Assura Plc · OTC:ARSSF
Assura — H1 2014 Earnings Presentation
49 slides from Assura's earnings presentation, Nov 26, 2013
Slide 1: Results for the six months ended 30 September 2013
Results for the six months ended 30 September 2013 Investing in the future of primary care property
Slide 2: Highlights for the six months
Highlights for the six months • 10.2% increase in underlying profit to £5.4m • 114% increase in profit before tax to £12.2m • 4.4% uplift in adjusted net asset value to 40.3p per share • Adding value through sales and acquisitions – 10% added to underlying profitability acquiring Trinity (6.4% yield
Slide 3: Four drivers of value
Four drivers of value Achieved in last 18 months £1m pa added from rent reviews Drive value from core investments 14% of prior underlying profit £104m growth in assets – Trinity & developments Grow asset base Development pipeline of £70m Engaged with NHS £30m proceeds from non‐core and LIFT Extract
Slide 4: Achievements lead to step change in dividend
Achievements lead to step change in dividend • Stronger cashflow and increased earnings • Greater flexibility in funding • 49% increase in dividend to 0.45p per quarter – Annualised dividend of 1.8p per share – 4.50% on adjusted net assets – equates to distributing 90% of underlying earnings • Fully
Slide 5: Financial highlights for the six months
Financial highlights for the six months • 3.9% Total Property Return – 2.9% income return • 6.0% Total Accounting Return1 – 1.6% dividend paid – 4.4% increase in adjusted net asset value • 10.2% increase in underlying profit from continued operations to £5.4m • 63% LTV following LIFT disposal 1 Incr
Slide 6: 13% growth in annualised rent roll
13% growth in annualised rent roll • 2.7% annualised increase from rent reviews settled £m 45.0 £4.0m 40.0 £0.7m £0.3m 35.0 (£0.2m) 30.0 £40.7m £35.9m 25.0 20.0 Mar‐13 Disposals Lease events Completed Trinity Sep‐13 developments Investing in the future of primary care property 6
Slide 7: 10% growth in underlying profit
10% growth in underlying profit £m 6.0 5.5 £1.0m 5.0 4.5 (£0.3m) (£0.2m) 4.0 £5.4m £4.9m 3.5 3.0 2.5 2.0 6 months to Sept 12 Net finance costs Admin expenses Net rental income 6 months to Sept 13 Investing in the future of primary care property 7
Slide 8: 15% increase in core investment portfolio
15% increase in core investment portfolio £m 620 £62.9m 600 580 560 £11.8m 540 £5.7m £1.2m 520 £612.2m 500 480 Stable Yields £530.6m 460 Yield Sep 2013 Mar 2013 440 Initial 5.94% 5.95% 420 Equivalent 6.09% 6.15% 400 Mar‐13 Subsequent expenditure Revaluation gain Completed developments Trinity Sep‐13
Slide 9: Strong and growing balance sheet
Strong and growing balance sheet £m Gross assets • £680m of contracted rental 700 £693.5m cashflow £51.9m • 98% of current rent roll still 650 £627.0m contracted in 2023 £610.4m 600 £596.4m • Over last 18 months £64.9m £69.7m £58.6m – non‐core assets 550 successfully recycled and £641.6m no longer s
Slide 10: Continued growth in adjusted net asset value
Continued growth in adjusted net asset value p • 4.4% growth in adjusted1 NAV 42 • LIFT sale worth further 2 pence per share 40 40.3p • 18 month track record2 in per 38.6p 38 share growth: 37.6p – 11% in adjusted NAV 36 36.3p – 68% in underlying profit – 44% in dividends 34 32 1 In accordance with E
Slide 11: Trinity – high quality portfolio
Trinity – high quality portfolio Freckleton Leyburn Investing in the future of primary care property 11
Slide 12: Trinity acquisition
Freckleton Trinity acquisition • 6.4% yield on all costs • 16.2 years weighted average unexpired lease term • 32 high quality investments with good geographic spread – £62.9m valuation • 57 tenancies with 96% of income from GPs/NHS bodies Leyburn • Rent review basis – 80% are industry standard open
Slide 13: Trinity – the opportunity
Trinity – the opportunity • Active asset enhancement opportunities • Additional land suitable for extensions and developments • No additional head count Ansdell Investing in the future of primary care property 13
Slide 14: Trinity asset enhancement
Trinity asset enhancement • Many locations on generous plots • Developments and extension opportunities plus pharmacy angles to explore Huddersfield Investing in the future of primary care property 14
Slide 15: Developments deliver shareholder value
Developments deliver shareholder value • £1.2m development gains in period • 7% yield on total cost of completed developments Completed On site Immediate pipeline Future pipeline Number of schemes 4 8 4 17 Development cost £10.7m £32.3m £11.5m c. £62m ERV £0.75m £2.25m £0.8m c. £4.3m Completion timi
Slide 16: Completed developments
Completed developments Huthwaite Leicester Maidstone Y Felinheli Investing in the future of primary care property 16
Slide 17: Outlook
Outlook • NHS going through fundamental change – reorganised to give clinicians the responsibility for commissioning services – structural changes made but processes interrupted – ever increasing demands on health service from ageing population, increasing expectations and medical advances – funding
Slide 18: Platform for growth
Platform for growth • 4.5% dividend yield on adjusted net assets – in line with REIT model – backed by c. 15 year leases unexpired, government backed – fully covered – progressive in line with underlying earnings momentum • Growth to come due to supply shortage and strong demand • Substantial develo
Slide 19: Q&A
Q&A Investing in the future of primary care property 19
Slide 20: Supplementary information
Supplementary information 1. Market 1.1 Growing demand / inadequate supply 1.2 Market: policy direction supportive 1.3 Yield outlook stable 1.4 Sector attractiveness 1.5 Asset class has proven its relative value 1.6 Strong and predictable cash flow 1.7 Robust cash flow 1.8 Core portfolio v IPD Healt
Slide 21: Growing demand / inadequate supply
Growing demand / inadequate supply Appendix 1.1 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
Slide 22: Market: policy direction supportive
Market: policy direction supportive Appendix 1.2 • Government policy to shift health provision from expensive acute / secondary sector into primary care setting • Health & Social Care Act brings GPs into commissioning role • From 2013 GPs regulated by Care Quality Commission • Pressures mounting fro
Slide 23: Yield outlook stable
Yield outlook stable Appendix 1.3 • Primary care property yields less volatile than other sectors • Yield spread remains over long‐dated gilts – 290 bps on core portfolio 8% Assura Net Initial Yield IPD UK Property Quarterly Index Net Initial Yield 7% 15 Year Gilt 6% 5% 4% 3% 2% 1% 0% Jun 06 Jun 07
Slide 24: Sector attractiveness
Sector attractiveness Appendix 1.4 • Market Features – Health spend is non‐discretionary – Planning environment ‘benign’ 20% – District Valuer determines rent reviews • Tenant Features 7% – Private businesses underwritten by 4% Government – Premises are bespoke 69% – GPs are not mobile – “stickiness
Slide 25: Asset class has proven its relative value
Asset class has proven its relative value Appendix 1.5 • Income certainty Commercial Primary healthcare Residential 140 delivers impressive returns 130 – Yield stability 120 Total Return index from – Low cyclicality 110 • Attributable to 100 – Long leases – Negligible default 90 – No oversupply 80 –
Slide 26: Strong and predictable cash flow
Strong and predictable cash flow Appendix 1.6 • Government reimbursement of 89.5% of core portfolio leases • Weighted average unexpired lease term 14.9 years on core portfolio – Tenant breaks are uncommon – New leases for 21 years or more • Zero loss from defaults • Regearing opportunities arise as
Slide 27: Robust cash flow
Robust cash flow Appendix 1.7 £m • Government backs 40.0 89.5% core portfolio leases 35.0 Cash £35.7m • 14.9 years weighted 30.0 Undrawn average unexpired Facility £2.4m lease term (core only) 25.0 (£11.3m) £3.3m • 11.3 years average 20.0 £3.0m Cash £22.5m maturity of debt (£6.6m) £1.6m 15.0 (£3.2m)
Slide 28: Core portfolio v IPD Healthcare
Core portfolio v IPD Healthcare Appendix 1.8 IPD Return to December 2012 since inception of index in 2006 % 10.0 Income Return Capital Growth Total Return 8.0 7.3 1.1 6.0 5.2 4.0 6.7 6.1 2.0 0.0 ‐1.5 ‐2.0 ‐4.0 Assura All Healthcare Property Benchmark Source: IPD Investing in the future of primary ca
Slide 29: Assura well placed to outperform
Assura well placed to outperform Appendix 1.9 • Scale benefits IPD Annual Return to December 2012 since inception of index in 2006 8% – £651m total property assets 7.3% – 14.6 years weighted average 6.8% unexpired lease term 6% 6.1% 6.2% • Good reputation and relationships with GP 4% community 2% •
Slide 30: Transparent balance sheet
Transparent balance sheet Appendix 2.1 30 Sep 2013) 31 Mar 2013) £m) £m) Properties1 651.0) 569.3) LIFT 11.4) 11.2) Cash and deferred consideration2 25.5) 41.7) Debt (449.4) (392.1) Deferred revenue (16.1) (14.8) Other net working capital (13.1) (14.8) Derivatives at fair value (2.4) (3.6) Deferred
Slide 31: Adjusted net asset value movement
Adjusted net asset value movement Appendix 2.2 Pence per) £m) share*) Adjusted net asset value at 31 March 2013 204.4) 38.6) Income (underlying profit) 5.4) 1.0) Capital (revaluations and capital gains) 6.9) 1.3) Dividends (3.2) (0.6) Other (0.1) ‐) Adjusted net asset value at 30 September 2013 213.
Slide 32: Adjusted net asset value
Adjusted net asset value Appendix 2.3 Adjusted basic) Adjusted basic) & diluted NAV) & diluted NAV) per ordinary) per ordinary) share) share) Sep 13) Mar 13) £m) £m) Net assets 207.7) 198.1) Own shares held 1.9) 1.9) Derivative financial instruments 2.4) 3.6) Derivative financial instruments of asso
Slide 33: Total property assets
Total property assets Appendix 3.1 Sep 13 Mar 13 £m £m Core 604.8 523.6 Non‐core 9.1 9.3 Investment portfolio 613.9 532.9 Investment property under construction 17.2 14.3 Properties held for sale 9.4 12.0 Pharmacy lease premiums 7.4 7.0 Finance leases 3.1 3.1 Total 651.0 569.3 Balance sheet classifi
Slide 34: Capital value – core portfolio
Capital value – core portfolio Appendix 3.2 • Size is not an indication of performance – location is key • Smaller units affordable to private investors 4% Capital Number of Total Capital 18% Value Properties Value £m <£1m 38 £25.3m £1‐5m 134 £336.3m £5‐10m 18 £132.5m 56% >£10m 7 £110.7m 22% Investi
Slide 35: Sensitivity analysis on core portfolio
Sensitivity analysis on core portfolio Appendix 3.3 NIY ERV +1% +2% +3% p/share p/share p/share p/share 6.50% -9.84p -8.79p -7.75p -6.71p 6.25% -5.66p -4.58p -3.49p -2.41p 6.00% -1.14p -0.01p 1.12p 2.25p 5.75% 3.77p 4.95p 6.13p 7.31p 5.50% 9.13p 10.37p 11.60p 12.83p Investing in the future of primar
Slide 36: Core portfolio lease lengths
Core portfolio lease lengths Appendix 3.4 Average income weighted unexpired lease term 14.9 years 14 96 12 leases 10 112 leases Rental Value £m 8 6 53 leases 54 4 leases 2 38 28 leases 12 leases 8 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 prima
Slide 37: Non-core portfolio
Non‐core portfolio Appendix 3.5 £m • Non‐core valued at £18.5m 30.0 (March 2013: £20.5m) £26.3m • Income generating assets of 25.0 £9.1m, net initial yield of Held for sale 20.0 £18.5m 13.91% £11.4m £1.2m £1.5m • £0.5m disposals of non‐income 15.0 (£9.9m) (£0.6m) Held for sale earning assets £9.4m •
Slide 38: Portfolio rental income growth over five years
Portfolio rental income growth over five years Appendix 4.1 40 H2 Mar 35 H1 Sept 30 Actual Property Income £m 25 20 15 10 5 0 2009/10 2010/11 2011/12 2012/13 2013/14 Investing in the future of primary care property 38
Slide 39: ERV evolution and reversion
ERV evolution and reversion Appendix 4.2 45 £1.7m ERV • Vacant Space ERV £0.84m 40 £1.7m • Valuers rental ERV £0.86m 35 £1.8m £1.5m 30 £1.6m Core Portfolio Rent Roll £m 25 Estimated rental value £2.2m less passing rent 20 £1.8m £38.9m Passing Rent £2.1m £34.1m £32.5m 15 £28.8m 10 £19.3m £19.5m £15.8
Slide 40: Core portfolio rental growth
Core portfolio rental growth Appendix 4.3 Annualised Increase Year ended 6 months ended 31 March 2013 30 September 2013 Rent reviews settled 2.32% 2.50% Rent reviews settled excluding RPI/fixed uplift 2.03% 0.57% 8.0 4.00% £7.0m 7.0 3.50% £6.4m £6.2m 6.0 3.00% 5.0 2.50% Rent £m £4.1m 4.0 2.00% 3.0 5
Slide 41: Open market rents still increasing
Open market rents still increasing Appendix 4.4 • 2.69% annualised increase from rent reviews settled in the six months – 0.57% from open market rent reviews • Underlying rental trajectory masked by delayed rent review settlements Open market Number of outstanding Annualised reviews only reviews on
Slide 42: Basis of rent reviews
Basis of rent reviews Appendix 4.5 90% £31.4m 80% Upward/Downward Review Basis ‐ Tenant Can Instigate 6% (£2.3m) Upward/Downward Review Basis ‐ Landlord Only Trigger 21% (£8.1m) 70% Upward Only Review Basis 73% (£28.5m) % Core Portfolio by rental value 60% 50% 40% 30% 20% £3.8m 10% £2.7m £1.0m 0% OM
Slide 43: Contracted rental income
Contracted rental income Appendix 4.6 Total contracted rental income Sep 2013: £679.4m £m Mar 2013: £611.8m 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 .0 Sep‐14 Sep‐15 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 12 months ended Investing in the future of pr
Slide 44: REITs
REITs Appendix 5.1 • 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 ― Su
Slide 45: Bank and bond facilities
Bank and bond facilities Appendix 6.1 Fixed/ Effective Secured Rental Outstanding) Loan/Bond Floating Maturity Interest Rate Properties Income 30 September) £m £m £m) 10 year secured 10 year, bullet Bond Fixed repayment 2021 4.75%1 157.7 11.1 110.0) Aviva amortising secured loans Fixed Amortising to
Slide 46: Covenants
Covenants Appendix 6.2 All covenant conditions complied with Santander Bond Aviva Investment Facility Required Actual Required Actual Required Actual Interest v income cover 1, 2 > 1.50 > 2.0 ≥ 1.03 > 1.21 ≥ 1.70 > 2.3 Loan to Value > 1.35 > 1.40 n/a n/a < 75% LTV < 67% LTV Debt Service Coverage Rat
Slide 47: Contracted debt payment
Contracted debt payment Appendix 6.3 £m 140.0 Gross debt Sep 2013: £451.1m 120.0 Mar 2013: £395.7m 100.0 80.0 60.0 40.0 20.0 .0 12 months ended Investing in the future of primary care property 47
Slide 48: Dividend calendar
Dividend calendar Appendix 7.1 2013/14 Ex‐Div Date Record Date Payment Date Non‐PID PID Total Q4 9 Apr 20141 11 Apr 20141 23 Apr 20141 0.45p ‐ 0.45p Q3 8 Jan 20141 10 Jan 20141 22 Jan 20141 0.45p ‐ 0.45p Q2 9 Oct 2013 11 Oct 2013 23 Oct 2013 0.3025p ‐ 0.3025p Q1 10 Jul 2013 12 Jul 2013 24 Jul 2013 0
Slide 49: 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