Assura (OTC:ARSSF) — Annual General Meeting

0:00 Good morning, and welcome to the ASSURA PLC Annual General Meeting. Throughout this recorded meeting, attendees will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated in the right hand corner of your screen. Simply type in your questions and press send. I would now like to hand you over to nonexecutive chairman, Ed Smith. Good morning to you.

0:22 Good morning. It's now 11:00. And as there is a quorum present, I declare this meeting open. For those of you who don't know me, I'm Ed Smith, a nonexecutive chairman of ASSURA PLC, and I want to warmly welcome everybody to this year's AGM. In addition to those joining here today on this election day, This year's AGM has also been made available to view via via the investor meet company platform. Investors watching the meeting via this platform are able to see and hear the AGM, but have not seen or heard by the board and as made clear in the notice of AGM are unable to vote via the platform. Questions may be submitted in writing over the platform and will be addressed at various relevant points during the meeting.

1:15 I'm joined by my fellow board directors today, and I'd like to briefly introduce them. Obviously, Jonathan Murphy and Jane, our CEO and CFO. We have Jonathan Davies, my senior independent director, chair of the audit committee, Louise Fowler, chair of the remuneration committee, Mel Gordon, chair of the environmental

1:36 social governance committee, Emma Kerriaga, and Sam Barrow. We also have Ori Ball, our company secretary, and Amir Aziz, who is a board fellow of ASSURA, the second board fellow we've had as part of a program of development and association with expertise that is not currently resident in the board. Jonathan, can I now ask you to provide an overview of the company's performance in the first quarter, which we announced at the Stock Exchange this morning? Yes. Thank you, Ed, and and good morning, everybody. So, yes, we announced our our our quarterly trading update this morning and and very pleased to be reporting on continued progress across the business. We've been busy across a a number of areas with continuing our our continuing our developments and our on our aspirations to to continue delivering your quality health care spaces for the NHS and and for for private health markets as well.

2:33 In terms of activity across the first quarter, I guess the most relevant point to highlight is the the announcement of our of our new joint venture with USS. We announced this on our on our results day. So this is a £250,000,000 joint venture with The UK's largest pension fund where we'll be working strategically with them to deliver the essential infrastructure to support the NHS and its aspirations to continue delivering health care across The UK. This is a big strategic development for us. It's the first time that we've accessed private capital. It's the right partner in a in a partner that is, you know, you know, a very large pension fund that is looking to put its pension holders money to good to good use and to deliver the the required investment for for the NHS.

3:24 So very excited about this partnership. We initially transferred across a £107,000,000 worth of assets with a view to growing it up to 250,000,000 within three years. So a really important strategic development for us. We've also continued to be active across other areas. So we've got three three developments completed with a total spend of 46,000,000, a GP surgery in Shirley, a new ambulance hub at Barry St. Edmunds, which is one of our flagship net zero carbon schemes. It is a fully net zero carbon in operation building. And our largest ever in house development project, which we completed in Cramington in the Northeast for the Northumbria Health and Care Academy. And if you follow us on on on social media at all, you will have seen, you know, videos and images of of that site. It's a really, really impressive facility providing state of the art training services, promoting the delivery of of of of trainees for the local trust and providing careers in health care for for the the people of the Northeast, a really flagship flagship property that we were really delighted to be able to deliver.

4:38 We've also been busy on on on a more routine matters. So 42 road reviews have been completed in the quarter,

4:45 and that allowed us to increase the road map by naught point 5,000,000 or 7.8% on the ones that were reviewed. We've also been delivered three asset enhancement projects, total spend of 1,500,000 and four lease free years, and we're on-site with a further five capital projects. So a very busy period and that was also reflected in a in in the continued strength and stability of the business. You know, we have a very strong balance sheet with with long term fixed rate debt and the security of long term leases and quality cash flows. And the confidence that we derive from that was was behind our decision to increase the dividend by 2.4% from the July payment date. So in summary, a busy first quarter, really pleased with the progress, exciting new strategic opportunity,

5:38 and we remain extremely well positioned to continue growing the business and delivering essential healthcare infrastructure for for the NHS and the and the private hospital market. Thank you, Jonathan. So before we move into the formal business of the AGM, I mean, are there any questions on the company's performance as outlined by John Jonathan? And we could we've got got a couple of questions on the the online, but can we take any questions if we have them in the room on the company's performance rather than on the AGM resolutions at this stage. Yes? I'm sorry about this for everybody here, but I have not seen the annual report. You haven't got one with you, so I'm asking some rather basic questions.

6:23 You said you've got a fixed rate going to debt. What is the rate, please? Yes. So the weighted average of our debt is 2.3%, which is, you know, across across all of the facilities. Yes. Right. You've got multiple you've got stuff in the private sector now.

6:40 Yes. What is the strategic view of the board with regards to strategic planning in the future? Because I know people who are well, they're on benefits virtually, but they're borrowing money to go private. Yes. And I grew up in a surgery. I've had seventy years at the NHS, and I ran the practice for years, so I've got a fair idea. This isn't going to snowball. The private sector, good or bad, is in for a massive expansion. Yes. I I think I I think there are a lot of, a lot of people are expecting that the private sector will increase in capacity. I mean, to put it in context, the the overall private market is is only 10% of the overall provision. So across that's across the whole health care market. So if it is going to grow, it's going from a relatively small base, and I don't think anyone is is suggesting that the NHS is is going to lose its place as the as the primary provider. But if there are opportunities for the private sector to support the NHS, then that is benefits both sides.

7:41 And there's a really good example in one of our projects this year. So we've just opened a cancer treatment center in Guildford. It's on the site of the NHS facility. It's entirely funded by the private sector, so the NHS has not paid a penny towards it. It's got two state of the art radiotherapy machines that the NHS cannot afford to buy, and it will provide 40 to 50% of its throughput will be NHS care delivered at NHS rates. So effectively, the NHS, for no money, has access to the best quality facilities, a fantastic facility, latest state of the art machinery, and it's able to put to to have half of the the capacity of that building at the NHS rates, so at at at no additional cost effectively.

8:28 So that's just a classic example of where you can work in partnership. It's not an eitheror, that sort of partnership is something we do think will grow. So it's currently 10% of our business, but I expect it to grow from here. But that is in no way us turning our back on the NHS. We you know, that is you know, remains the the vast majority of our business. We're very committed to supporting our GP partners, and we will remain remain committed to do so. Well, thank you for answering the next question because I wanted to use the site. I'm all in favor of efficient use of space. The next one is how does the board see the future with regard to joint ventures? It's obviously a good route for expansion, but it can come with cost, and you will tend to be 1,000,000,000 in debt already.

9:16 Yes. So, I mean, we're we're we're 1,000,000,000 in debt on a 2,700,000,000 portfolio. So we're we're very comfortable with our overall debt position. In in terms of joint ventures, we see it as a as a strategic source of capital. So clearly, at the moment, we have bondholders, we have bank finance, and we have shareholders. By accessing a joint venture partner, we can effectively use

9:40 their capital and put it to work to our benefit. So if you take the USS case, so we're using pension fund money that is for the university system. We're delivering state of the art new for the NHS, and we have a 20% stake in that business. So we receive 20% of the income. We then also get a management fee from the vehicle for that. So as a shareholder, you will benefit from those fees on top of of the rental income. But we've been able to access that pool of capital to deliver that growth. Whereas at the moment, on the equity market with where the share price is today, you know, we're trading in a 25% discount, so it's very difficult for us to raise fresh equity in that market. So this is an opportunity for us to access a different market, continue to grow, and it gives benefits to existing shareholders.

10:32 Right. You mentioned bonds in your answer. What is the coupon on your current bond? When is the next stop due for redemption, and will you be issuing any more? I've had a problem with National Grid, as you can

10:42 imagine, and they're continuing continual issuance of bonds. Yeah. So so the the weighted average on our our debt maturity is five point eight years. So we've got we've got no the first bond we've only got three bonds, the first the first maturity of that is is is beyond five years. The rates on our three bonds are

11:05 1.5, 1.6, and then the first one, James Three. Three. So those are the rates. The I'm sorry we don't have an annual report here, but there is if if if you look on the web so there is a very clear see the website properly. Okay. But that we Yeah. And do you have a printed annual report at all? I don't have one with me. No. No. But do you have one at all? Yes. I do. Yes. We Yes. Will consent to her. Yeah. No. Do you have any more questions? Well, I haven't had the annual report. So as I said, with regards to if I get here an hour early, I can generally read it or skim it. Yes. But I'll have to read this to minor minor set of questions at the moment. Well, we'll make sure we bring the annual reports next year. Yeah. We we do normally, I'm sorry to say. So We have three questions on online. Do you want Jane to to to read them?

12:11 So with the demise of Lloyd's and the changes in the pharmacy market, are you seeing rents holding up or falling back? Oh, gosh. So, yes, the pharmacy market is going through a lot of changes at the moment. So traditionally, in our practices, what we would what we would have, we would have one of the large multiples, so Lloyd's or or Boots as as a as a cornerstone pharmacy operator. A lot of those larger companies are pulling out of the market, so we're seeing the larger operators step back and smaller locally owned businesses coming forward and taking over those premises. I think there's still a lot of potential for growth. If you look at the policy of the current government or the potential new government tomorrow, they're all talking about expanding the role of pharmacies and the scope of services that pharmacies can provide. So I still think there is potential in that market, but we are going through a challenging period.

13:11 So it's a mixed picture. So we've got some pharmacies where we are or as a new tenant comes in, we are having to reduce the rents to make them affordable. We've got some where we're still continuing to see growth. So it's probably all overall, it's it's a it's a stable rather than a growing rent roll picture, but it's a market that is going through a lot of changes at the moment. Given the background of inflation over the last few years, has this made any discernible difference to the district valuers' office valuations when considering new developments? So so short answer is no. I and I guess the long answer is but it should do. So this is probably one of the key business challenges we have at the moment. When you look at the cumulative inflation over the last three years, you're looking at, you know, 30 to 40% across the board. And so, you know, bricks are costing us more, steel is costing us more, the fit out is costing us more.

14:07 And this is a big point of dispute, if you like, between us and the NHS at the moment because on current projects, we have 34 projects on hold at the moment with a total capital spend of over 170,000,000, and the reason why they're on hold is because we can't deliver them at the old rates because our costs have gone up 30%. So we need a 30% increase in the rent, and that at the moment is a position that is is not being accepted by the NHS, and so we're not able to progress with those schemes. It's a reality. Those costs have gone up, and therefore, the rents will have to go up to compensate.

14:45 But at the moment, we can't build new projects at a profit and so therefore we're not able to proceed with those 34. I've got two questions which are very similar, so I'll read them both together. When do you anticipate a recovery in your share price? What do you feel will be the trigger for many REITs to get share prices back to nearer net asset value per share? And additionally, the progress of ASSURA is very encouraging, but sadly this does not appear to have been recognised by the stock market. Please, can you explain why the share price continues to disappoint? Yes. Okay. So I I I I guess it's to start by saying I cannot explain why the share price does not does not correspond with our expectations because that ultimately is is a is a market driven formula that is outside of my control or, frankly, at the moment, my understanding.

15:37 In in terms of what is going on, I think there is, in general, in real estate, there is a general negativity towards the sector because of higher interest rates and higher inflation. So I think there's a sort of general negative background, and I think that's holding all of the the whole sector down. I think what's what's happening also happening is that we are not getting the credit for our unique positioning. So we are a specialist healthcare investor developer. We are, you know, the the we have the the dominant position in our market. We are delivering,

16:12 you know, fantastic new projects into a market which is experiencing material growth and has a significant growth to come as well both in GPs, but also in private hospitals in in Ireland and in mental health. And we have an amazing balance sheet with the, frankly, the best step book in the listed real estate sector. And none of those things, I think, are being are being credited in in the current environment. So when will it change? What is the catalyst? Which is the other part of the question. Very difficult to say. I what I my best guess would be that a period of stable inflation, which I think is hopefully where we are, and one or two interest rate cuts, which, again, I think we are near to. I I think we could see a rerating. Not that that has any direct impact, but I think that could change the sentiment.

17:00 I guess there's also a potential that we are it is election day. There is going likely to be based on current estimates to be a new government tomorrow. Again, we see that as a real positive for the business in terms of their stated ambition to invest in NHS community infrastructure. So again, that could be could be a catalyst for a change in this. And the final question I have sorry. I'll do the final one and then we're done. How did you select the assets to put into the JV? Oh, good question. So effectively, what we did was one of the big problems with having JVs is if you if you have multiple pots of capital and you don't know which assets go in which pot, it gets very messy and you end up sort of you are agreeing with with your with your investors about where they go. So what we did is we came up with some very clear criteria.

17:53 So what we said was assets that are generally larger in size have at least fifteen years leases, have to be direct let to the NHS or a GP. So they wanted specific NHS exposure, and they also wanted it to have contractual formulae rental growth assumptions included. So we put all of those criteria together, and then anything that meets those criteria is what goes into the JV. And, effectively, what we did is we took a sample of our assets that met those criteria, seven of them, and we we moved those across in the first instance. And now any new projects that we develop that meet those criteria will automatically be offered to the JV in the first instance.

18:37 Yes. I have a question. Leisure question. Yes. Have you had any opportunities for cooperation, possibly joint ventures, but just cooperation with the likes of SEGRO or Tritax because they've got the space and they've got lots of experience as well. And they do operate up towards Manchester Way. Well, we we have 614 assets right across The UK, so we're we're very we're we're geographically neutral. We're very happy to work anywhere in The UK. The answer is no. We haven't had any specific conversations with them. We have had conversations with a number of retail property operators where they've got empty spaces in shopping centers, and they said, well, we'd like you to move your medical center into our into our facility.

19:25 We've just opened the Shirley asset that I mentioned before. For example, that's actually it formally was an Aldi, So we have got experience of converting surplus retail spaces into health care because that's an obvious opportunity for us. It's quite hard in practice. There's quite a lot of technical challenges with taking a shopping center and turning it into a health center, but it's it's definitely an area for growth. Less so on the logistics, Seagro and the TriTacs, because frankly, their buildings are full.

19:56 Those are very expensive, very high rents, and so that's that's nice. But but if you're Sheldon then, that's great, but it makes it harder to convert into health spaces. And what think the government will improve the planning situation for you? And how long are they gonna take doing it? Planning is not really a big problem for us because generally speaking, planning officers don't vote against GP surgeries. And so it's not a big problem, But I think just if they're certainly talking about hiring more planning officers, and we we do experience delays because they are under resourced. So that has to be positive. So, yes, we are hopeful that it would it would see an improvement.

20:38 On your point on shopping centers and other spaces, what we are seeing is the diagnostic screening end of sector looking at at at those spaces and things, but they have to provide the equipment in in into them as well. So there is some movement. And being able to have a diagnostic as you do a bit of shopping and and and things is always, of course, quite a helpful thing to to to to do for some. Okay. So we had the the the questions. I mean, I just want to summarize by saying that we are, as a board, completely focused on long term shareholder value. This is our purpose. But associated with that is we build for health, And we are passionate, as some of the questions in the room and on the screen have indicated, we are passionate about driving great spaces for the health economy in this country, be it the National Health Service, private health service, associated allied professional health services, including the education of of health workers, mental health, and and the private sector. So that's what we're going to do. We just need to have, shall we say, the wind behind us on a number of fronts to keep doing what we are really good at doing and what we are absolutely intent on driving into the future.

22:04 So I hope that is a helpful final comment on on our purpose. Can I move to the formal business of the AGM, which we will now proceed to? This consists of resolutions set out in the notice of meeting date of the 06/01/2024, which was sent to shareholders with an explanatory circular and notwithstanding the comment this morning, the annual report on online, but we will get hard copies presented at at future meetings. As mentioned in the circular and as presented under ASSURA's articles of association, I direct that all business to be transacted at today's meeting be voted on by way

22:48 of a poll. This will result result in a more accurate reflection of the views of shareholders by ensuring that every vote is recognized, including the votes of those shareholders who have been unable to attend, but who have appointed proxies at the meeting. Shareholders present in person, corporate representatives, and proxies are, of course, entitled to vote. The notice of the meeting includes 18 items of business for your consideration. An explanation of each of these is set out in the AGM circular. But in summary, resolution one covers our annual report and accounts for the year ended 03/31/2024. Resolution two seeks approval by way of an advisory resolution of the director's remuneration report for the year ended 03/31/2024 contained in the annual report and accounts.

23:40 Resolutions three and four are audit related resolutions. Resolutions five to 12 cover the reelection of Louise Fowler, Jonathan Murphy, Jane Cottom, Jonathan Davies, Sam Barrell, Emma Carriaga, Noel Gordon, and myself as directors. Resolutions 13 to 17 cover capital and other issues, including authorizations relating to the allotment of share capital, the dissapplication of preemption rights to repurchase of shares, and the notice period for general meetings. Resolution 18 covers the change to our articles to satisfy the legal requirements for the company to register as a b corp. Resolutions 14 to 18 are proposed as special resolutions.

24:26 Does anyone either in the room or online have any questions on today's resolutions before we proceed to voting?

24:35 I'll explain the voting procedure in a minute, but I'll mention now the fact that because all resolutions will be voted on by way of a poll, these resolutions will in effect be voted upon simultaneously rather than sequentially. So there is one opportunity to ask questions that you might have before I invite you to both both. Yes. We have a question. This business about b? B Corp. Corp. Corp. And is it explained in the annual report when I eventually get one? Yes. It is. Thank you very much. It is. Would you like a brief explanation now? Well, not if everybody else in the room has an any idea what it would Well, let me let me because we we think it's absolutely consistent with delivering long term shareholder value. We think it's the right thing to do, but our company secretary, Paula, has been driving this process. And and just give thirty seconds on Yes. So, basically, the b corp movement is a real recognition that business should be a force for good. So as well as making money, you should also be looking after the people in the planet, so communities, your employees, all your stakeholders.

25:49 You had to do an assessment to see whether we were a responsible business. You had to get a certain number of points, and we scored far more than we needed because we already operate as a responsible business. So what we're doing now is we have to change our articles so that we're saying we are making money for, obviously, for shareholders, which shareholders is important, but so are all of our stakeholders, including the planet, and that's the way we operate. So it's it's basically making sure that businesses going forward are used for the the the best purpose that they can be. As I said to a shareholder on a call last week, with with 90% of our customer base being the public sector, the NHS.

26:35 The intent of of what we do is very consistent with with that mission. And for our staff coming and joining ASSURA, it's equally very consistent with what people want to see organizations like us do. So we don't think it will make much difference to how we have operated for a number of years, but we think that certification and stepping up to it and demonstrating it is an important part of being a responsible business. And I think, Paul, the thing to highlight and and probably the bit that I'm we're most proud about the whole process is speaking to other companies that have done this. They actually had to make quite big changes. They had to change their policies. Had to change procedures. Had to change the way they run things. We made no changes. So we've already acted in this way, and it's part of our overall belief in in, yeah, our overall mission and purpose.

27:28 So really, really delighted that we are able to now meet that meet that grade. Presumably, it's all ties to your Irish holdings as well. There's been no division. Yes. It's a it's a it's a company wide accreditation. Yes. That's it. But it is equally positive in the the Irish market as well to be able to represent yourself as having this this this statement and accreditation as a responsible business. Okay. So I think there are no more questions online. So I'll now explain the poll voting procedures. The company secretary, Laura Ball, will act as scrutineer in connection with the poll. She will be assisted by our registrar's link asset services. Only shareholders or their proxies or corporate representatives are entitled to vote on the poll. And to vote on the poll, you will need the poll card which you were given when you registered today.

28:23 If you wish to vote on the poll in more than one capacity, you will need a separate poll card for each capacity in which you vote. If you need a further poll card, please put your hand up. We'll have one pass to you. Their shareholders present present who have returned the form of proxy need not complete the poll card unless you wish to alter your voting instructions based on being here this morning. However, if a shareholder now completes a poll card, any proxy vote given by that shareholder will be then canceled. When the poll commences, you should insert in your poll card in the places indicated the full name of the shareholder, if you are using a poll card to vote only some of the shares registered in the shareholder's name but not all of them, the number of shares that you are voting with the card, and a cross in respect of each resolution to indicate that you are voting for or against that resolution or withholding your vote.

29:22 If you wish to vote some shares for a resolution and other shares against it, you should insert the relevant number of shares alongside the separate crosses that you insert for that resolution. You should then sign the card in the place indicated and the cards will be collected at the end of the poll procedure when I have declared the poll closed. Does anybody have questions on that poll process? Okay. Can I suggest that we commence the poll process then for the shareholders in present this morning? I'm happy to Thank you. I know one person.

30:17 I don't. No. Don't. I don't need that. I've done this. Because you're you're working for proxies. Yeah. Okay. It's important. To put more more ticks and crosses in the box, and you do have to the polling stations during the course of the day. How are we doing? Are we are we completed on our polling?

31:14 I haven't had the notice of the meeting. I don't know what the resolutions are. I've no biographies of the directors, and I've got no idea about your financial results in relation to my other holdings, certainly. Okay. Hopefully, we'll rectify that. I think sir, have you completed your Okay. Thank you. So I think we're we are done. And as I said, no more poll cards to be completed. The poll is now closed. The results of the poll will be determined by miss Ball as scrutineer. This will take some time. The results will be announced by RNS as soon as practical practicable. We believe that will be sometime during the course of the afternoon later today.

32:02 If you'd like to see any details of the valid proxy votes lodged or the relevant proxy cut relevant proxy cutoff time, these are available from miss Ball. And that concludes the annual general meeting for this year. Thank you for attending. Thank you for the questions. Thank you. Thank you very much to the board for updating attendees today. Could I please ask attendees not to close this session as you will now be automatically redirected to provide your feedback and all of that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be very valued by the company. On behalf of the board of ASSURA PLC, we'd like to thank you for attending today's annual general meeting, and good morning to you all.

32:52 Thank you.