Assura reports rent growth, enters £250m joint venture

21st May 2024 08:40

(Sharecast News) - Specialist healthcare property investor and developer Assura reported a rise in full-year net rental income on Tuesday, along with a strategic £250m joint venture with the Universities Superannuation Scheme (USS).

The FTSE 250 firm said its net rental income was ahead 3.8% year-on-year in the 12 months ended 31 March, to £143.3m, while its passing rent roll grew 5% to £150.6m.

It said that despite a challenging economic environment, it achieved a 6% rise in EPRA earnings to £102.3m, resulting in EPRA earnings per share of 3.4p.

The company declared a 5.2% increase in dividends per share to 3.24p.

Assura recorded an IFRS loss before tax of £28.7m, which was 75.8% narrowing from the prior year, primarily due to a 4% like-for-like valuation decline driven by an outward yield shift.

Investment property value slightly decreased to £2.71bn, from £2.74bn a year earlier.

The company said its balance sheet remained robust, with a weighted average cost of debt steady at 2.3% and net debt-to-EBITDA ratio of 9.4x, compared to 9.1x.

It said it had undrawn facilities and cash of £235m, down from £243m a year earlier.

On the operational front, Assura completed five developments valued at £72m, and one significant acquisition in Ireland.

It also finished eight asset enhancement projects with a total spend of £8.9m.

Rent reviews resulted in an 8.9% like-for-like increase on 24% of the reviewed rent roll.

Assura said it was continuing to diversify its portfolio across broader healthcare markets, including private health, NHS trusts, and mental health.

Notable projects included day case hospitals in Kettering and Guildford, the £25m Northumbria Training Academy, and an £11m net-zero carbon ambulance hub in Bury St Edmunds.

Looking ahead, Assura said it remained focused on stable production, cost management, and advancing its development pipeline, with eight projects currently on site and an immediate pipeline of five schemes.

"We have continued our track record of growth to deliver another period of increased EPRA earnings and dividend, driven by our disciplined approach to investment, extensive sector expertise, and ability to identify new market opportunities," said chief executive officer Jonathan Murphy.

"It is these capabilities, underpinned by our strong financial position and secure balance sheet, that make Assura best placed to meet the critical need for new and enhanced healthcare capacity in a community setting.

"Our portfolio continues to deliver high-quality cash flows, against a turbulent economic backdrop, as we further demonstrate our long-term resilience with another year of strong financial performance - increasing rental income by 4% to £143.3."

Murphy said opportunities across broader healthcare markets, each identified as meeting the same underlying demand and offering attractive risk-adjusted investment characteristics, were becoming "meaningful contributors" to Assura's £2.7bn portfolio and cash flows.

"Our five completions reflect the shifting demand in the healthcare sector and include schemes for private operators such as a state-of-the art day case hospital in Kettering as well as our first development in Ireland.

"Assura is the partner of choice for the future - best positioned to provide high-quality, sustainable new premises for the delivery of health services in the community - and deliver long-term value for all stakeholders."

Separately, Assura announced a strategic partnership with USS, forming a £250m joint venture to support investment in NHS community healthcare buildings.

The 20-year partnership, including an initial portfolio of seven assets valued at £107m from Assura's existing portfolio, aimed to grow to £250m over the next three years, with potential expansion to £400m.

Assura said it would retain a 20% equity interest and act as the property and asset manager, receiving management fees linked to portfolio valuation.

The proceeds would be reinvested into Assura's development pipeline, enhancing its financial position and supporting future growth.

"We are delighted to announce this exciting transaction with a high-quality and long-term capital partner in USS," said Jonathan Murphy.

"This important transaction highlights the attractive investment characteristics in the healthcare sector and specifically the long term resilient cash flows generated by our assets.

"As well as demonstrating our ability to re-deploy capital into our pipeline of opportunities in broader healthcare markets, we have sourced new capital that will fund investment in healthcare infrastructure that is so badly needed to enable better health outcomes."

At 0948 BST, shares in Assura were down 0.28% at 42.6p.

Reporting by Josh White for Sharecast.com.