Assura PLC · OTC:ARSSF

Assura — H1 FY2018 Earnings Presentation

52 slides from Assura's earnings presentation, September 2017

  1. Slide 1: Results for the six months ended 30 September 2017

    RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

  2. Slide 2: Overview

    OVERVIEW Jonathan Murphy – CEO Results for the six months ended 30 September 2017 2

  3. Slide 3: Operational highlights

    OPERATIONAL HIGHLIGHTS Accelerated growth Strong valuation gains Investment property up 16% EPRA NAV up 8% EPRA EPS up 8% Scalable model Strong and refreshed pipeline Cost of debt down by 28 bps Acquisitions £126m EPRA Cost Ratio reduced to 12% Developments £83m Results for the six months ended 30 S

  4. Slide 4: 12% growth in annualised rent roll

    12% GROWTH IN ANNUALISED RENT ROLL Acquisitions driving rental growth £m 85 7.7 80 0.2 0.3 0.5 75 70 83.1 65 74.4 60 55 50 Mar-17 Asset Rent reviews Development Acquisitions Sep-17 management completions Results for the six months ended 30 September 2017 4

  5. Slide 5: 18% growth in EPRA earnings

    18% GROWTH IN EPRA EARNINGS Continued growth through acquisitions and positive rent reviews £m 25 5.4 20 (0.2) (0.2) (1.5) 15 23.3 10 19.8 5 0 Six months to Sep-16 Admin expenses Tax and other Net finance costs Net rental income Six months to Sep-17 Results for the six months ended 30 September 2017

  6. Slide 6: 8% growth in diluted EPRA NAV per share

    8% GROWTH IN DILUTED EPRA NAV PER SHARE Strong income growth and valuation uplift 54p 2.9p 53p 52p 51p 1.3p 50p 49p 0.8p 53.1p 48p (1.2p) 47p 49.3p 46p 45p Mar-17 Dividends Share issue Income Capital Sep-17 (EPRA EPS) (revaluations) Results for the six months ended 30 September 2017 6

  7. Slide 7: 16% increase in investment property

    16% INCREASE IN INVESTMENT PROPERTY Portfolio opportunities accelerate expansion £m 1,600 153 1,500 50 1,400 15 (3) 1,300 1,560 1,200 1,345 1,100 1,000 Mar-17 Other Development costs Revaluation gain Acquisitions Sep-17 Results for the six months ended 30 September 2017 7

  8. Slide 8: Diversified funding structure

    DIVERSIFIED FUNDING STRUCTURE Strong financial position delivering better terms and pricing  £96m of funds raised in June through a Sep Mar placing at 60p per share 2017 2017  28 basis point reduction in weighted average Investment property 1,560 1,345 cost of debt, 71% of borrowings are fixed rat

  9. Slide 9: EPRA cost ratio reduced to 12%

    EPRA COST RATIO REDUCED TO 12% Scale driving cost efficiencies EPRA Cost Ratio 24% 22% 20% 20% 18% 18% 16% 17% 14% 14% 12% 12% 10% Mar-14 Mar-15 Mar-16 Mar-17 Sep-17 Results for the six months ended 30 September 2017 9

  10. Slide 10: Property & market update

    PROPERTY & MARKET UPDATE Andrew Darke – Property Director Results for the six months ended 30 September 2017 10

  11. Slide 11: Modest yield compression

    MODEST YIELD COMPRESSION Strong valuation gains  Asset enhancement and yield Yield progression compression result in strong 8% valuation gains 7%  Period end initial yield of 4.93%  Fundamentals remain strong with 6% prospect of rental growth 5% 4% 3% 2% 1% IPD monthly UK index initial yield 0% A

  12. Slide 12: Continued strong growth

    CONTINUED STRONG GROWTH Portfolio acquisitions contributed to accelerated growth  £215m increase in portfolio value Sep Mar  £153m acquisitions, of which £77m 2017 2017 were portfolio deals Investment property £1,560m £1,345m  5.0% average yield on cost Rent roll £83.1m £74.4m  Solicitors instru

  13. Slide 13: Investment process

    INVESTMENT PROCESS Disciplined approach to acquisitions  Database provides crucial c.9,000 GP buildings in the market market information  Referrals, direct marketing, conferences and events key to Focus on core due For example: sourcing opportunities • Patient list diligence • Service provision 

  14. Slide 14: Investment case study

    INVESTMENT CASE STUDY Portfolio success  One of three portfolios – predominantly in Wales c£25m – 12 assets  sellers interviewed 4 parties  continuation of proactive and responsive management was key consideration Padarn Surgery, Aberystwyth  trusted reliable purchaser important to seller  rela

  15. Slide 15: Developments and pipeline

    DEVELOPMENTS AND PIPELINE Marked increase in secured schemes  3 forward funded schemes Immediate completed Completed On site pipeline  5 forward funding schemes Number of schemes 3 5 12 currently on site Development cost £9.5m £34.3m £49.0m  Appointed on 12 schemes with an approximate end Cost to

  16. Slide 16: Rent reviews

    RENT REVIEWS Prospective growth driven by developments  Annualised uplifts Rent review settlements  average 1.81% RPI/fixed/other c.27% OMR c.73% 6.0%  RPI/fixed/other 2.84%  open market 0.83% 5.0%  Linkage to cost inflation on new developments creates evidence 4.0% for rental growth 3.0% 2.0%

  17. Slide 17: Enhancing existing portfolio

    ENHANCING EXISTING PORTFOLIO Pro-active portfolio management team  Asset enhancement initiatives contributed No. Rent to half year uplift in value New leases signed 9 £0.2m  New leases, lease re-gears and extensions remain a priority Lease re-gears 4 £0.2m  Portfolio 98% let Physical extensions 3

  18. Slide 18: Property outlook

    PROPERTY OUTLOOK Three high performing teams  Increased rate and value of acquisitions and pipeline  Asset enhancement contributes to valuation gain  Increased number of live and pipeline developments  Continued ability to deliver growing returns to shareholders  Provide primary care estate of

  19. Slide 19: Outlook

    OUTLOOK Jonathan Murphy – CEO Results for the six months ended 30 September 2017 19

  20. Slide 20: Primary care at heart of NHS agenda

    PRIMARY CARE AT HEART OF NHS AGENDA  Rising to Naylor’s challenge  £3bn Primary Care Buildings Pledge by leading investors  Demand for NHS capital into buildings remains high  £325m capital “down payment” to the most advanced STPs  Focus on value for money across the political spectrum is welco

  21. Slide 21: Assura overview

    ASSURA OVERVIEW Delivering the UK’s primary healthcare estate of the future Strong and A growth market Market leader replenished pipeline Delivering growth & Financial strength Scalable model income Delivering superior risk adjusted returns – proposed 9%1 increase in dividend from January 2018 1 Sub

  22. Slide 22: Q&A

    Q&A Ashby Frome Guildford Donnington Results for the six months ended 30 September 2017 22

  23. Slide 23: Supplementary information

    SUPPLEMENTARY INFORMATION 1. Market 1.1 Growing demand / inadequate supply 5. Financials 5.1 Financial highlights 1.2 Positive political backdrop 5.2 Five year track record 1.3 Policy statements 5.3 Balance sheet at 30 September 2017 1.4 Ageing population 5.4 EPRA NAV 1.5 Risk reward spectrum 5.5 Di

  24. Slide 24: Growing demand / inadequate supply

    1.1 GROWING DEMAND / INADEQUATE SUPPLY Demand Supply  Consistent cross-party support for:  2014 BMA survey of GP practices  care closer to home  40% of GPs stated premises inadequate for  greater patient choice provision of general practice services  Ongoing funding challenge  70% said premis

  25. Slide 25: Positive political backdrop

    1.2 POSITIVE POLITICAL BACKDROP  Cross party support for primary care investment continues  Broad consensus on estate as a key enabler of transformation and “It is very important to have sustainability a high-quality estate, and  Government policy supportive: even more important in healthcare; wh

  26. Slide 26: Policy statements

    1.3 POLICY STATEMENTS Next Steps on the Five Year Forward The Naylor review of NHS property and estates: why the View estate matters for patients  Published March 2017  Published March 2017  Emphasis on primary care  Recommendations:  NHS needs to ‘protect and improve  new NHS property board t

  27. Slide 27: Ageing population

    1.4 AGEING POPULATION 2014 Male 100 Female 2039 90 80 70 60 50 40 30 20 10 0 600 400 200 0 200 400 600 Population (thousands) in each age band Source: Office for National Statistics, Lazarus Results for the six months ended 30 September 2017 27

  28. Slide 28: Risk reward spectrum

    1.5 RISK REWARD SPECTRUM Total return vs standard deviation – ten years to December 2016 9% Residential index 8% Primary Healthcare Total Return (per annum) 7% Bonds All Healthcare Office 6% Industrial Equities 5% All property 4% Retail 3% 2% 1% 0% 18 16 14 12 10 8 6 4 2 0 Source: MSCI Risk (standar

  29. Slide 29: Assura well placed to outperform

    1.6 ASSURA WELL PLACED TO OUTPERFORM  Good reputation and relationships with IPD annual return to Dec-16 since inception GP community of index in 2006  Development capability and strong Assura Primary Healthcare Benchmark pipeline 9% 8.1%  Internally managed 8% 7.5%  Knowledgeable and focused te

  30. Slide 30: Total property assets

    2.1 TOTAL PROPERTY ASSETS Sep 2017 Mar 2017 £m £m Completed investment property 1,523.4 1,315.3 Investment property under construction 27.1 20.2 Pharmacy lease premiums 6.5 6.4 Finance leases 3.0 3.0 Property assets held for sale 4.8 0.9 Total 1,564.8 1,345.8 Sep 2017 Mar 2017 Balance sheet classifi

  31. Slide 31: Completed investment property

    2.2 COMPLETED INVESTMENT PROPERTY Properties Value (£m) Value (%) >£10m 25 372.0 24 £5-10m 55 370.3 24 £1-5m 284 711.7 47 <£1m 111 73.2 5 475 1,527.21 100 Properties Value (£m) Value (%) North 166 616.3 40 South 158 459.2 30 Midlands 82 301.8 20 Scotland 22 47.7 3 Wales 47 102.2 7 475 1,527.21 100 R

  32. Slide 32: Sensitivity analysis

    2.3 SENSITIVITY ANALYSIS ERV) +1%) +2%) +3%) NIY ) p/share) p/share) p/share) p/share) 5.50% (8.68p) (7.92p) (7.17p) (6.42p) 5.25% (5.10p) (4.32p) (3.53p) (2.74p) 5.00% (1.17p) (0.35p) 0.48p) 1.30p) 4.75% 3.17p) 4.04p) 4.91p) 5.78p) 4.50% 8.00p) 8.92p) 9.83p) 10.75p) Results for the six months ended

  33. Slide 33: Cash flow summary

    3.1 CASH FLOW SUMMARY Six months to Six months to Year to) Sep 2017) Sep 2016 Mar)2017) £m) £m £m) Opening cash 23.5) 44.3) 44.3) Net cash from operations 20.3) 15.6) 39.0) Cash flows from investing activities: Property and business acquisitions (155.3) (82.7) (157.9) Development expenditure (14.8)

  34. Slide 34: Contracted rental income

    3.2 CONTRACTED RENTAL INCOME £1,130m total contracted cash flow, 74% of rent roll still contracted in 2027 90 Contracted at 30-Sep-17 80 70 60 50 40 30 20 10 0 Results for the six months ended 30 September 2017 34

  35. Slide 35: Lease lengths

    3.3 LEASE LENGTHS 25 Weighted average unexpired lease term 12.8 years 939 leases 74% of rent roll 9+ years unexpired term 20 176 leases 201 leases Rental value (£m) 15 128 10 leases 116 leases 99 leases 5 71 leases 64 84 leases leases 0 21+ 18-20 15-17 12-14 9-11 6-8 3-5 0-2 Years remaining Results

  36. Slide 36: Debt repayment profile

    3.4 DEBT REPAYMENT PROFILE Sep 2017 Mar 2017 Gross debt £591.7m £523.8m Weighted average maturity 7.9 years 8.7 years Weighted average cost of debt 3.78% 4.06% 250 Aviva Bond RCF Private placement 200 150 100 50 0 Results for the six months ended 30 September 2017 36

  37. Slide 37: ERV evolution and reversion

    4.1 ERV EVOLUTION AND REVERSION ERV at 30 September 2017 £85.7m; vacant space £1.8m, valuers rental ERV £0.8m Passing rent ERV 90 £2.6m 80 £83.1m £2.3m 70 £74.4m 60 Rental value (£m) 50 40 30 20 10 0 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Sep-17 Results for the six months ended 30 September 2017 37

  38. Slide 38: Open market rents results

    4.2 OPEN MARKET RENTS RESULTS  1.81% annualised increase Open Number of from rent reviews settled in market outstanding Annualised the period reviews reviews only % (passing rent)  0.83% from open market Rent reviews settled in six months to rent reviews 30 September 2017 0.8%  2.84% from RPI and

  39. Slide 39: Basis of rent reviews

    4.3 BASIS OF RENT REVIEWS 80% Upward/downward review basis - tenant can instigate (6%) Upward/downward review basis - landlord only trigger (22%) 70% Upward only review basis (72%) 60% Proportion of rent roll 50% 40% 30% 20% 10% 0% OMR RPI Fixed Other Results for the six months ended 30 September 20

  40. Slide 40: Developments drive rental growth

    4.4 DEVELOPMENTS DRIVE RENTAL GROWTH  New developments capture Relationship of increased costs and rent increased land and construction Build costs resulting in increased rents Size Initial rent Scheme Year costs (m2) (£/m2)  Higher rental tone linked to (£/m2) increasing construction costs Wallas

  41. Slide 41: Rent review timing

    4.5 RENT REVIEW TIMING Split of current rent roll by rent review basis and frequency of review: Annually 3 Year 5 Year Other OMR - 66% 7% - 73% RPI 5% 5% 4% - 14% Fixed 1% 5% 1% - 7% Other - 5% - 1% 6% 6% 81% 12% 1% 100% Results for the six months ended 30 September 2017 41

  42. Slide 42: Financial highlights

    5.1 FINANCIAL HIGHLIGHTS Six months to Six months to) Income statement Change Sep 2017 Sep 2016) Net rental income (£m) 38.3 32.9) up 16% EPRA earnings (£m) 23.3 19.8) up 18% EPRA EPS (p) 1.3 1.2) up 8% Dividend per share (p) 1.2 1.1) up 9% Balance sheet Sep 2017 Mar 2017) Change Investment property

  43. Slide 43: Five year history

    5.2 FIVE YEAR HISTORY Scale 2017 2016 2015 2014 2013 Rent roll (£m) 74.4 63.8 55.6 41.8 35.9 Investment property (£m) 1,344.9 1,109.4 925.3 656.7 557.3 Net assets (£m) 818.0 754.3 451.9 226.6 198.1 Flexibility Free cash/available facilities (£m) 123.5 118.7 65.3 27.6 15.6 Unencumbered assets (£m) 25

  44. Slide 44: Balance sheet at 30 September 2017

    5.3 BALANCE SHEET AT 30 SEPTEMBER 2017  £215m increase in Property and debt investment property £m Investment property Net debt 1,800  Loan to value of 36% 1,600  £102m of available 1,560 facilities and cash 1,400  Positioned strongly for 1,345 1,200 future growth 1,109 1,000 925 800 600 657 569

  45. Slide 45: EPRA net asset value

    5.4 EPRA NET ASSET VALUE EPRA NAV) EPRA NAV) Sep 2017) Mar 2017) £m) £m) Net assets 971.2) 818.0) Deferred tax (0.5) (0.5) EPRA NAV 970.7) 817.5) Number of shares in issue 1,827,642,764) 1,655,040,993) EPRA NAV per share – basic 53.1p 49.4p Diluted number of shares 1,827,815,773) 1,658,284,284) EPRA

  46. Slide 46: Diluted EPRA NAV movement

    5.5 DILUTED EPRA NAV MOVEMENT £m) Pence per share) Diluted EPRA NAV at 31 March 2017 817.5) 49.3) Income (EPRA earnings) 23.3) 1.3) Capital (revaluations and capital gains) 50.1) 2.9) Dividends (19.9) (1.2) Equity issuance 99.5) 0.8) Other 0.2) -) Diluted EPRA NAV at 30 September 2017 970.7) 53.1) G

  47. Slide 47: EPRA earnings per share

    5.6 EPRA EARNINGS PER SHARE Six months to Six months to Sep 2017 Sep 2016 £m £m Profit for the period 73.4 41.7 EPRA earnings 23.3 19.8 Weighted average number of shares in issue – basic 1,748,149,201 1,641,793,597 Basic EPS – net profit 4.2p 2.5p – EPRA 1.3p 1.2p Weighted average number of shares i

  48. Slide 48: Bank and bond facilities

    6.1 BANK AND BOND FACILITIES Effective Outstanding Fixed / Secured/ Loan / Bond Maturity interest 30 Sep 2017 Floating unsecured rate £m 10 year listed Bond Fixed Dec-21 4.75%1 Secured 110.0) Aviva loans Fixed Various to 2044 5.43%1 Secured 211.7) £250m revolving credit facility1 Floating May-21 1.7

  49. Slide 49: Covenants

    6.2 COVENANTS All covenant conditions Bond Aviva Unsecured facilities complied with Req. Act. Req. Act. Req. Act. Interest cover >1.5 2.19 ≥1.05 1.51 ≥1.75 7.17 LTV >1.35 1.73 <70% 50% - - WAULT >10 yrs 10.3 yrs - - >7 yrs 14.0 yrs NHS >75% 78% - - - - Leverage - - - - <60% 30% Gearing - - - - <150%

  50. Slide 50: REITs

    7.1 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

  51. Slide 51: Dividend calendar

    8.1 CALENDAR 2016/17 Payment date2 Ex-div date2 Record date2 PID Non PID Total22 Q1 20 Apr 20161 17 Mar 20161 18 Mar 20161 - 0.55p 0.55p21 Q2 27 Jul 20161 23 Jun 20161 24 Jun 20161 - 0.55p 0.55p21 Q3 19 Oct 20161 15 Sep 20161 16 Sep 20161 - 0.55p 0.55p21 Q4 18 Jan 20171 15 Dec 20161 16 Dec 20161 - 0

  52. Slide 52: 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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