Grainger plc Regulatory News (GRI)

8 February 2017

Grainger plc

("Grainger", the "Company", the "Group")

Trading Update

Good start to the year and positive private rented sector ("PRS") market conditions

Grainger plc, the UK's largest listed residential landlord, today provides an update on trading for the four months to 31 January 2017.

Helen Gordon, Chief Executive, said:

"It has been a good start to the year. We have seen positive progress on lettings and rental growth and we are making good progress in developing our secured PRS build to rent schemes, a market where we see strong potential for growth. We are seeing the benefits of the actions taken to reduce our operational and financial costs. Our sales pipeline is building well and provides good earnings visibility for the full year.

"We continue to be very active on the PRS acquisitions front and are appraising, reviewing and moving forward with a number of exciting opportunities. I look forward to updating on these further as we move through the year.

"We welcome the Government's Housing White Paper which represents a significant shift in focus, rebalancing Government housing policy toward a broader, more holistic approach, which moves away from primarily focusing on home ownership and recognises that the UK needs homes to rent, as well as homes to buy, to solve the housing crisis. This should underpin Grainger's strategy to invest £850m into the PRS by 2020 and improve shareholder returns with a greater focus on income.

"I would like to thank Baroness Ford, as she steps down from the Board following today's AGM. Her contribution to the business over the last nine years has been instrumental in guiding Grainger to its current strong position. I would like to welcome to the Board Mark Clare, who will be joining as Chairman, and Justin Read as non-executive director."

Highlights

Good lettings and sustained rental growth

▪ 3.4% total like-for-like rental growth year to date, including regulated tenancies and PRS homes.

▪ 2.8% like-for-like rental growth year to date on our PRS homes, with continued strong demand for our rental homes and a strong pickup in rental growth in January following a seasonally slower period for Christmas.

▪ Annualised rental growth of 4.2% on regulated tenancy rental reviews.

Robust sales performance and pipeline

▪ Total sales pipeline* for FY17 of £83m (January 2016: £83m).

▪ Completed sales of £49m (January 2016: £47m).

▪ Sales of vacant properties at 1.5% above the September 2016 year end vacant possession value (January 2016: 4.2%).

▪ Our sales performance is in line with expectations. We expect first half volumes to return to normal levels this year, compared to the prior year where we saw increased activity ahead of the changes to Stamp Duty Land Tax.

Further progress on our PRS growth strategy

▪ On 2 February, Leeds City Council resolved to grant planning consent for our c.£40m, 242 unit build to rent scheme on the Yorkshire Post site in Leeds city centre, which we conditionally agreed to forward acquire in September. We expect construction to begin in Autumn this year and are targeting a c.7% gross yield post completion in late 2019.

▪ Construction is progressing well on our PRS phase at Berewood in Hampshire, which will deliver 104 new PRS homes by the end of this calendar year and is expected to generate a c.7.5-8% gross yield once fully let.

▪ Development of Argo Apartments, our c.£34m, 134 PRS unit scheme in Canning Town, London, which is being acquired by our PRS fund GRIP REIT, is progressing well, with practical completion expected in Autumn 2017. A c.7.5% gross yield is targeted, which for Grainger, will be supplemented by management fees.

▪ Construction is under way at our c.£99m, 614 unit, Clippers Quay PRS scheme in Salford, where first completions are expected in late FY18 and we are targeting a c.8% gross yield once fully let.

▪ Construction is due to start within the next month at Finzels Reach, our 194 unit, £46m PRS build-to-rent development in Bristol, with completion expected in FY19 (c.7% gross yield target).

Focusing on operational performance

▪ We are focused on improving our operational performance to enhance and improve the scalability of our platform to support our growth strategy. We have made further progress in reducing property operating expenditure since the start of the year.

▪ We are seeing the benefit from the actions taken last year to reduce overhead costs and are on track to achieve our £27.5m overheads target.

▪ Cost benefits are also coming through from the recent financing activity, with a cost of debt at c.3.7% this is helping enhance returns as we reinvest into new PRS assets.

Comments on the British Government's Housing White Paper

▪ The recently published Housing White Paper highlights the Government's focus on stimulating housing supply, a change in direction from previous policy where initiatives such as Help to Buy were focused on supporting demand. As a developer of new homes, this is a positive shift from Grainger's perspective.

▪ The White Paper recognises the importance of the private rented sector, which is positive for Grainger. In the past, the Government's housing policy was primarily focused on home ownership, but the change of direction to a more holistic approach is very welcome.

▪ Specific policy announcements within the White Paper include:

o Changes to the planning system to support more PRS development (build to rent) - This will support Grainger's £850m investment plan into the PRS.

o Longer tenancies for renters - This is a welcome move, it provides greater visibility for tenants and landlords and is an offering Grainger already provides across a number of our sites.

o Greater flexibility in affordable housing requirements (Section 106) - The Government announced its intention to allow greater flexibility in the types of housing tenures which satisfy affordable housing requirements. We have been pioneering such new forms of tenures across our sites, which support delivery and viability, and we therefore welcome this proposal.

o Lettings fee ban - The Government will consult on the banning of lettings fees, a move which Grainger welcomes in order to protect customers, help professionalise the rental market, and stop the practice of double charging.

o Ensuring local authorities plan for housing - The White Paper made clear that the Government intends to ensure that local authorities support and plan for housing development in their areas, and release public land for housing. This is a positive initiative, particularly as Grainger has a successful record of working with local authorities and the public sector, for example with the Royal Borough of Kensington and Chelsea, West Berkshire Council and the Defence Infrastructure Organisation.

o As expected, there were no changes to stamp duty land tax, nor any other tax changes in the White Paper. We expect the next window of opportunity to address tax issues is at the Budget in the spring. We continue to discuss with Government the impact of this surcharge on the sector, particularly the brake it applies to the supply of new rental homes.

* Sales pipeline includes transactions completed, exchanged and with solicitors.

-ENDS-

For further information:

Grainger plc

Helen Gordon/ Vanessa Simms/ Kurt Mueller

London Office Tel: +44 (0) 20 7940 9500

Newcastle Office Tel: +44 (0) 191 261 1819

Camarco (Financial PR adviser)

Ginny Pulbrook / Geoffrey Pelham-Lane

+44 (0) 20 3757 4992/4985