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
  +0.40p +0.62% 65.00p 64.90p 65.00p 66.10p 64.20p 66.10p 2,534,367 12:08:35
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Food & Drug Retailers 99.3 63.8 2.7 24.1 1,549

Assura PLC Assura Full Year Results

21/05/2019 7:01am

UK Regulatory (RNS & others)

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3 Months : From Apr 2019 to Jul 2019

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Assura PLC

21 May 2019

21 May 2019

Continued strong growth and operational metrics

Reinforces Assura's position as a key partner to the NHS

Assura plc ("Assura"), the leading primary care property investor and developer, today announces its results for the 12 months to 31 March 2019.

Jonathan Murphy, CEO, said: "Assura has delivered another year of strong operational performance with robust revenue and rental growth. This has been driven by our development and investment teams' focus on growing and enhancing our portfolio and active asset management. We are well positioned in the primary care property market and our development pipeline is the strongest it has been in 10 years. Our expertise in this field will be further strengthened by today's announcement of the acquisition of the primary care developer GPI which enhances our development pipeline by an initial GBP92 million.

"As the government continues to approve healthcare schemes, we look forward to maintaining our deep relationships with the NHS. This is built on our strong links with healthcare trusts and ability to provide high-quality primary care facilities that benefit patients and reduce pressure on the NHS."

Valuation up strongly, driven by new developments and carefully selected acquisitions

   --      Portfolio value up 14% to GBP1,979 million driven by both acquisitions and new developments 

-- Portfolio NIY now 4.74% and WAULT of 12.0 years demonstrates attractiveness of sector and Assura as a business

   --      Diluted EPRA NAV per share up by 1.7% to 53.3p 

High-quality developments and acquisitions reinforce market-leading portfolio

-- Strong development and investment team successfully secured GBP240 million of property additions in the year

   --      Three state-of-the-art developments completed with nine developments moved to on-site 
   --      Strong portfolio growth of 57 carefully selected and high-quality property additions 
   --      Pipeline of properties in legal hands at GBP142 million 

-- Outlook supported by today's announcement of the acquisition of the primary care developer GPI which will reinforce Assura's position as the leading developer in the sector, strengthening our development team and adding an initial GBP92 million to the immediate and extended pipeline

   --      12 disposals amounting to GBP7 million 

Portfolio well-placed to capture rental growth

-- Portfolio expansion has enabled rent roll growth of 13% to GBP102.7 million and rental income growth up 19% to GBP95.2 million

-- 2.2% of rental growth secured through settled rent reviews, including 1.10% relating to open market reviews

   --      Rental growth from acquisitions, new developments and increase in rent reviews 
   --      EPRA EPS up 8% to 2.7p reflecting strong pipeline and cost of debt 
   --      Profit before tax up 17% to GBP84.0 million 

-- Strong growth reflected in dividend per share rise of 8% to 2.65p and quarterly dividend increased by 5% to 0.685p

Robust balance sheet strengthens long-term prospects and access to finance

   --      Strong balance sheet and primarily unsecured structure 
   --      EPRA cost ratio down to 12.5%, one of the lowest in sector 
   --      EPRA NAV increased 1.7% to 53.3p 
   --      Undrawn facilities and cash up 44% at GBP287 million 
   --      LTV of 34% provides good headroom to create value and build portfolio 

-- One of few listed peers assigned rating of A- (stable outlook) by Fitch Ratings Limited providing us with a broadened access to debt capital markets and lenders

-- Completed issuance of GBP300 million unsecured listed bond with tenor of 10 years and interest rate of 3% per annum

Results strengthen Assura's position as the NHS's partner of choice

   --      Primary care remains an integral part of reducing pressure on the NHS's services 

-- Assura is best-placed to support given its people, capital strength, quality of its service and its long-term relationships and market understanding

-- Assura's buildings sit at the heart of communities across the UK, supporting 5.6 million patients which equates to 8.5% of the UK population

-- Strong pipeline of properties in legal hands at GBP142 million will reinforce Assura's position as partner of choice

Summary Results

 Financial performance                 March 2019   March 2018   Change 
 EPRA earnings per share               2.7p         2.5p         8.0% 
                                      -----------  -----------  ------- 
 Profit before tax                     GBP84.0m     GBP71.8m     17.0% 
                                      -----------  -----------  ------- 
 Net rental income                     GBP95.2m     GBP80.2m     18.7% 
                                      -----------  -----------  ------- 
 Dividend per share                    2.65p        2.455p       7.9% 
                                      -----------  -----------  ------- 
 Property valuation and performance    March 2019   March 2018   Change 
                                      -----------  -----------  ------- 
 Investment property                   GBP1,979m    GBP1,733m    14.2% 
                                      -----------  -----------  ------- 
 Diluted EPRA NAV per share            53.3p        52.4p        1.7% 
                                      -----------  -----------  ------- 
 Rent roll                             GBP102.7m    GBP91.0m     12.9% 
                                      -----------  -----------  ------- 
 Financing                             March 2019   March 2018   Change 
                                      -----------  -----------  ------- 
 Loan to value ratio                   34%          26%          8ppts 
                                      -----------  -----------  ------- 
 Undrawn facilities and cash           GBP287m      GBP199m      44.2% 
                                      -----------  -----------  ------- 
 Weighted average cost of debt         3.24%        3.12%        12bps 
                                      -----------  -----------  ------- 

Alternative Performance Measures ("APMs")

The highlights page and summary results table above include a number of financial measures to describe the financial performance of the Group, some of which are considered APMs as they are not defined under IFRS. Further details are provided in the CFO Review and the notes to the accounts.

For further information, please contact:

   Assura plc:        Tel: 01925 420 660 
   Jayne Cottam 
   Orla Ball 
   David Purcell 
   Finsbury:          Tel: 0207 251 3801 
   Gordon Simpson 

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 21 May 2019 at 8.30am London time, with a webcast available from our website or via the following link:

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 outstanding spaces for health services in our communities. At 31 March 2019, Assura's property portfolio was valued at GBP1,979 million.

Further information is available at

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

Chairman's statement

We continue to solidify our position as a partner of choice to the NHS

Our people, our capital strength, the quality of our service, our buildings and our long-term relationships are the five unique hallmarks of our partnerships with GPs and the NHS.

In these first months as Chairman, I have been struck by just how deeply embedded these qualities are across this business. As our nation's health service seeks to deliver on the much-needed ambition set out in the NHS Long Term Plan, significant capital investment is required to support it, meaning the way we combine our unique strengths to deliver GP and NHS infrastructure has never been more important.

This year has given us particularly strong examples of all five elements in action. The team has worked together to cement our strategy around a clear vision and purpose, underpinned by a set of values and ways of working which we agree are important to us, our customers and the public.

The NHS is our prime customer, accounting for 85% of our total rent roll. Approximately 8.5% of the UK's NHS patients now use our premises and we are proud to be providing the infrastructure that serves so many people.

The last 12 months have seen us continue on our growth journey and we now own and manage 563 properties.

Our portfolio has expanded through both new developments and acquisitions, with GBP240 million of property additions in the year and GBP314 million from the prior year. This has helped us to grow our net rental income by 18.7% to GBP95.2 million.

Following the extensive support of our shareholders during 2017 we were able to fulfil our intentions to restructure some of our more expensive debt facilities. The restructure provided the platform for Assura to gain an A- investment grade rating from Fitch Ratings Limited and successfully execute a GBP300 million public bond.

In a defining year for our development pipeline, we opened new spaces around the country for GP practices and three NHS Trusts, and acquired 57 high quality assets including one of the country's biggest primary care centres.

This impressive progress would not have been possible without our long-term relationships and market understanding. The skills and knowledge of our team enable us to bring together successfully the many stakeholders on each deal, navigating the complex NHS procurement processes and managing our supply chain to meet the individual needs of each community.

The quality of our service and depth of our relationship with our tenants remain a key part of our strategy and this year we have evolved our approach of listening, listening and listening even more to the needs of everyone using our buildings. We have ensured there are locally based teams serving some of our busiest geographical areas. We have developed a new structure for our portfolio team to enhance our customer service and introduced a new role of senior project manager dedicated to overseeing our service to tenants during asset enhancement schemes.

Results and dividends

Our effective business model and ability to acquire, develop and manage and enhance properties has led to an increase in our EPRA earnings to GBP63.8 million, growth of 27.6%. Our profit before tax was GBP84.0 million.

Delivering superior and sustainable risk adjusted returns to our shareholders, including a progressive and covered dividend, is a core focus for us as a business. In January 2019, the Board increased the dividend payment by 7.7% to 2.65 pence per share.

Strong shareholder engagement

We are committed to shareholder engagement through open and transparent dialogue and communicate with our shareholders regularly. Our management team invests significant time and effort in this process and has conducted 108 meetings in the year. In addition, we have commissioned an investor study in the year as well as a consultation regarding changes to our Remuneration Policy, further details of which can be found on within the Annual Report.

Our people and the Board

Having taken over as Chairman in July last year, it has been a pleasure to join such a motivated team. We have 58 people within our business, and their skills are at the very heart of Assura's success. On behalf of the Board I would like to thank each of them for their hard work, commitment and dedication.

David Richardson has decided to retire after the AGM in July. He has been Senior Independent Non-Executive Director and chair of the Audit Committee for seven years now and was a key figure in the many changes that Assura has undergone. I would like to thank David for his service to the Company.

Jonathan Davies joined as Non-Executive Director in June 2018 and will take over as Senior Independent Director and Audit Committee chair following David's retirement from the Board. Jonathan is Chief Financial Officer of SSP Group plc and brings a wealth of experience to the Company.

The future

Looking ahead, we have a health service with an energetic strategy for the future, additional revenue funding, and real drive for integration of services and adoption of new technologies. What it lacks, however, is the capital investment strategy to match; in due course the Spending Review will set out the Government's contribution to the NHS's long-term capital needs, but other solutions will be needed to reach the significant level of investment required. We're ready to play our part; demonstrated by our acquisition of primary care developer, GPI - strengthening our development capability, growing our pipeline and reinforcing our market position. Our goal of creating outstanding spaces for health services in our communities is our vision for the future, accommodating the transition towards more services in primary care, more specialist treatments in communities, general practice at scale and the growth of social prescribing.

As the Government continues to approve healthcare schemes, we continue to solidify our position as a partner of choice to the NHS and play a key role in providing high quality primary care facilities to reduce the pressure on the NHS.

I would like to take this opportunity to thank our shareholders and the whole Assura team - the beating heart of our business - for their support and commitment over the year.

Ed Smith, CBE

Non-Executive Chairman

20 May 2019

CEO review

Well positioned sector leader in a market which is under-invested


Assura has just completed its 15th year and we have again demonstrated our ability to deliver sustainable growth with an increase in the value of our portfolio of GBP246 million to GBP2 billion. This growth was driven by property additions as our investment and development teams successfully secured 57 assets for inclusion in our portfolio at an average yield on cost of 4.8% and a WAULT of 14.5 years.

The primary care property market remains highly attractive with its secure, long-term income, linkage to construction cost inflation and constrained supply leading to stable long-term returns.

Assura's position in the market is distinct in that our all-round model offers investment, development and management of premises to our GP clients. 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 future investment or development opportunities.

It also enables us to own the relationship with our customers so that we can protect and enhance the brand and reputation that have been so carefully nurtured over Assura's 15 years in operation. By retaining the property management and enhancement skills in-house we are also better able to understand the potential from our portfolio. We are currently strengthening our asset enhancement team by creating a dedicated project team to focus on delivering physical extensions and asset enhancements within our portfolio. We believe this has the potential to play a much bigger role in our value creation in the future.

As well as asset enhancement, we continue to accelerate our investment in development opportunities. Development activity enhances our returns in two ways: first, developments provide a higher level of return for a low level of development risk; and, second, they provide evidence of construction cost inflation that, in turn, drives rental growth. We have significantly strengthened our extended development pipeline this year to a total of GBP190 million.

This commitment to development as a key strategic driver of value is reflected in today's announcement of the acquisition of the primary care developer, GPI. GPI has been a leading developer in primary care for over 25 years and its experienced team and strong pipeline are a valuable addition to the Assura proposition. Our development team will now increase from five to nine surveyors and our extended pipeline will increase from GBP190 million to GBP282 million. This makes it the strongest pipeline in our history and reinforces our position as market leaders.

To support this growth, we have put in place a robust financial structure with an emphasis on long-term sustainability through a lower level of gearing and maximising our flexibility by using unsecured funding. This approach was recognised earlier in the year by Fitch Ratings Limited when they awarded us an investment grade rating of A-, which marks us out as being amongst the most financially strong of the listed property businesses.

Distinct market

Assura holds a leading position in a distinct market with the majority of its properties let to GPs on very long leases. These bespoke assets are designed and built to the local health requirements of the communities they serve and so are essential local social infrastructure. The GPs receive 100% funding for their rental costs and so this NHS backing provides excellent security for our income.

The bespoke nature of the assets means that they must be carefully matched to local requirements and so all new buildings are approved by the NHS in advance to exacting standards. This approval process is rigorous and can be very time consuming with pre-qualification standards for contractors. This effectively prevents any speculative development and the net effect of this is a very stable market with low volatility.

The sector is subject to strong growth in underlying demand. There are three key elements for this growth in demand.

The first of these are the health and demographic changes we are undergoing as a population. The UK population is forecast both to grow and the relative proportion of older patients to increase significantly. This has an outsize impact on healthcare demands as the elderly have significantly higher health treatment requirements. The population of the over 80s is forecast to increase by 70% over the next 20 years according to the Office for National Statistics.

The second key element is the historically low levels of investment in primary care property in the UK. This under-investment has left the UK with an infrastructure that is struggling to keep pace with the increasing demands of the NHS and its patients. The detailed study of the state of the NHS property estate, the Naylor Review, was published in 2017 with its recommendation of a GBP10 billion investment in NHS property across both primary care and the hospital sector. The most recent study in this area was a survey by the British Medical Association which was published in February of this year. 50% of practices did not feel their primary care buildings were currently fit for purpose and 80% judged that their premises would be unsuitable for meeting the future needs

of their patients.

The final element is the policy direction to see more health treatments occurring outside of the hospital environment. This policy has cross-party support and recognises that it is both more convenient for the patient and cheaper for the NHS for more routine outpatient, diagnostic and minor urgent care to be dealt with by primary care centres and not by hospitals.

These factors result in a market where there is a significant requirement for investment in primary care and in the buildings that enable that care to be delivered. In January 2019, the NHS published its Long Term Plan. This was a response to an announcement by the Government last summer that it was going to increase the overall NHS budget by over GBP20.5 billion in real terms in the next five years. The Plan included GBP4.5 billion of additional funding being allocated to primary care with a specific emphasis on more healthcare staff working with and within GP practices including more physiotherapists, pharmacists, physician associates and social prescribing link workers. The Plan also called for a significant expansion in the provision of outpatient clinics and diagnostic services in a primary care setting. Our ability to provide the innovative and flexible workspaces that this would require is second to none and puts us in prime position to support the delivery of the Plan.

Financial highlights

I am pleased to be reporting on an excellent set of results for Assura this year with profit before tax growing by 17% to GBP84.0 million and growth in EPRA earnings per share of 8% to 2.7 pence. In addition, we have achieved an increase in portfolio value supporting a further 2% gain in EPRA net asset value to 53.3 pence per share.

These strong results have been achieved through focusing on delivering revenue growth, ensuring economies of scale are captured for the benefits of shareholders and on optimising the value from our portfolio.

The overall impact of all of these factors has enabled us to increase our quarterly dividend from January 2019 by 8% to 0.685 pence per share which is the seventh successive dividend increase over a period of six years.

Going forward, we plan to announce proposed dividends annually at the time of our full year results rather than with the interim results as is currently the case. In order to facilitate this change, at the interim results in November 2019, we will announce the dividend for the following two quarters before implementing this approach with the full year results in May 2020. Dividends will continue to be paid on a quarterly basis.

Robust revenue growth

The skills of our development and investment teams were the key element in securing the property additions of GBP240 million in the year, which was the largest contributor to the GBP246 million increase in investment property in the year. This has enabled our rent roll to grow by 13% to GBP102.7 million.

In the year rental growth from settled rent reviews was 2.2%. Most of our rent reviews are on an open market basis, which saw a growth in the year of 1.1% up from 0.7% in the prior year. These rents are 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. This inflation is also partially affected by yield compression in recent years. New development activity is starting to pick up as evidenced by the strength of our development pipeline and this gives us confidence in rental growth prospects over the medium term.

Improved operational efficiency

Assura adopts an internally managed model, so the Assura team members are all employees of the business. This means that a lot of our costs are fixed, and do not move in line with the gross asset value as they typically do in funds managed by external fund managers.

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 28% growth in EPRA earnings to GBP63.8 million which has been achieved by a combination of 19% growth in our net rental income and a reduction from 13% to 12.5% in our EPRA Cost Ratio.

Optimising portfolio value

Assura is a constituent of the MSCI 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 9.1% pa over the same period.

Our 563 medical centres, which are geographically diverse and collectively serve approximately 8.5% of the UK's population, currently have a rent roll of GBP102.7 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.

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

It is not always asset value that determines the importance of an asset within the portfolio. A good example of this is a property we acquired this year in West Wales for under GBP1.5 million. It has a patient list of 6,000, which is well below our average. However, it provides an essential service to the local community and as a rural practice the nearest alternative practice, which does not have any spare capacity, is more than six miles away. We also identified the practice as under-rented and so at first review we have been able to secure an uplift in the passing rent of 9%.

We also work with our practices to identify opportunities for extensions or improvements as this can often be a very cost effective way of significantly improving the return on our assets.

A good example of this is Outwood Park Medical Centre in Wakefield where, working with the GP practice and the NHS, we were able to agree a new 25-year lease and complete some premises improvement works including installation of some energy efficient LED lighting. Overall, during the year we agreed 13 new leases and 6 lease extensions, significantly improving surgery provision for some 222,000 patients, whilst adding a further GBP10.3 million to our total contracted rent roll.

The Assura team's property skills and wide expertise have enabled us to end the year with a contracted rent roll of over GBP1.35 billion. We have built up this rent roll through our portfolio management over these last 15 years. During this time, we have developed deep relationships with our GPs and the local NHS teams. This has given us a unique opportunity to maximise the value from all our 563 properties.

To put this in context, over the last five years through acquisition, development and asset enhancement, we have been able to protect our average lease length so that the five years we should have lost through the passing of time we have been able to mitigate to 2.4 years, with the WAULT now standing at 12.0 years.

Each asset enhancement initiative may of itself be modest but this perseverance in the improvement of our estate is crucial to the further growth in our contracted rent roll.

The balance of our ungeared annualised return is generated from capital growth, which has seen a like-for-like valuation growth of 1.5% in the past year. This increase has primarily come from the movement in yields with our net initial yield moving down by six basis points over the past year to stand at 4.74%. The portfolio net equivalent yield as at 31 March 2019 was 4.77%.

We completed three developments during the year at a total development cost of GBP18.7 million. This has added GBP1.0 million to our annual rent roll.

The combined impact of our investment and asset management activity has been to achieve a 2% growth in EPRA NAV to 53.3 pence per share.

Positive social impact

Assura's purpose is to create outstanding spaces for health services in our communities. Part of that commitment is to continuously improve our buildings and Assura has been at the forefront of innovation and technical advances.

One of the crucial elements to the new generation of medical centres is sustainability, and Assura has a commitment to the highest standards. All of our in-house developments achieved a "Very Good" or "Excellent" BREEAM rating, which is the industry benchmark for sustainability as assessed by the Building Research Establishment ("BRE"). At two of our developments this year, Brixworth and Stow-on-the-Wold, both sites have had solar panels installed. All of the materials at Brixworth were chosen from the BRE Green Guide to Specification and Stow also includes an air source heat pump to minimise carbon emissions.

Providing the most sustainable buildings supports our climate change efforts, though there is also a commercial imperative as sustainable buildings have been shown to provide better returns for investors and lower running costs for our customers.

A further crucial element is the positive impact that investment in medical centres can have on the communities our GPs serve.

This year we have established a national partnership with the charity, Dementia UK, given that the condition impacts upon millions of patients, staff and carers using our buildings. We are helping to fund Dementia UK's national helpline for carers and are working on the development of the country's first medical centre to be accredited for dementia friendly design.

A key aspect of the NHS Long Term Plan is a growing role for social prescribing in primary care. For some practices, this will mean making space for link workers and projects within their buildings, which Assura is ideally placed to support. We are also supporting projects themselves: we asked our GP practice tenants about the social prescribing schemes which are making the biggest difference to health for their patients, allowing us to fund 28 local initiatives from community cafés and gardening clubs to dementia music groups.


The fundamentals of our sector remain constant: long-term, government backed income, with a linkage to cost inflation and with constrained supply. These elements have supported the consistent returns that our sector has delivered. Assura has established a distinctive positioning in this market that has enabled us to enjoy strong growth over the past five years and achieve a portfolio of 563 properties with a contracted rent roll of GBP1.35 billion.

The requirements for investment in primary care continue to increase and our ability to meet these needs has been strengthened through our continued investment in our development and asset enhancement teams. These investments reflect our belief in the future prospects of Assura and enable us to look forward with confidence to the next 15 years.

Jonathan Murphy


20 May 2019

CFO review

A strong performance in the year

Portfolio as at 31 March 2019 GBP1,978.8 million (31 March 2018: GBP1,732.7 million)

Our business is based on our investment portfolio of 563 properties. This has a passing rent roll of GBP102.7 million (March 2018: GBP91.0 million), 85% of which is underpinned by the NHS. The WAULT is 12.0 years and 69% of the rent roll will still be contracted in 2029.

At 31 March 2019 our portfolio of completed investment properties was valued at a total of GBP1,960.5 million, including investment properties held for sale of GBP17.2 million (March 2018: GBP1,709.6 million and GBP7.4 million), which produced a net initial yield ("NIY") of 4.74% (March 2018: 4.80%). 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 4.77% (March 2018: 4.98%). Adjusting this Royal Institution of Chartered Surveyors ("RICS") standard measure to reflect the advanced payment of rents, the true equivalent yield is 4.91% (March 2018: 5.15%).

Our EPRA NIY, based on our passing rent roll and latest annual direct property costs, was 4.73% (March 2018: 4.77%).

                         2019   2018 
                         GBPm   GBPm 
                        =====  ===== 
Net rental income        95.2   80.2 
                        -----  ----- 
Valuation movement       20.2   79.4 
======================  =====  ===== 
Total Property Return   115.4  159.6 
======================  =====  ===== 

Expressed as a percentage of opening investment property plus additions, Total Property Return for the year was 5.9%, which is lower than the 9.7% return achieved in 2018 due to greater yield compression in the prior year.

Our annualised Total Return over the five years to 31 December 2018 as calculated by MSCI was 9.9% compared with the MSCI All Healthcare Benchmark of 9.1% over the same period.

The net valuation gain in the year of GBP20.2 million comprises a 1.53% uplift on a like-for-like basis net of movements relating to properties acquired in the period. The valuation increase, whilst lower than the previous two years, reflects yield compression in the period as competition for property in our sector remains high. Despite the downward pressure, the NIY on our assets continues to represent a substantial premium over the 15-year UK gilt which traded at 1.337% at 31 March 2019.

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:

Acquisition of completed medical centres    218.3 
Developments/forward funding arrangements    21.1 
Like-for-like portfolio (improvements)        2.2 
==========================================  ===== 
Total capital expenditure                   241.6 
==========================================  ===== 

The majority of the growth in our investment portfolio has come from the acquisition of 54 properties for GBP218.3 million during the period in addition to our three completed developments.

These were at a combined total cost of GBP240 million with a combined passing rent of GBP11.4 million (yield on cost of 4.8%) and a WAULT of 14.5 years.

We continue to source properties that meet our investment criteria for future acquisition. The acquisition pipeline stands at GBP41 million, being opportunities that are currently in solicitors' hands and which we would hope to complete within three to six months, subject to satisfactory due diligence.

Our development team has had a successful year converting schemes from our pipeline to on site, as well as replenishing the pipeline. At the half year we reported 14 schemes in our immediate pipeline, and eight of these moved to on site in the second half, meaning a total of 11 schemes were on site at year end.

Of the 11 developments on site at 31 March 2019, seven are under forward funding agreements and four are in-house developments. These have a combined development cost of GBP48.6 million of which we had spent GBP15.4 million as at the year end.

In addition to the 11 developments currently on site, we have an immediate pipeline of 11 properties (estimated cost GBP52 million) which we would hope to be on site within 12 months. This takes the total development pipeline to GBP101 million, which includes an increasing proportion that are directly sourced and developed by our in-house team (as opposed to being forward funded).

We recorded a revaluation gain of GBP1.1 million in respect of investment property under construction (2018: GBP6.2 million).

Live developments and forward funding arrangements

                       Estimated completion date  Development costs   to date        Size 
                       =========================  =================  ========  ========== 
Cinderford                                Apr-20            GBP5.5m   GBP0.4m  1,491 sq.m 
                       -------------------------  -----------------  --------  ---------- 
Darley Dale                               Apr-19            GBP2.3m   GBP2.1m    773 sq.m 
                       -------------------------  -----------------  --------  ---------- 
Great Barr                                Jun-20            GBP4.6m   GBP1.1m  1,170 sq.m 
                       -------------------------  -----------------  --------  ---------- 
Knebworth                                 Jan-20            GBP3.1m   GBP0.1m    859 sq.m 
                       -------------------------  -----------------  --------  ---------- 
Netherfield                               Feb-20            GBP4.7m   GBP1.1m  1,247 sq.m 
                       -------------------------  -----------------  --------  ---------- 
Newtown                                   Jul-20            GBP4.7m   GBP0.9m  1,317 sq.m 
                       -------------------------  -----------------  --------  ---------- 
South Woodham Ferrers                     Jul-19            GBP6.3m   GBP3.8m  1,357 sq.m 
                       -------------------------  -----------------  --------  ---------- 
Stafford                                  Mar-20            GBP7.2m   GBP1.7m  2,800 sq.m 
                       -------------------------  -----------------  --------  ---------- 
Stow-on-the-Wold                          Aug-19            GBP2.7m   GBP2.7m    742 sq.m 
                       -------------------------  -----------------  --------  ---------- 
Timperley                                 May-20            GBP2.0m   GBP0.2m    424 sq.m 
                       -------------------------  -----------------  --------  ---------- 
Tonbridge                                 May-20            GBP5.6m   GBP1.3m  1,405 sq.m 
=====================  =========================  =================  ========  ========== 

Portfolio management

During the year we have disposed of 12 properties where we believed there was no further growth, generating proceeds of GBP7.1 million.

Our rent roll grew by GBP11.7 million during the year to GBP102.7 million. GBP1.0 million of this growth was from rent reviews. We successfully concluded 178 rent reviews during the year to generate a weighted average annual rent increase of 2.18% (2018: 1.70%) on those properties, which is a figure that includes 27 reviews we chose not to instigate in the year. These reviews covered GBP18.5 million of our rent roll at the start of the year and the absolute increase of GBP1.0 million is a 5.5% increase on this rent. Our portfolio benefits from a 29% weighting in fixed, RPI and other uplifts which generated an average uplift of 3.17% during the period. The majority of our portfolio is subject to open market reviews and these have generated an average uplift of 1.10% during the period.

We have secured 13 new tenancies with an annual rent roll of GBP0.2 million in addition to 6 lease re-gears (rent of GBP0.6 million). We currently have a pipeline in legal hands of 12 new tenancies (rent GBP0.1 million) and 11 re-gears (rent GBP1.0 million), in addition to a pipeline of 13 asset enhancement opportunities (expenditure GBP7.5 million).

Our EPRA Vacancy Rate was 1.5% (2018: 1.8%).

Our current rent roll is GBP102.7 million and, on a proforma basis, would increase to in excess of GBP120 million once the acquisition pipeline and extended development pipeline (including GPI) are completed plus anticipated rent reviews and asset enhancements identified.

Administrative expenses

The Group analyses cost performance by reference to our EPRA Cost Ratios (including and excluding direct vacancy costs) which were 12.5% and 11.4% respectively (2018: 13.0% and 12.0%).

We also measure our operating efficiency as the ratio of administrative costs to the average gross investment property value. This ratio during the period equated to 0.47% (2018: 0.51%) and administrative costs stood at GBP8.7 million (2018: GBP7.9 million).


As we continue to grow through both acquisitions and developments, we have obtained additional lending during the period on an unsecured basis, in line with our financing strategy.

In July 2018, we were assigned an investment grade corporate rating of A- (stable outlook) by Fitch Ratings Limited. As noted in the press release issued by Fitch, the key sensitivities that may lead to a negative impact on the rating include LTV increasing to above 40% on a sustained basis, the net debt to EBITDA ratio being above nine times on a sustained basis, increasing usage of secured debt and the EBITDA net interest cover dropping below two times. As a result, we have included these measures within our financing statistics included in the table below.

Immediately following the rating being issued, on 12 July 2018, we priced a GBP300 million unsecured bond with a tenor of 10 years at an interest rate of 3% per annum.

As announced in our trading update at the start of July, we had temporarily increased the revolving credit facility ("RCF") to GBP400 million to support our acquisition pipeline prior to the bond being launched. The facility has now returned to GBP300 million and GBP30 million is drawn as at the end of March.

Financing statistics                   2019       2018 
                                  =========  ========= 
Net debt                          GBP667.8m  GBP460.4m 
                                  ---------  --------- 
Weighted average debt maturity      7.3 yrs    6.0 yrs 
                                  ---------  --------- 
Weighted average interest rate        3.24%      3.12% 
                                  ---------  --------- 
% of debt at fixed/capped rates         96%        73% 
                                  ---------  --------- 
EBITDA to net interest cover           3.8x       3.3x 
                                  ---------  --------- 
Net debt to EBITDA                     7.7x       6.4x 
                                  ---------  --------- 
LTV                                     34%        26% 
================================  =========  ========= 

Our current LTV is 34% and will increase in the short term as we draw down on available facilities to fund the pipeline of acquisitions and development opportunities. Our policy allows us to reach the range of 40% to 50% should the need arise.

At 31 March 2019, 96% of our facilities are at fixed interest rates, although this will change as we draw on the RCF which is at a variable rate. The weighted average debt maturity is 7.3 years.

As at 31 March 2019, we had undrawn facilities and cash totalling GBP287 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 GBP22.4 million (2018: GBP22.0 million).

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 GBP84.0 million (2018: GBP71.8 million). The increase reflects the higher net rental income following additions to the portfolio, as highlighted by the EPRA earnings table below.

EPRA earnings

                                      2019    2018 
                                      GBPm    GBPm 
                                    ======  ====== 
Net rental income                     95.2    80.2 
                                    ------  ------ 
Administrative expenses              (8.7)   (7.9) 
                                    ------  ------ 
Net finance costs                   (22.4)  (22.0) 
                                    ------  ------ 
Share-based payments and taxation    (0.3)   (0.3) 
==================================  ======  ====== 
EPRA earnings                         63.8    50.0 
==================================  ======  ====== 

The movement in EPRA earnings can be summarised as follows:

Year ended 31 March 2018    50.0 
Net rental income           15.0 
Administrative expenses    (0.8) 
Net finance costs          (0.4) 
=========================  ===== 
Year ended 31 March 2019    63.8 
=========================  ===== 

EPRA earnings has grown 28% to GBP63.8 million in the year to 31 March 2019 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 3.5 pence (2018: 3.7 pence).

EPRA EPS, which excludes the net impact of valuation movements, was 2.7 pence (2018: 2.5 pence).

Based on calculations completed in accordance with IAS 33, share-based payment schemes are currently expected to be dilutive to EPS, with 0.5 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     3.5      3.5 
                  -----  ------- 
EPRA                2.7      2.7 
================  =====  ======= 


Total dividends settled in the year to 31 March 2019 were GBP63.3 million or 2.65 pence per share (2018: 2.455 pence per share). GBP8.3 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 2018 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:

                                       2019     2018 
                                       GBPm     GBPm 
                                    =======  ======= 
Opening cash                           28.7     23.5 
                                    -------  ------- 
Net cash flow from operations          72.9     49.9 
                                    -------  ------- 
Dividends paid                       (55.0)   (36.7) 
                                    -------  ------- 
                                    -------  ------- 
Property acquisitions               (210.1)  (282.3) 
                                    -------  ------- 
Development expenditure              (21.2)   (31.7) 
                                    -------  ------- 
Sale of properties                      7.1      0.9 
                                    -------  ------- 
                                    -------  ------- 
Net proceeds from equity issuance         -    397.1 
                                    -------  ------- 
Net borrowings movement               195.9   (92.0) 
==================================  =======  ======= 
Closing cash                           18.3     28.7 
==================================  =======  ======= 

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 2018           1,249.9       52.4 
                                            -------  --------- 
EPRA earnings                                  63.8        2.7 
                                            -------  --------- 
Capital (revaluations and capital losses)      20.2        0.9 
                                            -------  --------- 
Dividends                                    (63.3)      (2.7) 
                                            -------  --------- 
Other                                           8.8          - 
==========================================  =======  ========= 
Diluted EPRA NAV at 31 March 2019           1,279.4       53.3 
==========================================  =======  ========= 

Our Total Accounting Return per share for the year ended 31 March 2019 is 6.8% of which 2.65 pence per share (5.1%) has been distributed to shareholders and 0.9 pence per share (1.7%) is the movement on EPRA NAV.

Jayne Cottam


20 May 2019

Portfolio analysis by capital value

                                 Total value  Total value 
           Number of properties         GBPm            % 
           ====================  ===========  =========== 
>GBP10m                      35        558.5           29 
           --------------------  -----------  ----------- 
GBP5-10m                     71        474.1           24 
           --------------------  -----------  ----------- 
GBP1-5m                     348        859.7           44 
           --------------------  -----------  ----------- 
<GBP1m                      109         68.2            3 
=========  ====================  ===========  =========== 
                            563      1,960.5          100 
=========  ====================  ===========  =========== 

Portfolio analysis by region

                                 Total value  Total value 
           Number of properties         GBPm            % 
           ====================  ===========  =========== 
North                       182        756.9           38 
           --------------------  -----------  ----------- 
South                       216        662.4           34 
           --------------------  -----------  ----------- 
Midlands                     85        350.6           18 
           --------------------  -----------  ----------- 
Scotland                     23         54.6            3 
           --------------------  -----------  ----------- 
Wales                        57        136.0            7 
=========  ====================  ===========  =========== 
                            563      1,960.5          100 
=========  ====================  ===========  =========== 

Portfolio analysis by tenant covenant

                                 Total rent roll 
           Total rent roll GBPm                % 
           ====================  =============== 
GPs                        69.4               68 
           --------------------  --------------- 
NHS body                   17.8               17 
           --------------------  --------------- 
Pharmacy                    8.2                8 
           --------------------  --------------- 
Other                       7.3                7 
=========  ====================  =============== 
                          102.7              100 
=========  ====================  =============== 

EPRA performance measures

The European Public Real Estate Association ("EPRA") has published Best Practices Recommendations with the aim of improving the transparency, comparability and relevance of financial reporting within the real estate sector across Europe.

Summary table

                                                       2019  2018 
                                                       ====  ==== 
EPRA EPS (p)                                            2.7   2.5 
                                                       ----  ---- 
EPRA Cost Ratio (including direct vacancy costs) (%)   12.5  13.0 
                                                       ----  ---- 
EPRA Cost Ratio (excluding direct vacancy costs) (%)   11.4  12.0 
=====================================================  ====  ==== 
                           2019  2018 
                           ====  ==== 
EPRA NAV (p)               53.3  52.4 
                           ----  ---- 
EPRA NNNAV (p)             52.5  51.8 
                           ----  ---- 
EPRA NIY (%)               4.73  4.77 
                           ----  ---- 
EPRA "topped-up" NIY (%)   4.78  4.81 
                           ----  ---- 
EPRA Vacancy Rate (%)       1.5   1.8 
=========================  ====  ==== 

Consolidated income statement

For the year ended 31 March 2019

                                                      2019                          2018* 
                                                   Capital                        Capital 
                                       EPRA   and non-EPRA   Total    EPRA   and non-EPRA   Total 
                               Note    GBPm           GBPm    GBPm    GBPm           GBPm    GBPm 
=============================  ====  ======  =============  ======  ======  =============  ====== 
Gross rental and related 
 income                                99.3            3.1   102.4    83.5            2.6    86.1 
Property operating 
 expenses                             (4.1)          (3.1)   (7.2)   (3.3)          (2.6)   (5.9) 
=============================  ====  ======  =============  ======  ======  =============  ====== 
Net rental income                 2    95.2              -    95.2    80.2              -    80.2 
Administrative expenses               (8.7)              -   (8.7)   (7.9)              -   (7.9) 
Revaluation gains                 7       -           20.2    20.2       -           79.4    79.4 
Loss on sale of property                  -              -       -       -          (0.3)   (0.3) 
Share-based payment 
 charge                               (0.3)              -   (0.3)   (0.3)              -   (0.3) 
Finance revenue                         0.1              -     0.1     0.1              -     0.1 
Finance costs                     3  (22.5)              -  (22.5)  (22.1)          (0.9)  (23.0) 
Early repayment costs             3       -              -       -       -         (56.4)  (56.4) 
=============================  ====  ======  =============  ======  ======  =============  ====== 
Profit before taxation                 63.8           20.2    84.0    50.0           21.8    71.8 
=============================  ====  ======  =============  ======  ======  =============  ====== 
Taxation                          4       -              -       -       -              -       - 
=============================  ====  ======  =============  ======  ======  =============  ====== 
Profit for the year 
 attributable to equity 
 holders of the parent                 63.8           20.2    84.0    50.0           21.8    71.8 
=============================  ====  ======  =============  ======  ======  =============  ====== 
EPRA EPS   - basic & diluted      5    2.7p                           2.5p 
EPS        - basic & diluted      5                           3.5p                           3.7p 
=========  ==================  ====  ======  =============  ======  ======  =============  ====== 

There were no items of other comprehensive income or expense and therefore the profit for the year also reflects the Group's total comprehensive income. All income arises from continuing operations.

*2018 restated to include comparative IFRS 15 disclosures, with no impact on net rental income or profit for the year.

Consolidated balance sheet

As at 31 March 2019

                                                    2019     2018 
                                           Note     GBPm     GBPm 
=========================================  ====  =======  ======= 
Non-current assets 
 Investment property                          7  1,978.8  1,732.7 
 Property, plant and equipment                       0.2      0.4 
 Deferred tax asset                                  0.5      0.5 
=========================================  ====  =======  ======= 
                                                 1,979.5  1,733.6 
=========================================  ====  =======  ======= 
Current assets 
 Cash, cash equivalents and restricted 
  cash                                              18.3     28.7 
 Trade and other receivables                        14.7     13.7 
 Property assets held for sale                7     17.6      8.4 
=========================================  ====  =======  ======= 
                                                    50.6     50.8 
=========================================  ====  =======  ======= 
Total assets                                     2,030.1  1,784.4 
=========================================  ====  =======  ======= 
Current liabilities 
 Trade and other payables                           37.5     20.2 
 Borrowings                                   9     11.0        - 
 Deferred revenue                             8     21.3     19.0 
=========================================  ====  =======  ======= 
                                                    69.8     39.2 
=========================================  ====  =======  ======= 
Non-current liabilities 
 Borrowings                                   9    672.3    486.3 
 Obligations due under finance leases                2.8      2.8 
 Deferred revenue                             8      5.3      5.7 
=========================================  ====  =======  ======= 
                                                   680.4    494.8 
=========================================  ====  =======  ======= 
Total liabilities                                  750.2    534.0 
=========================================  ====  =======  ======= 
Net assets                                       1,279.9  1,250.4 
=========================================  ====  =======  ======= 
Capital and reserves 
 Share capital                               10    239.8    238.3 
 Share premium                                     587.4    580.4 
 Merger reserve                                    231.2    231.2 
 Retained earnings                                 221.5    200.5 
=========================================  ====  =======  ======= 
Total equity                                     1,279.9  1,250.4 
=========================================  ====  =======  ======= 
NAV per Ordinary Share - basic & diluted      6    53.4p    52.5p 
EPRA NAV per Ordinary Share - basic 
 & diluted                                    6    53.3p    52.4p 
=========================================  ====  =======  ======= 

The financial statements were approved at a meeting of the Board of Directors held on 20 May 2019 and signed on its behalf by:

   Jonathan Murphy             Jayne Cottam 
   CEO                                 CFO 

Consolidated statement of changes in equity

For the year ended 31 March 2019

                                      Share     Share    Merger   Retained    Total 
                                    capital   premium   reserve   earnings   equity 
                             Note      GBPm      GBPm      GBPm       GBPm     GBPm 
===========================  ====  ========  ========  ========  =========  ======= 
1 April 2017                          165.5     246.1     231.2      175.2    818.0 
                                   ========  ========  ========  =========  ======= 
Profit attributable to 
 equity holders                           -         -         -       71.8     71.8 
                                   ========  ========  ========  =========  ======= 
Total comprehensive income                -         -         -       71.8     71.8 
Issue of Ordinary Shares       10      70.9     338.2         -          -    409.1 
Issue costs                               -    (12.0)         -          -   (12.0) 
Dividends                      11       1.6       8.1         -     (46.4)   (36.7) 
Employee share-based 
 incentives                             0.3         -         -      (0.1)      0.2 
===========================  ====  ========  ========  ========  =========  ======= 
31 March 2018                         238.3     580.4     231.2      200.5  1,250.4 
===========================  ====  ========  ========  ========  =========  ======= 
Profit attributable to 
 equity holders                           -         -         -       84.0     84.0 
                                   ========  ========  ========  =========  ======= 
Total comprehensive income                -         -         -       84.0     84.0 
Issue of Ordinary Shares       10         -       0.2         -          -      0.2 
Dividends                      11       1.5       6.8         -     (63.3)   (55.0) 
Employee share-based 
 incentives                               -         -         -        0.3      0.3 
===========================  ====  ========  ========  ========  =========  ======= 
31 March 2019                         239.8     587.4     231.2      221.5  1,279.9 
===========================  ====  ========  ========  ========  =========  ======= 

Consolidated cash flow statement

For the year ended 31 March 2019

                                                          2019     2018 
                                                 Note     GBPm     GBPm 
===============================================  ====  =======  ======= 
Operating activities 
Rent received                                            100.8     81.0 
Interest paid and similar charges                       (16.7)   (22.8) 
Fees received                                              0.9      0.8 
Interest received                                          0.1      0.1 
Cash paid to suppliers and employees                    (12.2)    (9.2) 
===============================================  ====  =======  ======= 
Net cash inflow from operating activities                 72.9     49.9 
===============================================  ====  =======  ======= 
Investing activities 
Purchase of investment property                        (210.1)  (282.3) 
Development expenditure                                 (21.2)   (31.7) 
Proceeds from sale of property and investments             7.1      0.9 
Net cash outflow from investing activities             (224.2)  (313.1) 
===============================================  ====  =======  ======= 
Financing activities 
Issue of Ordinary Shares                                     -    409.1 
Issue costs paid on issuance of Ordinary 
 Shares                                                      -   (12.0) 
Dividends paid                                     11   (55.0)   (36.7) 
Repayment of loans                                  9  (100.0)  (213.8) 
Long-term loans drawdown                            9    298.4    180.0 
Early repayment costs                                        -   (56.4) 
Loan issue costs                                    9    (2.5)    (1.8) 
===============================================  ====  =======  ======= 
Net cash inflow from financing activities                140.9    268.4 
===============================================  ====  =======  ======= 
(Decrease)/increase in cash and cash 
 equivalents                                            (10.4)      5.2 
===============================================  ====  =======  ======= 
Opening cash and cash equivalents                         28.7     23.5 
===============================================  ====  =======  ======= 
Closing cash and cash equivalents                         18.3     28.7 
===============================================  ====  =======  ======= 

Notes to the accounts

For the year ended 31 March 2019

1. Corporate information and operations

The Company is a public limited company, limited by shares, incorporated and domiciled in England and Wales, whose shares are publicly traded on the main market of the London Stock Exchange.

With effect from 1 April 2013, the Group has elected to be treated as a UK REIT. See Note 4 for further details.

Basis of preparation

The financial information set out in this preliminary announcement is derived from but does not constitute the Group's statutory accounts for the years ended 31 March 2019 and 31 March 2018, and as such, does not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards ("IFRSs"). The financial information has been extracted from the Group's audited consolidated statutory accounts. The auditor has reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis, and did not contain statements under s498(2) or (3) of the Companies Act 2006.

The Directors consider that the Group has, at the time of approving the Group financial statements, adequate resources to continue in operational existence for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the preliminary consolidated financial information.

The Annual Report will be posted to Shareholders on or before 31 July 2019.

The Preliminary Announcement was approved by the Board of Directors on 20 May 2019.

The Announcement and Annual Report can also be accessed on the internet at

2. Net rental income

                                   2019   2018 
                                   GBPm   GBPm 
================================  =====  ===== 
Rental revenue                     98.4   82.7 
Service charge income               3.1    2.6 
Other related income                0.9    0.8 
================================  =====  ===== 
Gross rental and related income   102.4   86.1 
================================  =====  ===== 
Finance revenue 
Bank and other interest             0.1    0.1 
================================  =====  ===== 
                                    0.1    0.1 
================================  =====  ===== 
Total revenue                     102.5   86.2 
================================  =====  ===== 
                                   2019   2018 
                                   GBPm   GBPm 
================================  =====  ===== 
Gross rental and related income   102.4   86.1 
Direct property expenses          (4.1)  (3.3) 
Service charge expenses           (3.1)  (2.6) 
================================  =====  ===== 
Net rental income                  95.2   80.2 
================================  =====  ===== 

Following the adoption of IFRS 15, gross rental and related income and direct property expenses have been restated and are now shown gross of service charge income and expenses. There has been no impact on net rental income or any measure of profit as a result of this change.

3. Finance costs

                                               2019   2018 
                                               GBPm   GBPm 
============================================  =====  ===== 
Interest payable                               21.8   21.9 
Interest capitalised on developments          (0.5)  (0.7) 
Amortisation of loan issue costs                1.2    0.9 
============================================  =====  ===== 
Finance costs presented through EPRA profit    22.5   22.1 
Write off of loan issue costs                     -    0.9 
Early repayment costs                             -   56.4 
============================================  =====  ===== 
Total finance costs                            22.5   79.4 
============================================  =====  ===== 

Interest was capitalised on property developments at the appropriate cost of finance at commencement. During the year this ranged from 4% to 5% (2018: 4% to 5%).

Loan costs written off related to facilities terminated prior to their maturity, and early repayment costs were amounts paid in the prior year to terminate the Aviva facilities.

4. Taxation

                                                      2019   2018 
Consolidated income tax                               GBPm   GBPm 
===================================================  =====  ===== 
Deferred tax 
Relating to origination and reversal of temporary 
 differences                                             -      - 
===================================================  =====  ===== 
Income tax charge/(credit) reported in consolidated 
 income statement                                        -      - 
===================================================  =====  ===== 

The differences from the standard rate of tax applied to the profit before tax may be analysed as follows:

                                                      2019    2018 
                                                      GBPm    GBPm 
==================================================  ======  ====== 
Profit before taxation                                84.0    71.8 
UK income tax at rate of 19% (2018: 19%)              16.0    13.6 
Effects of: 
Non-taxable income (including REIT exempt income)   (16.0)  (13.5) 
Movement in unrecognised deferred tax                    -   (0.1) 
==================================================  ======  ====== 
                                                         -       - 
==================================================  ======  ====== 

The Group elected to be treated as a UK REIT with effect from 1 April 2013. The UK REIT rules exempt the profits of the Group's property rental business from corporation tax. Gains on properties are also exempt from tax, provided they are not held for trading or sold in the three years post completion of development. The Group will otherwise be subject to corporation tax at 19% in 2019/20 (2018/19: 19%).

Any Group tax charge/(credit) relates to its non-property income. As the Group has sufficient brought forward tax losses, no tax is due.

As a REIT, the Group is required to pay Property Income Distributions ("PIDs") equal to at least 90% of the Group's rental profit calculated by reference to tax rules rather than accounting standards. During the year the Group paid a PID as part of the October 2018 dividend. Future dividends will be a mix of PID and normal dividends as required.

To remain as a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activities and the balance of business. The Group remains compliant at 31 March 2019.

Further reductions in the main rate of corporation tax have been substantively enacted; the rate reduced to 19% from 1 April 2018 and will reduce to 17% from 1 April 2020. These changes have been reflected in the calculation of deferred tax.

5. Earnings per Ordinary Share

                                                        EPRA                          EPRA 
                                     Earnings       earnings       Earnings       earnings 
                                         2019           2019           2018           2018 
                                         GBPm           GBPm           GBPm           GBPm 
==============================  =============  =============  =============  ============= 
Profit for the year                      84.0           84.0           71.8           71.8 
==============================  =============  =============  =============  ============= 
Early repayment costs                                      -                          56.4 
Revaluation gains                                     (20.2)                        (79.4) 
Loss on sale of property                                   -                           0.3 
Write off of loan issue costs                              -                           0.9 
==============================  =============  =============  =============  ============= 
EPRA earnings                                           63.8                          50.0 
==============================  =============  =============  =============  ============= 
Weighted average number of 
 shares in issue - basic        2,391,704,889  2,391,704,889  1,963,754,891  1,963,754,891 
Potential dilutive impact 
 of share options                     560,853        560,853        210,307        210,307 
==============================  =============  =============  =============  ============= 
Weighted average number of 
 shares in issue - diluted      2,392,265,742  2,392,265,742  1,963,965,198  1,963,965,198 
==============================  =============  =============  =============  ============= 
Earnings per Ordinary Share 
 - basic & diluted                       3.5p           2.7p           3.7p           2.5p 
==============================  =============  =============  =============  ============= 

6. NAV per Ordinary Share

                                                         EPRA                          EPRA 
                                           NAV            NAV            NAV            NAV 
                                          2019           2019           2018           2018 
                                          GBPm           GBPm           GBPm           GBPm 
===============================  =============  =============  =============  ============= 
Net assets                             1,279.9        1,279.9        1,250.4        1,250.4 
===============================  =============  =============  =============  ============= 
Deferred tax                                            (0.5)                         (0.5) 
===============================  =============  =============  =============  ============= 
EPRA NAV                                              1,279.4                       1,249.9 
===============================  =============  =============  =============  ============= 
Number of shares in issue        2,398,371,795  2,398,371,795  2,383,122,112  2,383,122,112 
Potential dilutive impact 
 of PSP                                560,853        560,853        210,307        210,307 
===============================  =============  =============  =============  ============= 
Diluted number of shares in 
 issue                           2,398,932,648  2,398,932,648  2,383,332,419  2,383,332,419 
===============================  =============  =============  =============  ============= 
NAV per Ordinary Share - basic 
 & diluted                               53.4p          53.3p          52.5p          52.4p 
===============================  =============  =============  =============  ============= 
                                    EPRA     EPRA 
                                   NNNAV    NNNAV 
                                    2019     2018 
                                    GBPm     GBPm 
==============================   =======  ======= 
EPRA NAV                         1,279.4  1,249.9 
Mark to market of fixed rate 
 debt                             (19.2)   (14.4) 
===============================  =======  ======= 
EPRA NNNAV                       1,260.2  1,235.5 
===============================  =======  ======= 
EPRA NNNAV per Ordinary Share 
 - basic                           52.5p    51.8p 
===============================  =======  ======= 

The EPRA measures set out above are in accordance with the Best Practices Recommendations of the European Public Real Estate Association dated November 2016.

Mark to market adjustments have been provided by the counterparty or by reference to the quoted fair value of financial instruments.

7. Property assets

Investment property and investment property under construction ("IPUC")

Properties are stated at fair value, which has been determined for the Group by Savills Commercial Limited and Jones Lang LaSalle as at 31 March 2019. The properties have been valued individually and on the basis of open market value in accordance with RICS Valuation - Professional Standards 2017 ("the Red Book"). Valuers are paid on the basis of a fixed fee arrangement, subject to the number of properties valued.

                                Investment    IPUC    Total  Investment    IPUC    Total 
                                      2019    2019     2019        2018    2018     2018 
                                      GBPm    GBPm     GBPm        GBPm    GBPm     GBPm 
==============================  ==========  ======  =======  ==========  ======  ======= 
Opening market value               1,707.7    22.2  1,729.9     1,321.7    20.2  1,341.9 
                                ==========  ======  =======  ==========  ======  ======= 
- acquisitions                       218.3       -    218.3       278.9       -    278.9 
- improvements                         2.2       -      2.2         6.0       -      6.0 
                                ==========  ======  =======  ==========  ======  ======= 
                                     220.5       -    220.5       284.9       -    284.9 
Development costs                        -    21.1     21.1           -    31.7     31.7 
Transfers                             22.0  (22.0)        -        35.5  (35.5)        - 
Transfer (to)/from 
 assets held for sale                (9.3)     0.2    (9.1)       (7.4)   (0.2)    (7.6) 
Capitalised interest                     -     0.5      0.5           -     0.7      0.7 
Disposals                            (7.1)       -    (7.1)       (0.2)   (0.9)    (1.1) 
Unrealised surplus 
 on revaluation                       19.1     1.1     20.2        73.2     6.2     79.4 
==============================  ==========  ======  =======  ==========  ======  ======= 
Closing market value               1,952.9    23.1  1,976.0     1,707.7    22.2  1,729.9 
Add finance lease obligations 
 recognised separately                 2.8       -      2.8         2.8       -      2.8 
==============================  ==========  ======  =======  ==========  ======  ======= 
Closing fair value 
 investment property               1,955.7    23.1  1,978.8     1,710.5    22.2  1,732.7 
==============================  ==========  ======  =======  ==========  ======  ======= 
                                                         2019     2018 
                                                         GBPm     GBPm 
====================================================  =======  ======= 
Market value of investment property as estimated by 
 valuer                                               1,943.3  1,702.2 
Add IPUC                                                 23.1     22.2 
Add capitalised lease premiums and rental payments        9.6      5.5 
Add finance lease obligations recognised separately       2.8      2.8 
====================================================  =======  ======= 
Fair value for financial reporting purposes           1,978.8  1,732.7 
====================================================  =======  ======= 
Completed investment property held for sale              17.2      7.4 
Land held for sale                                        0.4      1.0 
====================================================  =======  ======= 
Total property assets                                 1,996.4  1,741.1 
====================================================  =======  ======= 

At March 2019, 19 assets are held as available for sale (2018: 15 assets).

The total value of investment property is GBP1,960.5 million, which is completed investment property of GBP1,943.3 million plus GBP17.2 million of investment properties held for sale. Disposals during the year of GBP7.1 million include properties that were classified as held for sale at March 2018.

Fair value hierarchy

The fair value measurement hierarchy for all investment property and IPUC as at 31 March 2019 was Level 3 - Significant unobservable inputs (2018: Level 3). There were no transfers between Levels 1, 2 or 3 during the year.

Descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are as follows:

Valuation techniques used to derive Level 3 fair values

The valuations have been prepared on the basis of fair market value which is defined in the Red Book as "the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion".

Unobservable inputs

The key unobservable inputs in the property valuation are the equivalent yield and the ERV.

The equivalent yield ranges from 4.00% to 8.00% (2018: 4.10% to 8.00%), in respect of 97% of the portfolio by value. A decrease in the equivalent yield applied to a property would increase the market value. Factors that affect the equivalent yield applied to a property include the weighted average unexpired lease term, the estimated future increases in rent, the strength of the tenant covenant and the physical condition of the property. Lower yields generally represent properties with index-linked reviews, 100% NHS tenancies and longer unexpired lease terms, ranging from 4.00% to 4.65%. Higher yields (range 5.60% to 8.00%) are applied for a weaker tenant mix and leases approaching expiry. Our properties have a range of tenant mixes, rent review basis and unexpired terms. A 0.25% shift of equivalent yield would have approximately a GBP108.5 million (2018: GBP90.3 million) impact on the investment property valuation.

The ERV ranges from GBP100 to GBP425 per sq.m (2018: GBP100 to GBP405 per sq.m), in respect of 98% of the portfolio by value. An increase in the ERV of a property would increase the market value. A 1% increase in the ERV would have approximately a GBP19.6 million (2018: GBP17.1 million) increase in the investment property valuation. The nature of the sector we operate in, with long unexpired lease terms, low void rates, low tenant turnover and upward only rent review clauses, means that a significant fall in the ERV is considered unlikely.

8. Deferred revenue

                                                    2019   2018 
                                                    GBPm   GBPm 
=================================================  =====  ===== 
Arising from rental received in advance             20.9   18.5 
Arising from pharmacy lease premiums received in 
 advance                                             5.7    6.2 
=================================================  =====  ===== 
                                                    26.6   24.7 
=================================================  =====  ===== 
Current                                             21.3   19.0 
Non-current                                          5.3    5.7 
=================================================  =====  ===== 
                                                    26.6   24.7 
=================================================  =====  ===== 

9. Borrowings

                                      2019     2018 
                                      GBPm     GBPm 
=================================  =======  ======= 
At 1 April                           486.3    520.1 
Amount drawn down in year            298.4    180.0 
Amount repaid in year              (100.0)  (213.8) 
Loan issue costs                     (2.5)    (1.8) 
Amortisation of loan issue costs       1.1      0.9 
Write off of loan issue costs            -      0.9 
=================================  =======  ======= 
At 31 March                          683.3    486.3 
=================================  =======  ======= 
Due within one year                   11.0        - 
Due after more than one year         672.3    486.3 
=================================  =======  ======= 
At 31 March                          683.3    486.3 
=================================  =======  ======= 

The Group has the following bank facilities:

1. 10-year senior secured bond for GBP110 million at a fixed interest rate of 4.75% maturing in December 2021. The secured bond carries a loan to value ("LTV") covenant of 75% (70% at the point of substitution of an investment property or cash) and an interest cover requirement of 1.15 times (1.5 times at the point of substitution). In addition, the bond is subject to a WAULT test of 10 years which, if not met, gives the bondholder the option to request repayment of GBP5.5 million every six months. The WAULT of the charged properties is below 10 years at 31 March 2019 and GBP11.0 million has therefore been shown as due within one year, at the option of the bondholder. At the date of this report, the option has not been taken up.

2. Five-year club revolving credit facility with RBS, HSBC, Santander and Barclays for GBP300 million on an unsecured basis at an initial margin of 1.50% above LIBOR, expiring in May 2021. The margin increases based on the LTV of the subsidiaries to which the facility relates, up to 2.0% where the LTV is in excess of 50%. The facility is subject to a historical interest cover requirement of at least 175%, maximum LTV of 60% and a weighted average lease length of seven years. As at 31 March 2019, GBP30 million of this facility was drawn.

3. 10-year notes in the US private placement market for a total of GBP100 million. The notes are unsecured, have a fixed interest rate of 2.65% and were drawn on 13 October 2016. The facility is subject to a historical interest cover requirement of at least 175%, maximum LTV of 60% and a weighted average lease length of seven years.

4. GBP150 million of privately placed notes in two tranches with maturities of eight and 10 years drawn on 20 October 2017. The weighted average coupon is 3.04%. The facility is subject to a historical cost interest cover requirement of at least 175%, maximum LTV of 60% and a weighted average lease length of seven years.

5. 10-year senior unsecured bond of GBP300 million at a fixed rate of 3% maturing July 2028. The facility is subject to an interest cover requirement of at least 150%, maximum LTV of 65% and priority debt not exceeding 0.25:1. In accordance with pricing convention on the bond market, the coupon and quantum of the facility are set to round figures with the proceeds adjusted based on market rates on the day of pricing.

The Group has been in compliance with all financial covenants on all of the above loans as applicable throughout the year.

10. Share capital

                                                   Share                    Share 
                                        Number   capital         Number   capital 
                                     of shares      2019      of shares      2018 
                                          2019      GBPm           2018      GBPm 
===============================  =============  ========  =============  ======== 
Ordinary Shares issued and 
 fully paid 
===============================  =============  ========  =============  ======== 
At 1 April                       2,383,122,112     238.3  1,655,040,993     165.5 
Issued 19 April 2017 - scrip                 -         -      1,514,247       0.2 
Issued 23 June 2017                          -         -    163,999,820      16.4 
Issued 19 July 2017 - scrip                  -         -      3,861,017       0.4 
Issued 30 August 2017                        -         -      3,226,687       0.3 
Issued 18 October 2017 - scrip               -         -      3,061,389       0.3 
Issued 6 December 2017                       -         -    545,124,813      54.5 
Issued 17 January 2018 - scrip               -         -      7,293,146       0.7 
Issued 18 April 2018 - scrip         2,355,911       0.2              -         - 
Issued 19 July 2018 - scrip          6,467,532       0.7              -         - 
Issued 17 October 2018 - scrip       1,945,311       0.2              -         - 
Issued 16 January 2019 - scrip       4,195,055       0.4              -         - 
Issued 14 February 2019                285,874         -              -         - 
===============================  =============  ========  =============  ======== 
At 31 March                      2,398,371,795     239.8  2,383,122,112     238.3 
Own shares held                              -         -              -         - 
===============================  =============  ========  =============  ======== 
Total share capital              2,398,371,795     239.8  2,383,122,112     238.3 
===============================  =============  ========  =============  ======== 

The Ordinary Shares issued in April 2017, July 2017, October 2017, January 2018, April 2018, July 2018, October 2018 and January 2019 were issued to shareholders who elected to receive Ordinary Shares in lieu of a cash dividend under the Company scrip dividend alternative.

In June 2017, a total of 163,999,820 new Ordinary Shares of 10 pence each were placed at a price of 60 pence per share. The raising resulted in gross proceeds of approximately GBP98.4 million which has been allocated appropriately between share capital (GBP16.4 million) and share premium (GBP82.0 million). Issue costs totalling GBP2.3 million were incurred and have been allocated against share premium.

In August 2017, 3,226,687 Ordinary Shares were issued following employees exercising nil-cost options awarded under the Value Creation Plan, which was a long-term incentive plan that is now completed. Full details of amounts paid can be found in the 2018 accounts.

On 6 December 2017, 545,124,813 Ordinary Shares were issued by way of a Firm Placing, Placing and Open Offer and Offer for Subscription at a price of 57 pence per Ordinary Share. Gross proceeds to the Company were GBP310.7 million, which has been allocated appropriately between share capital (GBP54.5 million) and share premium (GBP256.2 million). Issue costs totalling GBP9.7 million were incurred and have been allocated against share premium.

On 14 February 2019, 285,874 Ordinary Shares were issued as part consideration for the acquisition of a medical centre.

11. Dividends paid on Ordinary Shares

                                 Number of 
                  Pence per       Ordinary   2019   2018 
Payment date          share         Shares   GBPm   GBPm 
================  =========  =============  =====  ===== 
19 April 2017          0.60  1,656,555,240      -    9.9 
19 July 2017           0.60  1,656,555,240      -    9.9 
18 October 2017        0.60  1,827,642,764      -   11.0 
17 January 2018       0.655  2,383,122,112      -   15.6 
18 April 2018         0.655  2,383,122,112   15.6      - 
18 July 2018          0.655  2,385,478,023   15.6      - 
17 October 2018       0.655  2,391,945,555   15.7      - 
16 January 2019       0.685  2,393,890,866   16.4      - 
================  =========  =============  =====  ===== 
                                             63.3   46.4 
================  =========  =============  =====  ===== 

The April dividend for 2019/20 of 0.685 pence per share was paid on 17 April 2019 and the July dividend for 2019/20 of 0.685 pence per share is currently planned to be paid on 17 July 2019 with a record date of 14 June 2019.

A scrip dividend alternative was introduced with effect from the January 2016 quarterly dividend. Details of shares issued in lieu of dividend payments can be found in Note 10.

The October 2017 and October 2018 dividends were PIDs as defined under the REIT regime. Future dividends will be a mix of PID and normal dividends as required.

12. Commitments

At the year end the Group had 11 (2018: five) committed developments which were all on site with a contracted total expenditure of GBP47.8 million (2018: GBP23.6 million) of which GBP15.3 million (2018: GBP13.9 million) had been expended.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact or visit



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May 21, 2019 02:01 ET (06:01 GMT)

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