Slide 1: Assura Group Results Presentation Year ended 31 March 2012
Assura Group Results Presentation Year ended 31 March 2012 Investing in the future of primary care property
Slide 2: Introducing Assura
Introducing Assura • Experienced management & board • Strategy – Primary care property – No diversification • Shareholders – REIT – Quarterly progressive dividend Investing in the future of primary care property 2
Slide 3: Assura well positioned within an attractive asset class
Assura well positioned within an attractive asset class • Asset class has proven its relative value • Economic and political pressures support continued outperformance • Assura well placed within sector Investing in the future of primary care property 3
Slide 4: Asset class has proven its relative value
Asset class has proven its relative value Income certainty delivers 130 128 impressive returns 120 115 – Yield stability Total Return index from 110 – Low cyclicality 100 Attributable to 98 90 91 – Long leases 88 – Negligible default 80 – No oversupply 70 – Access to finance 66 60 Rental outlook pos
Slide 5: The appeal of primary care property lies in its distinct characteristics
The appeal of primary care property lies in its distinct characteristics • Market Features £32.2m Rental Profile for Core Portfolio – Health is non‐discretionary spend – Planning environment ‘benign’ – District Valuer determines rent reviews • Tenant Features – Private businesses underwritten by 68%
Slide 6: Growing demand / Inadequate supply
Growing demand / Inadequate supply Demand Supply • 10 year track record of cross‐ • Most recent survey of GP practices party support for: – ¾ of GPs stated premises not – More services delivered locally suitable for future needs – Greater patient choice – ⅓ said not capable of complying – More commu
Slide 7: Assura well placed to outperform
Assura well placed to outperform • Scale benefits IPD 5 Year Return to December 2011 – £549m total property assets 8% – 16 years lease length 7.4% • Track record of out performance 6% 6.6% 6.1% 6.2% and rental growth • Good reputation and 4% relationships with GP community 2% 2.4% 2.1% • Development
Slide 8: Results reflect continuing progress
Results reflect continuing progress • Core business progressing well • Disposals of non‐core activity and refinancing completed • Underlying results positive • Transparent balance sheet • Strong and predictable cash flow Investing in the future of primary care property 8
Slide 9: Core business progressing well
Core business progressing well • Continued rental progression in the Rent Reviews Settled in the Year year – 99 rent reviews completed in the year 4.0 £3.77m – Weighted average annualised uplift of 3.41% (29% of portfolio by rental 3.0 26 value) reviews Rent £m – Follows rent reviews in year to Marc
Slide 10: Disposals of non-core activity and refinancing completed
Disposals of non‐core activity and refinancing completed • Sale of Pharmacy division and LIFT consultancy business for £36.3m – £9m deferred consideration (including vendor loan) • Closure of NAB interest rate swap for a cash cost of £69.3m – £52.7m exceptional swap loss in the year • Refinancing –
Slide 11: Positive underlying results
Positive underlying results • Net rental income up 50% 2012) 2011) +/‐ % helped by AHMP £m) £m) acquisition Net rental income 30.9) 20.6) +50% LIFT profit and interest 1.6) 1.6) • LIFT earnings stable Joint ventures (0.1) (0.4) • Administration costs down Administrative costs (4.5) (5.5) ‐18% 18% Sh
Slide 12: Net asset value movement
Net asset value movement £m) Net asset value at 31 March 2011 220.1) Profit from continuing operations 11.4) Profit from discontinued operations 1.6) Dividend (5.1) Rights issue proceeds 33.5) Swap cost (54.7) Deferred tax 1.0) Goodwill write off (20.0) Other 0.1) Net asset value 31 March 2012 187.9
Slide 13: Transparent balance sheet
Transparent balance sheet 2012) 2011) £m) £m) Properties1 549.2) 509.6) LIFT 10.5) 9.9) Cash and deferred consideration2 31.0) 38.9) Gross debt (375.6) (361.8) Deferred revenue (13.3) (10.4) Other net working capital (12.9) (8.4) 188.9 177.8 Goodwill/intangibles ‐ 44.6) SWAP (2.5) (17.3) Deferred ta
Slide 14: Core investment portfolio
Core investment portfolio • 158 primary care centres valued at £506m (2011: £450m) • 1% valuation uplift1 • 89.5% Government income (2011: 91.5%) • 15.8 years weighted unexpired lease length (2011: 15.9 years) • Rent review basis 2012 2011 – 80% Open market Initial yield 5.89% 5.87% – 9% RPI Equival
Slide 15: Development activity
Development activity • 9 sites completed adding 11,400m2 – £37.4m development cost – £2.7 ERV – 7.3% average yield on cost – 14% average profit on cost • 6 fully funded sites on‐going to add 4,900m2 – £8.4m book value – £8.5m cost to complete – £1.1m ERV • 8 immediate prospects for a further 9,000m2
Slide 16: LIFT investments
LIFT investments • Assura is an investor in 6 out of 49 • Local Improvement Finance Trusts are companies held by LIFTCos the public and private sector to develop and own medical • Look through investment in £100m of centres predominantly let on modern primary care property long term leases with infl
Slide 17: Non-core - £26m portfolio, net rental income of £1.5m
Non‐core ‐ £26m portfolio, net rental income of £1.5m Former Head Office 55,000 sqft freehold Lease < 5 years Daresbury Business Park £860K rents receivable 3 retail malls in hospitals Leasehold £935K rents receivable 18 years left on head lease £240K rents payable Land 60% by value under offer / Ni
Slide 18: Strong and predictable cash flow
Strong and predictable cash flow • Government reimbursement of 89.5% of core portfolio leases • Remaining lease length 16 years average – Breaks are unusual – New leases for 21 years or more • Zero loss from defaults • Regearing opportunities arise as change requirements arise, e.g. extensions • Lan
Slide 19: Building for the future
Building for the future • Development is one means of growing the portfolio • Key to success is GP relationships • NHS procurement process • Bespoke and demand led – no speculative development Investing in the future of primary care property 19
Slide 20: Moor Park, Blackpool - 2007
Moor Park, Blackpool – 2007 Investing in the future of primary care property 20
Slide 21: Moor Park, Blackpool - 2010
Moor Park, Blackpool – 2010 Investing in the future of primary care property 21
Slide 22: Moor Park, Blackpool - 2011
Moor Park, Blackpool – 2011 Investing in the future of primary care property 22
Slide 23: Moor Park - financial overview
Moor Park ‐ financial overview • 5,800m2 internal space • 21 year leases with 3 yearly open market rent reviews • £897,000pa rent roll • c£10.6m total build cost including – professional fees and land – exit strategy on ex‐surgeries • £14.4m valuation on completion • £3.8m uplift on revaluation • 7.
Slide 24: Rental outlook
Rental outlook • Rent increasing, but primary care property not immune – District Valuers sensitive to economy – Primary Care Trusts not incentivised to settle – New developments slowing as decision making delayed • Underlying direction of open market rental growth subdued Open market Open market Re
Slide 25: Yield outlook
Yield outlook • Primary care property yields have been less volatile than all‐property • Yield gap with long‐dated gilts now very significant 8% 7% 6% 5% Assura Net Initial Yield 4% IPD UK Property Quarterly 3% Index Net Initial Yield 2% 20 Year Gilt 1% 0% Jun 06 Jun 07 Mar 08 Mar 09 Mar 10 Mar 11 M
Slide 26: Assura - the future
Assura – the future • Focus on operational excellence • Create value from developments and acquisitions • Recycle capital: disciplined approach to core and non‐core portfolios • Position company to benefit from NHS reconfiguration • Capture benefits of REIT Conversion • Deliver high quality fit for
Slide 27: Investing in the future of primary care property
Investing in the future of primary care property 27
Slide 28: Appendix
Appendix Appendix 1: Dividends Appendix 2: REITs Appendix 3: Property income 5 years Appendix 4: Core portfolio lease lengths Appendix 5: Basis of rent reviews Appendix 6: ERV Evolution Appendix 7: Net asset value movement H1 & H2 Appendix 8: EPRA – Net Asset Value Appendix 9: Capital value Appendix
Slide 29: Dividends
Dividends Appendix 1 • Quarterly dividends reflecting underlying rental receipt pattern and high degree of income certainty • Normally reviewed annually to reflect cash flow progression • Post REIT conversion may be subject to withholding tax at 20% for some shareholders • Quarterly dividend 0.285p
Slide 30: REITs
REITs Appendix 2 • 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 dividends ― 90% of taxable property rental profits ― Subject to 20% withholding tax
Slide 31: Portfolio rental income growth over years
Portfolio rental income growth over 5 years Appendix 3 35 2011/12 includes 12 months of H2 Mar AHMP income 30 H1 Sept Actual Property Income £m 25 20 15 10 5 0 2007/08 2008/09 2009/10 2010/11 2011/12 (9 Months 15 months) Investing in the future of primary care property 31
Slide 32: Core portfolio lease lengths
Core portfolio lease lengths Appendix 4 12 Average income weighted unexpired lease term 15.8 years 10 86 leases 8 88 Rental Value £m 58 leases leases 6 4 39 leases 2 8 15 7 21 leases leases leases leases 0 21+ 18‐20 15‐17 12‐14 9‐11 6‐8 3‐5 0‐2 Years Remaining Investing in the future of primary care
Slide 33: Basis of rent reviews
Basis of rent reviews Appendix 5 90% £26.3m 80% Upward/Downward Review Basis ‐ Tenant Can Instigate 6% (£2.1m) Upward/Downward Review Basis ‐ Landlord Only Trigger 18% (£5.8m) 70% Upward Only Review Basis 76% (£24.5m) % Portfolio by rental value 60% 50% 40% 30% 20% £3m 10% £2.1m £0.9m 0% OMR RPI Fix
Slide 34: ERV evolution and reversion
ERV evolution and reversion Appendix 6 £35m Vacant Space Total £1.5m ERV at March 2012 £777,650 £30m £1.6m £25m Estimated Rental Value less Passing Rent Portfolio Rent Roll £20m £1.8m £2.2m Passing Rent £2.1m £32.5m £15m £28.8m £10m £19.3m £19.5m £15.8m £5m £m Mar‐08 Mar‐09 Mar‐10 Mar‐11 Mar‐12 Inve
Slide 35: Net asset value movement H1 & H2
Net asset value movement H1 & H2 Appendix 7 H1) H2) £m) £m) At 1 April 2011 / 1 October 2011 220.1) 206.0) Profit from continuing operations 13.9) (2.5) Profit from discontinued operations 1.1) 0.5) Dividend (5.1) ‐ Rights Issue ‐ 33.5) Revaluation of swaps (37.1) (17.6) Deferred tax asset recognise
Slide 36: EPRA - Net asset value
EPRA – Net asset value Appendix 8 Adjusted basic & diluted Adjusted basic & diluted NAV per ordinary share NAV per ordinary share 2012 2011 £m £m Net assets 187.9 220.1 Own shares held 1.9 2.0 Derivative financial instruments 2.5 17.3 Derivative financial instruments of associates 1.2 4.2 Deferred t
Slide 37: Capital value - core portfolio
Capital value – core portfolio Appendix 9 • Size is not an indication of performance ‐ location is key • Smaller units affordable to private investors 50% Capital Number of Total Capital Value Properties Value £m <£1m 31 £20,000,000 £1‐5m 103 £252,115,000 £5‐10m 17 £125,310,000 >£10m 7 £108,065,000
Slide 38: Sensitivity analysis on core portfolio
Sensitivity analysis on core portfolio Appendix 10 NIY ERV +1% +2% +3% p/share p/share p/share p/share 6.25% -5.50p -4.60p -3.70p -2.80p 6.00% -1.75p -0.81p 0.12p 1.06p 5.75% 2.32p 3.30p 4.28p 5.26p 5.50% 6.77p 7.79p 8.81p 9.84p 5.25% 11.64p 12.71p 13.78p 14.85p Investing in the future of primary ca
Slide 39: Development summary
Development summary Appendix 11 Total Development Annual Development Cost to Come Rental Size Cost (excl. Interest) Income m2 £m £m £m Completed developments 11,400 37.4 2.7 Developments on site 4,900 16.2 9.2 1.1 Immediate pipeline 9,000 26.0 24.3 1.8 Investing in the future of primary care propert
Slide 40: Bank and bond facilities
Bank and bond facilities Appendix 12 Fixed/ Effective Secured Rental Outstanding Loan/Bond Floating Maturity Interest Rate Properties Income 31 March £m £m £m 10 year secured 10 year, bullet Bond Fixed repayment 2021 4.75%1 157 11.0 110.0 Aviva amortising secured loans Fixed Amortising 2011 ‐ 2041 5
Slide 41: Covenants
Covenants Appendix 13 All covenant conditions complied with Santander Bond Aviva Investment Facility Required Actual Required Actual Required Actual Interest v income cover 1, 2 > 1.50 > 2.00 ≥ 1.03 > 1.2 ≥ 1.70 >2 < 65% LTV > 1.35 > 1.40 n/a n/a < 75% LTV LTV DSCR n/a n/a n/a n/a > 1.05 >2 In addit
Slide 42: Primary healthcare - Government direction of travel
Primary healthcare – Government direction of travel Appendix 14 Government policy statements reflect unsustainable model of overprovision and expense of acute/ secondary care – 2000: NHS plan targeted 500 new one‐stop primary care costs (c. 100 built) – 2006: Our Health, Our Care, Our Say – provide
Slide 43: Total property assets
Total property assets Appendix 15 2012 2011 £m £m Core 505.7 449.8 Non‐core 14.9 20.0 Investment portfolio 520.6 469.8 Investment property under construction 8.4 35.0 Properties held for sale 11.4 9.8 Pharmacy lease premiums 5.7 3.2 Finance leases 3.1 1.0 Total 549.2 518.8 Balance sheet classificati