RESULTS FOR THE YEAR ENDED 31 MARCH 2018

Transcription

1 RESULTS FOR THE YEAR ENDED 31 MARCH 2018

2 OVERVIEW Jonathan Murphy CEO 2

3 SIGNIFICANT PROGRESS Consolidating our leadership position in UK primary care property Accelerated growth Investment property up 29% 120 property additions Strong financial position 409m equity raise to fund: - pipeline - Aviva debt redemption Further valuation gains 6.9% like-for-like gain EPRA NAV up 6% Scalable model Cost of debt down by 94 bps to 3.12% EPRA Cost Ratio 13% Delivering for investors EPRA EPS up 4% Dividend increased 9% to 0.655p per quarter Refreshed pipeline Acquisitions 81m Developments 71m Government policy remains supportive of primary care infrastructure investment 3

4 FINANCIAL PERFORMANCE Jayne Cottam CFO 4

5 FINANCIAL HIGHLIGHTS Further growth achieving economies of scale Income statement Mar 2018 Mar 2017) Change Net rental income ( m) ) up 18% EPRA earnings ( m) ) up 24% EPRA EPS (p) ) up 4% Dividend per share (p) ) up 9% Balance sheet Mar 2018 Mar 2017) Change Investment property ( m) 1, ,344.9) up 29% Diluted EPRA NAV per share (p) ) up 6% LTV (%) 26 37) Down 11 ppts 5

6 22% GROWTH IN ANNUALISED RENT ROLL Acquisitions driving rental growth m Mar-17 Asset management Rent reviews Development completions Acquisitions Mar-18 6

7 24% GROWTH IN EPRA EARNINGS Continued growth through acquisitions and positive rent reviews m (0.3) (0.9) (1.4) Mar-17 Tax and other Admin expenses Net finance costs Net rental income Mar-18 7

8 EPRA COST RATIO REDUCED TO 13% Scale driving cost efficiencies EPRA Cost Ratio 24% 22% 20% 20% 18% 16% 18% 17% 14% 12% 14% 13% 10% Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 8

9 6% GROWTH IN DILUTED EPRA NAV PER SHARE Strong income growth and valuation uplift 54p 52p 4.0p 50p 48p 2.5p 46p 44p 49.3p (2.5p) (2.4p) 0.1p 1.4p 52.4p 42p 40p Mar-17 Dividends Refinancing Other Share issue Income (EPRA EPS) Capital (revaluations) Mar-18 9

10 29% INCREASE IN INVESTMENT PROPERTY Portfolio opportunities accelerate expansion m 1,800 1, % Equivalent yield 4.98% 5.10% Net initial yield 4.80% 279 1,600 1, ,400 1,300 (2) 32 1,733 1,200 1,100 1,000 1,345 Mar-17 Other Development costs Revaluation gain Acquisitions Mar-18 10

11 STRENGTH OF FINANCIAL POSITION Capital discipline in financing strategy Support from both equity and debt investors 98m and 311m of funds raised in June and December respectively RCF extended to 300m 150m of notes issued under UK private placement Aviva loans repaid in full, break costs in line with expectations LTV & interest rate history LTV 70% 60% 50% 40% 30% 20% 10% Interest rate 6% 5% 4% 3% 2% 1% 0% Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 LTV Weighted average interest rate 0% 11

12 DIVERSIFIED FUNDING STRUCTURE Unsecured funding journey continues Current sources of funding Bank RCF UK private placement US private placement Listed Bond Mar 2018 Mar 2017 Net debt ( m) LTV 26% 37% Cash/undrawn facilities ( m) Weighted average interest rate 3.12% 4.06% Weighted average debt maturity (years) Interest cover 327% 296% Unsecured debt (% of gross debt) 78% 38% Assets secured against facilities 12% 45% 12

13 PROPERTY UPDATE Simon Gould Head of Development 13

14 CONTINUED STRONG GROWTH Portfolio acquisitions contributed to accelerated growth 388m increase in portfolio value 279m acquisitions, of which 134m were portfolio deals 4.9% average yield on cost Solicitors instructed on a further 81m of acquisitions pipeline replenished with acquisition opportunities that meet our criteria Mar 2018 Mar 2017 Investment property 1,733m 1,345m Rent roll 91.0m 74.4m WAULT 12.6 years 13.2 years Acquisitions 279m 156m 14

15 STRENGTHENED DEVELOPMENT TEAM To help us meet increased demand Increased team in response to growing pipeline and enquiries Experienced team with track record of delivery Blend of forward funding and direct development Innovation in design and construction to meet NHS needs Reduce cost in use Enhance environment for patients and staff West Gorton Increase flexibility and future proofing 15

16 DEVELOPMENTS AND PIPELINE Strong immediate pipeline 6 forward funded schemes completed 4 forward funding schemes and 1 development currently on site Appointed on 10 schemes, with a move to more inhouse approximate end cost of 47m Completed On site Immediate pipeline Number of schemes Development cost 31.3m 23.6m 47m Cost to complete 9.7m Completion timing 2018/ /20 Darley Dale 16

17 HIGHLIGHTED DEVELOPMENTS Continued delivery of schemes that benefit the community Porthcawl GPs, pharmacy, podiatry, community services including nursing & midwifery After Before 17

18 RENT REVIEWS Prospective growth driven by developments Annualised uplifts average 1.70% RPI/fixed/other 3.14% Rent review settlements 6% OMR c.72% RPI/fixed/other c.28% open market 0.68% 5% Linkage to cost inflation on new developments creates evidence for rental growth Slight lag awaiting evidence flowing through to rent reviews 4% 3% 2% 1% 0% 18

19 ENHANCING EXISTING PORTFOLIO Pro-active portfolio management Asset enhancement initiatives contributed to half year uplift in value New leases, lease re-gears and extensions remain a priority Portfolio 98% let Dedicated proactive portfolio managers add value through initiatives team increased by 3 No. Rent New leases signed m Lease re-gears m Physical extensions 3 0.1m 19

20 ASSET ENHANCEMENT CASE STUDY Extension at Wideway Surgery highlights portfolio management strengths Wideway Surgery 195m 2 extension, lease regear Partnership with local CCG and NHS England London Improvement Grant Funding Six consultation rooms, minor operation suite and improved training facilities Seven-day opening This extension will take our services into the future of primary care, allowing us to deliver care closer to home for thousands more patients in Merton Mariam Ganesaratnam, Managing Partner 20

21 OUTLOOK Jonathan Murphy CEO 21

22 MARKET OVERVIEW Strong valuation gains Strong underlying demand resulting in yield compression and significant valuation gains Period end initial yield of 4.80% Fundamentals remain strong Yield progression 8% 7% 6% 5% 4% 3% 2% 1% IPD monthly UK index initial yield Assura Net Initial Yield 15 year Gilt 0% 22

23 PRIMARY CARE INFRASTRUCTURE AT HEART OF NHS AGENDA 3bn primary care buildings pledge Majority of Naylor s recommendations accepted Demand for NHS capital into buildings remains high 1bn pledged to projects from the most advanced STPs all areas must submit detailed estates plans this summer Growing communities need healthcare infrastructure Pulse research shows GP practices missing out on millions in funding from housing development 23

24 ASSURA OUTLOOK Assura s capabilities to drive next stage of growth Knowledge & expertise Brand & reputation Our offering develop, invest, manage Best in class team Financial strength Internally managed model Economies of scale Proprietary database Strong pipeline Influencing government as a thought leader Delivering superior risk adjusted returns 24

25 Q&A Kibworth Swansea Ilkley Ilminster 25

26 SUPPLEMENTARY INFORMATION 1. Market 1.1 Growing demand / inadequate supply 1.2 Positive political backdrop 1.3 Policy statements 1.4 Ageing population 1.5 Risk reward spectrum 1.6 Assura well placed to outperform 2. Portfolio 2.1 Total property assets 2.2 Completed investment property 2.3 Investment process 2.4 Sensitivity analysis 3. Cash flows 3.1 Cash flow summary 3.2 Contracted rental income 3.3 Lease lengths 3.4 Debt repayment profile 5. Financials 5.1 Five year history 5.2 Balance sheet at 31 March EPRA NAV 5.4 Diluted EPRA NAV movement 5.5 EPRA EPS 6. Borrowings 6.1 Bank and bond facilities 6.2 Covenants 7. REITs 7.1 REITs 8. Dividends 8.1 Calendar 4. Rents 4.1 ERV evolution and reversion 4.2 Open market rents results 4.3 Basis of rent reviews 4.4 Developments drive rental growth 4.5 Rent review timing 26

27 1.1 GROWING DEMAND / INADEQUATE SUPPLY Demand Consistent cross-party support for: care closer to home greater patient choice Ongoing funding challenge 22bn efficiency savings by , tightly-stretched capital allocation More than 340 million GP consultations per year visits to the doctor by the average person have doubled since 2008 Supply 2014 BMA survey of GP practices 40% of GPs stated premises inadequate for provision of general practice services 70% said premises not suitable for offering a full range of services 80% said premises prevented them hosting a full primary / community healthcare 40% said existing premises could not be extended or developed to meet current or future needs 27

28 1.2 POSITIVE POLITICAL BACKDROP Cross party support for primary care investment continues Broad consensus on estate as a key enabler of transformation and sustainability Government policy supportive: expansion of access to GP services, growing the primary care workforce and collaboration between practices in Next Steps for the Five Year Forward View rollout of Estates and Technology Transformation Fund schemes continues; 1bn capital allocated to most advanced STP projects since summer 2017 supporting Naylor recommendations Pressures mounting from changing demands ageing population increasing expectations of service growing range of medical solutions and use of technology changing career and practice profile retirement and recruitment If we want to deliver worldclass care, we need worldclass buildings in which to deliver it. That is why it is critical that we invest in the NHS estate and find creative ways to modernise. Lord O Shaughnessy, Parliamentary Under Secretary of State for Health (Government response to the Naylor Review, January 2018) 28

29 1.3 POLICY STATEMENTS Next Steps on the Five Year Forward View Published March 2017 Emphasis on primary care NHS needs to protect and improve its estates Universal access to evening and weekend GP appointments by March 2019 Grow the primary care workforce: 5,000 more doctors, 1,000 physician associates and 1,300 clinical pharmacists in surgeries within three years Government s response to the Naylor review of NHS property and estates: why the estate matters for patients Published January 2018 Actions: creation of a new NHS property board to lead overarching national estate and capital strategy, chaired by Minister a strategic estates planning service to support STPs and building of estate skills take full advantage of private investment, where it offers good value improving data collection and application, and guidance on primary care buildings 29

30 1.4 AGEING POPULATION 2014 Male 100 Female Source: Office for National Statistics, Lazarus Population (thousands) in each age band 30

31 Total Return (per annum) 1.5 RISK REWARD SPECTRUM Total return vs standard deviation eleven years (since inception of index) to December % Residential index Primary Healthcare 8% Industrial All Healthcare 7% Equities Office Bonds 6% All property 5% 4% Retail 3% 2% 1% 0% Source: MSCI Risk (standard deviation) 31

32 1.6 ASSURA WELL PLACED TO OUTPERFORM Good reputation and relationships with GP community Development capability and strong pipeline Internally managed Knowledgeable and focused team IPD annual return to Dec-17 since inception of index in % 8% 7% 6% 6.0% Assura 6.1% Primary Healthcare Benchmark 8.5% 7.9% 5% 4% 3% 2% 1% 2.3% 1.7% 0% Income Return Capital Growth Total Return 32

33 2.1 TOTAL PROPERTY ASSETS Mar 2018 m Mar 2017 m Completed investment property 1, ,315.3 Investment property under construction Pharmacy lease premiums / rent adjustments Finance leases Property assets held for sale Total 1, ,345.8 Balance sheet classification Mar 2018 m Mar 2017 m Investment property 1, ,344.9 Property assets held for sale Total 1, ,

34 2.2 COMPLETED INVESTMENT PROPERTY Properties Value ( m)) Value (%) > 10m ) m ) m ) 45 < 1m ) , Properties Value ( m)) Value (%) North ) 39 South ) 33 Midlands ) 18 Scotland ) 3 Wales ) , Rent roll ( m)) Value (%) GPs 61.8) 68 NHS Body 14.6) 16 Pharmacy 7.4) 8 Other 7.2) ) includes 7.4m of investment property held for sale 34

35 2.3 INVESTMENT PROCESS Disciplined approach to acquisitions Database provides crucial market information Referrals, direct marketing, conferences and events key to sourcing opportunities Flexible and engaged approach to addressing tenant requirements Brand and reputation c.9,000 GP buildings in the market Focus on core due diligence Desktop review of key statistics Conversations with GPs Explaining the process Flexible approach to sale and leaseback In depth due diligence and assessment Offer 115 acquisitions in 2017/18 For example: Patient list Service provision Practice finances Local economy Competition For example: Rental tone and growth Enhancement opportunities Life span of building Lease renewal prospects Lease terms 35

36 2.4 SENSITIVITY ANALYSIS NIY ERV) p/share) +1%) p/share) +2%) ) p/share) +3%) p/share) 5.50% (9.17p) (8.54p) (7.92p) (7.29p) 5.25% (6.19p) (5.53p) (4.88p) (4.22p) 5.00% (2.91p) (2.22p) (1.54p) 0.85p) 4.75% 0.71p) 1.43p) 2.16p) 2.88p) 4.50% 4.73p) 5.50p) 6.26p) 7.03p) 36

37 3.1 CASH FLOW SUMMARY Year to) Mar 2018) m) Year to) Mar)2017) m) Opening cash 23.5) 44.3) Net cash from operations 49.9) 39.0) Cash flows from investing activities: Property and business acquisitions (282.3) (157.9) Development expenditure (31.7) (19.9) Sale of properties 0.9) 1.4) Other -) (0.3) Cash flows from financing activities: Equity issues, net of costs 397.1) -) Dividends paid (36.7) (31.9) Net borrowings movement (92.0) 148.8) Closing cash 28.7) 23.5) 37

38 3.2 CONTRACTED RENTAL INCOME 1,215m total contracted cash flow, 74% of rent roll still contracted in Contracted at Mar

39 Rental value ( m) 3.3 LEASE LENGTHS leases 219 leases WAULT 12.6 years 1,034 leases 74% of rent roll 9+ years unexpired term leases 116 leases 132 leases leases 77 leases Years remaining 94 leases 39

40 3.4 DEBT REPAYMENT PROFILE Mar 2018 Mar 2017 Gross debt 490m 523.8m Weighted average maturity Weighted average cost of debt 6.0 years 8.7 years 3.12% 4.06% m Bond RCF Private placements

41 Rental value ( m) 4.1 ERV EVOLUTION AND REVERSION ERV at 31 March m; vacant space 1.7m, valuers rental ERV 1.1m 100 Passing rent ERV m 74.4m 2.8m 91.0m Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 41

42 4.2 OPEN MARKET RENTS RESULTS 1.70% annualised increase from rent reviews settled in the period 0.68% from open market rent reviews 3.14% from RPI and fixed uplift reviews Annualised Rent reviews settled in year to 31 March 2018 Relating to review dates from calendar years: Open market reviews only % 0.7% Number of outstanding reviews (passing rent) ( 0.1m) ( 0.1m) 2011 (2 reviews) 0.2% 3 ( 0.3m) 2012 (2 reviews) - 6 ( 0.2m) 2013 (7 reviews) 1.2% 16 ( 1.3m) 2014 (7 reviews) 2.8% 30 ( 3.2m) 2015 (35 reviews) 0.7% 68 ( 7.2m) 2016 (36 reviews) 0.4% 112 ( 12.1m) 2017 (3 reviews) 0.6% 141 ( 13.9m) 42

43 Proportion of rent roll 4.3 BASIS OF RENT REVIEWS 80% 70% Upward/downward review basis - tenant can instigate (5%) Upward/downward review basis - landlord only trigger (18%) Upward only review basis (77%) 60% 50% 40% 30% 20% 10% 0% OMR RPI Fixed Other 43

44 4.4 DEVELOPMENTS DRIVE RENTAL GROWTH New developments capture increased land and construction costs resulting in increased rents Higher rental tone linked to increasing construction costs Relationship of increased costs and rent Scheme Year Size (m 2 ) Initial rent ( /m 2 ) Build costs ( /m 2 ) Wallasey , ,491 West Gorton , ,953 Increase 17% 31% Woodville , ,136 Netherfield , ,460 Increase 8% 15% 44

45 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 - 65% 7% - 72% RPI 4% 7% 4% - 15% Fixed 1% 4% 1% - 6% Other - 6% - 1% 7% 5% 82% 12% 1% 100% 45

46 5.1 FIVE YEAR HISTORY Scale Rent roll ( m) Investment property ( m) 1, , , Net assets ( m) 1, Flexibility Free cash/available facilities ( m) Unencumbered assets ( m) LTV (%) Performance EPRA EPS (p) EPRA NAV per share (p) Dividends (p) Figures represent year to 31 March 46

47 5.2 BALANCE SHEET AT 31 MARCH m increase in investment property Loan to value of 26% 199m of available facilities and cash Positioned strongly for future growth Property and debt m Investment property Net debt 2,000 1,800 1,600 1,733 1,400 1,200 1,345 1,000 1, Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 47

48 5.3 EPRA NET ASSET VALUE EPRA NAV) Mar 2018) m) EPRA NAV) Mar 2017) m) Net assets 1,250.4) 818.0) Deferred tax (0.5) (0.5) EPRA NAV 1,249.9) 817.5) Number of shares in issue 2,383,122,112) 1,655,040,993) EPRA NAV per share basic 52.4p 49.4p Diluted number of shares 2,383,332,419) 1,658,284,284) EPRA NAV per share diluted 52.4p 49.3p 48

49 5.4 DILUTED EPRA NAV MOVEMENT m) Pence per share) Diluted EPRA NAV at 31 March ) 49.3) Income (EPRA earnings) 50.0) 2.5) Capital (revaluations and capital gains) 79.1) 4.0) Dividends (46.4) (2.5) Equity issuance 411.0) 1.4) Refinancing costs (57.3) (2.4) Other (4.0) 0.1) Diluted EPRA NAV at 31 March ,249.9) 52.4) Growth 3.1) 6.3% 49

50 5.5 EPRA EARNINGS PER SHARE Mar 2018 m Mar 2017 m Profit for the period EPRA earnings Weighted average number of shares in issue basic 1,963,754,891 1,647,388,495 Basic EPS net profit 3.7p 5.8p EPRA 2.5p 2.4p Weighted average number of shares in issue diluted 1,963,965,198 1,650,631,786 Diluted EPS net profit 3.7p 5.8p EPRA 2.5p 2.4p 50

51 6.1 BANK AND BOND FACILITIES Loan / Bond Fixed / Floating Maturity Effective interest rate Secured/ unsecured Outstanding 31 Mar 2018 m 10 year listed Bond Fixed Dec % 1 Secured 110) 300m revolving credit facility 1 Floating May % 2 Unsecured 130) 100m private placement notes Fixed Oct % 1 Unsecured 100) 150m private placement notes Fixed Oct-25 Oct % 1 Unsecured ) 150) 490) Loan issue costs (4) Finance leases 3) Cash (29) Net debt 460) 1 increased to 300m from October % plus LIBOR, subject to LTV 51

52 6.2 COVENANTS All covenant conditions complied with Bond Unsecured facilities Req. Act. Req. Act. Interest cover > LTV / leverage > <60% 24% WAULT - - >7 yrs 13.7 yrs NHS >75% 77% - - Gearing - - <150% 32% Net rental income - - >8.5% 13.1% 52

53 7.1 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 20% withholding tax (unless investor is a qualifying institution) Other dividends are not subject to withholding tax Assura currently pays dividends not PIDs as the minimum PID is nil 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 53

54 8.1 CALENDAR 2017/18 Payment date 2 Ex-div date 2 Record date 2 PID Non PID Total 2 Q1 19 Apr Mar Mar p 0.60p 2 Q2 19 Jul Jun Jun p 0.60p 2 Q3 18 Oct Sep Sep p p 2 Q4 17 Jan 2018) 14 Dec 2017) 15 Dec 2017) p 0.655p 2018/19 Payment date 2 Ex-div date 2 Record date 2 PID Non PID Total 2 Q1 18 Apr 2018) 15 Mar 2018) 16 Mar 2018) p) 0.655p) Q2 18 Jul Jun Jun p p 2 Q3 17 Oct Sep Sep p p 2 Q4 16 Jan Dec Dec p p 2 1 Provisional date 2 Provisional amount 54

55 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 these statements. Many of these risks and uncertainties relate to factors that are beyond Assura s ability to control or estimate precisely, such as future market conditions, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company s ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Assura does not undertake any obligation to publicly release any revision to these forward-looking statements to reflect events or circumstances after the date of these materials. Information contained in this presentation relating to the Company or its share price, or the yield on its shares, should not be relied upon as a guide to future performance. 55