Assura PLC Assura Full Year Results (9438O)

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Assura Plc	LSE:AGR	London	Ordinary Share	GB00BVGBWW93	ORD 10P

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.20	0.49%	41.08	41.08	41.18	41.36	40.84	41.36	17,707,969	13:50:39

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
Real Estate Agents & Mgrs	150.4M	-119.2M	-0.0402	-10.22	1.22B

Assura (LSE:AGR)
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RNS Number : 9438O

Assura PLC

23 May 2018

Assura plc

Accelerated investment, improved balance sheet and strong financial performance

23 May 2018

Assura plc ("Assura"), the leading primary care property investor and developer, is pleased to announce its results for the year to 31 March 2018:

Continued growth of the portfolio

   --      28.8% increase in investment property to GBP1.7 billion (2017: GBP1.3 billion) 
   --      6.3% growth in diluted EPRA NAV per share to 52.4 pence (2017: 49.3 pence) 
   --      22.3% increase in rent roll to GBP91.0 million (2017: GBP74.4 million)

Delivering for investors

   --      4.2% increase in EPRA EPS to 2.5 pence (2017: 2.4 pence)

-- Profit before tax of GBP71.8 million (2017: GBP95.2 million) reduced reflecting the net impact of the GBP56.4 million early repayment costs payable to Aviva

   --      Dividend increased by 9.1% to 2.455 pence (2017: 2.25 pence)

Strengthened balance sheet enabling reduction in cost of debt

-- Over GBP400 million, gross of expenses, raised from equity placing in June 2017 and share issue in December 2017

   --      Weighted average cost of debt reduced by 94 bps to 3.12% (March 2017: 4.06%) 
   --      GBP211 million of Aviva debt repaid in January 2018

-- Unsecured revolving credit facility increased to GBP300 million at initial margin of 150 bps

-- GBP150 million notes in two tranches privately placed in October 2017, weighted average coupon 3.04%, maturities of eight and ten years

Well positioned, sector leader in a market that is in significant need of investment

   --      Current LTV of 26% (2017: 37%) giving Assura significant headroom for future investment 
   --      Strong pipeline with GBP152 million of acquisitions and developments 
   --      Scalable internally managed operating model, with in-house development team 
   --      Consensus that primary care must play a bigger role in health provision

-- Significant underinvestment in the nation's primary care premises, many GP premises not currently fit for purpose

-- Group operates in a highly fragmented market: portfolio of 518 medical centres compares with a total UK market of approximately 9,000 surgery buildings

Jonathan Murphy, CEO, said:

"We have delivered against our key objectives for the past year of growing the portfolio through acquisitions, strengthening the balance sheet to allow us to capitalise on the opportunities in our market and delivering sustainable returns to investors. Primary care remains key to the future requirements of the NHS. Our unique model, which delivers significant value to the NHS, and diversified funding structure, positions us well to deliver the improvements needed for a primary care estate that is fit for the future."

Summary Results

 
                                     2018       2017       Change 
Financial performance 
EPRA earnings per share              2.5p       2.4p       4.2% 
Profit before tax                    GBP71.8m   GBP95.2m   (24.6%) 
Net rental income                    GBP80.2m   GBP67.9m   18.1% 
Dividend per share                   2.455p     2.25p      9.1% 
Property valuation and performance 
Investment property                  GBP1,733m  GBP1,345m  28.8% 
Diluted EPRA NAV per share           52.4p      49.3p      6.3% 
Rent roll                            GBP91.0m   GBP74.4m   22.3% 
Financing 
Loan to value ratio                  26%        37%        (11ppts) 
Undrawn facilities and cash          GBP199m    GBP123m    61.8% 
Weighted average cost of debt        3.12%      4.06%      (94bps)

For further information, please contact:

 
 Assura plc:        Tel: 01925 420 
  Jonathan Murphy    660 
  Jayne Cottam 
  Orla Ball 
 Edelman:           Tel: 0203 047 
  John Kiely         2546 
  Brett Jacobs 
  Rob Yates

This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014 and has been announced in accordance with the Company's obligations under Article 17 of that Regulation.

Presentation and webcast:

A presentation will be held for analysts and investors on 23 May 2018 at 11am London time, with a webcast available from our website or via the following link:

http://webcasting.brrmedia.co.uk/broadcast/5ad4d1f35a296618f1792adc

Notes to Editors

Assura plc, a constituent of the FTSE 250 and the EPRA* indices, is a UK REIT and long-term investor in and developer of primary care property. The company, headquartered in Warrington, works with GPs, health professionals and the NHS to create innovative property solutions in order to facilitate delivery of high quality patient care in the community. At 31 March 2018, Assura's property portfolio was valued at GBP1,733 million.

Further information is available at www.assuraplc.com

*EPRA is a registered trademark of the European Public Real Estate Association.

Chairman's statement

Dear Shareholder

Assura exists to provide premises to the UK's primary care sector and we are proud of our role in supporting the public health of the UK. The NHS is often maligned, but it is in fact a great organisation providing free health services to everyone, based on need not means, and at a cost that is competitive in international terms. It is widely accepted now that the NHS needs to leverage its investment in primary care more effectively in order to relieve the strain on secondary care and to reduce costs whilst improving patient outcomes. When the Government makes this change of emphasis, as surely it must, Assura will be well placed to assist by providing further private sector capital to enhance primary care premises, enabling GPs to provide more services and attend to more patients.

The NHS is Assura's prime customer, accounting for 84% of our total rent roll. Some 7.5% of the UK's NHS patients now use our premises. This important social dimension to our work is reflected in our alignment with the values of the NHS and our commitment to the highest standards of ethics and integrity.

Over the last 12 months, Assura has continued to grow, providing more and better premises to the primary care sector. Our property portfolio has been expanded significantly, through both acquisitions and new developments. We now own and manage 518 premises, up by 120 since last year. Over the period under review we have added GBP314 million of property and this, together with the GBP170 million of property additions in the previous year, increased our net rental income by 18% to GBP80.2 million.

Thanks to the continued support of our shareholders we were able to raise GBP409 million in two separate equity raises in June 2017 and December 2017. This support has enabled us to fund our investment programme and restructure some of our more expensive debt facilities. We are well advanced in implementing our plan to deploy these proceeds.

We remain the UK's largest developer and owner-manager of primary healthcare property with a property portfolio valued at over GBP1.7 billion. The increased scale of our operations and our strong financial position have assisted us in obtaining better terms on our debt. We have signed new unsecured debt facilities of GBP200 million, lowering the overall cost of borrowings by 94 basis points to 3.12%.

Following the two equity raises in the year our loan to value ("LTV") fell from 37% to 26% at the year end. We have stated previously that we are comfortable with LTV increasing to a level between 40% and 50%, so the current position gives us a significant level of headroom for future investment. We are continuing to source attractive opportunities and currently have a GBP152 million pipeline of further property acquisitions and developments in solicitors' hands.

A key part of our strategy is our unique partnership with GPs, to whom we offer all elements of property service. This provides GPs with a long-term partner approach throughout the lifecycle of a medical centre, from first idea for a new surgery through the NHS business case; the development and build of the new surgery; moving in; sale of the old property; and maintenance of the new premises over the next 25 plus years. Our ability to "develop, invest and manage" gives us a crucial advantage when securing new development opportunities and other asset management initiatives. Moreover, our model is highly scalable meaning that, as we grow, the benefits of scale accrue to shareholders through a growing dividend stream. The benefit of this model has been illustrated again this year as net rental income rose by 18% to GBP80.2 million and EPRA earnings rose by 24% to GBP50 million, and profit before tax was GBP71.8 million.

Dividends

We aim to deliver superior risk adjusted returns to our shareholders and a key component of this return is a growing, covered dividend. In January 2018 the Board increased the quarterly dividend payment by 9% to 0.655 pence per share. This represents an increase of nearly one third from the level of 0.5 pence per share paid three years ago.

Shareholder engagement

We are committed to the highest standards of financial transparency and believe a significant investment in investor relations activity is a key responsibility for any public company. We have held 141 meetings with investors during the year and I am delighted to welcome a number of significant new shareholders onto our register.

Our people and the Board

Following the appointment of Jonathan Murphy as CEO in February 2017, we then recruited a very talented new CFO in Jayne Cottam, who joined us in September 2017. Jayne brings a wealth of financial and debt strategy experience as well as a keen mind. Andrew Darke retired from the Board on 31 March 2018 after 14 years of sterling service, although I am pleased to report that he continues to support the business as an advisor.

I indicated to the Board last year that I was considering retiring, and as a result Ed Smith was appointed as a Non--Executive Director in October 2017 with a view to succeeding me as Chairman. On 22 March 2018, I announced my intention to retire at the conclusion of the AGM and the Board has announced that it intends to appoint Ed Smith as Chairman at that time. Ed has a long and successful career in finance as well as deep experience of the health service and government and this will serve us well when he becomes Chairman of this Company.

Assura has undergone much change since I joined back in August 2011. We refocused to become a pure property company, sold non-core activities, simplified the Group structure, launched five equity issues to raise a total of GBP933 million, refinanced our debt, became a REIT and entered the FTSE 250 index. Over this period, our property portfolio increased from some GBP500 million to GBP1.7 billion today, and our market capitalisation increased from GBP120 million at its low point to just over GBP1.4 billion today. The business is now in excellent shape with a leadership position in its chosen market, a supportive shareholder base and a strong financial position to underpin future growth.

We have 50 people employed in Assura and, on behalf of the Board, I would like to thank each and every one of them for their hard work, dedication and contribution to the success of the business. They are the key to Assura's success.

Looking ahead

Assura has the strongest balance sheet in the sector and we are well placed to continue investing in primary care property, which remains a very fragmented market. In addition, we remain focused on carefully managing our existing portfolio with our in-house management team striving to deliver the highest standard of customer service and operational excellence for the nation's GPs, while also maximising the value of our portfolio through asset management initiatives.

Although the policy consensus across all mainstream parties to increase emphasis and investment in primary care is more positive now than ever before, we remain frustrated by the slow progress in transforming policy into meaningful investment. Everyone seems to agree that better healthcare hinges on more care being provided in the primary sector. Having more doctors and better leveraging their expertise through ancillary healthcare professionals will require more and better premises. We stand ready to support this essential investment in NHS infrastructure by offering a powerful combination of the right skills, relationships and capital to make such plans a reality on the ground.

Simon Laffin

Non-Executive Chairman

22 May 2018

CEO review

Overview

Assura has continued to deliver significant growth in 2018, adding 120 medical centres to create a portfolio of 518 properties at the year end.

The UK primary care market remains highly fragmented with approximately 9,000 medical centres and so this represents a market share of around 6%.

Assura maintains a distinct model that offers investment, development and management of premises to our GP customers. This multi-faceted approach enables us to understand better the requirements of the GPs and to anticipate their future needs, thus giving us an advantage in securing investment or development opportunities. This has been a key factor behind our success in adding GBP314 million of property additions. We continue to source many schemes off market, taking advantage of our relationships and market knowledge to identify opportunities that are not widely advertised.

I would specifically highlight four successful portfolio transactions in the year which between them included 57 properties for a gross consideration of GBP134 million. They neatly reflect our long-term approach to business as we had been patiently tracking several of these deals for a number of years to ensure that we were in pole position when the opportunities materialised.

Delivering long-term outperformance in property returns

Assura is a constituent of the IPD All Healthcare Index and over the last five years we have delivered an annualised ungeared return of 9.9% which compares favourably to the Index at 9.4% over the same period.

Moreover, these strong returns have been achieved against a background of historically low levels of development activity. Development activity enhances our returns in two ways: firstly, we are typically able to develop new premises at an effective yield on cost that is 100 basis points higher than achieved through buying existing premises; and secondly, developments provide evidence of construction cost inflation that in turn drives rental growth.

Our 518 medical centres, which are geographically diverse and collectively serve more than 7.5% of the UK's population, currently have a rent roll of GBP91.0 million. Our investment approach is to identify and acquire those assets we believe are best in class in their local catchment areas and facilitate provision of a broad range of services to their local communities. We believe such properties provide better prospects for lease renewal on expiry and so drive higher property returns over the long term.

A good example of this approach is seen in our acquisition of Argyle Surgery Medical Centre, which was acquired off market after a direct approach through our marketing team. This centre today serves over 24,000 patients and as such is the largest practice in Wales. It provides almost 20 additional services on site including counselling, phlebotomy, asthma treatment, coronary disease clinics and a minor surgery suite.

At the same time, we are prepared to acquire shorter leases, and then use our property skills to redevelop or enhance the premises, whilst seeking to re-gear the lease to a longer period.

Rental income

The key driver of our property return is the income from our long-term leases. In the year, rental growth was 1.7% from settled rent reviews. Most of our rent reviews are on an open market basis, set by reference to rental awards agreed with the District Valuer on new schemes. This means that rents are influenced by land and construction cost inflation over the medium term. While there has been significant inflation in these costs in recent years, this is not yet fully reflected in our passing rents as the slowdown in new schemes has reduced the available evidence of that inflation. Our portfolio is well placed to capture this rental growth once new development activity picks up and this gives us confidence in rental growth prospects over the medium term.

Capital growth

The balance of our ungeared annualised return is generated from capital growth, which has seen a like-for-like valuation growth of 6.9% in the past year. This increase has primarily come from a movement in yields, with our net equivalent yield moving down by 31 basis points over the past year. The portfolio net initial yield as at 31 March 2018 was 4.80%. We completed six developments during the year at a total development cost of GBP31.3 million. This has added GBP1.6 million to our annual rent roll.

We also add value through active asset management of our properties, working with our GP tenants on proposals for physical extensions or agreeing new or extended lease terms. We have done this at Wide Way Medical Centre, where working with the practice and the NHS, with part funding from the NHS London Improvement Grant Fund, we were able deliver a 195 sq.m extension. This provides five new patient consultation rooms, a minor operations suite and a conference room, as well as improved reception, waiting and administration areas allowing the premises to provide seven day extended access to primary care. As part of this new extension Assura was able to agree a new 25-year lease with the GP tenant. Overall, during the year we agreed three extensions, 13 new leases and 15 lease extensions, significantly improving surgery provision for some 235,000 patients, whilst adding a further GBP0.5 million to our rent roll.

The combined impact of our investment and asset management activity has been to achieve a 6% growth in EPRA NAV to 52.4 pence per share.

Maximising operational efficiency

GPs are our principal customer, so we naturally measure ourselves against their satisfaction with what we do for them and the best test of this is whether our GPs would recommend us to other GPs. In our annual tenant satisfaction survey, over 96% of our tenants said they would recommend us as potential landlords to other GPs. This is reflected in the fact that our GPs remain our greatest source of referrals for new business. We continue to focus on understanding their evolving needs and demands, so we can be at the forefront of the significant investment required in improving premises going forward.

Our team of portfolio and investment managers are responsible for identifying value enhancing asset management opportunities, such as lease extensions and redevelopments within our existing estate, as well as new acquisition opportunities.

This approach enables us to optimise the efficiency with which we can translate increased rental income into underlying profit and hence dividends. In the year we have delivered a 24% growth in EPRA earnings to GBP50.0 million, which has been achieved from a combination of 18% growth in our net rental income and a reduction from 14% to 13% in our EPRA Cost Ratio. Profit before tax was GBP71.8 million.

The overall impact of all of these factors has enabled us to increase our quarterly dividend from January 2018 by 9% to 0.655 pence per share, which is the sixth successive dividend increase over a period of six years.

Continued focus on our specialist sector

Assura maintains a proprietary database of every primary care property in the UK from which we can identify and analyse potential acquisition opportunities. This unique market perspective has been a key contributor to our continued success in expanding our portfolio. We closed the year with a portfolio of 518 properties and a valuation in excess of GBP1.7 billion.

The ongoing growth in the portfolio has largely been achieved through acquisitions. In the year we completed GBP314 million of property additions, which was the largest contributor to the GBP388 million increase in investment property in the year. This has enabled our rent roll to grow by 22% to GBP91.0 million.

Meanwhile our in-house development team is currently busier than it has been for a number of years. We completed six schemes in the year for a gross development cost of GBP31.3 million and the number of potential opportunities has increased markedly. We are currently on site at a further five schemes with a gross development cost of GBP23.6 million. The pipeline where we expect to be on site within the next 12 months remains strong, comprising a further 10 schemes with a gross development cost of GBP47 million.

This increased level of activity is encouraging and has resulted in us increasing the size of our development team from two to five colleagues as we look to both secure more schemes and increase the proportion that we manage in-house.

There continue to be delays in implementing approved schemes under the Estates and Technology Transformation Fund, although we are encouraged by the announcement in the Autumn Budget of GBP2.6 billion being made available to support capital projects by Sustainability and Transformation Partnerships ("STPs"). More than GBP700 million of this total has already been allocated to the most advanced projects, including a number of primary care schemes, and we remain optimistic that these central initiatives will result in increased future investment across the NHS estate. Assura has the skills, resources and capital to support these plans when they convert into action.

Funding further growth

The success in delivering growth in our portfolio has only been possible thanks to the continued support of our shareholders and we successfully raised GBP409 million in two separate equity issues in June 2017 and December 2017.

In October 2017 we secured GBP150 million from a UK private placement with Legal & General Investment Management with a maturity split between eight and 10 years and a blended interest rate of 3.04%. In addition, the available facilities under the RCF were increased to GBP300 million, which is a variable rate facility at an initial margin of 150 basis points. In line with Assura's funding strategy, the new notes and the RCF are unsecured.

Our LTV was 26% at the year end. We are comfortable with our LTV increasing to a level between 40% and 50% and so we retain significant headroom to fund future growth. We are continuing to source attractive investment opportunities and we currently have a pipeline of further property acquisitions and developments of GBP152 million in solicitors' hands.

Market developments

Estates have been a continuing theme of focus for STPs this year, with government expecting detailed estates strategies to be submitted by all areas this summer. Through work with the Nuffield Trust, we have played our part in supporting a number of STPs with their thinking and planning on primary care infrastructure matters. Providing a wider range of health services closer to home, from a broader range of primary care professionals, creates a better care experience for patients and the conditions for better outcomes for the NHS. The outdated and unfit converted residential stock of surgery premises must evolve into purpose built medical centres, with the capacity and the capability to meet the challenges the NHS will face in the future. The NHS desperately needs more investment in its primary care estate, which is largely owned now by GPs themselves, and we stand ready to provide capital to deliver this investment.

In the past year the importance of improving the quality of physical infrastructure for primary care has been explicitly recognised as being part of the solution to broader NHS challenges, with the Government's formal response to the Naylor Review largely accepting its recommendations as well as highlighting the need for private capital to play a role in funding the investment that will be required.

Executive Board

I am delighted to report that Jayne Cottam was appointed Chief Financial Officer in September, joining us from the leading private house builder, Morris Homes. She serves on both the Group and Executive Boards.

Andrew Darke stepped down from both Boards at the end of the year. Following this change, I have taken the opportunity to rejig the Executive Board to include the three Heads of Department from our property team who join Jayne Cottam, our CFO, Orla Ball, our Head of Legal, and myself. The three new members are: Spencer Kenyon (Head of Portfolio Management) who has been with the business since its formation and has managed the portfolio throughout this time; Simon Gould (Head of Development) who has led our development efforts for the last decade; and Patrick Lowther (Head of Investment) who joined us last year having previously been a property fund manager at Savills and so benefits from extensive investment management experience.

The new Executive Board has been in place only a few months, but I am pleased with the progress the newly established team has made already and I look forward to working with them as we enter the next chapter in Assura's development as a leading real estate business and partner to the NHS.

Outlook

The political agenda continues to be dominated by Brexit, but in its 70th anniversary year, the NHS is one of the few domestic issues managing to secure meaningful debate. The Prime Minister has publicly accepted the need for a long-term funding settlement for the health service, and MPs from all parties are working together on potential solutions. Assura firmly believes in the NHS. Regardless of the politics, the fundamentals for primary care estate will remain steadfast: to reduce pressure on hospitals, improve access to general practice and help the people who rely on health services the most to reach them closer to home. GP surgery buildings and primary care premises must be fit for the future.

Jonathan Murphy

CEO

22 May 2018

Business review

Portfolio as at 31 March 2018 GBP1,732.7 million (31 March 2017: GBP1,344.9 million)

Our business is based on our investment portfolio of 518 properties. This has a passing rent roll of GBP91.0 million (March 2017: GBP74.4 million), 84% of which is underpinned by the NHS. The WAULT is 12.6 years and 74% of the rent roll will still be contracted in 2028.

At 31 March 2018 our portfolio of completed investment properties was valued at a total of GBP1,709.6 million, including investment properties held for sale of GBP7.4 million (March 2017: GBP1,315.3 million and GBPnil), which produced a net initial yield ("NIY") of 4.80% (March 2017: 5.10%). Taking account of potential lettings of unoccupied space and any uplift to current market rents on review, our valuers assess the net equivalent yield to be 4.98% (March 2017: 5.29%). Adjusting this Royal Institution of Chartered Surveyors ("RICS") standard measure to reflect the advanced payment of rents, the true equivalent yield is 5.15% (March 2017: 5.47%).

Our EPRA NIY, based on our passing rent roll and latest annual direct property costs, was 4.77% (March 2017: 5.05%).

 
                           2018    2017 
                           GBPm    GBPm 
-----------------------  ------  ------ 
 Net rental income         80.2    67.9 
 Valuation movement        79.4    56.5 
-----------------------  ------  ------ 
 Total Property Return    159.6   124.4 
-----------------------  ------  ------

Expressed as a percentage of opening investment property plus additions, Total Property Return for the year was 9.7%, which is the same return as in 2017.

Our annualised Total Return over the five years to 31 December 2017 as calculated by IPD was 9.9% compared with the IPD All Healthcare Benchmark of 9.4% over the same period.

The net valuation gain in the year of GBP79.4 million comprises a 6.86% uplift on a like-for-like basis net of movements relating to properties acquired in the period. The uplift has arisen due to the downward pressure on yields with increased demand for assets in the sector. Despite the downward pressure, the NIY on our assets continues to represent a substantial premium over the 15-year UK gilt which traded at 1.588% at 31 March 2018.

Investment and development activity

We have invested substantially during the period, with this expenditure split between investments in completed properties, developments, forward funding projects, extensions and fit-out costs enabling vacant space to be let as follows:

 
                                               2018 
                                               GBPm 
-------------------------------------------  ------ 
 Acquisition of completed medical centres     278.9 
 Developments/forward funding arrangements     31.7 
 Like-for-like portfolio (improvements)         6.0 
-------------------------------------------  ------ 
 Total capital expenditure                    316.6 
-------------------------------------------  ------

The bulk of the growth in our investment portfolio has come from the acquisition of 115 properties for GBP278.9 million during the period.

Despite the continued delay in NHS approval of new developments, we have completed six developments during the period (all under forward funding agreements) with a total development cost of GBP31.3 million. This has added GBP1.6 million to our annual rent roll and generated a 5.2% yield on cost. The GBP31.7 million in the table above is development spend during the year, whereas the GBP31.3 million relates to projects completed.

During the year we recorded a revaluation gain of GBP6.2 million in respect of investment property under construction (2017: GBP0.8 million).

Development gains are recorded based on the stage of completion whilst there has also been uplift reflecting an element of yield shift, as with the existing portfolio.

As at 31 March 2018, we had five developments on site (four under forward funding agreements), with a total committed investment value of GBP23.6 million, and a further 10 which we would hope to be on site shortly (estimated cost of GBP47 million).

Live developments and forward funding arrangements

 
                      Estimated 
                     completion   Development      Costs 
                           date         costs    to date       Size 
-----------------  ------------  ------------  ---------  --------- 
 Brixworth               May-18       GBP1.2m    GBP0.1m   600 sq.m 
 Darley Dale             Sep-18       GBP2.3m    GBP1.0m   773 sq.m 
                                                              2,069 
 Durham                  Apr-18      GBP10.2m    GBP9.7m       sq.m 
                                                              2,212 
 Porthcawl               Feb-19       GBP7.2m    GBP2.0m       sq.m 
 Stow-on-the-Wold        Dec-18       GBP2.7m    GBP1.0m   742 sq.m 
-----------------  ------------  ------------  ---------  ---------

Portfolio management

We have continued to deliver rental growth and have successfully concluded 182 rent reviews during the year to generate a weighted average annual rent increase of 1.70% (2017: 1.57%) on those properties. Our portfolio benefits from a 28% weighting in fixed, RPI and other uplifts which generated an average uplift of 3.14% during the period. The majority of our portfolio is subject to open market reviews and these have generated an average uplift of 0.68% during the period.

We have secured 13 new tenancies with an annual rent roll of GBP0.4 million, in addition to 15 lease re-gears (rent of GBP0.9 million) and three extensions to existing buildings (rent of GBP0.1 million). Our EPRA Vacancy Rate was 1.8% (March 2017: 2.1%).

Administrative expenses

The Group analyses cost performance by reference to our EPRA Cost Ratios (including and excluding direct vacancy costs) which were 13.0% and 12.0% respectively (2017: 13.7% and 12.4%).

We also measure our operating efficiency as the proportion of administrative costs to the average gross investment property value. This ratio during the period was 0.51% (2017: 0.57%) and administrative costs stood at GBP7.9 million (2017: GBP7.0 million).

Financing

In line with our financing strategy, we have continued the move from secured to unsecured facilities and increased our share capital base through two equity issuances.

In May 2017, we extended the revolving credit facility to GBP250 million. The terms were unchanged, being unsecured and at an initial margin of 150 basis points above LIBOR, subject to leverage. In October 2017, this was further extended to GBP300 million.

In June 2017, we completed a GBP98.4 million, gross of expenses, equity raise via a placing of approximately 164 million shares.

In October 2017, we issued GBP150 million of privately placed loan notes in two tranches with maturities of eight and 10 years. The weighted average coupon is 3.04% and the notes are unsecured.

In December 2017, we completed a GBP310.7 million, gross of expenses, equity raise via Firm Placing, Placing and Open Offer and Offer for Subscription.

In January 2018, the proceeds from the December equity raise were used, in part, to repay the remaining GBP211 million of long-term loans held by Aviva Commercial Finance, with associated repayment costs of GBP56 million.

 
Financing statistics                     2018        2017 
---------------------------------  ----------  ---------- 
 Net debt                           GBP460.4m   GBP499.6m 
 Weighted average debt maturity     6.0 years   8.7 years 
 Weighted average interest rate         3.12%       4.06% 
 % of debt at fixed/capped rates          73%         81% 
 Interest cover(1)                       327%        296% 
 LTV                                      26%         37% 
---------------------------------  ----------  ----------

1. Interest cover is the number of times net interest payable is covered by EPRA earnings before net interest.

Our LTV ratio currently stands at 26% following the equity raises in the year. LTV will increase in the short term as we invest in additional properties and our policy allows us to reach the range of 40% to 50% should the need arise. 73% of the debt facilities are fixed with a weighted average debt maturity of 6.0 years.

As at 31 March 2018, we had undrawn facilities and cash totalling GBP199 million. Details of the outstanding facilities and their covenants are set out in Note 9.

Net finance costs presented through EPRA earnings in the year amounted to GBP22.0 million (2017: GBP20.6 million).

Finance costs presented outside of EPRA earnings totalled GBP57.3 million (2017: GBP1.4 million). These costs represent one-off costs associated with early repayment of facilities or accounting adjustments to write off loan fees where the revolving credit facility was amended. The 2018 charge included GBP56.4 million of early redemption fees associated with the Aviva loans being repaid in January 2018, in line with the plan announced in the prospectus for the December 2017 equity raise.

Alternative Performance Measures ("APMs")

The financial performance for the period is reported including a number of APMs (financial measures not defined under IFRS). We believe that including these alongside IFRS measures provides additional information to help understand the financial performance for the period, in particular in respect of EPRA measures which are designed to aid comparability across real estate companies. Calculations of the measures, with reconciliations back to reported IFRS measures, are included where possible.

Profit before tax

Profit before tax for the period was GBP71.8 million (2017: GBP95.2 million). The decrease reflects the net impact of the early repayment costs incurred relating to the repayment of the Aviva facilities, offset by increased valuation gain on investment property and the higher net rental income following additions to the portfolio.

EPRA earnings

 
                                        2018     2017 
                                        GBPm     GBPm 
-----------------------------------  -------  ------- 
 Net rental income                      80.2     67.9 
 Administrative expenses               (7.9)    (7.0) 
 Net finance costs                    (22.0)   (20.6) 
 Share-based payments and taxation     (0.3)        - 
-----------------------------------  -------  ------- 
 EPRA earnings                          50.0     40.3 
-----------------------------------  -------  -------

The movement in EPRA earnings can be summarised as follows:

 
                                       GBPm 
-----------------------------------  ------ 
 Year ended 31 March 2017              40.3 
 Net rental income                     12.3 
 Administrative expenses              (0.9) 
 Net finance costs                    (1.4) 
 Share-based payments and taxation    (0.3) 
-----------------------------------  ------ 
 Year ended 31 March 2018              50.0 
-----------------------------------  ------

EPRA earnings has grown 24% to GBP50.0 million in the year to 31 March 2018 reflecting the property acquisitions and developments completed as well as the impact of our asset management activity with rent reviews and new lettings. This has been offset by increases in administrative expenses and financing costs.

Earnings per share

The basic earnings per share ("EPS") on profit for the period was 3.7 pence (2017: 5.8 pence).

EPRA EPS, which excludes the net impact of valuation movements and gains on disposal, was 2.5 pence (2017: 2.4 pence).

Based on calculations completed in accordance with IAS 33, share-based payment schemes are currently expected to be dilutive to EPS, with 0.2 million new shares expected to be issued. The dilution is not material as illustrated in the table below:

 
EPS measure        Basic  Diluted 
-----------------  -----  ------- 
 Profit for year    3.7p     3.7p 
 EPRA               2.5p     2.5p 
-----------------  -----  -------

Dividends

Total dividends settled in the year to 31 March 2018 were GBP46.4 million or 2.455 pence per share (2017: 2.25 pence per share). GBP9.7 million of this was satisfied through the issuance of shares via scrip.

As a REIT with requirement to distribute 90% of taxable profits (Property Income Distribution, "PID"), the Group expects to pay out as dividends at least 90% of recurring cash profits. Three of the four dividends paid during the year were normal dividends (non-PID), as a result of brought forward tax losses and available capital allowances. The October 2017 dividend was paid as a PID and future dividends will be a mix of PID and normal dividends as required.

The table below illustrates our cash flows over the period:

 
                                         2018      2017 
                                         GBPm      GBPm 
-----------------------------------  --------  -------- 
 Opening cash                            23.5      44.3 
 Net cash flow from operations           49.9      39.0 
 Dividends paid                        (36.7)    (31.9) 
 Investment: 
 Property acquisitions                (282.3)   (157.9) 
 Development expenditure               (31.7)    (19.9) 
 Sale of properties                       0.9       1.4 
 Other                                      -     (0.3) 
 Financing: 
 Net proceeds from equity issuance      397.1         - 
 Net borrowings movement               (92.0)     148.8 
-----------------------------------  --------  -------- 
 Closing cash                            28.7      23.5 
-----------------------------------  --------  --------

Net cash flow from operations differs from EPRA earnings due to movements in working capital balances.

Diluted EPRA NAV movement

 
                                                        Pence 
                                                          per 
                                                 GBPm   share 
-------------------------------------------  --------  ------ 
 Diluted EPRA NAV at 31 March 2017              817.5    49.3 
 EPRA earnings                                   50.0     2.5 
 Capital (revaluations and capital losses)       79.1     4.0 
 Dividends                                     (46.4)   (2.5) 
 Shares issued                                  411.0     1.4 
 Refinancing costs                             (57.3)   (2.4) 
 Other                                          (4.0)     0.1 
-------------------------------------------  --------  ------ 
 Diluted EPRA NAV at 31 March 2018            1,249.9    52.4 
-------------------------------------------  --------  ------

Our Total Accounting Return per share for the year ended 31 March 2018 is 11.0% of which 2.455 pence per share (5.0%) has been distributed to shareholders and 3.1 pence per share (6.0%) is the movement on EPRA NAV.

Portfolio analysis by capital value

 
                                Total    Total 
                     Number     value    value 
              of properties      GBPm        % 
----------  ---------------  --------  ------- 
 >GBP10m                 29     437.5       26 
 GBP5-10m                67     440.3       26 
 GBP1-5m                315     764.3       45 
 <GBP1m                 107      67.5        3 
----------  ---------------  --------  ------- 
                        518   1,709.6      100 
----------  ---------------  --------  -------

Portfolio analysis by region

 
                                Total    Total 
                     Number     value    value 
              of properties      GBPm        % 
----------  ---------------  --------  ------- 
 North                  172     664.0       39 
 South                  182     557.2       33 
 Midlands                84     313.3       18 
 Scotland                23      50.3        3 
 Wales                   57     124.8        7 
----------  ---------------  --------  ------- 
                        518   1,709.6      100 
----------  ---------------  --------  -------

Portfolio analysis by tenant covenant

 
                          Total 
                  Total    rent 
                   rent    roll 
              roll GBPm       % 
----------  -----------  ------ 
 GPs               61.8      68 
 NHS body          14.6      16 
 Pharmacy           7.4       8 
 Other              7.2       8 
----------  -----------  ------ 
                   91.0     100 
----------  -----------  ------

Consolidated income statement