Assura Plc · OTC:ARSSF

Assura — H1 FY2016 Earnings Presentation

46 slides from Assura's earnings presentation, September 2015

  1. Slide 1: Results for the six months ended 30 September 2015

    RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015

  2. Slide 2: Key Achievements

    KEY ACHIEVEMENTS Significant progress over six months Step change since 30 September  79% growth in underlying profit before  Equity raise of £300m (net) tax  Funds further growth at lower leverage  5.5% growth in diluted EPRA NAV per  Identified pipeline of acquisitions and share developments

  3. Slide 3: Assura Today

    ASSURA TODAY A leading healthcare REIT  305 medical centres nationwide, serving over 3m patients, 4.8% of the population  £1bn investment value generating over £60m pa in rent roll  34 staff: internally managed  Expertise in medical centre development and investment  Running costs c.60 bps  In

  4. Slide 4: Financial Highlights

    FINANCIAL HIGHLIGHTS Income statement for six months 2015) 2014) )% change) Net rental income (£m) 28.1) 22.2) 27) Underlying profit before tax (£m) 11.3) 6.3) 79) Underlying profit per share (p) 1.1) 1.1) -) Balance sheet 30 Sep 2015) 31 Mar 2015) % change) Investment property (£m) 1,025) 925) 11)

  5. Slide 5: 7% Growth in Annualised Rent Roll

    7% GROWTH IN ANNUALISED RENT ROLL £m 65 60 3.7 0.1 0.2 55 50 59.6 55.6 45 40 Mar-15 New tenants Rent reviews Acquisitions Sep-15 Results for the six months ended 30 September 2015 5

  6. Slide 6: 79% Growth in Six Month Underlying Profit

    79% GROWTH IN SIX MONTH UNDERLYING PROFIT £m 12 5.9 10 8 6 11.3 (0.7) (0.2) 4 6.3 2 0 6 months to Sep-14 Net finance costs Admin expenses Net rental income 6 months to Sep-15 Results for the six months ended 30 September 2015 6

  7. Slide 7: Diluted EPRA NAV per Share Movement

    DILUTED EPRA NAV PER SHARE MOVEMENT 48p 47p 2.5p 46p 45p 1.1p 44p 0.2p 43p 46.4p 1.0p 42p 44.0p 41p 40p 39p Mar-15 Other Dividends Income (underlying Capital (revaluations) Sep-15 profit) Results for the six months ended 30 September 2015 7

  8. Slide 8: 11% Increase in Investment Property

    11% INCREASE IN INVESTMENT PROPERTY 30 Sep 2015 31 Mar 2015 Net initial yield 5.42% 5.56% Equivalent yield 5.60% 5.77% £m 1,040 65 1,020 1,000 980 26 960 940 8 1,025 1 920 900 925 880 860 Mar-15 Other Development costs Revaluation gain Acquisitions Sep-15 Results for the six months ended 30 Septembe

  9. Slide 9: Market Overview

    MARKET OVERVIEW  Stability of valuations over “cycle” Yield development  Limited yield compression to date 8%  Fundamentals remain strong with 7% prospect of rental growth rebounding 6%  Pricing remains attractive for further 5% additions 4% 3% 2% 1% IPD monthly UK index initial yield 0% Assura

  10. Slide 10: Transformed Balance Sheet

    TRANSFORMED BALANCE SHEET  Initial long-term debt redemption Net Gross and immediate pipeline results in debt property LTV c.35% LTV (£m) (£m) 30 Sep 2015 521 1,025 51%  immediate interest saving from debt pay down Assura today 281 1,032 27%  future growth funded from Expected 407 1,158 35% (post

  11. Slide 11: Continued Growth in Six Months

    CONTINUED GROWTH IN SIX MONTHS  £100m increase in portfolio value 30 Sep 2015 31 Mar 2015  £65m additions Investment property £1,025m £925m  5.8% average yield on cost Rent roll £59.6m £55.6m  Weighted average unexpired lease WAULT 14.1 years 14.4 years term of 17.3 years on new additions  Acqu

  12. Slide 12: Developments Pipeline

    DEVELOPMENTS PIPELINE  Immediate pipeline of 5 sites with On site Immediate pipeline an approximate end value of £23m Number of schemes 1 5  Pipeline of identified future Development cost £5m £23m developments in excess of £29m Completion timing 2015/16 2016/17  Assura’s strong brand recognition

  13. Slide 13: Partner of Choice to NHS and GPs

    PARTNER OF CHOICE TO NHS AND GPs  Long-term track record as both developer and landlord  Strong line-up with sector leading architect  Focused team of in-house property managers  Strongest balance sheet in the sector  Equity attractive to property vendors  Strong brand and track record of work

  14. Slide 14: Rent Review Growth

    RENT REVIEW GROWTH  RPI and fixed are currently the main drivers Rent review settlements of rental growth 1.0  RPI and fixed +1.96% 0.80%  open market +0.80% Absolute rent roll increase (£m) 0.8 0.38%  combined +1.42% 1.96%  Less rental evidence for rent reviews due 0.6 3.06% 0.35% to recent hi

  15. Slide 15: Immediate Investment Required in Addition to Long-Term Challenge

    IMMEDIATE INVESTMENT REQUIRED IN ADDITION TO LONG-TERM CHALLENGE Male 100 Female 2014 2039 90 80 70 60 50 40 30 20 10 0 600 400 200 0 200 400 600 Source: Office for National Statistics, Lazarus Population (thousands) in each age band Results for the six months ended 30 September 2015 15

  16. Slide 16: Outlook for Assura

    OUTLOOK FOR ASSURA  Attractive long term opportunity  Assura well placed  skills, structure, scale  ability to consolidate a fragmented market place  brand recognition with GPs  Our three priorities are:  securing future acquisition opportunities  building development pipeline  reducing cos

  17. Slide 17: Q&A

    Q&A Blaenavon Birkenhead Huthwaite Results for the six months ended 30 September 2015 17

  18. Slide 18: Supplementary Information

    SUPPLEMENTARY INFORMATION 1. Market 1.1 Growing demand / inadequate supply 5. Net assets 5.1 Balance sheet at 30 September 2015 1.2 Positive political backdrop 5.2 EPRA net asset value 1.3 Recent encouraging statements 5.3 Diluted EPRA net asset value movement 1.4 Sector attractiveness 5.4 Underlyin

  19. Slide 19: 1.1 Growing Demand / Inadequate Supply

    1.1 GROWING DEMAND / INADEQUATE SUPPLY Demand Supply  10 year track record of cross-party  2014 BMA survey of GP practices support for:  40% of GPs stated premises  more services delivered locally inadequate for provision of general  greater patient choice practice services  more community bas

  20. Slide 20: 1.2 Positive Political Backdrop

    1.2 POSITIVE POLITICAL BACKDROP  Cross party support for primary care investment continues “A vision of a modern NHS working for you  Current government policy supportive 7 days of the week –  has already committed £1bn funding to back new premises via Primary when you need it, Care Transformatio

  21. Slide 21: 1.3 Recent Encouraging Statements

    1.3 RECENT ENCOURAGING STATEMENTS Five Year Forward View Better Health for London  Simon Stevens, NHS Chief Executive  Commission for London (Lord Darzi)  Published 23 October 2014  Published 15 October 2014  Radical upgrade in prevention and public  Professionals deserve modern GP health prac

  22. Slide 22: 1.4 Sector Attractiveness

    1.4 SECTOR ATTRACTIVENESS  Market features  health spend is non-discretionary  planning environment ‘benign’  District Valuer determines rent reviews  Tenant features  private businesses underwritten by Government  premises are bespoke  GPs are not mobile – “stickiness” offsetting Residual V

  23. Slide 23: 1.5 Risk Reward Profile Unchanged

    1.5 RISK REWARD PROFILE UNCHANGED Total return vs standard deviation - eight years to December 2014 9% Residential index GP 8% Gilts Healthcare 7% Centres Other 6% All Healthcare property 5% Total Return Office Since 2007 Equities 4% Industrial All property 3% Retail 2% 1% 0% 18 16 14 12 10 8 6 4 2

  24. Slide 24: 1.6 Assura Well Placed to Outperform

    1.6 ASSURA WELL PLACED TO OUTPERFORM  Good reputation and relationships with IPD Annual Return to Dec-14 since GP community inception of index in 2006  Development capability and strong Assura Primary Healthcare Benchmark 8% pipeline 7.6% 7.0%  Internally managed 7% 6.2% 6.1%  Knowledgeable and

  25. Slide 25: 2.1 Total Property Assets

    2.1 TOTAL PROPERTY ASSETS 30 Sep 2015 31 Mar 2015 £m £m Completed investment property 999.8 908.3 Investment property under construction 15.1 6.7 Pharmacy lease premiums 7.1 7.3 Finance leases 3.0 3.0 Property assets held for sale 4.6 5.4 Total 1,029.6 930.7 30 Sep 2015 31 Mar 2015 Balance sheet cla

  26. Slide 26: 2.2 Completed Investment Property

    2.2 COMPLETED INVESTMENT PROPERTY Properties Value (£m) Value (%) <£1m 60 39.3 3.9 £1-5m 188 474.3 47.5 £5-10m 38 264.9 26.5 >£10m 15 221.3 22.1 301 999.8 Properties Value (£m) Value (%) North 119 429.0 42.9 South 85 271.9 27.2 Midlands 61 213.3 21.3 Scotland 18 33.0 3.3 Wales 18 52.6 5.3 301 999.8

  27. Slide 27: 2.3 Sensitivity Analysis

    2.3 SENSITIVITY ANALYSIS ERV) +1%) +2%) +3%) NIY ) p/share) p/share) p/share) p/share) 6.00% (9.52p) (8.63p) (7.74p) (6.85p) 5.75% (5.65p) (4.72p) (3.80p) (2.87p) 5.50% (1.43p) (0.46p) 0.51p) 1.48p) 5.25% 3.19p) 4.21p) 5.22p) 6.24p) 5.00% 8.27p) 9.34p) 10.41p) 11.48p) Results for the six months ende

  28. Slide 28: 3.1 Cash Flow Summary

    3.1 CASH FLOW SUMMARY 2015) 2014) £m) £m) Opening cash 66.5) 38.6) Net cash from operations 9.5) 9.5) Cash flows from investing activities: Property and business acquisitions (63.0) (34.8) Development expenditure (7.5) (8.5) Sale of properties 0.6) 2.5) Cash flows from financing activities: Equity i

  29. Slide 29: 3.2 Contracted Rental Income

    3.2 CONTRACTED RENTAL INCOME £904m total contracted cash flow, 90% of rent roll still contracted in 2025 Contracted at 30-Sep-15 60 50 40 30 20 10 0 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24 Sep-25 Sep-26 Sep-27 Sep-28 Sep-29 Sep-30 Results for the six months ended 30 September

  30. Slide 30: 3.3 Lease Lengths

    3.3 LEASE LENGTHS 18 Weighted average unexpired lease term 14.1 years 16 128 153 leases leases 14 12 Rental value (£m) 10 107 8 leases 87 6 leases 59 leases 4 2 39 31 42 leases leases leases 0 21+ 18-20 15-17 12-14 9-11 6-8 3-5 0-2 Years remaining Results for the six months ended 30 September 2015 3

  31. Slide 31: 3.4 Debt Repayment Profile

    3.4 DEBT REPAYMENT PROFILE 30 Sep 2015 31 Mar 2015 Gross debt £520.8m £516.6m Weighted average maturity 11.0 years 11.9 years Weighted average cost of debt 5.09% 5.28% 140 Aviva Bond RCF 120 100 80 60 40 20 0 Results for the six months ended 30 September 2015 31

  32. Slide 32: 4.1 ERV Evolution and Reversion

    4.1 ERV EVOLUTION AND REVERSION ERV at 30 Sep 2015 £61.9m; vacant space £1.7m, valuers rental ERV £0.6m Passing rent ERV 60 £2.3m £59.6m 50 40 Rental value (£m) 30 20 10 0 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Sep-15 Results for the six months ended 30 September 2015 32

  33. Slide 33: 4.2 Open Market Rents Results

    4.2 OPEN MARKET RENTS RESULTS  1.42% annualised increase Open Number of from rent reviews settled market outstanding Annualised reviews reviews in the period only % (passing rent)  0.80% from open Rent reviews settled in six months to 0.80% market rent reviews 30 Sep 2015 Relating to review dates

  34. Slide 34: 4.3 Basis of Rent Reviews

    4.3 BASIS OF RENT REVIEWS 80% Upward only review basis (69%) Upward/downward review basis - landlord only trigger (25%) 70% Upward/downward review basis - tenant can instigate (6%) 60% Proportion of rent roll 50% 40% 30% 20% 10% 0% OMR RPI Fixed Other Results for the six months ended 30 September 20

  35. Slide 35: 4.4 Rent Review Timing

    4.4 RENT REVIEW TIMING Split of current rent roll by rent review basis and frequency of review: Annually 3 Year 5 Year Other OMR - 68% 7% - 75% RPI 6% 5% 3% - 14% Fixed - 5% 1% - 6% Other - 4% - 1% 5% 6% 82% 11% 1% 100% Results for the six months ended 30 September 2015 35

  36. Slide 36: 5.1 Balance Sheet at 30 September 2015

    5.1 BALANCE SHEET AT 30 SEPTEMBER 2015  £100m increase in investment property in Property and debt six months £m Investment property Net debt 1,200  Loan to value of 51%  RCF extended to £120m in August 2015 1,000 1,025.3  £111m of available facilities and cash 925.3  Positioned strongly for fu

  37. Slide 37: 5.2 EPRA Net Asset Value

    5.2 EPRA NET ASSET VALUE Adjusted (EPRA)) Adjusted (EPRA)) net asset value) net asset value) 30 Sep 2015) 31 Mar 2015) £m) £m) Net assets 476.9) 451.9) Own shares held 0.4) 1.8) Deferred tax (1.3) (1.3) NAV in accordance with EPRA 476.0) 452.4) Number of shares in issue 1,014,989,571 1,006,900,141 E

  38. Slide 38: 5.3 Diluted EPRA Net Asset Value Movement

    5.3 DILUTED EPRA NET ASSET VALUE MOVEMENT £m) Pence per share) Diluted NAV in accordance with EPRA at 31 Mar 2015 452.4) 44.0) Income (underlying profit) 11.3) 1.1) Capital (revaluations and capital gains) 25.7) 2.5) Dividends (10.0) (1.0) Other (3.4) (0.2) NAV in accordance with EPRA at 30 Sep 2015

  39. Slide 39: 5.4 Underlying & EPRA Earnings per Share

    5.4 UNDERLYING & EPRA EARNINGS PER SHARE 2015 2014 £m £m Profit for the year (continuing operations) 35.4 16.3 EPRA earnings 9.7 5.7 Underlying profit 11.3 6.3 Weighted average number of shares in issue – basic 1,008,829,551 556,155,818 Basic EPS – continuing 3.5p 2.9p – EPRA 1.0p 1.0p – underlying

  40. Slide 40: 5.5 EPRA Cost Ratios

    5.5 EPRA COST RATIOS EPRA Cost Ratios give an indication of administrative and operating costs relative to gross rental income 2015 2014 EPRA Cost Ratio (including direct vacancy costs) 19.2% 18.4% EPRA Cost Ratio (excluding direct vacancy costs) 18.2% 16.7% The costs for the period include an incre

  41. Slide 41: 5.6 VCP Dilution

    5.6 VCP DILUTION  Five year scheme to align incentives for staff and management with long-term shareholder performance  Participants receive 10% of total shareholder return over 8% compound hurdle rate subject to overall cap of 25 million shares (which represents 2.5% of total issued share capital

  42. Slide 42: 6.1 REITs

    6.1 REITS  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% of taxable property rental profits  Subject to

  43. Slide 43: 7.1 Bank and Bond Facilities

    7.1 BANK AND BOND FACILITIES Effective1 Secured Rental Outstanding) Fixed / Loan / Bond Maturity interest1 properties income 30 Sep 2015) Floating rate1 £m £m £m) 10 year, bullet 10 year secured Bond Fixed repayment 4.75%1 174.6 11.5 110.0) 2021 Aviva amortising secured Amortising to Fixed 5.43%1 61

  44. Slide 44: 7.2 Covenants

    7.2 COVENANTS All covenant conditions Bond Aviva RCF complied with Req. Act. Req. Act. Req. Act. Income v interest cover >1.5 2.11 ≥1.05 1.33 ≥1.75 9.55 Loan to Value >1.35 1.56 n/a n/a <60% 24%  In addition, bond requires NHS backed income to exceed 75% (30 Sep 2015: 78%) and the weighted average

  45. Slide 45: 8.1 Dividend Calendar

    8.1 DIVIDEND CALENDAR 2014/15 Payment date2 Ex-div date2 Record date2 Total2 Q1 23 Apr 20141 9 Apr 20141 11 Apr 20141 0.45p2 Q2 23 Jul 20141 9 Jul 20141 11 Jul 20141 0.45p2 Q3 5 Nov 20141 23 Oct 20141 24 Oct 20141 0.45p2 Q4 21 Jan 20151 8 Jan 20151 9 Jan 20151 0.50p2 2015/16 Payment date2 Ex-div dat

  46. Slide 46: Disclaimer

    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 materially from those expressed in or implied by t

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