Assura Group. Results Presentation year ended 31 March Investing in the future of primary care property

Transcription

1 Assura Group Results Presentation year ended 31 March 2013 Investing in the future of primary care property

2 Assura Group Introduction Graham Roberts Investing in the future of primary care property

3 Assura Group Presentation Headlines Financial results Property update Market update Q & A Investing in the future of primary care property 3

4 Headlines Management has delivered Strong results Focused asset management generating rental growth Managing developments profitably Selling non core assets REIT conversion achieved Primary care sector is an extremely attractive market Assura is best placed to take advantage of the opportunity Trusted brand amongst GP community Scalable internal management structure Development profits retained Transparency of reporting Strong PLC Board Investing in the future of primary care property 4

5 Strong results 44% increase in underlying profits to 10.2m 6.3% increase in net asset value to 38.6p per share 18.6% total shareholder return Investing in the future of primary care property 5

6 Assura Group Financial results Jonathan Murphy Investing in the future of primary care property

7 Financial highlights 7.2% Property return 6.1% income return 8.7% Accounting returns 1 2.4% dividend paid 0.855p 6.3% increase in adjusted net asset value to 38.6p 44% increase in underlying profits to 10.2m 27% increase in underlying EPS to 1.9p 2% reduction in LTV to 62% 1 Increase in EPRA NAV and dividends Investing in the future of primary care property 7

8 Solid income growth 118 rent reviews completed: 2.4% weighted average annual uplift Last 2 years 3.4% and 3.8% annual uplift Backrents of 0.9m 0.9m new annual rent roll, developments 2.9% increase in annualised rent roll to 35.9m Rent m m 36 reviews Rent Reviews Settled in the Year 4.2m 46 reviews 1.8m 15 reviews 2.8m 21 reviews Q1 Q2 Q3 Q4 Previous Rent Rental Increase Investing in the future of primary care property 8

9 Underlying profit growth m m 0.7m 0.4m 0.2m m m m 6.0 Year to Mar12 Net rental income Finance revenue Finance costs Admin expenses Associates Year to Mar13 Investing in the future of primary care property 9

10 Lowest cost operator 7% new property income 4.5% long term interest rates Can manage 100m additional property for only 0.08% cost Further growth significantly earnings enhancing Investing in the future of primary care property 10

11 Core investment portfolio 162 primary care centres valued 524m 0.5% valuation uplift Rent review basis 80% open market 11% RPI 9% stepped & fixed 34.1m core annualised rent roll Mar 2013 Mar 2012 Initial yield 5.95% 5.89% Equivalent yield 6.15% 6.11% Investing in the future of primary care property 11

12 Transparent balance sheet 31 Mar 2013) 31 Mar 2012) m) m) Properties ) 549.2) LIFT 11.2) 10.5) Cash and deferred consideration ) 31.0) Debt (392.1) (375.6) Deferred revenue (14.8) (13.3) Other net working capital (14.8) (12.9) Derivatives at fair value (3.6) (2.5) Deferred tax 1.1) 1.3) Property plant & equipment 0.1) 0.2) Net assets 198.1) 187.9) Own shares held 1.9) 1.9) EPRA adjustments (slide appendix) 4.4) 2.4) EPRA NAV 204.4) 192.2) EPRA NAV per share 38.6p 36.3p Movement +2.3p (6.3%) 1 Includes available for sale 12.0m, Mar m 2 Deferred consideration 6.0m, Mar m Investing in the future of primary care property 12

13 EPRA net asset value movement Pence per) m) share*) EPRA net asset value at 31 March ) 36.3) Income (underlying profit) 10.2) 1.9) Capital (revaluations and capital gains) 5.9) 1.1) Dividends (4.5) (0.9) Other 0.6) 0.2) EPRA net asset value at 31 March ) 38.6) Growth 2.3) 6.3%) * Based on 529,548,924 shares in issue Investing in the future of primary care property 13

14 Robust cash flow Government backs 88.9% core portfolio leases 15.1 years weighted average remaining lease length m m 15.9m 3.6m 13.3m 4.5m Undrawn Facility 4.8m Cash 35.7m 11.3 years average maturity of debt 20.0 Cash 21.4m Investing in the future of primary care property 14

15 Dividend Underlying EPS of 1.9p per share 6% growth in quarterly dividend to 1.21p per share equivalent on an annual basis 1.6x covered by 2013 underlying profit Progressive dividend policy Investing in the future of primary care property 15

16 Assura Group Property update Andrew Darke Investing in the future of primary care property

17 Developments deliver shareholder value 3.5m development gains, profit on cost of 15.3% 7.1% yield on total cost of completed developments 70m value of 28 additional identified schemes Completed Fully funded on site Immediate prospects Development cost 12.4m 33.0m 30.6m Development cost to come n/a 19.2m 30.4m ERV 0.9m 2.3m 2.0m Number of schemes Investing in the future of primary care property 17

18 Development significant opportunity Continuing latent demand for new premises Care Quality Commission ( CQC ) is starting to impact 20% of premises failed registration and many will need new premises No change expected under new regime In house expert team very end user focused and knowledgeable Outlook remains strong Investing in the future of primary care property 18

19 Bespoke development completions Manchester Square Health Centre, Milford Haven St Hilary Group Practice, Wallasey Investing in the future of primary care property 19

20 Sudbury current healthcare Three existing facilities, all noncompliant with current NHS standards Investing in the future of primary care property 20

21 Sudbury Community Health Facility Example of integrated primary care centre services co located in one facility GP Practice Diagnostics Outpatients Physiotherapy Podiatry Audiology Counselling Midwifery Pharmacy Investing in the future of primary care property 21

22 Sudbury 3,300m 2 Gross Internal Area 20 year leases with 5 yearly RPI index linked rent reviews 547,000pa rent roll Fixed price build cost 8.6m approximate valuation on completion Investing in the future of primary care property 22

23 Sudbury Investing in the future of primary care property 23

24 Non core disposal success 14 of 19 non income earning properties sold Former Head Office sold for 5.5m Land at Scarborough (book value: 6.3m), nearing completion Non core no longer material Investing in the future of primary care property 24

25 Assura Group Market update Graham Roberts Investing in the future of primary care property

26 Significant market opportunity Sector offers excellent risk adjusted returns UK health infrastructure requires major investment Scale of opportunity could dwarf investment to date: Over 10Bn required for investment in the sector Assura is a trusted brand in the sector Internal management and REIT status will deliver the benefits of this growth to shareholders Investing in the future of primary care property 26

27 Partner of choice Assura working with new clinical bodies Dr James Kingsland appointed as strategic medical adviser Engaging with NHS Investing in the future of primary care property 27

28 Conclusions Management has delivered: Strong results Asset management disciplines delivering results Disposal of non core assets Continued profitable developments and pipeline Primary care sector is extremely attractive market Assura best placed to take advantage of the opportunity as internally managed REIT Investing in the future of primary care property 28

29 Q&A Investing in the future of primary care property 29

30 Supplementary information 1. Market 1.1 Growing demand / inadequate supply 1.2 Market: policy direction supportive 1.3 Yield outlook stable 1.4 Sector attractiveness 1.5 Asset class has proven its relative value 1.6 Strong and predictable cash flow 1.7 Assura well placed to outperform 1.8 Core portfolio v IPD Healthcare 2. Net assets 2.1 EPRA net asset value 3. Portfolio 3.1 Total property assets 3.2 Non core portfolio 3.3 Capital value core portfolio 3.4 Sensitivity analysis on core portfolio 3.5 Core portfolio lease length 4. Rents 4.1 Portfolio rental income growth over 5 years 4.2 ERV evolution and reversion 4.3 Core portfolio rental growth 4.4 Open market rents still increasing 4.5 Basis of rent reviews 5. REITs 5.1 REITs 6. Dividends 6.1 Dividends 7. Borrowings 7.1 Bank and Bond Facilities 7.2 Covenants Investing in the future of primary care property 30

31 Growing demand / Inadequate supply Appendix 1.1 Demand 10 year track record of crossparty support for: More services delivered locally Greater patient choice More community based facilities (medical centres, polyclinics) Unaffordable healthcare budget Doubled in 10 years to 120bn Number of consultations with GPs has been increasing at 2.5% per annum Over 300 million visits per year Supply Most recent survey of GP practices ¾ of GPs stated premises not suitable for future needs ⅓ said not capable of complying with Disability Discrimination Act ¼ said premises posed a risk to staff/patients Insufficient actually built GP premises to be regulated for first time from Act GPs given 80bn of the healthcare budget and told to lead NHS commissioning Investing in the future of primary care property 31

32 Market: policy direction supportive Appendix 1.2 Government policy to shift from expensive acute / secondary sector into primary care setting Health & Social Care Act brings GPs into commissioning role From 2013 GPs regulated by Care Quality Commission Pressures mounting from changing demands Ageing population Different expectations of service Growing range of medical solutions increasing demand Changing career and practice profile Efficiency will be essential Investing in the future of primary care property 32

33 Yield outlook stable Appendix 1.3 Primary care property yields have been less volatile Yield spread over long dated gilts up 50 bps since 31 March bps on core portfolio 8.00% 7.00% 6.00% 5.00% Assura Net Initial Yield 4.00% 3.00% IPD UK Property Quarterly Index Net Initial Yield 15 Year Gilt 2.00% 1.00% 0.00% Jun 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Investing in the future of primary care property 33

34 Sector attractiveness Market Features Health non discretionary Planning environment benign District Valuer determines rent reviews Tenant Features Private businesses underwritten by Government Premises are bespoke GPs are not mobile stickiness offsetting Residual Value (RV) Typical Lease Features 21 years, no breaks Upward and downward not less than initial Landlord triggers the review (3 years) Internal repairing and insuring 34.1m Rental Profile for Core Portfolio 67% Appendix % 7% 4% GPs Reimbursed by NHS NHS Body Pharmacy Other (Retail, Charities, Local Authorities, Dentists) Investing in the future of primary care property 34

35 Asset class has proven its relative value Appendix 1.5 Income certainty delivers impressive returns Yield stability Low cyclicality Attributable to Long leases Negligible default No oversupply Access to finance Rental outlook positive Growing demand Inadequate supply Total Return index from Commercial Primary healthcare Residential Source: IPD Investing in the future of primary care property 35

36 Strong and predictable cash flow Appendix 1.6 Government reimbursement of 88.9% of core portfolio leases Remaining lease length 15.1 years average on core portfolio Tenant breaks are uncommon New leases for 21 years or more Zero loss from defaults Regearing opportunities arise as change requirements arise, e.g. extensions Landlord triggers reviews in overwhelming majority of cases Passing rents core 34.1m, non core 1.8m 90% of rents received within 7 days of quarter day Investing in the future of primary care property 36

37 Assura well placed to outperform Appendix 1.7 Scale benefits 569m total property assets 14.8 years lease length on portfolio Good reputation and relationships with GP community Development capability and strong pipeline Internally managed Knowledgeable, motivated and focused team 8% 6% 4% 2% 0% 6.1% Income Return Assura IPD 6 Year Return to December % 1.1% 0.6% Capital Growth 7.3% Primary Healthcare Benchmark Total Return 6.8% Source: IPD Investing in the future of primary care property 37

38 Core portfolio v IPD Healthcare % IPD 6 Year Return to December Income Return Capital Growth Total Return Appendix Source: IPD Assura All Healthcare Property Benchmark Investing in the future of primary care property 38

39 EPRA net asset value Appendix 2.1 Adjusted basic) & diluted NAV) per ordinary) share) Adjusted basic) & diluted NAV) per ordinary) share) Mar 13) Mar 12) m) m) Net assets 198.1) 187.9) Own shares held 1.9) 1.9) Derivative financial instruments 3.6) 2.5) Derivative financial instruments of associates 1.9) 1.2) Deferred tax (1.1) (1.3) EPRA NAV 204.4) 192.2) Number of shares in issue 529,548,924) 529,548,924) EPRA net asset value per share 38.6p) 36.3p) Investing in the future of primary care property 39

40 Total property assets Appendix 3.1 Mar 13 Mar 12 m m Core Non core Investment portfolio Investment property under construction Properties held for sale Pharmacy lease premiums Finance leases Total Balance sheet classification Investment property Property assets held for sale Total Investing in the future of primary care property 40

41 Non core portfolio Appendix 3.2 Non core valued at 20.5m (March 2012: 26.3m) Income generating assets of 10.6m, net initial yield of 13.62% 1.8m disposals of nonincome earning buildings and 5.5m Daresbury Addition of 1.2m retail parade adjoining a medical centre Letting success offsets valuation decline from short leases m m Held for sale 11.4m Non core 14.9m Mar m 1.5m 0.4m Additions Revaluation Revaluation gains losses 8.1m Disposals 20.5m Held for sale 11.2m Non core 9.3m Mar 13 Investing in the future of primary care property 41

42 Capital value core portfolio Appendix 3.3 Size is not an indication of performance location is key Smaller units affordable to private investors 50% Capital Number of Total Capital Value Properties Value m < 1m m 1 5m m 5 10m m > 10m m Investing in the future of primary care property 42

43 Sensitivity analysis on core portfolio Appendix 3.4 NIY ERV +1% +2% +3% p/share p/share p/share p/share 6.50% -8.38p -7.47p -6.57p -5.66p 6.25% -4.75p -3.81p -2.87p -1.93p 6.00% -0.83p 0.16p 1.14p 2.12p 5.75% 3.45p 4.47p 5.50p 6.52p 5.50% 8.10p 9.18p 10.25p 11.32p Investing in the future of primary care property 43

44 Core portfolio lease lengths Appendix Average income weighted unexpired lease term 15.1 years leases 101 leases Rental Value m leases 2 32 leases 36 leases 10 leases 10 leases 28 leases Years Remaining Investing in the future of primary care property 44

45 Portfolio rental income growth over 5 years Appendix /12 includes 12 months of AHMP income 30 Actual Property Income m H2 Mar H1 Sept / / / / /13 Investing in the future of primary care property 45

46 ERV evolution and reversion Appendix m Vacant Space Total ERV at March m Core Portfolio Rent Roll 35m 30m 25m 20m 15m 1.8m 2.2m 1.6m 28.8m 1.5m 32.5m 1.8m 34.1m Estimated Rental Value less passing rent Passing rent 10m 19.3m 19.5m 5m m Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Investing in the future of primary care property 46

47 Core portfolio rental growth Appendix 4.3 Annualised Increase Year ended 31 March 2012 Year ended 31 March 2013 Rent reviews settled 3.12% 2.32% Rent reviews settled excluding RPI/fixed uplift 2.50% 2.03% 5% 5% 4% 4% OMR rent reviews by calendar year of review Year to Match 2012 Year to March 2013 Annual growth 3% 3% 2% 2% 1% 1% 0% Investing in the future of primary care property 47

48 Open market rents still increasing Appendix 4.4 Underlying rental trajectory masked by delayed rent review settlements 80% Open market reviews 20% RPIs, stepped and fixed uplifts Annualised Open market including RPI % on Core Open market only % on Core Rent reviews settled in period to 31 March Relating to review dates from calendar years: 2009 (1 review) ( 0.1m) 2010 (5 reviews) ( 0.4m) 2011 (21 reviews) ( 1.1m) 2012 (68 reviews) ( 3.4m) 2013 (5 reviews) ( 8.9m) Reviews to be settled on Core (passing rent) Investing in the future of primary care property 48

49 Basis of rent reviews Appendix % 80% 70% 27.4m Upward/Downward Review Basis Tenant Can Instigate 7% ( 2.3m) Upward/Downward Review Basis Landlord Only Trigger 17% ( 5.9m) Upward Only Review Basis 76% ( 25.9m) % Portfolio by rental value 60% 50% 40% 30% 20% 10% 0% 3.6m 2.2m 0.9m OMR RPI Fixed Other Investing in the future of primary care property 49

50 REITs Appendix 5.1 REIT Status is a tax election available to listed real estate companies REITs are tax exempt on property rental income and capital gains Profits are passed through to investors through minimum dividends (Property Income Distributions) 90% of taxable property rental profits Subject to 20% withholding tax (unless qualifying institution) Other dividends are not subject to withholding tax REITs are a recognised global investment class, attractive to specialist investors REITs are required to meet rules ensuring they remain focused on real estate investment activity Development activity is permitted but taxable if developments are sold within 3 years of practical completion Investing in the future of primary care property 50

51 Dividends Appendix 6.1 Quarterly dividends reflecting underlying rental receipt pattern and high degree of income certainty Normally reviewed annually to reflect cash flow progression Quarterly dividend increased to p per share from April 2013 Run rate equivalent to 1.21p per annum Investing in the future of primary care property 51

52 Bank and bond facilities Appendix 7.1 Loan/Bond Fixed/ Floating Maturity Effective Interest Rate Secured Properties Rental Income Outstanding 30 September m m m 10 year secured Bond Fixed 10 year, bullet repayment % Aviva amortising secured loans Fixed Amortising to % m Santander investment facility 10m Santander development facility Floating Floating Amortising from 2014, repayable % Development phase only 3.75% % interest rate swap of matching amount plus 195 bps % above LIBOR Investing in the future of primary care property 52

53 Covenants Appendix 7.2 All covenant conditions complied with Bond Aviva Santander Investment Facility Required Actual Required Actual Required Actual Interest v income cover 1, 2 > 1.50 > > > 2.1 Loan to Value > 1.35 > 1.42 n/a n/a < 75% LTV < 65% LTV Debt Service Coverage Ratio n/a n/a n/a n/a > 1.05 > 2.1 In addition, bond requires NHS backed income to exceed 75% (31 March 2013: 78%) and the weighted average lease length must exceed 10 years (31 March 2013: 14.1 years) 1 Some Aviva loans require only 0.9 times 2 All individually comply Investing in the future of primary care property 53