Assura Group Results Presentation Year ended 31 March 2012 Investing - PowerPoint PPT Presentation

Assura Group Results Presentation Year ended 31 March 2012 Investing in the future of primary care property

Introducing Assura • Experienced management & board • Strategy – Primary care property – No diversification Shareholders • – REIT – Quarterly progressive dividend Investing in the future of primary care property 2

Assura well positioned within an attractive asset class • Asset class has proven its relative value • Economic and political pressures support continued outperformance Assura well placed within sector • Investing in the future of primary care property 3

Asset class has proven its relative value Income certainty delivers 130 128 impressive returns 120 115 – Yield stability Total Return index from 110 – Low cyclicality 100 Attributable to 98 91 90 – Long leases 88 – Negligible default 80 – No oversupply 70 – Access to finance 66 60 Rental outlook positive – Growing demand – Inadequate supply Commercial Primary healthcare Residential Source: IPD Investing in the future of primary care property 4

The appeal of primary care property lies in its distinct characteristics Market Features • £32.2m Rental Profile for Core Portfolio – Health is non ‐ discretionary spend – Planning environment ‘benign’ – District Valuer determines rent reviews • Tenant Features – Private businesses underwritten by 68% 21% Government – Premises are bespoke – GPs are not mobile – “stickiness” 7% offsetting Residual Value (RV) 4% • Typical Lease Features – 21 years, no breaks – Upward and downward not less than £22.0m: GPs ‐ Reimbursed by NHS initial £6.9m: NHS Body – Landlord triggers the review (3 years) £2.2m: Pharmacy – Internal repairing and insuring £1.1m: Other (Retail, Charities, Local Authorities, Dentists) Investing in the future of primary care property 5

Growing demand / Inadequate supply Demand Supply 10 year track record of cross ‐ Most recent survey of GP practices • • party support for: – ¾ of GPs stated premises not suitable for future needs – More services delivered locally – ⅓ said not capable of complying – Greater patient choice with Disability Discrimination Act – More community based facilities – ¼ said premises posed a risk to (medical centres, polyclinics) staff/patients • Unaffordable healthcare budget – Insufficient actually built – Doubled in 10 years to £120bn • GP premises to be regulated for Number of consultations with • first time from 2013 GPs has been increasing at 2.5% • 2012 Act – GPs given £80bn of the per annum healthcare budget and told to lead – Over 300 million visits per year NHS commissioning Investing in the future of primary care property 6

Assura well placed to outperform Scale benefits • IPD 5 Year Return to December 2011 – £549m total property assets 8% – 16 years lease length 7.4% • Track record of out performance 6.6% 6% 6.2% 6.1% and rental growth • Good reputation and 4% relationships with GP community 2% 2.4% 2.1% • Development capability and 1.2% 0.4% strong pipeline 0% Income Capital Total Rental Value • Internally managed Return Growth Return Growth • Knowledgeable, motivated and Assura Primary Healthcare Benchmark focused team Source: IPD 7 Investing in the future of primary care property

Results reflect continuing progress • Core business progressing well • Disposals of non ‐ core activity and refinancing completed Underlying results positive • • Transparent balance sheet • Strong and predictable cash flow Investing in the future of primary care property 8

Core business progressing well Continued rental progression in the • Rent Reviews Settled in the Year year – 99 rent reviews completed in the year £3.77m 4.0 – Weighted average annualised uplift of 3.41% (29% of portfolio by rental 3.0 26 value) reviews Rent £m – Follows rent reviews in year to March 2011 of 3.77%, 2010 2.55% 2.0 £1.56m • Continuing development activity £1.04m 13 – 9 schemes completed for £37.4m at reviews 1.0 11 7.3% yield on cost £0.48m reviews – 6 fully funded schemes in progress 5 reviews with committed costs to complete of 0.0 Q1 Q2 Q3 Q4 £8.5m – 8 schemes in pipeline for total Previous Rent Rental Increase development cost of £26m Investing in the future of primary care property 9

Disposals of non ‐ core activity and refinancing completed • Sale of Pharmacy division and LIFT consultancy business for £36.3m – £9m deferred consideration (including vendor loan) • Closure of NAB interest rate swap for a cash cost of £69.3m – £52.7m exceptional swap loss in the year Refinancing • – Rights Issue £33.5m net of expenses – Bond issue £110.0m Investing in the future of primary care property 10

Positive underlying results • Net rental income up 50% 2012 ) 2011 ) +/ ‐ % £m ) £m ) helped by AHMP acquisition Net rental income 30.9) 20.6) +50% LIFT profit and interest 1.6) 1.6) • LIFT earnings stable Joint ventures (0.1) (0.4) • Administration costs down Administrative costs (4.5) (5.5) ‐ 18% 18% Share ‐ based incentives ‐ 0.2) • Underlying profit £7.1m Net finance costs 1 (20.8) (15.8) +32% (2011: £0.7m) Underlying (EPRA) profit 7.1) 0.7) • Underlying diluted EPS 1.5p (2011: 0.2p) 1 Excluding exceptional swap close out Investing in the future of primary care property 11

Net asset value movement £m) Net asset value at 31 March 2011 220.1) Profit from continuing operations 11.4) Profit from discontinued operations 1.6) Dividend (5.1) Rights issue proceeds 33.5) Swap cost (54.7) Deferred tax 1.0) Goodwill write off (20.0) Other 0.1) Net asset value 31 March 2012 187.9) EPRA adjustments (appendix) 4.3) EPRA net asset value at 31 March 2012 192.2) EPRA NAV per share (based on 529,548,924) 36.30p Investing in the future of primary care property 12

Transparent balance sheet 2012) 2011 ) £m ) £m ) Properties 1 549.2) 509.6) LIFT 10.5) 9.9) Cash and deferred consideration 2 31.0) 38.9) Gross debt (375.6) (361.8) Deferred revenue (13.3) (10.4) Other net working capital (12.9) (8.4) 188.9 177.8 Goodwill/intangibles ‐ 44.6) SWAP (2.5) (17.3) Deferred tax 1.3) 1.8) Property plant & equipment 0.2) 13.2) Net assets 187.9) 220.1) EPRA adjustments (appendix) 4.3) 21.7) EPRA NAV 192.2) 241.8) EPRA NAV per share 36.30p 55.51p 1 Includes available for sale £11.4m for 2012 (2011: £9.8m) 2 Deferred consideration £9.6m for 2012 (including vendor loan) (2011:nil) Investing in the future of primary care property 13

Core investment portfolio • 158 primary care centres valued at £506m (2011: £450m) • 1% valuation uplift 1 • 89.5% Government income (2011: 91.5%) • 15.8 years weighted unexpired lease length (2011: 15.9 years) • Rent review basis 2012 2011 – 80% Open market Initial yield 5.89% 5.87% – 9% RPI Equivalent yield 6.11% 6.12% – 11% Stepped & fixed 1 Portfolio valued half yearly by Savills and DTZ Investing in the future of primary care property 14

Development activity 9 sites completed adding 11,400m 2 • – £37.4m development cost – £2.7 ERV – 7.3% average yield on cost – 14% average profit on cost 6 fully funded sites on ‐ going to add 4,900m 2 • – £8.4m book value – £8.5m cost to complete – £1.1m ERV 8 immediate prospects for a further 9,000m 2 • – £1.8m ERV – £26m estimated development cost • Large number of further development schemes • No developments to commence without signed lease and committed funding Investing in the future of primary care property 15

LIFT investments • Local Improvement Finance • Assura is an investor in 6 out of 49 Trusts are companies held by LIFTCos the public and private sector to develop and own medical Look through investment in £100m of • centres predominantly let on modern primary care property long term leases with inflation linked leases. – £9m of Loan stock yielding 12% • The public sector tenant has a – Equity interest has inflation driven buy ‐ back right at the end of the option value lease. • Control rests with the public • Consultancy now sold (discontinued sector. activities) Investing in the future of primary care property 16

Non ‐ core ‐ £26m portfolio, net rental income of £1.5m Former Head Office 55,000 sqft freehold Lease < 5 years Daresbury Business Park £860K rents receivable 3 retail malls in hospitals Leasehold £935K rents receivable 18 years left on head lease £240K rents payable Land 60% by value under offer / Nil income exchanged 20 buildings Retail parade / flats Nominal income £5.7m Residential conversions of 3 sold since 31 March old surgeries 7 in solicitors hands Investing in the future of primary care property 17

Strong and predictable cash flow • Government reimbursement of 89.5% of core portfolio leases • Remaining lease length 16 years average – Breaks are unusual – 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 £32m, non ‐ core £3m 90% of rents received within 7 days of quarter day • Investing in the future of primary care property 18