Assura Plc · OTC:ARSSF
Assura — FY2022 Earnings Presentation
69 slides from Assura's earnings presentation, May 24, 2022
Slide 1: Annual results for the year ended 31 March 2022
Assura plc Annual results for the year ended 31 March 2022 24 May 2022
Slide 2: Overview
2 Results for the year ended 31 March 2022 Overview Jonathan Murphy CEO
Slide 3: Another year of strong progress
3 Results for the year ended 31 March 2022 Another year of strong progress Significant Strategic expansion progress against and new markets volatile backdrop Successful bond Strong and equity raises sustainability plans with accelerated support all use of proceeds stakeholders
Slide 4: Capital raising and deployment
4 Results for the year ended 31 March 2022 Capital raising and deployment Market leading £300m sustainability bond £185m equity raise 12 year, 1.625% Oversubscribed 3x oversubscribed Use of proceeds targets materially exceeded £152m of property acquisitions in second half (>50% over target)
Slide 5: Emerging opportunities
5 Results for the year ended 31 March 2022 Emerging opportunities All new areas leading to both additions in year and growth in pipelines Mental health Premises solutions Partnerships with NHS Trusts/ Irish primary care services in a for primary care at independent diagnostic centres centres communi
Slide 6: Assura – net zero
6 Results for the year ended 31 March 2022 Assura – net zero SixBySix pledges launched EPC B improvements Net zero Net zero for development pilots operational control Assura Community 100% development Fund net zero Net zero across entire portfolio 2020 2026 2030 2040
Slide 7: Business model benefits all stakeholders
7 Results for the year ended 31 March 2022 Business model benefits all stakeholders Geographically diverse portfolio: 645 properties which serve 6.8m patients Sustainability & social impact credentials benefit High quality portfolio and Assura communities and strategic focus generate align with resi
Slide 8: Financial & strategic update
8 Results for the year ended 31 March 2022 Financial & strategic update Jayne Cottam CFO
Slide 9: Financial summary
9 Results for the year ended 31 March 2022 Financial summary Earnings growth driven by acquisitions and developments Income statement 2022 2021 Change Net rental income (£m) 126.5 112.0 13% EPRA earnings (£m) 86.2 75.4 14% EPRA EPS (p) 3.1 2.8 11% Dividend paid during period per share (p) 2.93 2.82
Slide 10: Portfolio growth
10 Results for the year ended 31 March 2022 Portfolio growth Investment property (£m) Growth in rent roll from across portfolio £m £m 3,000 140 11.2 2,500 135 CAGR: 16% 2,000 130 2.2 1,500 125 2,752 1.5 135.7 2,453 1,000 1,979 2,139 120 1,733 (0.9) 1,109 1,345 121.7 500 115 0 110 Mar-16 Mar-17 Mar-1
Slide 11: Scale benefits drive returns
11 Results for the year ended 31 March 2022 Scale benefits drive returns Conservative balance sheet leads to lower cost of debt 8% Portfolio NIY Cost of debt Sustainability Bond issuance 7% 6% 5.56% 5.29% 5.10% 4.80% 4.74% 4.68% 4.58% 5% 4.48% 5.28% 4.84% 4% 4.06% 3% 3.24% 2.30% 3.12% 3.03% 2.47% 2%
Slide 12: Strong financial position
12 Results for the year ended 31 March 2022 Strong financial position Fixed rates secured for long duration – £300m 12-year Sustainability Bond issued Jun-21 LTV & interest rate history – 1.625% fixed rate LTV Interest rate 60% 6% – Issued in line with Sustainable Finance Framework 50% 5% – 3 times
Slide 13: Rent review results
13 Results for the year ended 31 March 2022 Rent review results – Annualised uplifts Rent review increases – Average 1.9% % £m – RPI/fixed/other 2.7% 4% 2.5 – Open market 1.4% 2.0 – Linkage to cost inflation on new 3% developments creates evidence for rental 1.5 growth, but takes time to flow throug
Slide 14: Rent review process
14 Results for the year ended 31 March 2022 Rent review process Typically 9-18 months New rent Negotiation agreed (and of fair OMR rent back rent market rent review date from date of with District review Valuer settled) Assura property team NHS agrees rent gather evidence for uplift based on Dis
Slide 15: Construction costs and rents
15 Results for the year ended 31 March 2022 Construction costs and rents East Anglia East Anglia 2013 2022 Change – Geopolitical factors continue to disrupt supply chains and Build costs £2,000/sq.m £3,500/sq.m 75% increase build costs GMS rent £162/sq.m £225/sq.m 40% – Negotiations with District Va
Slide 16: Property update
16 Results for the year ended 31 March 2022 Property update Patrick Lowther Head of Strategy and Markets
Slide 17: Significant activity
17 Results for the year ended 31 March 2022 Significant activity £271m additions EPCs: LED pilot project £37m developments, completed £234m acquisitions Improved EPC at 42 4.6% yield on cost, 19 buildings years WAULT 4 asset enhancement 22 lease regears capital projects completed completed - £2.7m C
Slide 18: Relationships with trusts
18 Results for the year ended 31 March 2022 Relationships with trusts Forward fund development: West Midlands Ambulance Service Hub – Building let to WMAS University NHS Foundation Trust – 30-year FRI lease – Index-linked rent reviews, 5 yearly review pattern – Specialist facility for Hazardous Area
Slide 19: Relationships with trusts
19 Results for the year ended 31 March 2022 Relationships with trusts Acquisition: Coldharbour Works Brixton Building let to King’s College Hospital NHS Foundation Trust 25-year FRI lease Index-linked rent reviews, 5 yearly review pattern Recent extensive refurbishment, including upgrade to
Slide 20: Independent providers
20 Results for the year ended 31 March 2022 Independent providers Forward fund development: GenesisCare diagnostic and treatment centre, Guildford Building let to GenesisCare 30-year FRI lease Index-linked rent reviews, annual review pattern Provides cutting-edge oncology and cancer care ser
Slide 21: Ireland
21 Results for the year ended 31 March 2022 Ireland First acquisition completed in Castlebar Working with developer on significant expansion opportunity at site Ireland is primarily a development- led opportunity Building relationships with the right developers Positive progress in creatin
Slide 22: Investment in Pi Labs
22 Results for the year ended 31 March 2022 Investment in Pi Labs Gains access to early stage PropTech start ups Q-Flow − Trialled on site for asset enhancement project at Riverside Solution for capturing, digitising Medical Centre, Castleford and analysing construction data - Used for our annual cu
Slide 23: Looking ahead
23 Results for the year ended 31 March 2022 Looking ahead Jonathan Murphy CEO
Slide 24: Market overview
24 Results for the year ended 31 March 2022 Market overview Strong underlying demand and robust fundamentals Yield progression 8% 7% 4.48% 6% Net 5% Initial Yield 4% 3% 2% 4.72% 1% 0% Equivalent Yield 15 year Gilt Assura Net Initial Yield MSCI monthly UK index initial yield
Slide 25: The NHS estate
25 Results for the year ended 31 March 2022 The NHS estate Community estate is unsuited to Critical need for investment in meet urgent need for additional primary care estate capacity Five years after the Naylor Report, limited investment has been seen and the pandemic has Converted residential prop
Slide 26: Responding to support the NHS
26 Results for the year ended 31 March 2022 Responding to support the NHS Building additional capacity for Designing buildings that GPs want community treatment to work in Community diagnostics centres and dedicated Unfit and outdated workplaces make GP elective surgery units recruitment and retenti
Slide 27: Growth of development pipeline
27 Results for the year ended 31 March 2022 Growth of development pipeline On site and pipelines increased in addition to schemes being delivered £m Extended pipeline 500 £198m Appointed exclusive partner, awaiting NHS Total approval development pipeline 400 £522m Extended pipeline Immediate 300 pip
Slide 28: Immediate pipelines
28 Results for the year ended 31 March 2022 Immediate pipelines Developments Acquisitions Asset Enhancements 20 20 23 £18m £158m assets £119m schemes projects projected spend over two years
Slide 29: Proforma rent roll demonstrates positive impact of pipeline
29 Results for the year ended 31 March 2022 Proforma rent roll demonstrates positive impact of pipeline Development and asset enhancement strategy key contributor to future growth £m – Opportunities in development 180 pipeline expected to flow through rent roll 170 – Total cost of pipelines £583m 16
Slide 30: Summary
30 Results for the year ended 31 March 2022 Summary Significant progress NHS estate remains against volatile significantly backdrop underfunded Continue to evolve Strong pipelines and our approach to balance sheet in meet NHS place for future requirements growth
Slide 31: Additional information
31 Results for the year ended 31 March 2022 Additional information
Slide 32: Additional information
32 Results for the year ended 31 March 2022 Additional information 1.1 Our market 4.1 Deployment of capital 1.2 Assura’s market leading position 4.2 Sustained track record of accretive additions 1.3 Primary care model 4.3 Strong pipeline 1.4 Risk reward spectrum 4.4 Strategic focus on developments 1
Slide 33: 1.1 Our market
33 Results for the year ended 31 March 2022 1.1 Our market Highly attractive sector characteristics A critical need – NHS response to impact of COVID requires significant boost to out of hospital facilities – Demographic pressures create growing demand – over 85s predicted to double by 2040 – Signif
Slide 34: 1.2 Assura’s market leading position
34 Results for the year ended 31 March 2022 1.2 Assura’s market leading position Well placed to respond to the needs of the market A long track record of delivery – Over £1.2bn of portfolio additions since April 2017 – £271m of additions in past year (yield on cost 4.6% for 19.0 years remaining leas
Slide 35: 1.3 Primary care model is key to meeting growing UK healthcare demand
35 Results for the year ended 31 March 2022 1.3 Primary care model is key to meeting growing UK healthcare demand Assura operates in primary care which is recognised as critical to NHS delivery and faces growing demand 1. Primary healthcare sector £45 X2 350m – – c. 9,000 primary care medical centre
Slide 36: 1.4 Risk reward spectrum
36 Results for the year ended 31 March 2022 1.4 Risk reward spectrum Total return vs standard deviation – 15 years (since inception of index) to Dec 2021 (source: MSCI) 10% Industrial Residential index 9% Primary Healthcare 8% Total return (per annum) 7% All Healthcare 6% Office All property Bonds 5
Slide 37: 1.5 Our typical range of medical centres
37 Results for the year ended 31 March 2022 1.5 Our typical range of medical centres Large - Central ‘hub’ serving wide community Medium - 1,800m2 – 3,000m2 Small - Serves small town or district - Up to 50,000 patients – Serves neighbourhood of rural - 800m2 – 1,800m2 - c.18 consulting rooms and 6 t
Slide 38: 1.6 Expanding our offering
38 Results for the year ended 31 March 2022 1.6 Expanding our offering NHS diagnostic & treatment centres Independent Ireland – Tenant: NHS – Tenant: Selected independent – Tenant: HSE (Health Service Executive, providers (such as Ramsay or Irish equivalent of NHS) – Typical lease: 20+ years, FRI, i
Slide 39: 2.1 Social impact strategy underpins business model
39 Results for the year ended 31 March 2022 2.1 Social impact strategy underpins business model No.1 listed property business for long term social impact Net zero for portfolio by 2040 Through the Assura Community Fund’s Work with our tenants to reduce the grant-making and our support for energy con
Slide 40: 2.2 SixBySix
40 Results for the year ended 31 March 2022 2.2 SixBySix Ambition to positively impact six million people by 2026 694,000 Actions that count toward our target to People impacted impact six million: by SixBySix – Built a new sustainable development in 2021/22 – Extended or refurbished an existing bui
Slide 41: 2.3 Sustainability approach
41 Results for the year ended 31 March 2022 2.3 Sustainability approach Ambition SixBySix Pledges 2022/23 actions Target EPC B for 50% by March 2023 Net zero carbon audits across 50 buildings in Work with our tenants to reduce the our portfolio with a view to completing a energy consumed in our buil
Slide 42: 2.4 Social impact approach
42 Results for the year ended 31 March 2022 2.4 Social impact approach Ambition SixBySix Pledges 2022/23 actions Launch at least two targeted pilot grant programmes aimed at building social prescribing capacity in current ‘cold spots’ Through the Assura Community Fund’s for applications including a
Slide 43: 2.5 Portfolio EPCs
43 Results for the year ended 31 March 2022 2.5 Portfolio EPCs – 33% of certificates at rating of B or better, target 100% by March 2026 where planned improvements don’t conflict with net zero carbon March 2022 % by area* – Interim target of 50% by March 2023 – Built into existing individual propert
Slide 44: 2.6 Net zero carbon development
44 Results for the year ended 31 March 2022 2.6 Net zero carbon development Net zero carbon design guide Sets out our granular approach Including ambitious targets for to be published Summer 2022 to the design process emissions on each scheme Metric/KPI Baseline (i.e. Best Practice Exemplary Polegat
Slide 45: 3.1 Portfolio statistics
45 Results for the year ended 31 March 2022 3.1 Portfolio statistics Number Rent WAULT Total floor Value <£1m £1-5m £5-10m >£10m Value Rent (£m) (years) area (m2) (£m) per m2 per m2 (£) (£) North East 144 30.3 12.5 153,737 595.5 9.9 232.1 172.1 181.4 3,873 197 Midlands 106 23.6 13.1 125,469 495.4 7.
Slide 46: 3.2 Security of tenant and lease length
46 Results for the year ended 31 March 2022 3.2 Security of tenant and lease length Property value by WAULT Rent roll Value (%) £m (£m) 1,200 GPs 84.4 62 66% NHS Body 26.5 20 1,000 Of rent Pharmacy 10.5 8 roll still contracted Independent 7.5 5 In 2030 providers 800 Other 6.8 5 135.7 100 600 Remaini
Slide 47: 3.3 Contracted rent
47 Results for the year ended 31 March 2022 3.3 Contracted rent Currently contracted rent Lease expiry profile £m 30 246 205 GMS/NHS 125 leases leases Pharmacy/other 25 178 leases 100 216 20 leases Rental value (£m) 141 75 leases 113 15 114 leases leases 50 10 133 leases 25 5 0 0 0-2 3-5 6-8 9-11 12
Slide 48: 3.4 Quality of long-term cash flows
48 Results for the year ended 31 March 2022 3.4 Quality of long-term cash flows Total contracted rent roll WAULT history £m Additions and asset enhancement Passage of time Years Additions and asset enhancement Passage of time 12.0 1,600 10.0 1,200 8.0 1,808 6.0 11.7 11.9 11.8 800 1,568 1,425 4.0 400
Slide 49: 3.5 Property and net debt
49 Results for the year ended 31 March 2022 3.5 Property and net debt Completed investment property 2022 (£m) 2,674.3 2021 (£m) 2,400.4 Investment property under construction 69.1 43.5 Pharmacy lease premium / rent adjustments 3.0 3.9 Head lease obligations 5.5 5.5 Property assets held for sale 76.4
Slide 50: 3.6 Sensitivity analysis
50 Results for the year ended 31 March 2022 3.6 Sensitivity analysis Equivalent yield ERV per +1% per +2% per +3% per – A 25bps movement would Mar-22: 4.72% share share share share result in a valuation movement of 5.25% (9.38p) (8.54p) (7.71p) (6.87p) approximately £153m or 5.2 pence per share 5.00
Slide 51: 4.1 Deployment of capital
51 Results for the year ended 31 March 2022 4.1 Deployment of capital At Nov-21 equity Delivered in placing second half Current Developments 1 development completed 17 developments 12 developments (£166m) 4.6% (£72m) on site 6 developments on site moved on site Yield on cost Acquisitions £102m 19 ac
Slide 52: 4.2 Sustained track record of accretive additions
52 Results for the year ended 31 March 2022 4.2 Sustained track record of accretive additions – Experienced investment and development teams have a strong track record of delivery at attractive prices – Acquisitions sourced via variety of methods (off market, agent processes, sale and leasebacks) –
Slide 53: 4.3 Strong pipeline
53 Results for the year ended 31 March 2022 4.3 Strong pipeline Continued replenishment of pipelines across teams Developments Acquisitions Asset Enhancements No. Pipeline Cost No. Pipeline Cost No. Pipeline Rent 17 On site £166m 20 Acquisitions £119m 49 Regears (existing rent) £6.9m 20 Immediate pi
Slide 54: 4.4 Strategic focus on developments
54 Results for the year ended 31 March 2022 4.4 Strategic focus on developments Strategic expansion of March 2022 development − Record pipeline of £522m capabilities − £187m development completions since April 2017 March 2017 − Acquisition of Matrix, GPI, Development Apollo − Growing proportion of s
Slide 55: 4.5 Benefits of development
55 Results for the year ended 31 March 2022 4.5 Benefits of development 1. Access to pipeline 2. Highest quality assets in our market 3. Long lease lengths 4. Capture development margin with relatively low risk (no speculative development) 5. Rent set relative to construction costs – sets evidence f
Slide 56: 4.6 On site developments
56 Results for the year ended 31 March 2022 Cramlington 4.6 On site developments Wallsend Nunthorpe – Geographically spread across country – Increasing data points for district valuers – Apollo & GPI acquisitions have strengthened our position as leading developer in the sector, with growing proport
Slide 57: 4.7 Developments drive rental growth
57 Results for the year ended 31 March 2022 4.7 Developments drive rental growth – New developments Relationship of increased costs and rent capture increased land and Cost (£/m2) Rent (£/m2) construction costs 4,000 300 resulting in increased rent 280 3,500 – Higher rental tone linked 260 3,000 to
Slide 58: 4.8 Asset enhancement
58 Results for the year ended 31 March 2022 4.8 Asset enhancement Asset enhancements bring benefits for tenants, community and Assura − Increased building capacity (patient list size and range of services) − Refurbished premises − Improved building energy efficiency − Extended lease (generally back
Slide 59: 5.1 Open market review results
59 Results for the year ended 31 March 2022 5.1 Open market review results Number of – 1.9% annualised increase from rent reviews Open outstanding settled in period market reviews reviews (passing – 1.4% from open market rent reviews Annualised only % rent) – 2.7% from RPI and fixed uplift reviews R
Slide 60: 5.2 Basis of rent reviews and timing
60 Results for the year ended 31 March 2022 5.2 Basis of rent reviews and timing 70% Split of current rent roll by rent review 60% basis and frequency of review: Upward/downward review basis - tenant can instigate (4%) Annually 3 year 5 year Total 50% Upward/downward review basis - OMR - 57% 8% 65%
Slide 61: 6.1 Portfolio growth flows through to earnings
61 Results for the year ended 31 March 2022 6.1 Portfolio growth flows through to earnings 12% growth in investment portfolio 14% growth in adjusted EPRA earnings £m £m 2,800 234 90.0 14.5 2,700 80.0 2,600 72 2,500 70.0 (0.8) 69 2,752 (2.9) 86.2 2,400 75.4 60.0 2,300 2,453 (76) 2,200 50.0 Mar-21 Dis
Slide 62: 6.2 Strong track record in key metrics
62 Results for the year ended 31 March 2022 6.2 Strong track record in key metrics Number of properties Rent roll (£m) Average annual rental growth 645 135.7 2.2% 609 563 576 121.7 1.9% 518 108.9 1.7% 1.8% 102.7 1.6% 91.0 1.5% 398 74.4 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 2017
Slide 63: 6.3 Net asset growth
63 Results for the year ended 31 March 2022 6.3 Net asset growth EPRA NTA EPRA NTA Mar 2022 Mar 2021 Diluted EPRA NTA (pence per share) £m £m £m Net assets 1,789.6 1,530.7 70 Deferred tax (0.6) (0.5) 60 CAGR: 5% EPRA NTA 1,789.0 1,530.2 50 40 Number of shares in issue 2.95bn 2.67bn 30 57.2 60.7 49.3
Slide 64: 6.4 New EPRA net asset measures
64 Results for the year ended 31 March 2022 6.4 New EPRA net asset measures – Updated EPRA measures for net Previous measures New measures assets EPRA EPRA EPRA EPRA EPRA – Two of the measures closely align NAV NNNAV NRV NTA NDV to previous NAV and NNNAV NAV per financial – NRV is Net Reinstatement
Slide 65: 6.5 EPRA EPS & cash flow
65 Results for the year ended 31 March 2022 6.5 EPRA EPS & cash flow 2022 2021 2022 2021 EPRA EPS £m £m £m £m Profit for the period 155.9 108.3 Opening cash 46.6 18.5 Net cash from operations 94.6 77.4 EPRA earnings 86.2 72.9 Cash flows from investing activities: Adjusted EPRA earnings 86.2 75.4 Pro
Slide 66: 7.1 Facilities & maturity profile
66 Results for the year ended 31 March 2022 Weighted Weighted Net average debt average maturity interest 7.1 Facilities & maturity profile £1,006m LTV 36% 8.0 years 2.30% Facility description Fixed/ Maturity Effective Secured/ Outstanding 31 £m Private placements floating interest rate unsecured Mar
Slide 67: 7.2 Covenants
67 Results for the year ended 31 March 2022 7.2 Covenants All covenant conditions RCF / PPs Unsecured bonds complied with Covenant Mar-22 Covenant Mar-22 Interest cover ≥1.75 4.21 ≥150% 445% LTV / leverage <60% 39% <65% 36% NHS - - - - Priority debt - - <0.25:1 £nil Unencumbered asset value >160% 25
Slide 68: 8.1 REIT overview & dividend calendar
68 Results for the year ended 31 March 2022 8.1 REIT overview & dividend calendar – REIT status is a tax election available to listed real 2021/ Payment date Ex-div Record Non estate companies 2022 date date PID PID Total – REITs are tax exempt on property rental income Q1 13 Apr 2022 10 Mar 2022 11
Slide 69: Disclaimer
69 Results for the year ended 31 March 2022 Disclaimer This presentation contains certain statements that are neither financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materi