Assura (OTC:ARSSF) — Interim Results

0:00 Good afternoon, and welcome to the ASSURA PLC interim results investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged, they can be submitted at any time using the q and a tab that's situated at the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Jonathan Murphy. Good afternoon to you, sir.

0:33 Good afternoon, and thank you everybody for joining us for our for our half year presentation. So in terms of the running order today, you're going to start with me, Jonathan Murphy, CEO. I will give you an overview, of the business and the key progress before I'll pass over to Jane Cottom, our CFO, to take you through the the the key key numbers for the first half. And then I'll return for a final overview in terms of key opportunities in our market and our outlook for the business before we move to q and a.

1:06 So in terms of the key highlights from the first the first six halves first the first six months of the year, we've had a significant period of strategic change during the year with two significant transactions completed. The first one was the £500,000,000 acquisition of private hostels that we acquired from Northwest in August. This represented a significant expansion of our exposure to the private hostel market, which we see as a really attractive market with long term growth potential that is very well suited to assure his expertise in health care and also our wider expertise in managing developments based on our sustainability skills. The second key element is in relation to our funding sources. So during the year, we secured a £250,000,000 joint venture with the pension fund USS.

1:59 This is a dedicated fund for investing in NHS assets and will enable us to continue to support the NHS in the delivery of its infrastructure requirements while also providing an ability for us to recycle capital. We'll come on and explain how this works in more detail later. The third key thing to highlight is the the significant shift, obviously, in the political backdrop where we've seen the election of a labor government with a substantial majority with a mandate for change, including investing in the NHS. What we found since the Labour Party took over is this commitment in in in opposition has translated into a firm commitment from them to increase the budget for the NHS by £22,000,000,000 and also a strong commitment to the delivery of more health care in the community.

2:52 We will come on and explain this in a lot more detail later. And all of this has translated into a really strong period of performance with an 8% growth in our overall income level, a 4% growth in our in in our profits, and a 4% growth in our dividend. And our dividend yield is currently yielding in excess of eight and a half percent for investors. In terms of that strategic progress that I mentioned, the the move into private hospitals reflects our ability and willingness to diversify within health care. As you can see here on the slide, our rent roll in the last five years has almost doubled up to a £179,000,000. The largest growth over that time period has been in the private hospital market, which now represents 25% of our overall rental income.

3:47 This reflects the strong and attractive investment characteristics that we see in this sector with its strong prospects for growth, its solid occupiers, and its index linked terms in terms of rental uplifts. If we look on the right hand side of the chart, the basis of our rent reviews has also changed materially over the last five years. So we have moved towards a a greater exposure to indexed and fixed uplifts. This is now close to 50%. What this means is that we can now guarantee rental growth on more than half of the portfolio, and the other half of the portfolio is subject to open market reviews.

4:30 The reason for diversifying within health care is to accelerate our growth. We see opportunities to take advantage of growth areas outside of our primary care market to enable to deliver greater returns for our investors. This means we can take advantage of the different timing that you might see in terms of growth opportunities. So for example, at the current time, the opportunity to invest in GP surgeries is relatively modest because of the available funding from the NHS, whereas we are seeing significant growth potential within the private hostel market. This does not in any way reflect the fact that we do not see significant growth in the long term for the GP market. It is purely a matter of timing. So what this enables us to do is to support growth across two different areas that might deliver at different times in the cycle, so therefore providing more stable and less cyclical returns to our investors.

5:28 This also reflects and will support our long term growth potential and enable us to continue to support growing earnings and dividends for our investors.

5:41 Now pass over to Jane to take you through some of the key commercials from the first half. Jane? Thank you, Jonathan, and, welcome, everybody. It's good to speak to you this afternoon. So I'm just gonna go through, our earnings and, and some of the activity that we've, we've had throughout, this first six months. As Jonathan has already mentioned, we have seen net rental income growth of, 8%, EPRA earnings growth of 4%, and our dividend increase of 4%. But underpinning all of this has been the growth in our rent roll. So a 179,100,000 is what our rent roll now is, and that is, made up of a number of items. 29,400,000 has come from the hospital portfolio.

6:28 1,700,000 has come from our rental growth. 1,900,000 has come from the completion of our asset enhancement and development program, but we've had a reduction of 3,400,000 for those assets that we've put into the USS, joint venture. But all in all, we think this has been a fantastic, six months for the business, delivering, on our strategy and, continuing to grow our earnings, as well as managing our costs. And you can see that our EPRA cost ratio was maintained at 12%. Our EPRA NTA, remained largely flat, increased just by point 2% to 49.4p per share, and I'll go into a bit more detail on that now.

7:15 So you can see here our net initial yield. Largely, the GP portfolio has remained flat at 5.2% net initial yield. However, within six weeks of acquisition of the portfolio, we saw a £25,000,000 net uplift on the hospitals that we acquired in the summer. Now this is because we bought well on these assets, and so we were expecting to see evaluation uplift at the end of September, and that obviously has borne through. But as you can see on the chart on the right there, this has helped to keep our EPRA NTA flat. So we came in the year at 49.3p per share.

8:01 As part of the transaction for the hospitals, we issued a £100,000,000 worth of shares to Northwest, and they reduced our NTA by 0.7p. However, the revaluation has increased our NTA by 0.8p. So any any, dilution from the share issue has been negated by the valuation gain. And the upper earnings and the dividend paid in the period matched each other, and therefore, we're at 49.4p now at an NTA level.

8:39 When we, announced our acquisition in August, our LTV at a pro form a level was around 48%. As of the September 30, this was 49. However, as I sit here today, we are already under 48%. We have a target, that we announced within eighteen to twenty four months to get the LTV to 45% or below, and we are definitely on our way to making progress towards that. So we have completed since the September 30, £25,000,000 disposals of a portfolio of GP assets. We also transferred two assets into the joint venture for 27,000,000. They were part of the original tranche that had, had a slight delay for for a few legal points.

9:29 Then in our pipeline to dispose within the next three to six months, we have a £110,000,000 worth of assets under active discussion. A large chunk of those are already already have commercial terms agreed, and they're a mix of asset disposals and transfers into the joint venture. Post this 110,000,000 will be at 46%. In the new year, we expect to launch a further portfolio of 90,000,000 of assets that we have identified. And once those are disposed off, that is when our LTV will be at 45%, and this is ahead of our schedule of eighteen to twenty four months.

10:12 This is just looking at the portfolio acquisition of the 14 private hospitals. We acquired them for 500,000,000 at a yield on cost of 5.9%. They are geographically spread around the country, but the majority, 64%, are within London and the Southeast. The assets are a 100% fully tenant repairing and insuring, so there is limited cost to us as landlord, and the weighted average unexpired lease term on these assets is twenty six years. We have a very strong rent cover at 2.3 times, and all occupiers are tier one and are trading, extremely well. And Jonathan will come on to that shortly.

10:57 The rent reviews are a 100% index linked, and therefore, is contributing to our rent reviews now being 49% index linked or fixed uplifts and 51% being open market, reviews.

11:17 I'll just spend a moment talking about our funding and our debt structure. In order to acquire the hospitals, we needed to be innovative and fleet of foot to acquire them at the price we did. So the transaction was funded with a £266,000,000 term loan, which stands with a 110 basis points margin and was provided by Barclays. That is a very competitive rate. It is fully hedged with a two year swap at just under 5.2%. We had a £100,000,000 worth of shares issued to Northwest. We drew down on our RCF, which we do expect to repay with the disposal proceeds of over the coming months. And we had some cash, on hand, which we we, we also used.

12:05 We have, no refinancings in the in the short term. We just have £70,000,000 in October next year. As you can see from the chart, we do have limited, refinancings, before, 2029, and, the earlier refinancings are all at a slightly higher rate of around 3%. Our average interest rate has gone up from 2.3 to 3%, but that obviously reflects the RCF that's drawn, at 6.7% and the 266,000,000 term loan. Just looking at the RCF, we were £85,000,000 drawn at the end of September. This will be reduced or has been reduced by the existing disposals and will continue to be reduced by the further disposals.

12:54 Therefore, we will be undrawn on the RCF in the short to medium term. When discussing our loan to value, following the transaction, we spoke with Fitch, and they were very supportive of the business, and they have reaffirmed our a minus rating. They gave a negative outlook from stable, but that was purely on the, risk the execution risk of the disposals. And as you can see, we are well underway with those. Therefore, we believe, when we next speak to Fitch next summer, we should return to our stable outlook. I just want to recap for a moment on our £250,000,000 joint venture with USS.

13:42 We did announce this at year end as it as it happened a few days before our results announcement in May. This is a joint venture fund which we have agreed, 8020 split with USS owning 80% of the company. It can be for up to £250,000,000, and we expect to complete this within three years. However, there is a good chance we will do this much earlier. The the fund can grow to 400,000,000. However, the obligation on ASSURA is up to 20% of the 250,000,000. We will retain that 20%, and we'll also be receiving fees, based on gross asset value for our role as property and asset manager.

14:28 The joint venture is a fantastic diversification of our funding sources. We've been able to access institutional private capital, and we've been we recycle that capital out of low yielding, stabilized assets, and we remain we we continued with management control, but we were then able to recycle that into the private hospitals at a yield on cost of 5.9%. So we see that as very, very good business. There are specific terms around the joint venture. The assets have to be let to the NHS or GP tenants directly. They also have to have, average lot sizes above 5,000,000. But the, the key point is that the leases need to have index linked or fixed uplifts on the rents.

15:20 We expect to see this to

15:23 we expect to see the joint venture grow, and that'll be either through existing assets from our our current, portfolio. We can introduce new assets, or indeed, we could look at development opportunities as we move forward.

15:39 Just coming on to our developments and asset enhancement completions. So we've completed three developments in the in the period. We completed at in Southampton, a GP Medical Center. We completed our, large building up at Cramlington, and we complete our ambulance hub at Berris and Edmunds. We are on-site with five developments. Three of those are in Ireland. One is a GP Medical Center in Winchester, and the other is a, children's therapy center in Farram. It's a 2,600,000 will be added to the rent roll from these developments, as they complete an 82% of the rents are index linked. One asset there on the bottom right, Grayswood asset enhancement is a perfect example of how we can work with the GPs and the NHS to not necessarily build a new facility, but to refurbish and extend an existing facility.

16:38 We have spent £1,200,000 on that asset, extending it and refurbishing it. And in return, we've got a seven and a half percent return on capital employed, but also we got ex new rents for the, new space, but also a 10% uplift on the existing space. And what that does is that provides evidence for all other assets within that area to provide additional rental growth. We have a number of these assets in our pipeline, and we expect to do more of this as we move forward to enhance the assets, but also to provide that very important evidence for rental growth. And looking at rental growth, we saw an average uplift of 3% in the in the period.

17:26 We reviewed 20,400,000 of our rents, with a 129 reviews, an uplift in overall rent of 1,700,000 or 8.2% of the rents, reviewed. You can see there, in the table at the bottom right that we have, changed the split as I as I mentioned from 51% to, OMR and 49% RPI fixed uplifts and other. But the benefit of the hospital portfolio, which is 25% of our rent roll now, is that they are annual RPI uplift rents, and therefore, from the January 1, we will expect to receive improved and increased cash flows from the hospital portfolio.

18:12 The chart on the left there is just showing how our rents have provided additional rent roll over the past few years. And whilst we don't give forecast, this is a general direction of travel. We've put in there what we expect to see as a minimum for the second half of the year. And as you can see, it is much higher than that what we've had in the past. So overall, we're very positive about rental growth. It's great that we've got a split between open markets and fixed uplifts, and therefore, we're very positive about how that will look going forward. And this last slide for me is just looking at our our cumulative, earnings and dividend growth. We aim to have a growing and fully covered and progressive dividend, and you can see that that is what we've provided to investors over the last ten years, with a compound annual growth rate of earnings of 6.2% and a dividend, per share of 7.3%.

19:15 As Jonathan mentioned, we have a dividend yield, north of eight and a half percent at the moment, and, obviously, we've had 4%, dividend growth in the last twelve months. And on the whole, we will pass on just under earnings growth, in the form of dividend growth, is what we've done in the past. And, we do expect that we will continue with a progressive dividend, albeit at a probably slightly lower, rate over the next couple of years.

19:48 Back to you, Jonathan. Great. Thank you, Jane. So what I'd like to do now is just have a look at some of the growth trends and the drivers behind, behind our sector. The first one is demographics, which is the single biggest driver of health care demand. And as you can see here on the chart, the proportion of the population 70 is forecast to increase by 37% between now and 2040. And in fact, the number 80 is predicted to increase even more by over 60%. Part of this increasing demands is leading to an increase in our waiting list across our our hospital portfolios. And And as you can see here, the NHS waiting lists have more than doubled over the last five years and now standing at 7,600,000.

20:39 So to put that in context, that is more than one in seven of the population in England. The growth in waiting list is a key part of the growing use of private hospitals, but actually the underlying growth in demand is even more significant. And if you look at this last chart, you can see that there is a 21% forecast increase in the demand for beds in the NHS by 2030. And to give you an idea of scale, that level of increase would require 64 new hospitals, which frankly is a level that we have never been able to build and is unlikely to be met going forward. So this will probably lead to an ever growing pressure on our community health care. So in this in this era of growing demand, what we want to focus on is we've spoken already about our hospital acquisition, but actually our GP market is an incredibly important part of our growth story as well.

21:37 And private hospitals is very much as an opportunity for us as well as the GP market. So I'd like to spend a little bit of time just taking you through some of the benefits we see and some of the growth drivers that we see in our GP market. The first one and probably the most significant one is the political backdrop. So what we've seen in the since the Labour government has been elected is a clear commitment for them in terms of investing in the NHS. In fact, West Streeting has stated that he has three key priorities for the NHS, and all of these are supportive of investment in primary care. So his first one is he wants to see more care in the community. Well, that is going to require a larger proportion of budget to be allocated to primary care.

22:24 His second one is he wants to see a shift from analog to digital. Well, the place to deliver that is the place where we have the most interactions with our patients, and that is in primary care. And then the last one is a shift in emphasis from treating sickness to a focus on prevention, and any outreach to the population is going to require the primary care workforce to deliver it, again, placing even greater pressure on the primary care sector. And a key benefit of this move of care into the community is the efficiency for the NHS. So, actually, the NHS's own data shows that it is up to 10 times cheaper to be treated in primary care than to be treated in a hospital. So clearly, a strong incentive for the system to ensure as many of us as possible are treated outside of a hospital environment.

23:14 It's very noticeable that in the budget on October 30, they were very clear about prioritizing the NHS as the number one area for future investment. So Rachel Reeves announced a £22,000,000,000 increase in general funding for the NHS and a £3,100,000,000 increase in funding for capital projects and a specific £100,000,000 funding to GP surgeries. All of this represents a significant commitment from the Labour government to funding and trying to improve the NHS. Just to understand that a little bit more detail, it's worth just exploring where we're coming from. So NHS data shows that around forty percent of current GP surgeries, and there are about 9,000 across The UK, So about forty percent of those are deemed by the NHS to be not fit for purpose and in need of replacement.

24:08 So in order to meet that, new larger buildings, modern buildings would need to be built. And based on the NHS's own numbers, this would require 1,000 new build properties. Clearly, that's a very significant opportunity for ASSURA to take advantage of. And just to give you an idea, so let's say that we built 15 surgeries a year for ten years. 15 is a number we have comfortably been building over the last over the last five years, so it's it's a reasonable basis. That would require an investment of about £1,000,000,000. That would enable 3,000,000 patients to be used to to have access to services in a brand new building, and it would cost the NHS a gross amount in rent of about £60,000,000 a year. So a relatively modest investment that could see a significant improvement in the overall estate and the potential to deliver improved health care into the community.

25:03 The key benefit for ASSURA from this would be to in order to facilitate this investment, we would require a 30% increase in rents to bring us up to current market levels. And clearly, that would have a read across benefit for our for our whole of our estate.

25:22 So I'd like now just to spend a few minutes explaining to what we see as some of the benefits of the private health care market, which we've already referenced that we have seen a significant investment this year with the £500,000,000 acquisition. And fundamentally, private health care provides long term secure and index cash flows, which enables us to continue to deliver a growing dividend to our investors. So let's look at the growth in the market first of all. So if you take the last twenty years, there has been a 6% growth in the market to £6,800,000,000. So this is a very strong level of growth over the last twenty years. But probably the more important thing is that we're very optimistic about the potential for this growth to continue into the future.

26:09 You can also see here on the slide, there are three distinct areas of demand. There's self pay where the patient pays out of their own resources. There's the private medical insurance market, and then there's the services delivered on behalf of the NHS. You can see here that all three have grown significantly, and all three represent a meaningful contributor to demand. So that gives us three growth areas to continue to support investing in in private hospitals. And probably worth mentioning Wes Streeting's view here in the box on the right hand side, where he's very explicitly said that he has no ideological objection to the delivery of services from the private sector. So long as it's free for the patient at the point of delivery, who provides that services is not of any significance.

26:59 So let's have a look at how private hospitals work in practice. First of all, private hospitals focus on the delivery of routine procedures. So they're not broad based at what acute hospitals. They're delivering a small number of routine procedures that they deliver at scale in specialized facilities that are typically close to their target customers.

27:21 The average size of hospital in The UK is between 15 and £30,000,000 of revenue, and they operate in a very efficient way, generating more than 20% margins, and that enables us to have a very strong rent cover on our portfolio, which currently stands at 2.3 times. This efficiency comes from being very focused on a limited number of procedures in each location.

27:48 And because of this, they're able to offer very attractive lease structures to us as landlord with twenty years on average, in terms of lease length, index linked, reviews, and on an FRI basis. So I e, all of the costs of the building rest with the occupier and not with us, ASSURA, as landlord.

28:11 So let's just look at some of the, assets we've acquired in the year as by way of example. The majority of the portfolio that we acquired had a had a bias to London. So 64% of the rental income was in London assets, but we also acquired a number of regional portfolios and regional assets that are equally as attractive. And if I just explain that by taking some of these examples. So Parkside Hospital in Wimbledon first. So this is our largest single asset in our portfolio. It is a a very substantial site in a central location in Wimbledon. It gets 95% of its business from private pay and from insured customers, which reflects the very strong economic demographic of that local area.

28:58 In contrast, the other two assets on the slide, the one in Lincoln and the one in Sheffield, they have a different range of procedures, and they've got a higher proportion of NHS business. This reflects the fact that they have adapted to local health requirements and means that they are able to be leaders in their own fields, in their own markets.

29:20 So I've spoken about two key growth markets, private hospitals and GMS GPs, but we are interested in all four of our growth markets, though our approach differs slightly in each one. Though all is based on our depth of health care knowledge, our development capabilities, and our sustainability skills. So in The UK GP market, which is 2,200,000,000 of our assets, we're focusing on rental growth and asset enhancement. In NHS Trusts, we're working with USS to unlock future opportunities that we can deliver through that joint venture. In the private market, we have now have established relationships with all of the key players, and we've positioned ourselves as their specialist partner building on our knowledge that comes from our years of dealing in health care.

30:09 And lastly, in Ireland, the Irish NHS, the HSC, continues to promote investment in primary care, and we're looking to support them in opportunities that we see coming forward. I'd like just to take a moment to describe a little bit more about how ASSURA operates on our approach to business. So we pride ourselves on doing things differently. We have a very clear purpose we build for health, and this means that we take into account the impact of our actions on all of our stakeholders. And this is broken down into three different areas, healthy environment, healthy communities, and healthy business. So in terms of healthy environment, we've delivered 98 improvement projects in the last three years, reducing energy consumption in those buildings by 3,600,000 kilowatt hours.

31:03 In terms of healthy communities, we look to support this through our actions and also through our ASSURA community fund. In the last four years, this fund has donated over £2,000,000 to charities and has generated over £8,000,000 of social value. And lastly, healthy business, where we focus on generating attractive returns for our investors through innovation, expertise, and customer service.

31:31 And as testament to our approach, we're delighted to say that we are the first FTSE two fifty business to achieve b corp accreditation, something that was voted for by our shareholders in July and reprimands and represents rather a real testament to our overall approach in this market.

31:51 So in summary, we've had a very busy six months. We've had a new JV, issued debt and equity to support our acquisition, and we're on track with our disposal targets. The political backdrop is as positive as it has ever been. We've been busy buying private hospitals where we see attractive growth opportunities. And as a diversified health care REIT, we've been able to take advantage of a broad range of opportunities, though always focused on supporting health and well-being through innovative sustainable buildings, whether for the NHS or for the private sector. And lastly, we've been able to grow our earnings and therefore support a growing dividend with a 4% growth in our dividend and a share yield dividend yield that currently stands north of eight and a half percent.

32:42 So a very strong basis from which to base our plans for future growth. And given the broad range of opportunities we see, we remain very optimistic about the potential for future growth. So that then concludes our presentation. And now it's, we'd like to to take you through some some questions that we've received. Please do carry on submitting questions. It is the the poll is open. We're very happy to take any questions that you might have. Perfect, Jonathan, Jane. Thank you very much for presentation. At this point, what I'll do is I'll just bring your cameras back up. Ladies and gentlemen, as Jonathan did just say, please do continue to submit your questions, and you can do that using the q and a tab, which is situated on the top right hand corner of your screen. But just while the company take a few moments for you, the questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

33:34 As you can see, we have received a number of questions throughout today's presentation. Jonathan, if I could just hand over to you to read out the questions and give response, that'd be great. And then I'll pick up from you both at the end. Great. Thank you. Yeah. So I'll read out each question and I'll I'll I'll I'll pass a number of them along to you, Jane, I'm sure as as we go through if that's alright. So the first question is, what are the benefits in the Johannesburg Stock Exchange listing? So, yeah, really good question. Simply, it's about liquidity for shareholders. So we've had a number of South African investors in our in our shares, over the last few years, and we found that we have a very attractive investment proposition for the South African investor. However, they have rules in their local market that restricts them from being able to invest in overseas, stocks and shares beyond a certain percentage.

34:26 So the benefit simply is if by listing there, we remove those restrictions, it opens us up to more potential investors and brings additional liquidity into the shares, which obviously benefits all, all investors. And the ongoing costs are very modest. It's it's a relatively low, cost regulatory charge, a few tens of thousands a year that we need to pay, and we're hoping we can unlock some significant liquidity gains. So next question is, can ASSURA meet the debt reduction targets within eighteen to twenty four months given rising borrowing costs? Jane, you okay to take that one? Absolutely. No problem at all. In short, the answer is yes. We absolutely can meet our debt reduction targets. If you actually look at our overall debt with the exception of the RCF, which obviously is at a floating rate. All of our debt is fixed, it's long term in nature. Indeed, we still have over 600,000,000 of our debt post 2030 at 1.7%.

35:26 We only have 70,000,000 refinancing within the next twelve months. So, and we talked about the, the disposals that we we have and the fact that we're actually in commercial negotiations for a large chunk of the £110,000,000 pipeline. So, we're very confident that we can we can meet the targets that we set in advance of the timetable that we set. Great. Thanks, Jim. So next question is, given the delays in new development approvals in the NHS and GP spaces, how is ASSURA planning to maintain its development pipeline momentum? Well, I guess the short answer is that in the short term, we're not planning to support the the growth in our pipeline. We are choosing to slow down our development pipeline very deliberately, and this reflects the fact that the the current schemes were not able to generate the returns that we need to to justify the investment. And it comes down to the fact that we need an increase in the rental level paid by the NHS of approximately 30%.

36:27 Now just to be clear, we're not trying to increase our profit margin in any way. This is purely trying to recover the level of construction cost inflation we've seen over the last three to four years. And until that rental level is agreed, then we will be slowing down our our development pipeline. So next question is how sustainable is the current dividend growth rate considering the ongoing disposals and debt reduction efforts? Jane, are you okay to take that one? Absolutely. So, we always provide a covered, and sustainable dividend. Given the disposals that we have in our pipeline, it's actually, a, it's a phased disposal approach, and b, it's actually only a small amount of our overall portfolio.

37:14 You know, a couple of 100,000,000 over a a period of time is just good capital recycling. We've got a £3,100,000,000 portfolio. And indeed, some of those disposals, which particularly those going into the JV, are going in at at, at lower yields in the in the fours. But we will be re recycling some of that capital to pay down our RCF, which as I mentioned, is priced at 6.7%, £85,000,000. So effectively, that's actually earnings enhancing. So, so we see no issue in terms of, keeping the current dividend going. Thanks, Joe. Next question. So how is the new Labour government's focus on community health care expected to impact your strategy? So really good question. So, essentially, what we've seen is this this really strong rhetoric from the lay government about this need to move care out of hospitals and into community.

38:12 And in addition, there's this all this additional funding going into the NHS. So what we're hoping is that when the detail of that extra cash is is identified, it will highlight a move to fund more investment in primary, primary care. And clearly, if that extra money is made available, then a key enabler to that and the delivery of more services will be the buildings and the infrastructure to support it. So if that comes through, what that will mean is that we will then need to prioritize primary care and allocate more capital and resources to delivering these opportunities. And this is the great advantage of this diversified strategy. So while one market is is moving slowly, we can prioritize on private health care. But if we're going to 2025 and labor really come through with this strategy, we can rebalance that and shift those resources back into primary care. So it's optionality that this, this overall approach gives us.

39:06 So the next question is, with a focus on private health care, how would you plan to balance this with your NHS commitments? Well, it's a bit of a similar similar response really. So what we'll do is we'll look at the opportunities in front of us, and we'll take advantage of those that are most readily available. But it's not an either or. This is very much both markets will see significant growth in the next five years. It's just a question of timing. So right here, right now, there's more opportunity in the private health care. But as I say, there's a realistic scenario where twelve months time we could be stood here telling you that actually we've we've switched that back the other way, and we're now focusing on GPs. So we're absolutely committed to both markets. It's purely a timing point as to when we'll look to invest in each one. So there's a few questions nested in this one, so I'll take them one at a time.

39:57 What is your target portfolio mix, GPs, NHS, private pharmacy, and how will ASSURA get there? Excellent question. So the short answer is we don't have a specific target. So at the moment, we've got 25% of our business in private hospitals, for example. Now we we were asked this question six months ago when our share in in private hospitals was 10%. And we didn't say we had a target of 25. We said we would look at the opportunities in front of us. And if there was a deal to be done that was attractive, we might well see that share increase. And that's exactly what's happened. So as we look forward from here, could we be in a similar situation in twelve months time where another hospital deal has come up and we've moved into, we've we've nudged that 25% up. Absolutely. That's very possible. But just the the most important thing to be clear on is that we're completely committed to both markets. We'll just allocate the capital based on where we see the best returns at the time.

40:55 Question two, and maybe, Jane, if I ask you to take this one, how would you typify the type and the yield of the assets being disposed of? Yeah. Thanks, Jonathan. Well, it'll be it'll it will depend. So, for example, we disposed of £25,000,000 worth of, GP medical centers. It was 25,000,000 for 12 assets. So, that they are at the smaller end. Obviously, there's a range in terms of the of the yields on those. Our net initial yield at the moment is 5.2%. So, for for a a an open market GP medical center, you can see you'll be in that kind of 5.5 to 6% range on those depending on where those assets are in the cycle. In terms of assets that are being disposed into the joint venture, for all the reasons I mentioned earlier that their direct GP, NHS, long lease, slightly larger assets, and they've got direct indexation, RPI uplifts.

41:52 They're at the keener end, so they're more in the mid to, low four percents in terms of what what they would do in terms of, getting those, disposed off. Great. Thanks, Jane. Next question. Regarding the acquisition of the private hospitals on Northwest Healthcare, what is the nature of the lockup agreement on the 100,000,000 of consideration shares? Yes. So this is a lockup period. It is effectively the shares are locked up for six months. So for six months, Northwest are not allowed to trade in those shares without our permission. And then at the expiry of that, they are free to do with those shares as they see fit. What we have though is we have had conversations with them at the time of the deal to ask them about their intentions with those shares, and they indicated to us that they were very committed to The UK market and were very much reluctant sellers. So there's definitely a possibility that they might hold on to those shares because they like The UK market a lot. If they do choose to sell them, the other thing to flag is, of course, they'll want to maximize the value that they receive for those shares. So it'll be very unlikely that we'll do anything to damage the share price by, for example, looking to sell too many too quickly, which would damage them, damage us, but also, obviously, reduce their realization.

43:10 So so we expect that they will they will manage and sell those assets in a in a in a measured and considered way if that's what they choose to do. So final question, is do you think the move to b corp has had a negative effect on the share price? That's a very interesting question. Never had that one before. So I guess the short answer is no. The share price has not performed very well, since we announced the b corp, but I don't think it's got anything to do with that. I think it's got much more to do with the sort of wider macro environment. And if you look at how real estate stocks in general have performed, there has been some negative pressure over the last few months in relation to that. I mean, from our perspective, we see B Corp as as very much something that adds to the business and will deliver real commercial value.

43:57 If you think about the nature of our business, health care, the nature of our of our customers, either private hostel occupiers or the NHS, they have a really strong commitment to improving the health and well-being of of of their of their end users. And actually having a an attitude of b corp where we're thinking about all of our stakeholders makes us a much more attractive partner for these types of businesses. And bearing in mind, our largest private landlord is now Nuffield. Nuffield is a charity. Our other largest client is the NHS. So these are people with with with values and an ethos, which is aligned to b corp. So we actually think overall, it will add to our add to our commercial benefits in the long run. I should also flag, there was no real cost to this process.

44:47 There's a very small annual fee that you pay. We didn't really have to change anything about the business or the way we operate. It didn't include additional costs or procedures or process for us. It was it was very much just reflecting the way we already operate. We're just receiving the recognition for So that's the end of the questions. So it just remains for me to say on behalf of ASSURA, we we really appreciate your your interest. Oh, no. We've got some last minute questions. So we'll we'll we'll carry on and take these. Okay. So next question is, what was the average discount to book value on the assets sold into the USS joint venture? So we've we we we didn't we didn't provide the specifics on that at the time of the deal because it was it's commercially sensitive, but it wasn't a it wasn't a significant discount.

45:37 And I should say that on the future deals, I think Jane's already identified that we'll that we are intending and expecting to sell those at a small premium to book value. Next question is how comfortable are you with the consensus estimate of 3% dividend growth in the financial year? Consensus, well, consensus consensus is the consolidated views of all of the analysts. It's always gonna have a a wide variety of of views, but our overall position is that we are we are comfortable with that. Which of the four subsectors, GPs, NHS, private hospitals, Ireland, offers the most attractive risk adjusted returns? Well, that's an excellent question. And that's exactly the question that we ask ourselves on all of our asset, capital allocation decisions, and we appraise each opportunity precisely with those terms in mind. So it's not just about what drives the highest return because that's, you know, that could well be investing in something completely outside of our current space. It's about that risk adjusted return.

46:36 In terms of right here, right now, I think we've been pretty clear that we see the best risk adjusted opportunity for now in private hospitals. But equally, we're very excited about the other markets, and it might well be that they, that switches if if further opportunities arise. But right here, right now, I would choose private hospitals as our top priority. K. So in the absence of any, any further questions, I'll just repeat. Thank you very much for your for your interest in the business, for being a shareholder if you are, and for an excellent set of questions and the level of engagement. So thank you for your time. Jonathan, Jane, thank you very much for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations.

47:26 This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of ASSURA PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.