Assura (OTC:ARSSF) — Annual General Meeting

0:01 Good morning, ladies and gentlemen, and welcome to the ASSURA PLC Annual General Meeting. Throughout this recorded meeting, attendees online will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Just please simply type in your questions at any time and press send. The company may not be in a position to answer every question submitted today. However, all questions will be reviewed with responses published on the Investor Meet company platform. I'd now like to hand over to United States Chief Chairman, Ed Smith. Good morning, sir.

0:30 Good morning. Thank you very much. Good morning, everyone. And it is, as has been said now, 11:00, and there is a quorum present. And it's particularly nice to have four shareholders present with us in the room this morning as well as those viewing live via the investor meet platform. Investors watching the meeting via this platform are able to see and hear the a AGM, but are not seen or heard by the board and and has made clear in the notice of the AGM, are unable to vote via that platform. Questions may be submitted in writing over the platform and will be addressed at relevant points during the AGM. I'm joined here today by all of my fellow directors, and I'll just briefly introduce them to you before we begin.

1:19 Company secretary on my left, all are Louise Hauer,

1:24 Jonathan Davis, Jane Cotton, Jonathan Murphy, Noel Gordon, four of our shareholders, Laura, is a board fellow under a board fellowship program we are jointly investing in Sam Barrel and Emma Karriaga. Jonathan, you'll now provide us with a brief overview of the first quarter results, which were announced this morning. Yes. Thanks, Ed, and good morning, everyone, and glad to welcome you all to AGM. So I'm sure you all have seen the announcement this morning. Very pleased to say that we've had a very strong first quarter to the year. We're very pleased with the way we ended last year. We had a very strong performance last year in terms of outperforming the market's expectations in terms of earnings and also from a from a net asset value point of view.

2:15 And we were delighted with the the progress we made on on particularly on the financing side last year. So we completed sustainability bond this time last year as well as an equity raise towards the back end of of October, which means that we entered the new financial year very well capitalized and in a very strong position. I'm pleased to say that we've then been able to continue to deliver on our growth plans, continuing to complete both acquisitions and developments and, you know, in excess of £100,000,000 invested in in in the first quarter, which is, you know, a very strong start to the year. We are also seeing our developments moving forward. So we've had two developments complete in the first quarter, and we're starting on-site with a further two sites. Now we are moving slightly cautiously with our developments.

3:11 So I'm sure you all will have read in the papers about construction cost inflation, supply chain disruption. And it's fair to say that we are experiencing some delays on some of our projects, so we are adopting a a cautious approach and only moving forward with schemes once we've got certainty on pricing, we've got fixed price contracts in place, and we're certain that we've got the right partner, and we've got all the commercials lined up with the NHS before before pressing ahead. So we might be slightly slower than anticipated in terms of developments, but we still got a very strong, strong pipeline of opportunities. I mean, ultimately, the NHS remains in a position where it has a very strong requirement for further investment in the types of assets that we we produce.

3:59 That hasn't changed given the the economic circumstances. So we anticipate that there will continue to be further further projects and further opportunities for us to invest over the over the coming months and for for the the rest of the year. Though we will be adopting a, you know, a disciplined approach and only pursuing those opportunities that we feel will provide a real turn in the in the current environment.

4:24 In terms of available facilities, yes, as I mentioned, we did a bond last year. We did our equity raise. So we're very well capitalized, and we had available cash and undrawn facilities of in excess of 226,000,000 at the end of June. So we have the available resources to continue to deliver on the opportunities that that we see in front of us, and our debt book is is incredibly strongly positioned, you know, over seven years of of maturity. Everything is fixed, so we've got no exposure to to short term short term interest rates. So overall, on balance, very pleased with the progress to the to the financial year, and we continue to see good opportunities moving forward.

5:08 You, Jonathan. So this is now an opportunity for any questions that have come in online, but also any questions that our shareholders would like to ask about the company performance. And perhaps I'll start by asking colleagues who have joined us, shareholders who joined us in in the room. Yes, sir. Right. You'd like to give your name be a shareholder. What bigger what's the size of the projects you're getting? You don't get involved in hospital building hospital, do you? So yeah. So so the size of relatively small projects. So the the average size of our developments will be 7 or £8,000,000, that that type of that type of size. So not sort of, you know, £100,000,000.100000000 pound hospitals. There are some projects which are a little bit bigger, so you might have read in our results presentation we talked about we've done just done a scheme in Birmingham, which is an ambulance hub. So and that's that's that project is is in excess of of 20,000,000.

6:03 We've got a project up in the Northeast, which is just under 20,000,000. So those are a bit bigger. So we do do a range, but those are sort of that's that's the upper limit, really. So, no, we're not we're not building large scale hospitals. It's it's it's community health facilities, whether that's directly occupied by GPs or supporting the NHS or some other way. That's the that's with partners at all, the bigger project? Yes. Absolutely. So really good example, that ambulance hub that I mentioned, that's the first time we've done an ambulance hub. So we didn't build that ourselves. We went into partnership with a a company that had experience in that area. Though interestingly, what we've done is we've learned from that project, and we're now bidding on a second project where actually we will lead and we will we'll learn from that and and take the lead on the next one. So you're absolutely right. If it's if it's slightly outside of our core, we would look for a partner to work with. Yeah.

6:55 You know, Balfour Beatty got involved with a big hospital project, that could be disaster. That's a different scale to us. And and one of the good things about type of projects we work on is we've got 18 projects. So they're all relatively modest in size, so you don't have all your eggs in one basket. So so you've got 18 different contractors because obviously, you know, contractor failure is a risk that you could face. So we're well diversified, well spread out, and they're they're relatively modest projects. Yep. We've

7:26 got I so. You've got Good afternoon. I'm probably What percentage of your rents are inflation rate? And what's the inflation cap? Very good question. Yes. So so in terms of our in terms of the rent roll split, so 65% of our leases are under open market reviews. So that's effectively negotiated with the NHS. And there's no cap or color on those, but it's what you negotiate with the NHS last year that they delivered a growth of 1.4%. So they have an indirect linkage to construction cost inflation, and it's a that's a commercial negotiation. So that's 65%. Then you have 15% of the portfolio, which is uncapped RPI direct with the NHS. So that's well, that's the RPI. So this year, that will be 12% is, I think, the most most most recent estimate.

8:17 So that's 15% of the portfolio. We then have another 6%, which is RPI but has a cap. And, typically, everyone's different, but it's about 4% is is is the normal cap. And then we have the last 14%, which is which is a fixed uplift or other metric. So, yeah, 2% every every year or or or steps or or whatever. So so you got the overall shape. So 65% open market. So 21% RPI, of which 15% is uncapped, and then you've got the the 40%, which is which is fixed of this. So it's a it's not a complete index linked portfolio, but it's got very strong characteristics. The other side I was going to ask for that is it are any of your borrowings inflation index linked from a way you always use fixed rate? In which case, presumably, the the company is in a very good position because it's getting inflation linked up that's on on on its premises and fixed rate borrowing. Yeah.

9:21 Do you want to explain a little bit more about the debt book and how it's set up? Yeah. So as the trading update says, all of our debt is fixed. Our maturity is now 7.7, and you and you're absolutely right. We did our sustainability bond last year, 1.625%, 300,000,000 with a twelve year maturity. But the year before, we did a social bond ten year money at one and a half percent. So all of our longer dated debt is at the much lower fixed rate. So everything we have is fixed. There is nothing variable that's drawn at the moment, and our weighted average interest rate has actually come down to 2.3%. So you're you're right. We're very very well positioned. We've got cash and some available facilities, 266,000,000 to to manage all of our all of our ambitious plans going forward.

10:11 And if I may just sort of supplementary, in terms of health service organisation Yeah. What sort of covenants do we have in the event that that practices emerge and then there is a so a practice could close down? Yeah. So so in terms of if you've got a there are two ways that we have. We have 82% of the rent roll which is linked to the NHS, and there are two ways that can be done. One is sort of direct with the NHS, and then the other way is via the GPs. So if we've got a a lease with a GP practice and they have a GMS contract, then the GPs have a statutory right to have that that rent reimbursed. So so long as they are, operating that that contract from that location, then you've got effectively, you've got an NHS guarantee.

11:00 Now in the event that they close that practice, and and and discontinue that GMS contract, then effectively, the doctors would be transferring that liability from the NHS to themselves. So this has happened to us in one case, and in that situation, the partners, closed their contract and effectively transferred a liability, which is about a £160,000, from the NHS to themselves. Right. Now as soon as they realized that's what they've done, funnily enough, they decided that

11:34 wasn't the course of action they wanted to go down, and they had a different conversation with the NHS. And, actually, what happened in that scenario was they said, we do want to retire. We want to step back. But they did it rather than walking out the door and triggering a liability. They had a conversation. They agreed and they they agreed a plan, and the NHS took over the lease of that building, and they became employed GPs. And then over a number of years, they've subsequently gone on to retire. So there'll be a managed process. If there isn't a managed process, the GPs end up exposed,

12:06 which is why there's that one case, and they they retract it. So we've never actually seen that situation. But we're constantly having conversations with our occupiers to understand, you know, what their outlook is, you know, what and if they have any concerns, you know, we encourage them to talk to the NHS so that because the the system absolutely wants that center to stay occupied and stay providing services to those patients even if the individual doctors might be coming up to retirement age and might want to leave. Right. Because the current pension arrangements are, of course, promoting early retirement. It's really unhelpful. Yeah. It's really unhelpful. It's actually just as bad in hospitals as well. Yeah. So essentially, yes, as you as you reach the upper limit of your pension cap, effectively to stay and work another year, you can get a really punitive tax bill, and it's encouraging GPs to retire early. It's it's yes. It's it's it's well, anyway, I won't I won't get to know. Slightly slightly broader agenda.

13:05 Yes. Everybody's living longer anyway. Yes. Perhaps not the best pension policy, shall we say, but I'll I'll leave it at that. Jane, you have some questions that have come through on the Yeah. I'll Jonathan. Yep. So so in terms of the pre submitted questions, we've got a question from Alessandro, which is saying, what is the raison d'etre of the company? Gosh. That's a a philosophical one. And and and where do you draw the line between shareholder and stakeholder interest? So what's the raison d'etre of the company? So so we have an overall mission, which is we build for health, which is about providing the right facilities to support the NHS in, you know, delivering successful health outcomes and and reducing health inequality. So that's that's the overall objective. But, obviously, in that, you know, we are we have multiple stakeholders. We have shareholders, and we provide, you know, a 4.7% dividend yield that we've been growing at 5% a year, and that's obviously absolutely essential.

14:01 We have banks that we have to raise money from and and bondholders that we have to we have to provide returns, and we have an investment grade rating for that. We obviously have our team who will use it as a key stakeholder. We to have make sure that we look after because we can't do anything without without the team supporting us. And, of course, we have a commitment and an obligation to support the the environment and to do what we can to support sustainability. So it there isn't one is is is the short answer, Alexander. It's it's a mixed model. We we look we have all stakeholder interests at heart. I mean, clearly, the financial returns is a key priority for us, but then so is so is sustainability and making sure that we deliver that. You can't do one without the other. You know, we we can't deliver positive health outcomes if we don't if we don't give good financial returns because we need the support from investors and banks to be able to fund that. So they they are it's not mutually exclusive. It's it's mutually supportive.

14:58 So further question from Alessandro is, is there an optimal size for the company either by number of assets or financially? So so really good question. So so over the last five years, we have effectively doubled the size of the business. So we've got now almost a £3,000,000,000 £3,000,000,000 portfolio. As as part of that process, by becoming larger, we've been able to access the bond market, for example. So because we can now afford to raise £300,000,000 in one go with a bond, we can get better interest rates because it's a it's a deeper, more liquid market. So scale gives you certain advantages in terms of capital markets. So you can raise equity

15:38 more efficiently. You can raise bonds more efficiently. So that's an advantage. There's definitely an advantage in terms of efficiency. So, yeah, we have a certain amount of overhead. We have certain amount of corporate overhead. And obviously, if you have a larger portfolio, you can spread that over your fixed cost over a larger base. So we have brought, you know, over the last eight years, we brought our cost ratio down 20% of our income to about 13%. So clearly, again, you can see there's a there's a there's an economy of scale. So there are economies of scale. Is there an optimal size? Well, no. There isn't really. So there are benefits from being slightly larger, but equally, we don't chase size for just for its own reward. It's about whether it provides the right overall return. So

16:23 we're very comfortable with the size we have. We have delivered economies of scale, but there isn't really a target around size. Equally, we're very comfortable if we continue to grow, but equally, we'll be very comfortable at the current size of the business. So I hope that I hope that helps, Alexandra. So a further question we've had online is from Nick. It is, what are your views on adding social prescribing facilities to your offering, which could include gym, sport, gardening, tai chi, green space or using making use of green space? Really good question, Nick. It's actually a question we got asked by a shareholder at our AGM about seven years ago, which was really interesting because then I remember it very well because at that time, prescribing wasn't really something that people were talking about, and he was involved with a charity that was providing those types of activities and supporting his local GP. It was the first

17:10 time I'd really heard of that. It's now something that we really actively support. We we, you know, we we provide we have our ASSURA community fund, which supports health and wellness activities linked to our buildings, and social prescribing's a really important part of that. That could be a garden for providing for people for communal garden for people to come and socialize and use the garden. It could be supporting walking groups. It could be providing, you know, an ability to to get debt advice, for example. It might sound very nonhealth related, but actually worrying about finances actually can have a material impact on your on your well-being and your health. So all of those things, absolutely. We do that either through our own, through the green spaces, through our projects, the community fund, or working with the GPs. So it's a really, really good question because it's a really important part of of what we do.

18:03 And a question from Andrew, which I'll ask Jane to answer, which is what percentage what percentage of your borrowing is fixed versus variable? It's quite an easy one. Yeah. So, Andrew, all of our debts is fixed. 2.3% average interest rate. We have no variable rate borrowing at this time. Okay. That's the last of the questions that we've had submitted online. Okay. Any further questions? Just

18:30 hoping You don't have a cladding problem by any chance. Know. Premises. That's okay. Good. Yeah. Just one thing. Not getting much information from my ICMS. I presume on your voting list, there'll be the share buybacks for them. That seems to be automatic, didn't it? That is a bit of a bet noir for me to share buybacks. You're a growth company, so I hope you don't ever get driven down that road. So the kiddie weeks in the city like it. You see, this is a trouble. And the other thing is the other nasty is these smart city makers come and say, oh, sale and leaseback. Mhmm. You know? Oh, yeah. And lend yourself down with some debt. Dependents are deadened. You know? So I mean, your growth company Yes. Don't waste your money. Share buyback. You because you you expect it, you know, because you're gonna need the finance. Yes. You know, there's no skew in your finance straight to 300,000,000, go and buy some shares.

19:29 No. I am Yeah. No. I'm not. Well, I mean, you've you've got a tie if you wanted to do that, you'd have to time it right, etcetera. We do we do have a general provision to give us flexibility on how we deal with our share capital in general. Yes, there's a question on the AGM, which is asking for authority. I can assure you we have no plans to enter into any share share buybacks. We have plenty of opportunities to deploy that capital into into health facilities and new projects. The idea of buying shares is not it's not on the agenda. It just means, you know, we get these companies. We don't know what to do with our money. You know? I think we we have You pay big dividends. You're very they're nicer, so I don't pay the tax on it. Anyway That's currently not a problem we seem to have. But that's But not you know, it's a It's not it's not a it's not a plan of ours. No. I think it's a difference for you between the institutions and the private shareholders. You know? So we know who wins in that battle, but there we are. You say you have limited information through your ISO shareholding, although the website has it. If you'd like my set of accounts to take away Okay.

20:30 Yeah. So I can take them after them. Plea please do because I can easily get another one, and it's excellent deal by my It's an excellent my deal. Post, and I live in a block of flats with no. Get holiday brochures. It's Well, enjoy reading that, which is next Yeah. It. Yeah. I've read it one yesterday to read as well. And and we'll see you next year and answer questions on on on this on the annual report. Okay. So so thank you very much. We'll now proceed with the formal business of the AGM, which consists of the 18 resolutions which are set out in the notice of meeting dated the June 1, and which was sent to you together with an explanatory note and the annual report itself. As mentioned in the circular and as permitted under the articles of association, I direct that all business to be transacted at today's h AGM be voted on by way of a poll.

21:25 This will 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 are unable to attend physically, but who have been who have appointed proxies for the meeting. Shareholders present in person, corporate representatives, and proxies are, of course, entitled to vote. The notice of the meeting includes no less than 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 the annual report and accounts for the year ended 03/31/2022. Resolution resolution two seeks approval of the director's remuneration policy for the year ended 03/31/2022 contained in the annual report and accounts, which so you can read at your your your leisure.

22:20 Resolution three seeks approval by way of advisory resolution of the director's remuneration report for the year ended 03/31/2022 contained in the annual report and accounts. Resolutions four and five are our audited audit related resolutions. Resolution six to 13 cover the reelection of Louise Fowler, Jonathan Murphy, Jane Cottam, Jonathan Davies, Sam Barrow, Emma Corriaga, Noel Gordon, and myself as directors. And resolutions 14 to 18 cover capital and other issues, including authorizations relating to the allotment of shared capital and the dissapplication of preemption rights, the repurchase of shares, and the notice period for general meetings. Resolutions 15 to 18 are proposed as special resolutions.

23:08 Does anyone have any questions on any of today's resolutions before we proceed to voting? I think you're mine. I can explain the voting procedure, but I'd mentioned now the fact because all resolutions will be voted on by way of a poll. These resolutions will be in effect voted on simultaneously rather than sequentially. Accordingly, this is a one opportunity for you to ask any questions you might have before I ask you to vote.

23:40 The process. Company secretary, Paula, will act to 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. To vote on the poll, you will need poll card, which you were given upon on registration. 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 wish to vote. And if you need a further poll card, please put your hand up now. Obviously, I need colleagues who are physically present, and one will be passed to you. Their show those shareholders present who've returned the form of proxy need not complete the poll card unless they wish to alter their voting instructions now.

24:30 However, if a shareholder completes a poll card now, any proxy vote that has already been given will be canceled. When the poll procedure commences, you should insert your name in the poll card in the places indicated, full name of the shareholder. If you're using the poll card to vote on only some of the shares registered, not that you have to insert the number of shares and put a cross in respect of each resolution to indicate you're voting for or against that resolution. You should then sign the card in the place indicated, and the cards will be collected after you have have completed them. Does anybody have any questions on the voting?

25:17 Sorry. I have to go through that for obvious reasons. And I I know given that the number of AGMs not taking place physically and over the last couple of years, it's worth reminding everybody. So we can now commence a poll of your you all submitted. The four four of you submitted as necessary. If you'd like to hand the

25:54 Thank you very much. So as there are no more poll cards to be completed, the poll is now closed. And the results of poll on each resolution will be determined by all of all as scrutineer. This will take some time. The results will be announced by an RNS as soon as practical, and we expect it, to be honest, to be later today as we have significant proxies, votes lodged at the relevant proxy cutoff time. And these are also available to from all, should anybody wish to see them. So that concludes the AGM, and we thank all of our shareholders. Jonathan rightly said, you know, we are very focused on on shareholder value.

26:46 But in doing in providing shareholder value, we are also conscious of our wider stakeholder obligations and community and the virtuous circle that is created by driving, being a really great organization to do business with and the delivery of that shareholder value. And we thank you for your support as shareholders in in that endeavor. And with that, thank you for attending the AGM. My call meeting closed. Thank you very much indeed. That's great. Thank you very much indeed. Could I please ask attendees online not to close this session as we'll now automatically redirect you to the opportunity to provide your feedback in order that the board can better understand your views and expectations? 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 board of ASSURA PLC, we'd like to thank you for attending annual this today's annual general meeting online, and may I wish you all a very pleasant morning. Thank you. Thank you very much. Thank you. Thank you, Cody. Thank you so much.