer the debt question?

Yes, absolutely. Well, fundamentally we see our business as very much a low risk, low volatility earnings stream business and also the resilience in the balance sheet as well. Really our earnings guidance and our leverage guidance has been predicated at that level in which we'll be able to grow our earnings throughout the full rebasing to higher interest rates and you've seen the trajectory that we've got. Now clearly we would maintain some flexibility because the variable in all of this will be where interest rates ultimately settle down to. So if indeed we did end up with an even higher for longer compared to what we've modeled, then we obviously have the flexibility through disposals to lower our leverage beyond that as well. So relating to the GBP 850 million of assets to dispose of, we do have quite ample flexibility.

Okay. And maybe a second one, if I can. Just a question on how you see the trade-off between share buybacks and leverage. If the share price stays around where it is, could we see you allocate any capital to buying back shares alongside deleveraging or is your preference very much to focus on deleveraging first so in effect buybacks might not be considered until after FY '29?

Yes. So I think we were clear in the presentation, we see it as after deleveraging. But Rob, why don't you explain why?

Yes. So actually we're constantly triangulating the different rates and what makes most sense from an accretion point of view for capital allocation. At current rates actually it's most accretive for us to reduce debt. And of course in this environment for the reasons we've just discussed, also reducing our financial risk I think given the volatility in the markets also makes sense. So really that's our primary focus. As we continue to work through our deleveraging, of course we'll keep an eye on all the alternatives of use of capital and maintain some agility as a result of that. But really our focus is on deleveraging for the reasons that we've set out.

Neil Green from JPMorgan. Just 1, please. You talked about the impact of the Renters' Rights Bill on landlords selling out. But just interested, and I appreciate it's only been a few weeks, if you've seen any impact on your portfolio whether it's increased admin or people coming to your assets. Just interested to get any take there, please?

Yes. Neil, it's a really interesting one. I mean it's very, very early days so we've only really had a week and a short week in that of trading, but we did see a spike in inquiries so inbound inquiries to our portfolio and I suspect that was because of the notice period. So a lot of Section 21s were served in the lead up to the Renters' Rights Act. So we have seen an increase. But having said that, it's quite hard for us to unpick that because this time of year is our strongest letting period as we go into the summer. Alastair?

Alastair Stewart at Progressive Equity Research. Just really one broad question on could you provide a bit of color on the development industry dynamics just now for instance build costs, I know who you're looking at, viability challenges, supply chain resilience. And on the flip side, is all of this providing any opportunities in the land market?

Yes. I'm going to ask Mike to come to this. But in the land market, obviously we have got a nice supply of land for the future that we've built up. But Mike, why don't you just talk about the state of the development market?

So as we know, viability for build-to-rent is challenged and that's a combination of obviously the values with construction costs higher and have become higher over the last 3 or 4 years. We have the benefit of a registered provider and a lot of discount market in affordable housing, which we've applied for grant for and have been successful. We've got applications out now. So we would expect with the changes we've made to the schemes to add density allied to dropping the affordable housing small amount plus the grant help will materially improve the viability of those schemes.

And in terms of actual build costs, are they accelerating? And something that was pointed out to me recently is supply chain resilience. What's your position on that?

So with the forward fund schemes, which is the ones on site at the moment, obviously those costs are fixed. They're fixed with the contractor and fixed with our partner with forward funding. And we do a huge amount of due diligence on both our partner and the supply chain that they enter into to make sure that we have resilience and good companies with good balance sheets. We would take exactly the same route with any direct development in the future to make sure that when we're entering into contracts, they're at fixed price and with good counterparties.

In terms of the cost inflation, we've seen the cost inflation. I think it went up by 40% I think in 5 years. The cost inflation related to Iran, which is what I think you were probably alluding to, isn't clear yet. Obviously the pressures are there. But as I say, we are sort of hedged away from those because of that forward funding. And we will take a view at the time that we would press the button on those development schemes around making sure that as we look at our capital allocation; they've got to make sense, they've got to be viable and they've got to be low risk.

And I think it's fair to say that there's quite a lot of capacity, Alastair, in the sector at the moment because obviously the housebuilding numbers in the U.K. have more or less fallen off a cliff.

Eleanor Frew at Barclays. You've already hinted at it. But given the rise in financing costs we've seen over the year, there is likely some upside pressure to that 5.5%. So do you see any risk to your FY '21 guidance should rates stabilize at these levels when you come to refinance?

We based our guidance on 5.5%. Clearly current rates are tracking a bit higher than that today. Obviously there's been quite a lot of volatility and who knows over this period where rates ultimately settle down to. But what we have is plenty of flexibility and the agility to adapt and really our best response I think in a higher interest rate environment is to reduce the leverage. And if rates are higher, then we will reduce our leverage by more and it's very accretive to do that given that we're trading out of lower yielding assets. So we've got enough tools in our toolkit to effectively manage and our focus is on hitting our guidance.

Great. Then on like-for-like rental growth, do you expect the differential between new lets and renewals to continue or will they trend towards each other as a consequence of the Renters' Rights Bill?

In terms of the new lets, we normally find they go stronger in the second half in any event. However, I would expect them to go closer together. And of course our new lets are supportive of our renewals because they are evidence for any debate. Chris?

Chris Millington at Deutsche. Can we just explore the point around the true net yield a little bit more and kind of the cost you're taking, which maybe other commercial companies aren't bearing out? I mean can you give us any details to what maintenance, what refurbishment costs are and just perhaps flesh that point out one at a time.

And it's important to say it is also different from other European residential firms as well. So we take all of the costs of refresh, dilapidations, et cetera, through our gross to net. We take our void cost, our leasing cost, everything goes through that 25% number. That's quite different to what happens in commercial where you let a lease for a long period of time and at the end you may have both obsolescence and dilapidations to come to because you're refreshing the whole time. And the reason for that is because that reflects what our customers are doing.

So we're leasing year-to-year and everyone must go into one of our apartments feeling that they are the first person to live there and so it's actually kept to a very high standard. And so that's the philosophy behind it. So what you don't get is at the end you don't have an obsolescent building where you have to reset. You're getting that genuine true net yield. And I think sometimes -- I've got some valuers in the room, but sometimes I think that's been missed in the investment market that the minute you let a commercial building, it's actually deteriorating and the minute you let an apartment, we've got the reverse. We've got the rental growth going up on each letting.

I'm not looking for the specifics, but of the 25% gross to net, is that a big chunk the refurbishment?

Yes, the largest thing is repairs and maintenance and refresh is the largest part. Larger obviously because we have very little void as well.

That's helpful. Next one is just on transactional evidence in the market. We're obviously seeing a bit of outward shift everywhere at the moment because of higher bond yields. Just wondering what you're actually seeing in kind of real world examples.

So the first quarter of this year I think was one of the strongest quarters in terms of transactions, but it wasn't actually transactions in our kind of stock. There's a lot in terms of single-family housing. So there hasn't been -- so my reference point was there hasn't been an awful lot of transactions in our geographies to sort of, if you like, to prove it. But there is a lot of appetite to invest in the sector. I think the reality is just people are not trading out of their portfolios. They're holding on to them. If you think of our peer group, there's a lot of long-term investors in that peer group. So they're holding on to them.

And the last one is just about customer behavior more recently. There's obviously been some pretty seismic changes out there. Are you seeing any reticence on the sales side, on the rental side? Is there any cohorts who are maybe doing better or worse? Just a little bit of fleshing out of that side effects?

Well, I think if you recall that our affordability level has actually got more affordable, which is telling that in the age demographic that rent with Grainger. Their incomes are going up and actually the 25- to 34-year-olds often that's the point where their salaries are accelerating. So we're not seeing any attrition from any of those groups at all. And as I mentioned, lot of key workers, lot of people in health care, et cetera. Anecdotally, I know that some of our peers saw a number of notices served after the Renters' Rights Act, the 2-month notices, but they have a high proportion of students and obviously that gives a lot more flexibility to students that they didn't previously have because they rented traditionally September to September. And now they can obviously get just over 2 months' notice and leave. So there has been some behavior, but not in our portfolio because we restrict the number of students in our portfolio.

Just on the sales side, any moderating momentum there maybe?

No. The regulated tenancies, I think there's an interesting dynamic going on at the moment, which is that if anyone knows anyone trying to buy a house, actually it's quite competitive particularly at the entry point where our regulated tenancies are. And so quite often we've got 4 or 5 bidders and we're going to best and final on our ex-regulated properties. I did mention in the presentation we had a slight slowdown just around the time of the budget and that was a sensible thing for people to do because one of the kites that was flown was the potential to reduce or abolish stamp duty. So why wouldn't you wait a couple of weeks or whatever and of course we waited an awful long time for that budget to come through.

We had 3 questions submitted online so I'll take them in order. We had Darren Leung from Resolution Capital in Australia. Given adjusted earnings is no longer provided as a KPI, will the leadership team's KPIs and compensation targets move to EPRA earnings?

Yes. We had a remuneration review that was approved at our AGM in February, which moves us to an EPRA earnings target. So the Board are consistent in aligning both short-term and long-term targets to the focus of the business.

The next question is from a private shareholder, Mitchell, who asks EPRA NTA has moved down to 290p per share despite operational rental growth remaining positive. How should shareholders think about the risk of further NTA erosion from here? Specifically, are current portfolio valuations already reflecting the higher rate environment or should we still expect further outward yield pressure to offset rental growth over the next 12 to 24 months?

Yes. I think we can't get away from the fact that the real estate equity market does have a linkage with the 10-year gilt. I think that that is unjustified in a way in Grainger's case because one of the things that we provide is index linking through our inflation linkage. So actually the comparison should probably be at the index-linked gilt. There we're obviously screaming 300 basis points plus difference between our net yield and an index-linked gilt. So although the reality is, I think we will get caught up in the higher bond market.

I think it's probably more people are realizing that we already see 100 basis points outward yield shift on our prime markets, but very little NTA erosion and the reason behind that is because rental growth has supported that. I'm going to try and do something now, which the brokers are going to go mad with me about, which is just to -- I'm sorry for those on the line. But Slide 50 in the deck shows the NTA resilience of Grainger and what that's showing is that rental growth has supported our NTA over this period. So whilst our NTA is down around 2%, you can see that some of the other sectors are materially more damaged because they don't have that inflation-linking capability in longer leases.

The next set of question is from Aakanksha Anand, the real estate analyst at Citi. That's a 2-parter. The first one: given the current uncertainty continues, how does the business underwrite the risk from weakening investment markets and slower rates of disposals? What level of discounts might be acceptable to current book values to continue progressing on the immediate priorities of the committed pipeline and debt reduction?

Okay. So a huge part of our sales are actually the regulated tenancies and they've actually maintained or slightly gone up in value. So we're not having to discount. In fact our sales are actually coming in around there. So we're not having to discount what we see on this.

The other one on ERV. Could you put some color around the drivers for the lower ERV growth at 1.1% for this half compared to 1.9% in the first half last year and 3.2% for the full year in '25? Where can we see this progressing?

I think we've always said that it will be between the 3% to 3.5%. That's the underwrite in our business. So an annualized 3% to 3.5% and that's done on the base of inflation. If we do get a more inflationary environment, of course we could see that number pick up, but 3% to 3.5% is where we see it. And all of the trends that we're seeing at the moment are actually substantiating that. Rob, do you want to add anything to that?

No, I think I mean it is aligned to that growth. Obviously the ERV growth is a 6-month number and we do expect that to pick up as we've said, but we're very much at 2.9% overall like-for-like rental growth. We're very much in line with where we said we'd be and we expect that to tick up into our range of 3% to 3.5% for the full year.

A couple more have just come in. So John Wong, real estate analyst at Kempen. Looking at your priorities for excess capital, starting new projects from the secured pipeline screams to be at the lowest priority. However, looking at the pipeline, the majority of projects are CLL. Are your priorities aligned with those of TfL? And also to what extent is the viability of these projects challenged and recognize that it's challenged?

Okay. So we have started one of our CLL projects and done that so that's on site right now, quite exciting because not a lot is being built in London, but that is. And that was an important strategic start on site for us with CLL. They are aligned with us in the fact that we have got a better planning environment now in London. And actually what has been happening on those sites is we're going for higher density and better schemes on those sites, if you like. So actually they have been aligned with, if you like, a deferral to improve the schemes. And we have a great working relationship with them and we continue to sort of work closely together.

Final question is from Marcus Phayre-Mudge at Columbia Threadneedle. You mentioned that you restrict the number of students. What is the maximum number that you allow? What's the percentage? And do you separately identify and distinguish between undergrads and postgrads?

Yes, we do. Great question. We restrict to 10%. We are below 10% and we restrict to we have mainly postgrads or students that are in a relationship with a working person. And there's a reason behind that, which didn't actually come from the structural situation in students. And the reason behind it is because of the environment we want to create within our buildings, which is that students, if we can remember that far back, can tend to be a bit more noisy and perhaps not as conducive to professionals at the early stages of their career wanting not to be strewing beer and pizzas in the corridor. So yes, that's the reason behind it. But of course we've been sort of a beneficiary of that. And also because we're trying to build stable communities and students do have more churn.

Any other questions? No more on the line, Kurt. Well, thank you very much, everyone, for coming this morning.

Good morning, ladies and gentlemen, and welcome to the Grainger plc Full Year Results Investor Presentation. [Operator Instructions] Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful.

And I would now like to hand you over to the executive management team from Grainger plc. Helen, good morning.

Good morning, and thank you, everyone, for joining us this morning. I'm joined today by Rob Hudson, our CFO; and Kurt Mueller, our Head of Corporate Affairs. Last week, we presented our full year results, and they were very strong in terms of the growth in our earnings, in our income and in our margin. And what we're going to do today is take you through an abbreviated presentation and then leave plenty of time for question and answer.

One of the things that has happened to Grainger this year that we've actually delivered, we are the U.K.'s leading residential REIT. So we converted to a REIT in September. And what that means is that now -- we're free from corporate tax on our income.

We are the largest build-to-rent investor operator in the U.K. And one of our real strengths is our operational platform, which is a real barrier to entry in a business that has a high degree of customer interface. and we have a long track record of proving our earnings and our growth in value.

The one thing I would say about our underlying business is that we're a low-risk business, but we offer really attractive inflation-linking income stream. On the top right of this chart, which I hope you can see, is actually how closely we track wage inflation.

And also, the quality of our product is very high. The majority of it was built since 2017. Those of you that know us for a while know that we've been around for 113 years. So we're obviously -- the last 10 years, we've just been concentrated on new purpose-built build-to-rent.

In terms of our guidance, we're still guiding to GBP 60 million in terms of EPRA earnings to full year '26 and GBP 72 million by full year '29. And as a reminder, that's a 50% growth from full year 2024. And that's after we absorb higher interest rates. Our current debt is fixed in the mid-3s. But as we refinance that, obviously, interest rates will go higher. But actually, our earnings still grow considerably.

Our rental growth is expected to stay at 3% to 3.5%, and we've got a really sustainable track record of rental growth with a very strong and diverse customer base, and we've got strong underlying fundamentals of demand for new homes and actually the shortage of smaller landlords exit the market. And all of that is going to deliver our earnings growth.

So I'll just quickly capture the headlines of our financial performance. Our net rental income was up 12%. Like-for-like rental growth was 3.6%, 12% growth in our earnings, 10% growth in our dividend. And our value of our assets, our NTA was resilient at 298p per share.

And then in terms of operations, we had very strong operational delivery, 98.1% occupancy, which is higher than we would normally run, very strong customer retention at 61% and good customer affordability. On average, our customers are paying 28% of their income on rent, which is below the national average. And we've got a very efficient operating platform. We're running at 75% margin on our rent, so 25% gross to net.

And one of the things that we've been doing during the year and over the last few years is proving our values by delivering sales. So I want to just remind people that over the last 5 years, we've sold GBP 1.9 billion of assets.

We've constantly been refreshing our portfolio. And over the last 3 years, which has probably been one of the harder investment markets, we've sold GBP 640 million, and that's been at our valuation. So our valuations are robust. We still have over GBP 900 million of noncore low-yielding assets to recycle out of, and that is actually funding our future investment.

I think it's worth talking about our capital allocation strategy. One of the things that we have a strong pipeline for growth. And in our committed pipeline, so those are the schemes that are on site, we have GBP 343 million of committed pipeline. It's this committed pipeline that's going to drive the GBP 72 million of earnings. We only have GBP 130 million remaining to invest in that.

And then we -- our next step will be to reduce our debt. So that's -- we're planning on reducing it by GBP 300 million to GBP 350 million. And in a moment, I'll ask Rob to take you through that. And that's in order that we manage our finance costs.

Then, as we continue to recycle out of that GBP 900 million, we can consider other routes to growth. We've obviously looked at stabilized acquisitions. We've got a very strong secured pipeline, and we've got a pipeline in planning and [ legals ], which is our future growth pipeline. And then, of course, we will consider increasing our capital returns to shareholders. So we have a very clear order as to how we deal with our capital.

Just looking at our pipeline, we still have over GBP 0.5 billion in regulated tenancies. As a reminder, these are the tenancies that were created before 1988. And as they roll off, we sell them, and that funds our new pipeline. Our overall operational portfolio is GBP 3.5 billion. GBP 343 million, which is the dark bar on this, is the committed pipeline that I've just spoken about. Only GBP 130 million left to invest there.

And then we've got a secured pipeline of GBP 541 million and GBP 393 million in planning and legals. And of course, as we add more homes onto our platform, our platform becomes even more efficient, and we're looking at EBITDA margin expansion to 60%.

I'll show my favorite slide because it's our direction of travel. Obviously, we have seen very, very strong growth in our rental income, an average of 14% per annum. We've got very strong growth in our EPRA earnings. And our operational leverage was originally at 19%. It's now at 55.5% and as I say, growing to 60%. So we've got a good -- a really strong trajectory in terms of where we're going.

So the highlights of the first half are the successful -- of the full year, sorry, successful conversion to a REIT, very strong occupancy, robust rental growth. And the one thing that's come through this year is that the Renters Rights Act, which I'll talk more about in a moment, which actually demonstrates that we have no rent controls. The government have absolutely confirmed no rent controls.

Very strong financial performance with 12% net rental income, 12% earnings growth and a very strong cash flow within the business and 10% dividend increase.

And our key focus for the future is maintaining that occupancy and rental growth, continuing to target earnings growth. We're focused on cost efficiencies. We are taking cost out of the business, and Rob will talk more about that in a moment and then in the short term, reducing our -- short to medium term, reducing our net debt.

So just going back, it might be worth, Rob, now you taking us through how we have achieved that GBP 72 million.

Yes, absolutely. So firstly, just to start off in terms of the rental growth that we delivered, so we've come off back of a very strong year, and we've got really strong momentum continuing in the business.

So if you look at the key drivers of that rental income, the first point is the like-for-like rental growth, which we delivered in the year, 3.6% overall. And we are guiding to continued strong like-for-like growth for the year ahead in our typical long-run historic range of 3% to 3.5%.

Although with the market normalizing that, we would expect some level of seasonality, given we always have a strong second half of the year, reflecting when people move over those summer months.

We had an excellent year in terms of continuing to deliver the pipeline and the lease-up that added a very significant GBP 18 million to our overall rent. And then as we trade down to our noncore assets, including some of the other assets and the [ regs ], that was GBP 6 million of rent attached to disposals. So overall rents up very healthy 12% overall.

And I'll just take you now to the earnings bridge that we in front of us. And we've got some very strong growth locked in the coming years. And you can see here, as Helen mentioned, we have GBP 60 million of earnings being guided for the year ahead, so a continued strong step-up over what we've delivered for the last financial year and that continuing to grow by 35% to GBP 72 million as compared with FY '25. So this growth is actually very much secured and locked in. We've got a great level of visibility.

So the key building blocks that are driving this. So firstly, we assume over this period to FY '29 our long run rate of like-for-like rental growth of 3% to 3.5%.

The second building block is this guidance is based purely of the committed pipeline where we're on site and currently delivering those schemes, which are on the ground. And that's continuing to drive strong profitable growth. And we're funding that by recycling out of our lower-yielding noncore assets, particularly rates and some strategic land and some older PRS assets. So low-yielding assets being recycled into new high-yielding BTR that income accretion.

And then the next element is our EBITDA margin. We were at 54% for FY '24 when we originally set out the guidance. We've said we're on a path to 60% by FY '29. We've already made a big step-up for the year just ended to 55.5%. So we're well on track. And this is actually just leveraging the central platform as we add each new home from the committed pipeline onto our platform that's dropping through to an incremental margin of 75%, and we're not adding lots of new cost centrally in order to deliver.

In fact, we are driving efficiencies. With this set of results, we did announce a GBP 2 million cost takeout from -- continue to drive efficiencies across the vast majority of areas of the business. So that's helping us on our journey to improve the margin. So we get clear visibility of that.

And then that last element, which you can see in gray on this chart, is the fact that towards the end of this period, we're actually locked into low interest rates in the mid-3s for the next few years, but we will be looking to refinance towards the end of that period. And this is based on the forward interest rate curve prediction of 5.5%, 3.5% today.

So we do have that full refinancing of all of our debt. And we assume some modest deleveraging at GBP 300 million to GBP 350 million, which will effectively mitigate around half of that impact and still mean that we're growing our earnings despite that higher interest rate headwind, which I think puts us in a good position.

With the set of results, we also give a little bit more color on our debt trajectory. And here, we provided, as you can see on the bottom right, a little more specificity around where we plan to take our debt.

So we do plan to reduce the debt from where it is today by GBP 300 million to GBP 350 million. We regard that very achievable, given the GBP 175 million plus of sales, which we are making each year. So really, it's just under a couple of years of sales. And that in turn will drive our LTV down to 30% and our net debt to EBITDA at a healthy level of 8x.

So this is really thinking about the impact of higher interest in our business and managing that impact so we can continue to progress our earnings growth.

And then, of course, in September, we converted to a REIT, which is a really significant milestone for the business. And what that means is that the biggest implication is actually GBP 15 million of tax saving that we made in the first year of being a REIT, which we've now [indiscernible] into FY '26. That adds around 60 basis points to our total returns.

And our dividend policy is to maintain a strong progressive dividend. So we expect it to continue to grow. We move our dividend policy in line with other REITs and paying out EPRA earnings. And over the next 2 years, we'll do a top of our regulated tenancy sales profits. And by FY '28, we expect to be fully covered by EPRA earnings, which puts us in a really strong position. And this, of course, growing the dividend is despite the fact that we have the impact of higher interest rates feeding through.

When we look over the longer term, with an organic growth rate of 3% to 3.5% and the operational leverage inherent in our business, that will provide for a growing dividend at the rate of 5% per annum before considering any other growth opportunities such as acquisitions or the continued development pipeline. So I think a healthy level of continued baseline growth [indiscernible].

Thanks, Rob. What I'm going to do now is just take you through Grainger's investment case. And I think it is really compelling. And there are 5 main plans of this investment case.

The first one is the fact that we are a very low-risk asset class with resilient growth. We've got strong market fundamentals of really strong demand for rental homes and a shortage of supply. We've got a strong customer base, which is very positive for our rental growth outlook. And then now we've got real clarity around our regulatory environment following the Royal Assent of the Renters Rights Act.

And then, of course, we've got our sector-leading platform, which is underpinned by the technology and data and insights. And I'll just quickly go through each of those.

So the first one is, yes, we are lower yielding than many other real estate asset classes. But actually, there's a good reason for that, and that is because we're significantly lower risk. And I've just put a couple of charts in here, which demonstrate that residential rent and residential capital values have significantly outperformed commercial property rents and commercial property values.

But also, we've -- rents generally have provided above-inflation rental growth, outstripping CPI, which obviously is not the same for all. So to a certain extent, our lower-yielding nature is a reflection of that lower risk.

And then we've got the market fundamentals. And the main one here is the -- we know that in this country, we've got a shortage of all homes. The shortage is about 4.3 million homes. In the residential sector -- residential rental sector, we have 5.6 million homes. Still, only around 2.5% of them are owned by professional landlords.

And smaller private landlords do continue to exit the market as they find the regulatory environment a lot more difficult, a lot more challenging. Fewer homes are being built, fewer homes are still getting planning consent. So that's the sort of supply-side shortage.

And then we've got a growing population of renters. And just to put a couple of major stats out there from the English National Housing Survey, a 10% increase in the number of households in the 10 years to 2032. And then rental demand set to grow by 20% in the 10 years to 2031. So that is a growing population and a diminishing supply. And both of those give us very strong market tension.

Grainger's customer base is in a very strong position. On average, our customers earn around GBP 38,000 per annum. And the average Grainger household is GBP 62,000. So we have a lot of sharers. Our core demographic is in that 20 to 40 age range, and they're the ones that are normally seeing the higher growth in their income.

And we have a very diverse customer base from all sectors in the market. But actually, the one thing that we do is we cap students at no more than 10%, and there's good reasons for that because we're trying to build really strong settled communities. So our average rent is around 28% of earnings, and that's below the market average.

Just carrying on to the Renters Rights Act, now that was passed last month. We've worked alongside government trying to give them insights into the implications of some of the changes. The act itself is meant to raise standards in renting. So as you can imagine, Grainger has nothing to fear from that point of view.

And we have had work streams in the business working to make sure that we're ready from day 1. We know now that it's going to be implemented from next May. And over the longer term, we know that this government is supportive in trying to achieve more rental homes in the U.K., more homes of all sorts, but obviously, build-to-rent features in there.

The 5 main areas are the abolition of no-fault evictions, well, that's consistent with our business. You can still evict for nonpayment of rent and anti-social behaviors, which is obviously where we mainly move tenants on, but we have very few of those.

We have an annual rent review process, which will now be ensuring pet-friendly policies. We already work with the RSPCA to make sure that we have pet-friendly policies. And then open-ended periodic tenancies. That's really at the moment our tenancies come to an end at the end of the lease, and then we renew the lease with -- whereas now we're just going to -- it's going to roll on.

And then decent home standards. And most of our buildings are new, but all of them are to modern energy-efficient standards. In fact, 96% of our homes are already at 2031 standards for energy efficiency.

The final limb is a very important limb, which is the operational excellence that we have within the business. We have been using technology since we started to grow our build-to-rent platform. And so we have moved recently from using a lot of that data that we collect from everything we do from our leasing, our renewals, our customer surveys to really understand what people want from their home. So we've moved from instinct of what we think people want to insight, real clear data of what people are telling us they want.

And all of that is leading to sector-leading scores in terms of our Net Promoter Scores as people who are advocates for us in our buildings. So we're ahead of the likes of Coca-Cola and aligned with Google. And the combination of technology and our great customer communications as well as our very friendly [ front desk ] staff mean that actually we've got great customer service, and that's a real differentiator. And it helps both in the leasing of our buildings and also in the retention of our customers.

So I'm just going to go on to -- this is a case study of the building that we completed in September of this year. And the reason for that is because Seraphina is part of a 3-building scheme in Canning Town -- it's opposite to Canning Town Interchange. Most of our sites are very well connected.

The first building we launched there was Argo in 2017, then [ Northrhine ] in 2023 and then Seraphina in 2025. And normally, we allow a year to lease up, but this building is -- the majority of it is leased up in a couple of months.

The thing that I'm really impressed about and proud of is that the differential between our first building that's launched in 2017, its current rent is only GBP 60 a month cheaper than Seraphina. And what that's really showing is the lack of depreciation and real resilience. And we do our refresh through our gross to net. So we don't capitalize it. And that's really showing the fact that with residential investment, you get a true net yield, you're not harboring up lots of depreciation.

So finally, greater shareholder value creation model. We are a low-risk asset class with good structural drivers. We're delivering inflation-linking rental growth. We've got a sector-leading platform that's capable of scaling and we're expanding our EBITDA margin, and we have strong growth opportunities in our pipeline.

We're disposing of our lower-yielding assets, and we've got a strong balance sheet, which we're lowering leverage on. And all of that, we believe, will deliver shareholder value and excellent risk-adjusted returns.

I'm going to stop there and invite questions.

[Operator Instructions] Just to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Guys, you can see that we have received a number of questions throughout your presentation this morning. And thank you to all of those on the call for taking the time to submit their questions.

But Kurt, at this stage, if I may hand over to you just to share the Q&A with the team and if I pick up from you at the end, that would be great. Thank you.

Thank you, Jake. The first question we have submitted, I'll read it out loud. Over the last 4 years, the share price has tracked lower from a high of 330 to now 180. Please explain why? And what are you going to do to reverse the trend?

It's a great question because it's a question that the Board are discussing all the time. So like many real estate companies, we have been grouped together. I think the interesting thing about our values is the fact that 330 was a premium at the time to our net asset value, representing our growth. 180 is significantly below our current asset value, and we're actually selling. So we're proving our underlying values.

It's extremely frustrating. It's frustrating for the whole leadership team that we're not being differentiated for the value protection that we've had during this time and the resilience in our underlying real estate values.

And it's worth saying that if you were to look across the market as the whole other NTAs, I think retail has dropped about 40%, office is about 28%. We're actually up over that period.

There were probably two or three main things that affected our share price. The first one was at the end of '22 when interest rates moved out. I think the whole of the real estate sector, we've been closely correlated to gilt yields.

And yet one of the things I would say is that although in the real estate sector, people look at the 5-year swap, the 10-year gilt, one of the other things that I think we should look at in relation to is actually the index-linked yield because we're actually producing real growth in our income, and that's index linking.

So I would say, it's extremely harsh. We can -- the other thing that hit our share price in the -- with the announcement of the general election. So we're on a route to recovery. And then I think there were concerns about rent controls. We've got real clarity about the rental regulatory environment in the future.

So coming to the main point about the question, what are we doing about it? Obviously, the importance is to continue to run the business well to delever, which is I think we're going to come on to a question on that; and to continue to sell down our noncore assets, prove the value. And as I alluded to earlier, we will look at all the opportunities to reinvest and grow the business and grow the margin in the context of that sales process.

Thank you, Helen. The second question we've had submitted around deleveraging is from David. You target GBP 300 million to GBP 350 million deleveraging to FY '29, how much is dependent on disposals versus operating cash flow?

So we actually have GBP 900 million of noncore assets, which we've earmarked to dispose off over the medium term, the majority of which sits in our regulated tenancies. We also have some strategic land, which is not yielding. And then some of the smaller element is POS disposals of older POS assets.

So of that GBP 900 million, we are earmarking GBP 300 million to GBP 350 million of it to delever and GBP 130 million on our cost to complete our committed development program, which still gives us further capital for investment. So our deleveraging is being funded out of disposals. And our EPRA earnings are effectively as the dividend policy is paying out EPRA earnings, then effectively the EPRA earnings are funding the dividend.

Thank you, Rob. Next question is submitted by Charles. What percentage of your homes have energy performance certificates of either A, B or C? And is it possible to provide a split?

I would -- so it's 96% are A, B and C. I'm not sure we've actually given the number to A and B...

Within that...

Yes. But having said that, the majority in our specification for new build, we have the majority aimed at A and B. So that's the -- so over time, as our new product is delivered, we'll see far more A and B. But C will be in the future, I think will be the requirement, and we're already 96% there. So I'll see if we can put on the website afterwards, we'll see if we can answer that in more detail.

Thank you, Helen. The next question has been submitted by Bridget. And it's a few questions, I believe, within that. Do you expect extra occupancy volatility due to the Renters' Rights Act? Also, can you go through the opportunity to acquire developed portfolios within the market? Is this likely to be a meaningful opportunity for you? And how would it be funded, given the high discount to NAV of shares?

Yes. Great question. Right. In terms of -- there is a huge debate whether we see greater occupancy as a result of Renters' Rights because we won't be naturally bringing people's leases to an end on an annual basis. So they may stay with us longer, although extra occupancy from 98% is pretty hard.

We actually quite like to run at 97% because that gets us the opportunity to go in and refresh and relet and things like that or whether or not we'll see more churn. And there's a real sort of -- no one knows how it will work. We have planned for both scenarios, and we're very efficient on turning around our buildings.

Most of our buildings operate with a waiting list. So if we get notices of people moving on, we can relet quite quickly. So that's the first part of the question, which is -- we just don't know at the moment, but we're set up for both.

The opportunity to acquire developed portfolio, the interesting thing about the market, I mentioned it's only 2.5%, is the owners of residential because it has been such a well protector and also because it has been -- because of the nature of who owns it, have actually not traded as readily. I mean we are now seeing an investment market in -- so we have got some good examples this year of buildings that trade.

It's very hard for us when we're trading at this discount to buy a stabilized acquisition and immediately put it in our company, which is a significantly lower value implied by our share price. So we haven't pressed ahead with a lot of stabilized acquisitions.

Although, of course, what we're doing is recycling out of currently discounted assets, if you like. We're recycling out of our older stock. So it would have to be matched with sales. And as I alluded to earlier, we've got a higher priority for our sales revenue.

So that's -- hopefully, that answers the second of the question. But there's been about -- in the market as a whole, I think there's been almost as much in terms of residential portfolios [ sale ] as there has been in terms of the commercial property market, which is unusual. Some of them coming out of housing associations in their private rented side and others, individual lots and some of the big insurers.

Thank you, Helen. The next question has been submitted by David. Renewals are running at more than double the rate of new lets rental growth. Does this signal a structural shift to pricing power? Or are you beginning to see demand elasticity at the point of new tenancies?

In terms of renewals, there is always a lag on renewals because obviously, you're renewing from a historic rent. But the one thing that's affected new let is that we -- where we've given any incentive, that's a referral friend incentive or a small rent-free period in order to drive up our occupancy, we put those right through and net them off our rental growth new let figure. And so that's what's impacted that.

And we have had to do that in some locations where we've had new products launched at a time when we were churning through. But -- so I think it's slightly distorted. And over time, they do even out.

The next question has been submitted by Charles. Why build new houses when you could buy your own existing ones at a 30% discount by having a share buyback?

Yes. So that's -- so that -- obviously, that was the reason behind the capital allocation slide chart, which is to say that we are committed because we're on site. So we obviously won't stop. And those commitments were made some time ago. So we will do our committed pipeline. And then we would consider any further investment in the light of our share price and buying back our stock.

So we're not saying that we will necessarily do all of our secured pipeline. We would consider everything. The Board is very disciplined about this as well into looking at whether or not we invest further at this discount.

That seems to be the end of the questions that have been submitted.

Absolutely, guys. If I may just jump back in there, thank you very much indeed for being so generous of your time and addressing every single question that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended.

But Helen, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments just to wrap up with, that would be great.

Yes. So Grainger has got a very strong growth trajectory. We're in a sector that has a shortage of supply and a growing demand, and we see it delivering very good risk-adjusted returns as we move through the next 4, 5 years.

Thank you so much, everyone, for joining us this morning. And please do reach out to any of us if a question occurs to you that we didn't deal with here. So thanks once again.

Thank you.

Thank you.

Perfect, guys. That's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure it will be greatly valued by the company.

On behalf of the management team of Grainger plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.

So good morning, everyone, and welcome to Grainger's full-year results. Once again, we have delivered an excellent performance as we continue to deliver strong growth in our earnings, in our income and in our margin with high occupancy and a Grainger product, which continues to deliver for customers and shareholders.

So the agenda this morning is that I will take you through the highlights, Rob will take you through the financial results, including our compelling growth to come and our conversion to REIT status. And then, I'll go through our investment case, the strength of our market and give you a quick insight into one of our new openings. And I will explain how we're well positioned for the changes to renting that are due to come in from next May and how we are driving shareholder value. We'll then have time for Q&A with members of the senior leadership team.

So I'm pleased to tell you that Grainger is now the U.K.'s leading residential REIT. It feels quite good to say that. We are a build-to-rent investor operator with a sector-leading portfolio of high-quality homes in the best location. Our fully integrated operational platform, enhanced by technology, is capable of scaling. And this operational platform gives us a real competitive advantage in a sector with high customer interface and where operational excellence is a barrier to entry. Our investment case of a real estate asset class that delivers inflation linking returns is proven. As you can see here, consistently tracking wage growth and as is our proven strategy, we continue to deliver earnings growth to our shareholders and great homes to our customers.

So looking at our earnings growth, we continue to target GBP 60 million of earnings in full year '26 and GBP 72 million by full year '29 and that's a 50% growth from full year '24. There are 2 simple reasons. We have sustainable rental growth outlook, and we have strong underlying fundamentals. And our strong earnings growth will be delivered after absorbing higher interest rates.

We're expecting rental growth to continue at 3% to 3.5%. And we have a resilient customer base to support this. We have strong underlying market fundamentals with regulatory certainty and no rent controls and growing demand and constrained supply. We're reducing debt, which Rob will cover later, and we have topline growth, and we are improving margin.

So turning now to the highlights of our results. We've delivered another outstanding performance. Our net rental income is up 12%. Our like-for-like rental growth is up 3.6%, and we've delivered 12% earnings growth and 10% dividend growth. And our NTA, our asset value, has remained resilient at 298p per share.

We continue to deliver operational excellence. We've delivered high occupancy at 98.1%, and we've secured strong customer retention at 61%. And we have good customer affordability. On average, our customers are paying 28% of their income on rent, which is below the market average. And we are delivering a sector-leading gross to net at 25%. That's a 75% rental margin. So overall, an excellent set of financial and operational results.

We continue to optimize our portfolio through sales of older or non-core assets and our investment in our new products. We have recycled GBP 1.9 billion of assets since the start of our strategy, and we've sold GBP 640 million since September '22. We've been selling in line with valuations and proving the accuracy of valuations.

And importantly, we have over GBP 900 million in non-core assets to fund our future growth and our deleveraging. We are a highly cash-generative business with over GBP 200 million in operational cash flows each year. And as we recycle out of this low-yielding non-core assets, we secure attractive income accretion.

We have a very clear capital allocation strategy. We are always focused on maximizing returns for shareholders. Our current priority is to fund our committed pipeline of GBP 343 million, and there's just GBP 130 million remaining to invest. And it is this committed pipeline, which will deliver our earnings growth to GBP 72 million by full year '29, a 35% increase from today. And as a reminder, a 50% increase from full year '24. Then, we are deleveraging in line with plan. Our debt is fixed at low rates to full year '29. So this deleveraging will support our earnings growth and ensure an optimal capital structure.

And as we continue to recycle, we can look at stabilized acquisitions, and we have also our secured and highly attractive, forward-funded and direct development opportunities. So we have further opportunities in our planning and legals pipeline. We have all these opportunities for future growth. And of course, we will assess these against other opportunities to return capital to shareholders. We have a capital allocation strategy delivering for shareholders in the short, in the medium and in the long term.

So turning to our portfolio and pipeline, GBP 3.5 billion, that's over 11,000 homes. And our portfolio of regulated tenancies is just over GBP 0.5 billion, and our future pipeline is GBP 1.3 billion. Our committed pipeline is immediate. Of the GBP 343 million, there was only GBP 130 million to invest. And indeed, last week, we completed on 374 homes in Bristol, one of our strongest cities and with more homes being delivered in our pipeline in London and Guildford.

We have a highly attractive secured pipeline for further growth, including our strategic JVs, and we have a portfolio of sites going through the planning process. So we have optionality for the future. And we have clear visibility on our earnings growth and our EBITDA margin expansion.

Our growth story is compelling. Yes, this is my favorite side. We've delivered extraordinary growth over the last 10 years. We've been consistent in our delivery, growing our net rental income on average 14% per annum. Our EPRA earnings have grown dramatically through the development of our platform and the efficiency it delivers. Our EBITDA margin has improved from 19% to 56%, with more to come. So this momentum is continuing with strong growth in our income, in our earnings and with further EBITDA margin expansion.

So in summary, we've delivered a strong performance. Our operational highlights are our conversion to a REIT, 98.1% occupancy achieved, robust rental growth secured at 3.6%. And now, we have the Renters' Rights Bill passed. We have real clarity on our future regulatory environment and no rent controls. We've delivered a strong financial performance, a 12% growth in our net rental income, 12% earnings growth and a strong sales performance and a 10% dividend increase.

We have a very clear focus on how to drive returns for our shareholders. We're focused on maintaining occupancy and rental growth. We're focused on delivering strong compounding earnings growth. We're focused on cost efficiency and reducing net debt, and of course, continuing to deliver high-quality homes and great customer service.

And I'll now hand over to Rob to take you through the detail.

Thank you, Helen, and good morning, everybody. Today, I'm going to run through the financial performance for the year and outline the very strong earnings growth that we have to come.

FY '25 has been another period of excellent growth, demonstrating Grainger's resilience and our market-leading position. We've continued to deliver a strong operational performance with like-for-like rental growth of 3.6% and occupancy at 98%. Overall, total net rents continued their strong growth, up 12%. This resulted in strong earnings growth with EPRA earnings up 12%, and we're still targeting our GBP 60 million guidance for the coming year and a 35% increase to GBP 72 million by FY '29.

Adjusted earnings were broadly flat at GBP 91 million, as the sales profits from our reducing regulated tenancy business are replaced with rental income from our pipeline. Our dividend per share increased by 10% to 8.3p, and EPRA NTA was resilient in the period at 298p.

Now, looking at the income statements in more detail. Our overall like-for-like rental growth was strong at 3.6%. Stabilized gross to net was again flat at 25%, demonstrating our ongoing focus on cost efficiency. Overhead costs were up 4% in the year, in line with wage inflation. And looking forward, we're targeting GBP 2 million of cost savings with a GBP 1 million benefit in FY '26. So overall, this will mean that overheads will not grow for the next 2 years.

Interest costs increased largely due to lower levels of capitalized interest and a slightly higher average interest rate during the year. EPRA earnings continued their strong growth trajectory, up 12%. And as a reminder, now, we're a REIT, this will be our key earnings metric going forward.

As expected, sales profits were lower at GBP 37 million, in line with the reduction in the regulated portfolio size, and our sales are performing well and in line with book. Other adjustments include derivative valuation movements and a fire safety provision, which reflects a revision of cost estimates.

Now, looking at the moving parts of our 12% increase in our net rent for the period. Strong occupancy and like-for-like rental growth of 3.6% contributed GBP 2 million. And this was driven by strong performances in both PRS at 3.4%, which is stabilizing back at long-run averages of 3% to 3.5% and our regulated portfolio of 6.6%. The strong lease-up performance of our recent pipeline deliveries has contributed an additional GBP 18 million of net rent. Our asset recycling program offset this growth by GBP 6 million.

Looking forward, we'd expect rental growth to continue in line with the long-term average of 3% to 3.5% in FY '26. With the occupational markets back to normalized levels, we expect to see some seasonality in rental growth return with half 2 stronger than half 1 growth.

This chart shows the key movements in NTA over the course of the year. Our EPRA NTA was maintained at 298p per share. Net rents and fees added 18p, with overheads and finance costs offsetting this by 11p. Overall, our portfolio valuation for the period was up 0.7%. And the PRS portfolio saw 1.1% valuation growth with ERV growth of 3.2% and a modest outward yield shift on some assets.

Valuations on the regs portfolio were down 0.6%, demonstrating their resilience, and further details of the valuation can be seen on Page 45 in the appendices of this presentation.

Now, turning to net debt. Net debt was broadly flat during the year at GBP 1.46 billion, in line with our plans. Operational cash flows remained strong with GBP 205 million generated and with disposals contributing GBP 169 million net of fees. The investments in our build-to-rent portfolio has now started to moderate, as we work our way through the committed pipeline, and there was GBP 133 million invested during the year, with a further GBP 130 million spent on the pipeline, and the majority of that being in FY '26.

In line with our previously discussed capital allocation strategy, we'll continue to generate sales at current levels. These proceeds will be used to fund the committed pipeline and then go towards lowering leverage by GBP 300 million to GBP 350 million. Going forward, we, therefore, expect net debt to remain broadly flat for the coming year before starting to delever from FY '27.

And our balance sheet remains in great shape. Both net debt at GBP 1.46 billion and LTV at 38% were broadly flat over the year, in line with our plans. We maintained strong liquidity and a robust hedging profile with rates fixed in the mid-3% range. As previously highlighted, we plan to reduce our net debt by GBP 300 million to GBP 350 million over the next 4 years, as we continue to sell through our lower-yielding non-core assets.

We regard this as very deliverable given our continued strong performance on sales. This will see our net debt, it's around GBP 1.1 billion, and that will equate to around an 8x net debt-to-EBITDA and an LTV of 30%, which we see as the right capital structure in this current interest rate environment. As net debt is brought down over the medium term, this will help mitigate the impact of rising finance costs, as our low rate hedging rolls off, and that ensures continued strong earnings growth.

REIT status has been a long-term ambition since the start of our strategy, and I'm pleased to say we successfully converted to a REIT back in September. The benefits to the business of being a REIT are substantial, as we no longer have to pay corporation tax on the profits of our build-to-rent business. And in the first year of FY '26 alone, this is expected to generate GBP 15 million of savings with this increasing as we deliver further growth.

We see the resilient growth that our residential business delivers is arguably the perfect fit for the REIT structure with no impact on our business model or our strategy. And we're firmly committed to delivering a strong progressive dividend.

Now, we're a REIT, our dividend policy will be to distribute at least 80% of EPRA earnings. In FY '26 and FY '27, we'll have a reg profits top up. Beyond that, we'd expect the dividend to be fully covered by our EPRA earnings. This will see a mid-single-digit growth over the next 4 years, as we absorb the full impact of interest rate increases.

As a reminder, beyond the higher interest rate headwind, we're a business that will deliver strong organic earnings and dividend growth of around 5%, simply as a result of our 3% to 3.5% rental growth and operating leverage, and that's even without any further growth in scale.

It's been a strong year of earnings growth in FY '25, but there is a lot more to come. The lease-up of our recent deliveries as well as the remaining committed pipeline will deliver an additional GBP 24 million of rent over the next 4 years. As a reminder, this pipeline only requires a further GBP 130 million of CapEx to deliver. This strong top line growth will ensure we continue to deliver very strong earnings growth, and we're targeting EPRA earnings guidance of GBP 60 million next year and a 50% increase in 5 years from FY '24 to GBP 72 million in FY '29. We see this growth as exceptionally strong, particularly as it's delivered through a period in which we'll absorb the full rebasing of our interest cost to market levels, which we currently assume to be 5.5%.

The bridge on this slide breaks down the key drivers, including the benefits of like-for-like rental growth assumed at 3% to 3.5%. The yield pickup from recycling out of our lower-yielding reg's assets into our build-to-rent portfolio, scale efficiencies with EBITDA margins growing to over 60% and the mitigating impacts of reducing debt on higher interest rates. This growth is locked in with upside from delivery of further pipeline schemes or stabilized acquisitions.

So to summarize, we've continued to deliver a very strong operational performance with rental income increasing by 12% and EPRA earnings also up by 12%. This growth is being delivered from a position of real financial strength. Our liquidity and our balance sheet are strong, giving us the flexibility through disposals to reduce our debt by GBP 300 million to GBP 350 million over the medium term, as we reinvest into our committed pipeline.

We maintain our EPRA earnings guidance of GBP 60 million by FY '26 and GBP 72 million by FY '29 from the delivery of just our committed pipeline alone, 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%, which we see as a low volatility return and which remains unchanged, assuming constant yields. And at the current share price, this would equate to a 12% return.

With that, I'll now hand you back to Helen.

Thank you, Rob. In this section, I'm going to go through the 5 fundamentals of our investment case, and then, look at the performance of one of our new openings and also the Renters' Rights Act and our shareholder value creation model.

Our investment case is compelling. We invest in a low-risk, low-volatility asset class with resilient and proven growth. We're in a market with exceptional fundamentals of housing supply shortages and growing demand. Our customer base is strong with a positive outlook for rental growth. And we now have certainty around our regulation following Royal Assent of the Renters' Rights Act. We have a sector-leading operational platform supported by technology, and this gives us great data and insights, and I'll now look at each of these in a little more detail.

So residential is a low-risk investment with sustainable growth. Yes, it's lower yielding than some asset classes, but that is because it's lower risk. It has consistent year-on-year rental growth, and it has delivered above inflation rental growth. And residential rents and capital values have outperformed commercial real estate. This is underpinned by a supply shortage of homes.

Our market fundamentals are strong, a shortage of supply and a growing population. We have in this country an estimated shortage of 4.3 million homes. And of the 5.6 million private rental homes, still only 2.5% are owned by professional build-to-rent landlords. Private landlords continue to exit the market, reducing supply, and fewer homes are being built. Recent revisions of the household growth show a 10% increase in household in the 10 years to 2032 and rental demand is set to grow by 20% in the 10 years to 2031.

The structural supply and demand imbalance that underpins our sector has never been more acute. Our customer base is strong. On average, a Grainger customer earns around GBP 38,000 per annum. And the average Grainger household income is GBP 62,000 per annum. Our core demographic is in the 20 to 48 range, which tends to see the fastest earnings growth. Our customer base is very diverse. And as a reminder, we cap our student numbers. This diverse customer base and healthy affordability gives us confidence on future rental growth and occupancy.

Now, last month, the Renters' Rights Bill achieved Royal Assent. This means we now have certainty on the regulatory outlook, and importantly, it rules out rent control. We contributed our insights to government throughout the process. The act is designed to raise standards, and we at Grainger are already delivering high standards. The proposed standards are consistent with our business model and our operational platform. And our customer-centric approach is embedded in Grainger's business.

So the 5 key changes here are the abolition of no fault evictions, annual market rent reviews, pet-friendly policies, open-ended tenancies and decent home standards. And these align with our business model or current practices. The changes in our processes to comply with the act are already well advanced. We know the main measures will be introduced from the 1st of May 2026, and we're ready. So importantly, we now have certainty that rent controls do not form part of this important act.

The final piece of our compelling investment case is our operational platform and how we deliver operational excellence. We've grown our offer supported by technology, and this gives us great insights into what our customers want. In our operational excellence, we have moved from instinct to insight. We use AI-driven sentiment analysis to inform our operations. And the data tells us what's important to our customers and what they want from a home. Now, this strengthens both our leasing and our customer retention.

Our intuitive customer app as well as our friendly on-site residence team drive our excellent engagement and performance scores, and we sit ahead of many big brands in customer satisfaction and Net Promoter Scores. Building trust is no small feat for a landlord.

Now turning to a recent case study, our latest opening in London is Seraphina at Fortunes Dock and it's opposite Canning Town transport interchange. Now, our commitment to this scheme was some time ago. However, even with outward yield movement, rental growth has more than compensated. It's a high-quality scheme, and it was delivered into our best letting season, which is late summer. And we allowed 12 months to lease up in our underwriting. But the lease up here in the first couple of months takes it to 88% let.

Rental growth is ahead of underwriting, and the scheme forms part of 3 buildings: Argo, which was launched in 2017; Nautilus, which was launched in 2023; and Seraphina. And whilst there is a slight rental difference, our cluster strategy delivers consistent service. What I'm so proud of is that the rent differential between Argo and Seraphina is only GBP 60 a month. And that is evidence of the low depreciation and resilience of our product.

Unlike other real estate asset classes, residential has lower depreciation and greater resilience. As a reminder, Argo is 8 years old, all refresh costs have gone through the gross to net, showing its resilience and lack of depreciation. Residential investment run well offers a true net yield.

Grainger's shareholder value creation model is simple and clear. We're investing in high-quality rental homes in great locations with strong demand, and this investment is low risk. We have inflation linking rental growth and the efficiency of a sector-leading operational platform. We are expanding our EBITDA margin, and we have strong growth opportunities secured for now and the future. Our growth is funded. We have demonstrated our track record of disposals. We have a strong balance sheet, and we are lowering leverage. So what this means is that this proven model is built to deliver shareholders' excellent risk-adjusted returns. Thank you.

I now invite you to ask questions, and I'll be joined by Rob Hudson, our Chief Financial Officer; Mike Keaveney, our Director of Land and Development; and Eliza Pattinson, our Director of Operations and Asset Management; and other senior leaders in the room. So anyone listening in, you can submit questions through the webcast, but we're going to take questions in the room first.

Chris, I've got my notepad because I know it will be a 3-parter.

I've learned the lesson there. Chris Millington at Deutsche. First one I'd like to ask is about this deleveraging and kind of how the strategy is working. So if we don't -- let's say, we don't get such a ramp-up in finance costs going forward, would you still look to delever to that extent? Or should we think it more you're managing the finance cost within the mix of earnings? I'll stop there and go again in a minute.

Yes, I think we'd always retain some level of flexibility, Chris. So if indeed, the outlook improves and interest rates start to fall a bit, we've modeled on current forward curves of 5.5%, then we'd obviously always aim to have a little bit of flexibility because we are thinking principally around preserving strong earnings growth in the business.

Very clear. Assuming your assumptions on the 5.5% are correct in the GBP 300 million, can you just talk about what capacity you've got to invest? What -- how should we think about the secured pipeline coming through and beyond and maybe stabilized acquisitions which you mentioned?

Yes. So you saw the slide, Chris, which actually had over GBP 900 million of capacity. And obviously, that sort of will grow over time. The main components of that are our regulated tenancy portfolio that we're working through strategic land portfolio and other older, non-core assets. So even with deleveraging, completing the pipeline because of our strong operational cash flow, we've got capacity to do our secured pipeline.

And when do you think we should start seeing that get committed to?

I think, as I mentioned, we'd look at that commitment in relation to all other options within the portfolios that deleveraging and also the investments in our existing pipeline. But obviously, as the Seraphina example shows, we make a commitment a couple of years out.

And then I just wanted to explore the valuation backdrop. Perhaps just a little bit of detail as to kind of what assets, regions drove the slight outward yield shift? And just what you're hearing from the value as in what you feel about the outlook for yields?

Yes. I mean, the interesting thing is how strong the investment market has been maintained for residential assets. We've seen some significant transactions. It was a few outward yield movements on some of our more regional portfolio, but it was literally 10 basis points outward yield movement there. And there were a couple of asset-specific movements. But overall, yields have been stable for the last couple of years, if you look at the valuers' charts.

Eleanor Frew from Barclays. So occupancy levels are high, rental growth slowing a little. Can you talk about how you're thinking about balancing the 2 moving forwards? You're likely to prioritize keeping occupancy. And then maybe any comment on incentives used over the year and any planned?

Yes. Great question. I would -- that occupancy figure is exceptional at 98.1%. We model our business on a lower occupancy. What I always say is important is getting real estate income producing. It's probably one of the most important things you can do. That's sort of rather than keeping occupancy to drive topline rental growth.

The new lets' figure that you saw in the numbers reflected the fact that in order -- because we got some late deliveries, if you like, into the year, we wanted to make sure that we went into the winter season with a really high level of occupancy. And so we did offer some incentives. So that blended rental growth just recognizes some small incentives that we made there, but occupancy and rental growth is something that the senior leadership team look at every single Monday morning in a lot of detail. So it's a really careful balance, and I think that anyone that's not looking at both might miss the picture.

Great. Then, we understand the market participants that students are increasingly turning to BTR instead of PBSA. Is that something you've seen? And have you seen any pressure on your cap?

Students have obviously liked build-to-rent for a very long time. Our business model is to build long-term communities, which are most resilient, and therefore, have higher retention rate since students obviously churn more readily. So we've kept our buildings to make sure that students are only a small proportion and that means that we don't get that big summer churn when they finish their courses.

But there's another reason for it as well, which is just that mix of young professionals and students doesn't always mix too many parties, I think. But we have -- there are certain cities where obviously, we've come under pressure to let more to students, and it's just really keeping very, very disciplined in order to ensure that we keep that balance of the community and prevent a high level of churn.

It's Tom Musson at Berenberg. You just mentioned on rent growth for the year ahead, I think to expect some sort of normal seasonality and growth higher in the second half. Can you just remind me what sort of dispersion is in terms of rent growth first half versus the second half?

I'm going to ask Rob to answer this in more detail in a moment. But one of the things I would say is that we've had quite an unusual market for the last few years. So -- this company is over 100 years old, and we always know that our best leasing season is the sort of late summer into the autumn. What happened during the pandemic and post pandemic is that, that changed with the way that the market went into fluctuation. And now, we're actually seeing it return to normal.

But Rob, why don't you give some more detail on that?

Yes, absolutely. So the first point is we continue to guide for our long run rate of 3% to 3.5% for the year ahead. And that's because we're sitting with very healthy levels of affordability at 28%, which has been constant at that level for quite some time. And, of course, the fundamentals of demand and supply with supply shrinking and demand remaining strong.

So, as Helen said, the market obviously has been quite exceptional for the past few years coming out of COVID. But we could expect something in the order of anything up to 100 basis points spread between the first and the second half, but still very much guiding towards the long run rate for the year ahead.

I just had a second one. You mentioned Bristol launched last week. Can you say -- I don't know if you have any early insight into how that's going? Any early demand there? Any chance that can be a successful lease-up as Seraphina?

We haven't actually launched it yet, but we -- there's a good buildup, and it sits within a really good cluster. And so we've got good insight into it being a very, very strong rental city and good sort of indication of demand.

Eliza, do you want to say anything on that?

Yes. I guess, just going back to seasonality, we've done extremely well in all of our lease-ups in Bristol, but we are launching this building into the low seasonality of lettings. So we'll be doing prelaunches, pre-lets, and we have got good interest at the moment.

Neil?

Neil Green from JPMorgan. Just one, please. There were some initiatives announced in London, I think, last month around speeding up housebuilding activity, focus on the affordable element, but interested to get your take on whether you think this is the catalyst and also whether there's changed anything for Grainger when it comes to the future pipeline, please?

Yes. I'm going to turn to Mike to talk about this because he's pulled all over the guidance on it. But -- I mean, I think it's a really strong signal of how difficult people are finding it to actually build in London. And just to give you an idea, I think the stat that was out was -- new homes delivered in May was 19. That's total new homes. So you can imagine they do need to stimulate housebuilding in London, but Mike, why don't you talk about the detail?

Sure. Thanks, Helen. So what was announced really were emergency measures around the fast track process for getting consents. And obviously, they dropped the amount of affordable housing that they expect from sites and also within that announced grant levels for the affordable housing. But it's really a signal that the GLA are listening to the fact that the housebuilding sector in London is under pressure from a viability perspective. And it's still going to be consulted through in the next 6 weeks or so. But I think it's a really welcome step that they realize, and it's not just build-to-rent, obviously, it's the house builders generally, that their viability models are struggling. And the right lever is affordable housing and grant. And so we welcome that.

Alastair?

Alastair Stewart from Progressive. A couple of questions related to that. Recently, have you -- I know you -- your performance with the building safety regulator has been better than most. But what's your reading of the overall [Audio Gap].

Definitely made a difference, and the big difference is engagement. So now developers in that process have someone they can speak to and talk about the process they're going through. And that's made a massive difference, I'd say. We recently achieved Gateway 2 approval with our partner in Guildford, and that was delivered in 22 weeks, which is much closer to the 12 weeks they originally started with. So we do see -- again, they are listening. They are trying to solve the problem and solve the problem without compromising safety. So yes, the direction of travel is good for that.

In terms of the second question, the principle behind that is that there will be a dearth -- there's a backlog of residential development that needs to be -- that will get released through Gateway 2, and suddenly, it will all arrive at once. I think the emergency measures tell you something about that likelihood.

The reality is you have Gateway 2 as a barrier, which is now being traversed. But after that, you have a viability issue on certain schemes around London, mainly with the house builders. So I -- and you'll see that the RPs are pulling back from development. So we don't see a massive increase in house building driving inflation. We see a steady progression of house building.

James?

James Carswell from Peel Hunt. Maybe a slight follow on from Chris's question. But just in terms of credit spreads and margins, it feels like they've probably come in looking at what some of the other REITs have done recently. I mean, where do you think -- if you were refinancing today, I appreciate you're not, where do you think your kind of marginal credit spread would be?

Yes. So based on our internal forecast and current rates, the all-in rate would be around 5.5%. So I think it's obviously true to say as obviously gilt yields have moved, then we've seen a country movement on credit spreads, but the all-in remains around 5.5%.

And then maybe just in terms of bigger picture, I mean, funding the kind of the next, I guess, phase of Grainger in terms of opportunities you're seeing, acquisitions, yes, how should we think about funding those? Because the non-core assets are kind of being used for the current pipeline and deleveraging. And is now a good time to maybe think about third-party capital? Is that under consideration?

We do look at third party, and the Board discuss it, the pros and cons of doing that. But James, we've got a lot of capacity and a big pipeline to go at that we can actually fund ourselves. And so it's obviously -- but we talk to partners all the time. And if there is a right opportunity. And, of course, we do have a joint venture with TfL on our strategic joint venture. So we are known as being good partners. So I wouldn't rule it out. But -- I mean, the great thing is we have clear visibility on how we can fund that secured pipeline.

Any other questions? Kurt, you are going to fire some from the webcast.

There are a few that have come in online. The first is from John Vuong, Van Lanschot Kempen. The #2 key positive drivers for NPS is the quality of the property. But at the same time, you mentioned that your assets have low depreciation and require minimal CapEx. How can you reconcile these 2 statements?

It's because we're constantly on top of them, and meaning, that we're refreshing all the time, and we're doing that through the 25% gross to net. So it's very different from, say, our European counterparts that do put their refresh costs -- capitalize their refresh costs. And just as a reminder to John, the majority of our portfolio has been built since 2017. So it is actually a very, very new portfolio. And when we designed it in our specification, we looked very, very carefully at the long-term use of finishes, which is why we invest in high-quality finishes to make sure it doesn't deteriorate as quickly.

Next question is from Andres Toome of Green Street. What is the impact to yield on cost for schemes benefiting from lower affordability housing quota and the community infrastructure levy in London? We partly answered that, I think, before. And do you see any opportunities emerging from these changes?

Yes. So -- I mean, most of our schemes have been through the planning process. But, Mike, why don't you answer this?

Yes. I think what lies behind the question is whether lower affordable housing and say, increased grant and that kind of combination would lead to greater returns, which is not quite the point of what the emergency measures are trying to do. The emergency measures are trying to bring back viability to housebuilders so that they make their returns. If you created a scenario where super normal returns were delivered through that, they would pull back. And so really, the benefit is that the housebuilders, the general housebuilders should be able to hit their viability returns, not make supernormal profits.

One final question from online. Dr. Francis Jardine, I believe, a private shareholder. "I have investments in over 20 REITs, who pay quarterly dividends, does the Board of Grainger intend to consider paying quarterly dividends going forward? Doing so is only a question of managing cash flow".

We pay -- obviously, we pay half yearly dividends, as a reminder. I will make sure that the Board discussed it at the next meeting.

That's it from online.

Any other questions in the room? Chris, another one?

It's as I was getting through to the appendix on the presentation. But I notice now we've got London and Southeast net initial yields, quite tight versus the rest of the country, actually, a little bit below where you're holding in the Southwest. I think it's 4.3%, place 4.1%. What do you think of the relative attractiveness of London now you've seen that sort of convergence?

Yes. I think it comes from the fundamentals of our sector, which is you've got a shortage of supply across the whole country. So you've got occupancy, and therefore, sort of they have converged the biggest -- I haven't put it in this year, but it is in the appendices. It is my chart where I show where is the best rental city. And the best rental city for obvious reasons is London. So I would argue -- I have to be careful, I think, we've got the values in the room, but I would argue that the London yields are too cautious. For most of my career, London yields have been significantly lower than where they sit today.

No more questions.

Thank you very much for getting up early and coming and joining us this morning. Any other questions, we will be around for a little while before I think another property company comes in here. So thank you.