Assura PLC · OTC:ARSSF

Assura — FY2018 Earnings Presentation

55 slides from Assura's earnings presentation, March 2018

  1. Slide 1: Results for the year ended 31 March 2018

    RESULTS FOR THE YEAR ENDED 31 MARCH 2018

  2. Slide 2: Overview

    OVERVIEW Jonathan Murphy – CEO Results for the year ended 31 March 2018 2

  3. Slide 3: Significant progress

    SIGNIFICANT PROGRESS Consolidating our leadership position in UK primary care property Accelerated growth Strong financial position Further valuation gains Investment property up 29% £409m equity raise to fund: 6.9% like-for-like gain - pipeline 120 property additions - Aviva debt redemption EPRA NA

  4. Slide 4: Financial performance

    FINANCIAL PERFORMANCE Jayne Cottam – CFO Results for the year ended 31 March 2018 4

  5. Slide 5: Financial highlights

    FINANCIAL HIGHLIGHTS Further growth achieving economies of scale Income statement Mar 2018 Mar 2017) Change Net rental income (£m) 80.2 67.9) up 18% EPRA earnings (£m) 50.0 40.3) up 24% EPRA EPS (p) 2.5 2.4) up 4% Dividend per share (p) 2.455 2.25) up 9% Balance sheet Mar 2018 Mar 2017) Change Inves

  6. Slide 6: 22% growth in annualised rent roll

    22% GROWTH IN ANNUALISED RENT ROLL Acquisitions driving rental growth £m 95 14.0 90 85 80 1.6 0.3 0.7 75 70 91.0 65 74.4 60 55 50 Mar-17 Asset Rent reviews Development Acquisitions Mar-18 management completions Results for the year ended 31 March 2018 6

  7. Slide 7: 24% growth in EPRA earnings

    24% GROWTH IN EPRA EARNINGS Continued growth through acquisitions and positive rent reviews £m 60 12.3 50 40 (0.3) (0.9) (1.4) 30 50.0 20 40.3 10 0 Mar-17 Tax and other Admin expenses Net finance costs Net rental income Mar-18 Results for the year ended 31 March 2018 7

  8. Slide 8: EPRA cost ratio reduced to 13%

    EPRA COST RATIO REDUCED TO 13% Scale driving cost efficiencies EPRA Cost Ratio 24% 22% 20% 20% 18% 18% 16% 17% 14% 14% 12% 13% 10% Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Results for the year ended 31 March 2018 8

  9. Slide 9: 6% growth in diluted EPRA NAV per share

    6% GROWTH IN DILUTED EPRA NAV PER SHARE Strong income growth and valuation uplift 54p 4.0p 52p 50p 2.5p 48p 46p (2.5p) 1.4p 52.4p 0.1p 49.3p 44p (2.4p) 42p 40p Mar-17 Dividends Refinancing Other Share issue Income Capital Mar-18 (EPRA EPS) (revaluations) Results for the year ended 31 March 2018 9

  10. Slide 10: 29% increase in investment property

    29% INCREASE IN INVESTMENT PROPERTY Portfolio opportunities accelerate expansion 5.29% Equivalent yield 4.98% 5.10% Net initial yield 4.80% £m 1,800 279 1,700 1,600 1,500 79 1,400 32 1,733 1,300 (2) 1,200 1,345 1,100 1,000 Mar-17 Other Development costs Revaluation gain Acquisitions Mar-18 Results f

  11. Slide 11: Strength of financial position

    STRENGTH OF FINANCIAL POSITION Capital discipline in financing strategy  Support from both equity and debt LTV & interest rate history investors LTV Interest rate  £98m and £311m of funds raised in 70% 6% June and December respectively 60% 5%  RCF extended to £300m  £150m of notes issued under U

  12. Slide 12: Diversified funding structure

    DIVERSIFIED FUNDING STRUCTURE Unsecured funding journey continues  Current sources of funding Mar Mar  Bank RCF 2018 2017  UK private placement Net debt (£m) 460 500  US private placement LTV 26% 37%  Listed Bond Cash/undrawn facilities (£m) 199 124 Weighted average interest rate 3.12% 4.06% We

  13. Slide 13: Property update

    PROPERTY UPDATE Simon Gould – Head of Development Results for the year ended 31 March 2018 13

  14. Slide 14: Continued strong growth

    CONTINUED STRONG GROWTH Portfolio acquisitions contributed to accelerated growth  £388m increase in portfolio value Mar Mar  £279m acquisitions, of which £134m 2018 2017 were portfolio deals Investment property £1,733m £1,345m  4.9% average yield on cost Rent roll £91.0m £74.4m  Solicitors instr

  15. Slide 15: Strengthened development team

    STRENGTHENED DEVELOPMENT TEAM To help us meet increased demand  Increased team in response to growing pipeline and enquiries  Experienced team with track record of delivery  Blend of forward funding and direct development  Innovation in design and construction to meet NHS needs  Reduce cost in

  16. Slide 16: Developments and pipeline

    DEVELOPMENTS AND PIPELINE Strong immediate pipeline  6 forward funded schemes Immediate completed Completed On site pipeline  4 forward funding schemes Number of schemes 6 5 10 and 1 development currently on site Development cost £31.3m £23.6m £47m  Appointed on 10 schemes, Cost to complete £9.7m

  17. Slide 17: Highlighted developments

    HIGHLIGHTED DEVELOPMENTS Continued delivery of schemes that benefit the community  Porthcawl  GPs, pharmacy, podiatry, community services including nursing & midwifery After Before Results for the year ended 31 March 2018 17

  18. Slide 18: Rent reviews

    RENT REVIEWS Prospective growth driven by developments  Annualised uplifts Rent review settlements  average 1.70% OMR c.72% RPI/fixed/other c.28% 6%  RPI/fixed/other 3.14%  open market 0.68% 5%  Linkage to cost inflation on new developments creates evidence 4% for rental growth 3%  Slight lag

  19. Slide 19: Enhancing existing portfolio

    ENHANCING EXISTING PORTFOLIO Pro-active portfolio management  Asset enhancement initiatives contributed No. Rent to half year uplift in value New leases signed 13 £0.4m  New leases, lease re-gears and extensions remain a priority Lease re-gears 15 £0.9m  Portfolio 98% let Physical extensions 3 £0

  20. Slide 20: Asset enhancement case study

    ASSET ENHANCEMENT CASE STUDY Extension at Wideway Surgery highlights portfolio management strengths  Wideway Surgery  195m2 extension, lease regear  Partnership with local CCG and NHS England  London Improvement Grant Funding  Six consultation rooms, minor operation suite and improved training

  21. Slide 21: Outlook

    OUTLOOK Jonathan Murphy – CEO Results for the year ended 31 March 2018 21

  22. Slide 22: Market overview

    MARKET OVERVIEW Strong valuation gains  Strong underlying demand resulting Yield progression in yield compression and significant 8% valuation gains 7%  Period end initial yield of 4.80%  Fundamentals remain strong 6% 5% 4% 3% 2% 1% IPD monthly UK index initial yield 0% Assura Net Initial Yield 1

  23. Slide 23: Primary care infrastructure at heart of NHS agenda

    PRIMARY CARE INFRASTRUCTURE AT HEART OF NHS AGENDA  £3bn primary care buildings pledge  Majority of Naylor’s recommendations accepted  Demand for NHS capital into buildings remains high  £1bn pledged to projects from the most advanced STPs  all areas must submit detailed estates plans this summ

  24. Slide 24: Assura outlook

    ASSURA OUTLOOK Assura’s capabilities to drive next stage of growth Our offering – Knowledge & expertise “develop, invest, manage” Financial strength Brand & reputation Best in class team Internally managed Proprietary database Influencing government model Strong pipeline as a thought leader Economie

  25. Slide 25: Q&A

    Q&A Kibworth Swansea Ilkley Ilminster Results for the year ended 31 March 2018 25

  26. Slide 26: Supplementary information

    SUPPLEMENTARY INFORMATION 1. Market 1.1 Growing demand / inadequate supply 5. Financials 5.1 Five year history 1.2 Positive political backdrop 5.2 Balance sheet at 31 March 2018 1.3 Policy statements 5.3 EPRA NAV 1.4 Ageing population 5.4 Diluted EPRA NAV movement 1.5 Risk reward spectrum 5.5 EPRA E

  27. Slide 27: 1.1 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

  28. Slide 28: 1.2 Positive political backdrop

    1.2 POSITIVE POLITICAL BACKDROP  Cross party support for primary care investment continues “If we want to deliver world- class care, we need world-  Broad consensus on estate as a key enabler of transformation and class buildings in which to sustainability deliver it. That is why it is critical th

  29. Slide 29: 1.3 Policy statements

    1.3 POLICY STATEMENTS Next Steps on the Five Year Forward Government’s response to the Naylor review of NHS View property and estates: why the estate matters for patients  Published March 2017  Published January 2018  Emphasis on primary care  Actions:  NHS needs to ‘protect and improve  creat

  30. Slide 30: 1.4 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 year ended 31 March 2018 30

  31. Slide 31: 1.5 Risk reward spectrum

    1.5 RISK REWARD SPECTRUM Total return vs standard deviation – eleven years (since inception of index) to December 2017 9% Residential index Primary Healthcare 8% All Healthcare Total Return (per annum) 7% Industrial Office Bonds 6% Equities All property 5% 4% Retail 3% 2% 1% 0% 18 16 14 12 10 8 6 4

  32. Slide 32: 1.6 Assura well placed to outperform

    1.6 ASSURA WELL PLACED TO OUTPERFORM  Good reputation and relationships with IPD annual return to Dec-17 since inception GP community of index in 2006  Development capability and strong Assura Primary Healthcare Benchmark pipeline 9% 8.5% 7.9%  Internally managed 8%  Knowledgeable and focused te

  33. Slide 33: 2.1 Total property assets

    2.1 TOTAL PROPERTY ASSETS Mar 2018 Mar 2017 £m £m Completed investment property 1,702.2 1,315.3 Investment property under construction 22.2 20.2 Pharmacy lease premiums / rent adjustments 5.5 6.4 Finance leases 2.8 3.0 Property assets held for sale 8.4 0.9 Total 1,741.1 1,345.8 Mar 2018 Mar 2017 Bal

  34. Slide 34: 2.2 Completed investment property

    2.2 COMPLETED INVESTMENT PROPERTY Properties Value (£m)) Value (%) >£10m 29 437.5) 26 £5-10m 67 440.3) 26 £1-5m 315 764.3) 45 <£1m 107 67.5) 3 518 1,709.61 100 Properties Value (£m)) Value (%) North 172 664.0) 39 South 182 557.2) 33 Midlands 84 313.3) 18 Scotland 23 50.3) 3 Wales 57 124.8) 7 518 1,7

  35. Slide 35: 2.3 Investment process

    2.3 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 provisio

  36. Slide 36: 2.4 Sensitivity analysis

    2.4 SENSITIVITY ANALYSIS ERV) +1%) +2%) +3%) NIY ) p/share) p/share) p/share) p/share) 5.50% (9.17p) (8.54p) (7.92p) (7.29p) 5.25% (6.19p) (5.53p) (4.88p) (4.22p) 5.00% (2.91p) (2.22p) (1.54p) 0.85p) 4.75% 0.71p) 1.43p) 2.16p) 2.88p) 4.50% 4.73p) 5.50p) 6.26p) 7.03p) Results for the year ended 31 Ma

  37. Slide 37: 3.1 Cash flow summary

    3.1 CASH FLOW SUMMARY Year to) Year to) Mar 2018) Mar)2017) £m) £m) Opening cash 23.5) 44.3) Net cash from operations 49.9) 39.0) Cash flows from investing activities: Property and business acquisitions (282.3) (157.9) Development expenditure (31.7) (19.9) Sale of properties 0.9) 1.4) Other -) (0.3)

  38. Slide 38: 3.2 Contracted rental income

    3.2 CONTRACTED RENTAL INCOME £1,215m total contracted cash flow, 74% of rent roll still contracted in 2028 100 Contracted at Mar-18 90 80 70 60 50 40 30 20 10 0 Results for the year ended 31 March 2018 38

  39. Slide 39: 3.3 Lease lengths

    3.3 LEASE LENGTHS 25 WAULT 12.6 years 1,034 leases 74% of rent roll 9+ years unexpired term 20 219 176 leases leases Rental value (£m) 15 146 leases 132 10 116 leases leases 74 5 leases 77 94 leases leases 0 21+ 18-20 15-17 12-14 9-11 6-8 3-5 0-2 Years remaining Results for the year ended 31 March 2

  40. Slide 40: 3.4 Debt repayment profile

    3.4 DEBT REPAYMENT PROFILE £m Mar 2018 Mar 2017 300 Bond Gross debt £490m £523.8m RCF Private placements Weighted average 250 6.0 years 8.7 years maturity Weighted average 200 3.12% 4.06% cost of debt 150 100 50 0 Results for the year ended 31 March 2018 40

  41. Slide 41: 4.1 ERV evolution and reversion

    4.1 ERV EVOLUTION AND REVERSION ERV at 31 March 2018 £93.8m; vacant space £1.7m, valuers rental ERV £1.1m Passing rent ERV 100 90 £2.8m £91.0m 80 £2.3m 70 £74.4m Rental value (£m) 60 50 40 30 20 10 0 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Results for the year ended 31 March 2018 41

  42. Slide 42: 4.2 Open market rents results

    4.2 OPEN MARKET RENTS RESULTS  1.70% annualised increase Open Number of from rent reviews settled in market outstanding Annualised the period reviews reviews only % (passing rent)  0.68% from open market Rent reviews settled in year to rent reviews 31 March 2018 0.7%  3.14% from RPI and fixed Rel

  43. Slide 43: 4.3 Basis of rent reviews

    4.3 BASIS OF RENT REVIEWS 80% Upward/downward review basis - tenant can instigate (5%) Upward/downward review basis - landlord only trigger (18%) 70% Upward only review basis (77%) 60% Proportion of rent roll 50% 40% 30% 20% 10% 0% OMR RPI Fixed Other Results for the year ended 31 March 2018 43

  44. Slide 44: 4.4 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

  45. Slide 45: 4.5 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 - 65% 7% - 72% RPI 4% 7% 4% - 15% Fixed 1% 4% 1% - 6% Other - 6% - 1% 7% 5% 82% 12% 1% 100% Results for the year ended 31 March 2018 45

  46. Slide 46: 5.1 Five year history

    5.1 FIVE YEAR HISTORY Scale 2018 2017 2016 2015 2014 Rent roll (£m) 91.0 74.4 63.8 55.6 41.8 Investment property (£m) 1,732.7 1,344.9 1,109.4 925.3 656.7 Net assets (£m) 1,250.4 818.0 754.3 451.9 226.6 Flexibility Free cash/available facilities (£m) 198.7 123.5 118.7 65.3 27.6 Unencumbered assets (£

  47. Slide 47: 5.2 Balance sheet at 31 March 2018

    5.2 BALANCE SHEET AT 31 MARCH 2018  £388m increase in Property and debt investment property £m Investment property Net debt 2,000  Loan to value of 26% 1,800  £199m of available 1,733 facilities and cash 1,600  Positioned strongly for 1,400 future growth 1,200 1,345 1,000 1,109 925 800 600 657 4

  48. Slide 48: 5.3 EPRA net asset value

    5.3 EPRA NET ASSET VALUE EPRA NAV) EPRA NAV) Mar 2018) Mar 2017) £m) £m) Net assets 1,250.4) 818.0) Deferred tax (0.5) (0.5) EPRA NAV 1,249.9) 817.5) Number of shares in issue 2,383,122,112) 1,655,040,993) EPRA NAV per share – basic 52.4p 49.4p Diluted number of shares 2,383,332,419) 1,658,284,284)

  49. Slide 49: 5.4 Diluted EPRA NAV movement

    5.4 DILUTED EPRA NAV MOVEMENT £m) Pence per share) Diluted EPRA NAV at 31 March 2017 817.5) 49.3) Income (EPRA earnings) 50.0) 2.5) Capital (revaluations and capital gains) 79.1) 4.0) Dividends (46.4) (2.5) Equity issuance 411.0) 1.4) Refinancing costs (57.3) (2.4) • Other (4.0) 0.1) Diluted EPRA NA

  50. Slide 50: 5.5 EPRA earnings per share

    5.5 EPRA EARNINGS PER SHARE Mar 2018 Mar 2017 £m £m Profit for the period 71.8 95.2 EPRA earnings 50.0 40.2 Weighted average number of shares in issue – basic 1,963,754,891 1,647,388,495 Basic EPS – net profit 3.7p 5.8p – EPRA 2.5p 2.4p Weighted average number of shares in issue – diluted 1,963,965,

  51. Slide 51: 6.1 Bank and bond facilities

    6.1 BANK AND BOND FACILITIES Effective Outstanding Fixed / Secured/ Loan / Bond Maturity interest 31 Mar 2018 Floating unsecured rate £m 10 year listed Bond Fixed Dec-21 4.75%1 Secured 110) £300m revolving credit facility1 Floating May-21 2.20%2 Unsecured 130) £100m private placement notes Fixed Oct

  52. Slide 52: 6.2 Covenants

    6.2 COVENANTS All covenant conditions complied with Bond Unsecured facilities Req. Act. Req. Act. Interest cover >1.5 2.21 ≥1.75 6.38 LTV / leverage >1.35 1.80 <60% 24% WAULT - - >7 yrs 13.7 yrs NHS >75% 77% - - Gearing - - <150% 32% Net rental income - - >8.5% 13.1% Results for the year ended 31 Ma

  53. Slide 53: 7.1 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

  54. Slide 54: 8.1 Calendar

    8.1 CALENDAR 2017/18 Payment date2 Ex-div date2 Record date2 PID Non PID Total2 Q1 19 Apr 20171 16 Mar 20171 17 Mar 20171 - 0.60p 0.60p2 Q2 19 Jul 20171 15 Jun 20171 16 Jun 20171 - 0.60p 0.60p2 Q3 18 Oct 20171 14 Sep 20171 15 Sep 20171 0.60p - 0.60p2 Q4 17 Jan 2018) 14 Dec 2017) 15 Dec 2017) - 0.655

  55. Slide 55: 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

Assura — FY2018 Earnings Presentation on 6ix