Assura Plc · OTC:ARSSF

Assura — H1 FY2017 Earnings Presentation

49 slides from Assura's earnings presentation, September 2016

  1. Slide 1: Results for the six months ended 30 September 2016

    RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016

  2. Slide 2: Overview

    OVERVIEW Strong Solid financial growth position New Pipeline schemes replenished announced Results for the six months ended 30 September 2016 2

  3. Slide 3: Assura and primary care

    ASSURA AND PRIMARY CARE  Sector characteristics  long Government funded leases  linkage to cost inflation  substantial development need  Assura’s positioning  brand, reputation and GP relationships  bespoke national GP property database  internal management model  in-house development capab

  4. Slide 4: Financial highlights

    FINANCIAL HIGHLIGHTS Income statement 30 Sep 2016) 30 Sep 2015 Change Net rental income (£m) 32.9) 28.1) up 17% Underlying profit before tax (£m) 19.8) 11.3) up 75% Underlying profit per share (p) 1.2) 1.1) up 9% Dividend per share (p) 1.1) 1.0) up 10% Balance sheet 30 Sep 2016) 31 Mar 2016) Change

  5. Slide 5: 10% growth in annualised rent roll

    10% GROWTH IN ANNUALISED RENT ROLL £m 75 4.9 70 0.7 65 0.2 0.5 60 70.1 63.8 55 50 Mar-16 Rent reviews Asset Development Acquisitions Sep-16 management completions Results for the six months ended 30 September 2016 5

  6. Slide 6: 75% growth in underlying profit

    75% GROWTH IN UNDERLYING PROFIT £m 25 4.8 20 4.1 15 10 (0.4) 19.8 5 11.3 0 Six months to Sep-15 Admin expenses Net finance costs Net rental income Six months to Sep-16 Results for the six months ended 30 September 2016 6

  7. Slide 7: 3% growth in diluted EPRA NAV per share

    3% GROWTH IN DILUTED EPRA NAV PER SHARE 48p 1.4p 47p 46p 1.2p 45p 1.1p 0.1p 44p 47.2p 43p 45.8p 42p 41p 40p Mar-16 Dividends Share issue / Income (underlying Capital Sep-16 other profit) (revaluations) Results for the six months ended 30 September 2016 7

  8. Slide 8: 11% increase in investment property

    11% INCREASE IN INVESTMENT PROPERTY 5.52% Equivalent yield 5.42% £m 5.29% Net initial yield 5.22% 1,240 81 1,220 1,200 1,180 1,160 23 1,140 12 1,227 1,120 2 1,100 1,080 1,109 1,060 1,040 Mar-16 Other Development costs Revaluation gain Acquisitions Sep-16 Results for the six months ended 30 September

  9. Slide 9: Strong balance sheet

    STRONG BALANCE SHEET  New £200m RCF at initial margin 30 Sep 31 Mar of 150 bps 2016 2016  New £100m private placement fixed at Investment property 1,227 1,109 2.65% for 10 years agreed in October Net debt (£m) 422 328  Both on unsecured basis Loan to value 34% 30%  56 basis point reduction in we

  10. Slide 10: Internally managed model drives efficiencies

    INTERNALLY MANAGED MODEL DRIVES EFFICIENCIES EPRA Cost Ratio 24% 22% 20% 20.2% 18% 17.7% 16% 16.5% 14% 13.5% 12% 10% Mar-14 Mar-15 Mar-16 Sep-16 Results for the six months ended 30 September 2016 10

  11. Slide 11: Market overview

    MARKET OVERVIEW  Stability of valuations over “cycle” Yield development 8%  Fundamentals remain strong with prospect of rental growth rebounding 7%  Pricing remains attractive for further 6% additions 5% 4% 3% 2% 1% IPD monthly UK index initial yield 0% Assura Net Initial Yield 15 year Gilt Resul

  12. Slide 12: Disciplined growth

    DISCIPLINED GROWTH  £118m increase in portfolio value 30 Sep 31 Mar Pipeline  £95m additions 2016 2016  5.9% average yield on cost Investment £83m £1,227m £1,109m property  Weighted average unexpired lease Rent roll £70.1m £63.8m term of 15.3 years on new additions WAULT 13.5 years 14.0 years 

  13. Slide 13: Developments and pipeline

    DEVELOPMENTS AND PIPELINE  2 forward funded schemes Immediate Completed On site completed pipeline  1 forward funding scheme Number of schemes 2 1 8 currently on site Development cost £13.8m £3.8m £44m  Appointed on 8 schemes with Completion timing 2017 2017/18 an approximate end cost of £44m Por

  14. Slide 14: Rent reviews

    RENT REVIEWS  Annualised uplifts Rent review settlements  RPI and fixed +2.48% OMR c.72% RPI/fixed c.28% 6.0%  open market +1.11%  combined +1.60% 5.0%  Limited rental evidence for 4.0% rent reviews 3.0%  Cost inflation provides potential for future growth 2.0% 1.0% 0.0% Results for the six mo

  15. Slide 15: Enhancing existing portfolio

    ENHANCING EXISTING PORTFOLIO  Letting of vacant space – £0.2m of new Sqm Rent lettings in the period adding value Leases signed 1,021 £0.1m  Portfolio 97.6% let In legal hands 1,447 £0.1m  Lease re-gears and extensions are priority  Property extensions add value Results for the six months ended

  16. Slide 16: Continuing move to primary care

    CONTINUING MOVE TO PRIMARY CARE  Improved primary care premises are essential infrastructure  requiring substantial investment  confirmed by Estates Strategies and Sustainability and Transformation Plans  300 new schemes supported by Estates & Technology Transformation Fund  Emerging strategy 

  17. Slide 17: Future opportunity

    FUTURE OPPORTUNITY  Fragmented market  Cost inflation provides potential for future rental growth  Market pricing still favourable  modest yield compression  Strong case for investment in primary care estate  underinvested primary care infrastructure  4 out of 10 GPs consider premises to be i

  18. Slide 18: Benefitting communities & NHS alike

    BENEFITTING COMMUNITIES & NHS ALIKE  Provides safe, fully compliant access  GPs as tenants to extended range of services  succession planning and easier to recruit  Improves health outcomes  more time for clinical issues  Sustainable design  knowledgeable landlord assists funding  Zero carbo

  19. Slide 19: Outlook for Assura

    OUTLOOK FOR ASSURA  Attractive long term opportunity  Assura well placed  expertise, scale, financial strength  reputation and brand recognition with GPs  Our priorities:  continue to promote the case for investment in primary care  acquisition opportunities  development pipeline  Deliverin

  20. Slide 20: Q&A

    Q&A Hackney Bewdley KIdderminster Harlech Blaenavon Results for the six months ended 30 September 2016 20

  21. Slide 21: Supplementary information

    SUPPLEMENTARY INFORMATION 1. Market 1.1 Growing demand / inadequate supply 5. Results 5.1 Five year track record 1.2 Positive political backdrop 5.2 Balance sheet at 30 September 2016 1.3 Policy statements 5.3 EPRA net asset value 1.4 Ageing population 5.4 Diluted EPRA net asset value movement 1.5 A

  22. Slide 22: 1.1 Growing demand / inadequate supply

    1.1 GROWING DEMAND / INADEQUATE SUPPLY Demand Supply  10 year track record of cross-party  2014 BMA survey of GP practices support for:  40% of GPs stated premises  more services delivered locally inadequate for provision of general  greater patient choice practice services  more community bas

  23. Slide 23: 1.2 Positive political backdrop

    1.2 POSITIVE POLITICAL BACKDROP  Cross party support for primary care investment continues “A vision of a modern NHS working for you  Current government policy supportive 7 days of the week –  has already committed £1bn funding to back new premises via Primary when you need it, Care Transformatio

  24. Slide 24: 1.3 Policy statements

    1.3 POLICY STATEMENTS Five Year Forward View General Practice Forward View – NHS England  Simon Stevens, NHS Chief Executive  Published April 2016  Published October 2014  Infrastructure  Radical upgrade in prevention and  proposed upgrades to practice premises public health  Care redesign 

  25. Slide 25: 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 Source: Office for National Statistics, Lazarus Population (thousands) in each age band Results for the six months ended 30 September 2016 25

  26. Slide 26: 1.5 Assura well placed to outperform

    1.5 ASSURA WELL PLACED TO OUTPERFORM  Good reputation and relationships with IPD Annual Return to Dec-15 since GP community inception of index in 2006  Development capability and strong Assura Primary Healthcare Benchmark 9% pipeline 7.9% 8%  Internally managed 7.4% 7%  Knowledgeable and focused

  27. Slide 27: 2.1 Total property assets

    2.1 TOTAL PROPERTY ASSETS 30 Sep 2016 31 Mar 2016 £m £m Completed investment property 1,207.7 1,088.0 Investment property under construction 9.5 11.5 Pharmacy lease premiums 6.6 6.9 Finance leases 3.0 3.0 Property assets held for sale 0.9 1.7 Total 1,227.7 1,111.1 30 Sep 2016 31 Mar 2016 Balance she

  28. Slide 28: 2.2 Completed investment property

    2.2 COMPLETED INVESTMENT PROPERTY Properties Value (£m) Value (%) <£1m 76 47.9 4 £1-5m 220 553.6 46 £5-10m 49 336.6 28 >£10m 18 269.6 22 363 1,207.7 100 Properties Value (£m) Value (%) North 132 495.5 41 South 114 350.0 29 Midlands 73 259.8 22 Scotland 20 42.6 3 Wales 24 59.8 5 363 1,207.7 100 Rent

  29. Slide 29: 2.3 Sensitivity analysis

    2.3 SENSITIVITY ANALYSIS ERV) +1%) +2%) +3%) NIY ) p/share) p/share) p/share) p/share) 5.75% (6.75p) (6.08p) (5.42p) (4.75p) 5.50% (3.73p) (3.03p) (2.34p) (1.64p) 5.25% (0.42p) 0.31p) 1.04p) 1.77p) 5.00% 3.22p) 3.99p) 4.75p) 5.51p) 4.75% 7.24p) 8.05p) 8.85p) 9.66p) Results for the six months ended 3

  30. Slide 30: 3.1 Cash flow summary

    3.1 CASH FLOW SUMMARY Six months to) Six months to) Year to) 30 Sep 2016) 30 Sep 2015) 31 Mar 2016) £m) £m) £m) Opening cash 44.3) 66.5) 66.5) Net cash from operations 15.6) 9.5) 22.9) Cash flows from investing activities: Property and business acquisitions (82.7) (63.1) (122.5) Development expendit

  31. Slide 31: 3.2 Contracted rental income

    3.2 CONTRACTED RENTAL INCOME £995m total contracted cash flow, 84% of rent roll still contracted in 2026 70 Contracted at 30-Sep-16 60 50 40 30 20 10 0 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24 Sep-25 Sep-26 Sep-27 Sep-28 Sep-29 Sep-30 Sep-31 Results for the six months ended 30 Septemb

  32. Slide 32: 3.3 Lease lengths

    3.3 LEASE LENGTHS 18 Weighted average unexpired lease term 13.5 years 16 756 leases 140 86% of rent roll 9+ years unexpired term leases 14 123 159 12 leases leases Rental value (£m) 10 111 leases 8 6 52 4 leases 53 62 leases leases 2 56 leases 0 21+ 18-20 15-17 12-14 9-11 6-8 3-5 0-2 Years remaining

  33. Slide 33: 3.4 Debt repayment profile

    3.4 DEBT REPAYMENT PROFILE 30 Sep 2016 31 Mar 2016 Gross debt £450.9m £372.8m Weighted average maturity 8.7 years 10.2 years Weighted average cost of debt 4.28% 4.84% Aviva Bond RCF 200 150 100 50 0 Results for the six months ended 30 September 2016 33

  34. Slide 34: 4.1 ERV evolution and reversion

    4.1 ERV EVOLUTION AND REVERSION ERV at 30 Sep 2016 £72.2m; vacant space £1.7m, valuers rental ERV £0.4m Passing rent ERV 70 £2.1m £70.1m £2.7m 60 £63.8m 50 Rental value (£m) 40 30 20 10 0 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Sep-16 Results for the six months ended 30 September 201

  35. Slide 35: 4.2 Open market rents results

    4.2 OPEN MARKET RENTS RESULTS  1.60% annualised increase Open Number of from rent reviews settled market outstanding Annualised reviews reviews in the period only % (passing rent)  1.11% from open Rent reviews settled in six months to 1.11% market rent reviews 30 Sep 2016 Relating to review dates

  36. Slide 36: 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 (23%) 70% Upward only review basis (72%) 60% Proportion of rent roll 50% 40% 30% 20% 10% 0% OMR RPI Fixed Other Results for the six months ended 30 September 20

  37. Slide 37: 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 Size Initial rent Scheme Year costs (m2) (£/m2) rents (£/m2)  Construction cost increased at Blaenavon 2013 2,134 149.5 1,488 h

  38. Slide 38: 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 - 64% 8% - 72% RPI 5% 5% 4% - 14% Fixed 1% 5% 1% - 7% Other - 6% - 1% 7% 6% 80% 13% 1% 100% Results for the six months ended 30 September 2016 38

  39. Slide 39: 5.1 Five year track record

    5.1 FIVE YEAR TRACK RECORD Scale 2016 2015 2014 2013 2012 Rent roll (£m) 63.8 55.6 41.8 35.9 34.9 Investment property (£m) 1,109.4 925.3 656.7 557.3 537.8 Net assets (£m) 754.3 451.9 226.6 198.1 187.9 Flexibility Free cash/available facilities (£m) 118.7 65.3 27.6 15.6 12.2 Unencumbered assets (£m)

  40. Slide 40: 5.2 Balance sheet at 30 September 2016

    5.2 BALANCE SHEET AT 30 SEPTEMBER 2016  £118m increase in investment Property and debt property £m Investment property Net debt 1,400  Loan to value of 34%  £103m of available facilities 1,200 1,227 and cash, plus £100m note 1,109 1,000 agreed in October 925  Positioned strongly for future 800 g

  41. Slide 41: 5.3 EPRA net asset value

    5.3 EPRA NET ASSET VALUE Adjusted (EPRA)) Adjusted (EPRA)) net asset value) net asset value) 30 Sep 2016) 31 Mar 2016) £m) £m) Net assets 780.5) 754.3) Own shares held -) 0.6) Deferred tax (0.4) (0.4) NAV in accordance with EPRA 780.1) 754.5) Number of shares in issue 1,649,878,316 1,637,706,738 EPR

  42. Slide 42: 5.4 Diluted EPRA net asset value movement

    5.4 DILUTED EPRA NET ASSET VALUE MOVEMENT £m) Pence per share) Diluted NAV in accordance with EPRA at 31 Mar 2016 754.5) 45.8) Income (underlying profit) 19.8) 1.2) Capital (revaluations and capital gains) 23.4) 1.4) Dividends (18.0) (1.1) Equity issuance 3.0) -) Other (2.6) (0.1) NAV in accordance

  43. Slide 43: 5.5 Underlying & EPRA earnings per share

    5.5 UNDERLYING & EPRA EARNINGS PER SHARE 30 Sep 2016 30 Sep 2015 £m £m Profit for the period 41.7 35.2 EPRA earnings 19.8 9.5 Underlying profit 19.8 11.3 Weighted average number of shares in issue – basic 1,641,793,597 1,008,829,551 Basic EPS – net profit 2.5p 3.5p – EPRA 1.2p 0.9p – underlying 1.2p

  44. Slide 44: 5.6 EPRA cost ratios

    5.6 EPRA COST RATIOS EPRA Cost Ratios give an indication of administrative and operating costs relative to gross rental income 30 Sep 2016 30 Sep 2015 31 Mar 2016 EPRA Cost Ratio (including direct vacancy costs) 13.5% 19.2% 16.5% EPRA Cost Ratio (excluding direct vacancy costs) 12.3% 18.2% 16.0% Res

  45. Slide 45: 6.1 REITs

    6.1 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

  46. Slide 46: 7.1 Bank and bond facilities

    7.1 BANK AND BOND FACILITIES Effective1 Outstanding) Fixed / Secured/ Loan / Bond Maturity interest1 30 Sep 2016) Floating unsecured rate1 £m) 10 year listed Bond Fixed Dec-21 4.75%1 Secured 110.0) Aviva loans Fixed Various to 2044 5.43%1 Secured 215.8) £200m revolving credit facility Floating May-2

  47. Slide 47: 7.2 Covenants

    7.2 COVENANTS All covenant conditions Bond Aviva Unsecured facilities complied with Req. Act. Req. Act. Req. Act. Interest cover >1.5 2.17 ≥1.05 1.48 ≥1.75 12.12 LTV >1.35 1.63 <70% 55% n/a n/a WAULT >10 yrs 11.2 yrs n/a n/a >7 yrs 14.3 yrs NHS >75% 78% n/a n/a n/a n/a Leverage n/a n/a n/a n/a <60%

  48. Slide 48: 8.1 Dividend calendar

    8.1 DIVIDEND CALENDAR 2015/16 Payment date2 Ex-div date2 Record date2 Total2 Q1 30 Apr 20151 16 Apr 20151 17 Apr 20151 0.50p2 Q2 22 Jul 20151 9 Jul 20151 10 Jul 20151 0.50p2 Q3 4 Nov 20151 22 Oct 20151 23 Oct 20151 0.50p2 Q4 20 Jan 20161 17 Dec 20151 18 Dec 20151 0.55p1 2016/17 Payment date2 Ex-div

  49. 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

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