Assura Plc · OTC:ARSSF
Assura — FY2019 Earnings Presentation
64 slides from Assura's earnings presentation, May 21, 2019
Slide 1: Results for the year ended 31 March 2019
Results for the year ended 31 March 2019
Slide 2: 1. Overview
Results for the year ended 31 March 2019 1. Overview Jonathan Murphy – CEO
Slide 3: 2019 overview
Results for the year ended 31 March 2019 2019 overview GPI acquisition boosts Portfolio growth development pipeline 57 property additions totalling £240m GPI has a 25 year track record on primary care development £2bn portfolio £92m added to extended pipeline Financial strength Conversion to earning
Slide 4: Our market
Results for the year ended 31 March 2019 Our market Highly attractive sector characteristics 1. Strong leases – Long-term income with 21+ year leases – NHS backed tenant covenant and no rent-free periods – Low default risk – 3 yearly rent review cycle with linkage to cost of new developments Sector
Slide 5: Our position
Results for the year ended 31 March 2019 Our position Our commanding position leaves us well placed to respond to the needs in our market 1. Diversified portfolio of scale – 563 assets across the UK with value of £2bn – Resilient income with 85% of leases NHS funded – £1.35bn of contracted rent roll
Slide 6: 2. Financial performance
Results for the year ended 31 March 2019 2. Financial performance Jayne Cottam – CFO
Slide 7: Earnings growth driven by acquisitions and financing strategy
Results for the year ended 31 March 2019 Earnings growth driven by acquisitions and financing strategy Income statement Mar 2019 Mar 2018 Change Net rental income (£m) 95.2 80.2 up 19% EPRA earnings (£m) 63.8 50.0 up 28% EPRA EPS (p) 2.7 2.5 up 8% Dividend paid during year per share (p) 2.65 2.455 u
Slide 8: 13% growth in annualised rent roll
Results for the year ended 31 March 2019 13% growth in annualised rent roll Acquisitions, rent reviews and development completions driving continued rental growth £m 105 10.4 102.7 100 95 1.0 91.0 0.9 90 0.6 85 80 Mar-18 Disposals Development Rent reviews Acquisitions Mar-19 completions 8
Slide 9: 28% growth in EPRA earnings
Results for the year ended 31 March 2019 28% growth in EPRA earnings Growth in net rental income has flowed through to EPRA earnings £m 70.0 15.0 60.0 50.0 (0.8) (0.4) 40.0 30.0 63.8 50.0 20.0 10.0 0.0 Mar-18 Admin expenses Net finance costs Net rental income Mar-19 9
Slide 10: EPRA cost ratio reduced to 12.5%
Results for the year ended 31 March 2019 EPRA cost ratio reduced to 12.5% Careful cost management driving further economies of scale % 22% 20% 18% 16% 14% 20% 18% 17% 12% 14% 13% 12.5% 10% 8% Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 10
Slide 11: 2% growth diluted EPRA NAV per share
Results for the year ended 31 March 2019 2% growth diluted EPRA NAV per share Stable EPRA NAV with income distributed as dividend Pence 56 54 2.7 52 0.9 50 (2.7) 53.3 48 52.4 46 44 Mar-18 Dividends Capital Income Mar-19 (revaluations) (EPRA EPS) 11
Slide 12: 14% increase in investment property
Results for the year ended 31 March 2019 14% increase in investment property Growth in portfolio primarily relates to acquisitions £m 2,000 221 1,950 1,900 1,850 1,800 20 21 1,979 1,750 1,700 ( 16 ) 1,650 1,733 1,600 1,550 Mar-18 Disposals & transfers Revaluation gain Development costs Acquisitions
Slide 13: Strength of financial position
Results for the year ended 31 March 2019 Strength of financial position Capital discipline in financing strategy – A- (stable outlook) rating from Fitch LTV & interest rate history – £300m unsecured bond raised in July LTV Interest rate 70% 6% – 10 year tenor – 3% coupon 60% 5% – £270m of RCF curren
Slide 14: Proforma rent roll demonstrates positive impact of pipeline
Results for the year ended 31 March 2019 Proforma rent roll demonstrates positive impact of pipeline – Pipeline of opportunities expected to flow £m 125 through to rent roll – Positive outlook in respect of rent reviews and 120 asset enhancement opportunities 115 110 Note This is not a profit foreca
Slide 15: 2. Property update
Results for the year ended 31 March 2019 2. Property update Simon Gould – Head of Development
Slide 16: Continued strong growth
Results for the year ended 31 March 2019 Continued strong growth Pipeline delivered and replenished – £246m increase in portfolio value Mar 2019 Mar 2018 – £240m additions of which £67m Investment property (£m) 1,979 1,733 were portfolio deals Rent roll (£m) 102.7 91.0 – 4.8% average yield on cost W
Slide 17: Strongest on site and pipeline numbers in 10 years
Results for the year ended 31 March 2019 Strongest on site and pipeline numbers in 10 years – 3 schemes completed Completed On site Immediate Extended pipeline pipeline – 11 schemes currently on site Number of schemes 3 11 11 16 – Appointed on 11 further schemes Cost incurred £15m which we hope to c
Slide 18: Managing development risk
Results for the year ended 31 March 2019 Managing development risk Schemes not committed until tenants signed up and fixed price contract in place Experienced team Pre-let to GPs/NHS Fixed price JCT Substantial due Building Contract diligence 18
Slide 19: 11 schemes currently on site
Results for the year ended 31 March 2019 11 schemes currently on site Success getting schemes on site during year – Increasing momentum in new project approvals – Third Party Development model (3PD) continues to play integral role – Build and land cost inflation contributing to new rental levels Dar
Slide 20: Strong immediate pipeline of 11 schemes
Results for the year ended 31 March 2019 Strong immediate pipeline of 11 schemes we hope to commence in the coming year Immediate n 11 schemes £52m Extended 16 schemes n £89m Architects: Stride Treglown 20
Slide 21: Development pipeline growth
Results for the year ended 31 March 2019 Development pipeline growth Strongest development pipeline in the last 10 years, before taking GPI acquisition into account £m 300 250 200 150 100 Extended pipeline 50 Immediate pipeline On site - 21
Slide 22: Prospective growth driven by developments
Results for the year ended 31 March 2019 Prospective growth driven by developments Rent reviews – Annualised uplifts Rent review settlements – Average 2.18% 6% – RPI/fixed/other 3.17% 5% – Open market 1.10% – Linkage to cost inflation on new 4% developments creates evidence for rental 3% growth – Sl
Slide 23: Enhancing existing portfolio
Results for the year ended 31 March 2019 Enhancing existing portfolio Pro-active portfolio management – New leases, lease re-gears and extensions remain a priority – Investment and Portfolio Management teams work together to identify opportunities pre-acquisition – 13 new leases signed (£0.2m rent)
Slide 24: GPI acquisition
Results for the year ended 31 March 2019 GPI acquisition Strengthens our position as leading developer in our sector – Acquisition of one of longest standing Immediate pipeline Extended pipeline 3rd Party Developers Number of schemes 7 11 – Further bolster our immediate and extended pipeline, with a
Slide 25: Development pipeline growth
Results for the year ended 31 March 2019 Development pipeline growth GPI acquisition further bolsters development pipeline £m 300 GPI deal has bolted £92m to pipeline, with further 250 opportunities beyond this 200 150 100 Extended pipeline 50 Immediate pipeline On site - 25
Slide 26: 4. Outlook
Results for the year ended 31 March 2019 4. Outlook Jonathan Murphy – CEO
Slide 27: Market overview
Results for the year ended 31 March 2019 Market overview Strong underlying demand and robust fundamentals; NIY 4.74% Yield progression 8% 7% 6% 5% 4% 3% 2% 1% 0% 15 year Gilt Assura Net Initial Yield MSCI monthly UK index initial yield 27
Slide 28: Our approach to portfolio value
Results for the year ended 31 March 2019 Our approach to portfolio value In-house team proactively driving value – Nationwide portfolio – excellent diversification – Robust asset screen for current and prospective assets – Asset dominance not just linked to asset value – Examples from 2019: – West W
Slide 29: Political backdrop remains supportive
Results for the year ended 31 March 2019 Political backdrop remains supportive Positive recent announcements – NHS Long Term Plan published January 2019 “Much of our estate consists of world-leading facilities that enable the NHS to deliver outstanding – Outlining how £20.5bn of additional governmen
Slide 30: Social impact
Results for the year ended 31 March 2019 Social impact Sustainability and social impact key business drivers – Assura has always led on innovation and technological advances – Sustainability is a priority for all new developments – UK’s most sustainable medical centre in West Gorton – Latest sustain
Slide 31: Conclusion: Sustainable, profitable growth
Results for the year ended 31 March 2019 Conclusion Sustainable platform for growth Sustainable, profitable Financial strength growth Strongest pipeline for Delivering earnings and future growth dividend growth 31
Slide 32: 5. Additional information
Results for the year ended 31 March 2019 5. Additional information
Slide 33: Additional information
Results for the year ended 31 March 2019 Additional information 1. Intro to Assura 1.1 Assura’s position and strengths 3. Portfolio additions 3.1 Acquisition process 1.2 Business model and strategy 3.2 Developments process 1.3 Primary care model 3.3 Our typical range of medical centres 1.4 GP fundin
Slide 34: 1.1 Assura's position and strengths
Results for the year ended 31 March 2019 1.1 Assura’s position and strengths What sets us apart Our Market Assura More GP-led Significant Supported by Knowledge Best in class Financial services in investment demographics and expertise team strength communities required Secure long- Significant No In
Slide 35: 1.2 Business model and strategy
Results for the year ended 31 March 2019 1.2 Business model and strategy Business model designed to deliver resilient and predictable income 1. Develop – Providing bespoke, community-led property solutions for each of our healthcare partners – 100% pre-let with no speculative development – Innovatio
Slide 36: 1.3 The primary care model is key to meeting growing healthcare demand
Results for the year ended 31 March 2019 1.3 The primary care model is key to meeting growing healthcare demand in the UK Assura operates in primary care which is recognised as critical to NHS delivery and faces growing demand 1 Primary healthcare sector Market outlook – key statistics A visit to a
Slide 37: 1.4 GP funding structure
Results for the year ended 31 March 2019 1.4 GP funding structure How the funding mechanism works 1 2 Lease Agreement GMS Contract (typically 20-25 years) (lifetime contract) NHS England Rental income GMS Payments (4.75-5% NIY) (inc. Premises Payment) GP (Partnership) Notes 1 GP Partnerships lease p
Slide 38: 1.5 Rent reimbursement mechanism
Results for the year ended 31 March 2019 1.5 Rent reimbursement mechanism Changes to the rent reimbursement mechanism are considered unlikely 1 There is significant historical precedent for this arrangement – The rent reimbursement mechanism has been in place for 70 years since the NHS was founded i
Slide 39: 1.6 Positive political backdrop
Results for the year ended 31 March 2019 1.6 Positive political backdrop Assura operates in a sector benefitting from political and public support 1 Cross party support for primary care investment continues 2 Broad consensus on the NHS as a key enabler of transformation and sustainability – Number o
Slide 40: 1.7 Risk reward spectrum
Results for the year ended 31 March 2019 1.7 Risk reward spectrum Total return vs standard deviation – 12 years (since inception of index) to December 2018 (Source: MSCI) 10% Residential index 9% Primary Healthcare 8% Total return (per annum) Industrial 7% All Healthcare 6% Office Bonds All property
Slide 41: 1.8 Buildings that support the communities they serve
Results for the year ended 31 March 2019 1.8 Buildings that support the communities they serve Assura has provided support for Dementia UK and 28 social prescribing projects •n •n •n 41
Slide 42: 2.1 Portfolio statistics
Results for the year ended 31 March 2019 2.1 Portfolio statistics Total floor area Number Value (£m) Rent (£m) WAULT (years) (m2) North East 124 440 23.9 12.7 125,369 Midlands 85 351 17.6 13.1 97,938 North West 58 317 15.8 12.5 81,751 South East 105 309 17.0 9.0 88,402 London 62 204 10.4 11.5 47,245
Slide 43: 2.2 Portfolio statistics
Results for the year ended 31 March 2019 2.2 Portfolio statistics £m Total <£1m £1-5m £5-10m >£10m North East 440 9 208 100 123 Midlands 351 10 137 102 102 North West 317 10 68 33 206 South East 309 14 160 90 46 London 204 4 121 57 23 South West 149 9 60 36 43 Wales 136 8 77 50 - Scotland 55 4 29 6
Slide 44: 2.3 Security of tenant and lease length
Results for the year ended 31 March 2019 2.3 Security of tenant and lease length Property value by WAULT Rent roll (£m) Value (%) GPs 69.4 68 £m NHS Body 17.8 17 1,000 Pharmacy 8.2 8 900 Other 7.3 7 102.7 100 800 700 Remaining lease term Value (£m) Value (%) 600 Up to 5 years 124 6 500 5 – 10 years
Slide 45: 2.4 Contracted rental income
Results for the year ended 31 March 2019 2.4 Contracted rental income £1,351m total contracted cash flow WAULT history 69% of rent roll still contracted in 2029 £m Additions and asset enhancement Passage of time Contracted at Mar-19 15.0 100 14.5 0.6 14.0 80 13.5 0.2 1.0 13.0 60 1.0 0.4 12.5 14.4 0.
Slide 46: 2.5 Lease lengths
Results for the year ended 31 March 2019 2.5 Lease lengths 25 WAULT 12.0 years 216 1,143 leases leases 176 69% of rent roll 9+ years unexpired term leases 20 189 GMS/NHS Pharmacy/other leases Rental value (£m) 15 137 123 leases leases 10 84 106 leases leases 112 5 leases 0 0-2 3-5 6-8 9-11 12-14 15-
Slide 47: 2.6 Property and net debt
Results for the year ended 31 March 2019 2.6 Property and net debt Mar 2019 Mar 2018 Property and debt £m £m £m Completed investment property 1,943.3 1,702.2 2,500 Investment property under construction 23.1 22.2 Pharmacy lease premium / rent adjustments 9.6 5.5 2,000 1,979 Finance leases 2.8 2.8 1,
Slide 48: 2.7 Sensitivity analysis
Results for the year ended 31 March 2019 2.7 Sensitivity analysis Equivalent yield ERV per share +1% per share +2% per share +3% per share Mar-19: 4.77% 5.25% (7.55p) (6.81p) (6.06p) (5.32p) 5.00% (3.84p) (3.06p) (2.28p) (1.50p) 4.75% 0.26p) 1.08p) 1.90p) 2.72p) 4.50% 4.85p) 5.68p) 6.55p) 7.41p) 4.2
Slide 49: 3.1 Acquisition process
Results for the year ended 31 March 2019 3.1 Acquisition process c.9,000 GP buildings in the market – Database provides crucial market information For example: – Referrals, direct marketing, Focus on core due • Patient list diligence • Service provision conferences and events key to • Practice finan
Slide 50: 3.2 Development process
Results for the year ended 31 March 2019 3.2 Development process 1 HOW WE SOURCE DEVELOPMENTS 2 MANAGING DEVELOPMENT RISK 3 STRENGTHENED DEVELOPMENT TEAM ▪ New opportunities are secured by: c.9,000 ▪ Agreement for LeaseGP buildings before commencingin the market ▪ Increased team in response to growi
Slide 51: 3.3 Our typical range of medical centres
Results for the year ended 31 March 2019 3.3 Our typical range of medical centres Small Medium Large – Serves neighbourhood or – Serves small town or district – Central ‘hub’ serving wide community rural town/village – 800m2 – 1,800m2 – 1,800m2 – 3,000m2 – Around 5,000 patients – Up to 15,000 patien
Slide 52: 3.4 Developments drive rental growth
Results for the year ended 31 March 2019 3.4 Developments drive rental growth – New developments capture increased Relationship of increased costs and rent land and construction costs resulting in Cost (£/m2) Rent (£/m2) increased rent 3,000 300 280 – Higher rental tone linked to increasing 2,500 26
Slide 53: 4.1 Open market review results
Results for the year ended 31 March 2019 4.1 Open market review results – 2.18% annualised increase from rent Number of reviews settled in the period Open market Annualised outstanding reviews reviews only % – 1.10% from open market rent (passing rent) reviews Rent reviews settled in year to 31 Marc
Slide 54: 4.2 Basis of rent reviews and timing
Results for the year ended 31 March 2019 4.2 Basis of rent reviews and timing 80% Split of current rent roll by rent review basis and Upward/downward review basis - tenant can instigate (4%) frequency of review: 70% Upward/downward review basis - landlord only trigger (19%) Upward only review basis
Slide 55: 5.1 Financial performance history
Results for the year ended 31 March 2019 5.1 Financial performance history Number of properties Rent roll (£m) Investment property (£m) 26.2% 563 1,979 518 102.7 1,733 91.0 398 1,345 74.4 321 63.8 1,109 265 55.6 925 202 41.8 657 FY14A FY15A FY16A FY17A FY18A FY19A FY14A FY15A FY16A FY17A FY18A FY19A
Slide 56: 5.2 Financial performance history
Results for the year ended 31 March 2019 5.2 Financial performance history Gross rental income (£m) EPRA EPS (pence per share) Dividends paid (pence per share) 26.2% 95.2 2.7 2.65 2.5 2.46 83.5 2.4 2.25 71.1 2.1 2.05 2.0 1.85 60.2 1.7 50.1 1.36 39.0 FY14A FY15A FY16A FY17A FY18A FY19A FY14A FY15A FY
Slide 57: 5.3 EPRA NAV
Results for the year ended 31 March 2019 5.3 EPRA NAV EPRA NAV) EPRA NAV) Pence per) Mar 2019) Mar 2018) £m) share) £m) £m) Net assets 1,279.9) 1,250.4) Diluted EPRA NAV at 31 Mar 2018 1,249.9) 52.4) Deferred tax (0.5) (0.5) Income (EPRA earnings) 63.8) 2.7) EPRA NAV 1,279.4) 1,249.9) Capital (reval
Slide 58: 5.4 EPRA EPS
Results for the year ended 31 March 2019 5.4 EPRA EPS Mar 2019 Mar 2018 £m £m Profit for the period 84.0 71.8 EPRA earnings 63.8 50.0 Weighted average number of shares in issue – basic 2,391,704,889 1,963,754,891 Basic EPS – net profit 3.5p 3.7p – EPRA 2.7p 2.5p Weighted average number of shares in
Slide 59: 5.5 Cash flow summary
Results for the year ended 31 March 2019 5.5 Cash flow summary Year to) Year to) Mar 2019) Mar 2018) £m) £m) Opening cash 28.7) 23.5) Net cash from operations 72.9) 49.9) Cash flows from investing activities: Property and business acquisitions (210.1) (282.3) Development expenditure (21.2) (31.7) Sa
Slide 60: 6.1 Facilities and maturity profile
Results for the year ended 31 March 2019 6.1 Facilities and maturity profile £m Secured bond Weighted average Weighted average Gross debt 450 Private placements maturity interest Unsecured bond £690m 7.3 years 3.24% 400 RCF (if drawn) 350 Fixed / Effective Secured / Outstanding Facility description
Slide 61: 6.2 Covenants
Results for the year ended 31 March 2019 6.2 Covenants All covenant conditions RCF / PPs Unsecured bond 2028 Secured bond 2021 complied with Covenant Mar-19 Covenant Mar-19 Covenant Mar-19 Interest cover ≥1.75 4.91 ≥150% 423% >1.5 2.21 LTV / leverage <60% 33% <60% 34% >1.35 1.84 WAULT >7 yrs 12.4 yr
Slide 62: 7.1 REIT overview
Results for the year ended 31 March 2019 7.1 REIT overview – REIT status is a tax election available to listed real estate companies – REITs are tax exempt on property rental income and capital gains – Profits are passed through to investors through minimum Property Income Distributions (PIDs) – 90%
Slide 63: 7.2 Dividend calendar
Results for the year ended 31 March 2019 7.2 Dividend calendar 2018/19 Payment date Ex-div date Record date PID Non PID2 Total2 Q1 18 Apr 2018 15 Mar 2018 16 Mar 2018 – 0.655p) 0.655p) Q2 18 Jul 2018 14 Jun 2018 15 Jun 2018 – 0.655p2 0.655p2 Q3 17 Oct 2018 13 Sep 2018 14 Sep 2018 0.655p 0.655p2 0.65
Slide 64: Disclaimer
Results for the year ended 31 March 2019 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 materiall