Assura Limited (AGR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Assura plc post-AGM investor Q&A session. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet Company dashboard. And we'll send you an e-mail to notify you when they're ready for your review. I'd also like to remind you that this presentation meeting is being recorded. I'd now like to hand over to Ed Smith, Chairman from Assura. Good afternoon to you, sir.

Thank you very much, and a very warm welcome to everybody, and thank you for joining us. Just a reminder that this is not the formal AGM. The AGM was conducted earlier in the day and no attendance in person was permitted due to the COVID restrictions. I'm pleased to report that all resolutions were passed with the required majorities and we're grateful for the shareholder support in those resolutions. This session is to give shareholders the opportunity to ask questions of management. Jonathan and Jayne will give a quick overview of the trading update published this morning before we invite questions. Questions can be submitted online, has been said within the web browser on which you are watching the video. So with that, over to Jon.

Great. Thanks, Ed. So I'd just like to start off this afternoon's conversation with a brief update from our first quarter trading. So we released our trading update first thing this morning. Delighted to say that we've started the year very strongly. So we had a very strong year in the last financial year, delivering over GBP 300 million worth of deals to the end of March. And we've continued as we start the new year in a very active vein. So we've secured 12 further additions to the portfolio for GBP 53 million, but we've also been active in terms of recycling capital and moving assets on where we no longer feel that they meet our investment criteria. And 11 assets have been sold in the last quarter for proceeds of GBP 15 million. We've also had a very successful bond launch, which Jayne will come on and talk to you about in a moment. And we continue to see opportunities in our adjacent areas. So we referenced at the full year that we were looking at a number of emerging areas. So these were primary care at scale, increasing use of direct leasing to the NHS, working with private providers and also looking at opportunities within mental health. All of these areas continue to be of interest to us and we've made good progress in the quarter in terms of reviewing potential opportunities and bringing further forward. So in summary, really pleased with the start of the financial year. First quarter has proceeded in accordance with our plans, had a very busy first quarter, and we continue to make good progress. So now I'd just like to hand over to Jayne to talk to you about probably the highlight of the first quarter, which is the sustainability bond. Jayne?

Thanks, Jonathan. So building upon the social bond, which we raised last year, we decided to have a green element to our financing, and this aligns with our social impact and sustainability strategy. So we went out to bond investors using the strength of our credit in the business with an A- rating, but linked that with the SixBySix social impact strategy that we have and managed to raise a sustainable bond of GBP 300 million. It's worth noting this transaction was heavily oversubscribed. We are delighted with the outcome of an all-in rate of 1.625%. However, it's also worth noting that the strength of the business and how the bond investors see our strategy in this area enabled us to price at a record debt margin for ourselves of 85 basis points. So what that means is we have the GBP 300 million to deploy, but we also have GBP 205 million in undrawn banking facility in order for us to continue with the very strong pipeline that we announced in the trading update but also at our year-end.

Thank you very much. Opportunity for questions, and we have one kicking off from Andy. You mentioned in your last set of results that you were exploring exciting opportunities in new areas, all supporting delivery of community-based services away from hospital. Could you expand on some of those? Jon?

Thanks, Ed. Yes, so as I mentioned briefly in my update on the first quarter, we continue to see lots of opportunity in what we describe as adjacent areas. So essentially what we're seeing is the need to create capacity within the hospital sector by moving services away from hospitals and delivering them in a community-based setting. So for example, community diagnostics is something that the NHS has specifically talked about and in fact, published a detailed proposal only last week about the potential for this opportunity. This is essentially routine tests and screening that you would go to hospital for at the moment. Is there an opportunity for some of those services to be delivered at community sites? That could be in some of our existing medical centers. It could be in empty retail units on the high street or it could be in new purpose-built facilities within communities. So this is definitely an area that we see as one that we have great potential to support. We've got the development capability. We've got the relationships with the NHS. So expect to hear more about that over the coming weeks and months.

Thank you. And then we have a question from Ryan. What is the criteria when adding new assets, selling the mature assets?

Yes, a good question. So in terms of, if I take that second part first. So in terms of disposals, what we'll look to do is we'll analyze the potential returns from the assets over a longer-term period. And what we're looking at, is that asset essential for its local health economy? So will it remain an essential piece of infrastructure in that community? Is it, therefore, likely to have a renewal of the lease at the end of the expiry? So say there's 5 years left to run on a lease, we're trying to assess in 5 years' time, do we think that asset will continue to be essential for that community? If it is, then it's very likely that it will receive a lease renewal and it's unlikely that it would move on to our disposals list. If we have some concerns around the likelihood for lease renewal, then we might well consider looking to sell that on to another party. Now just to be clear, these are all good quality assets. It's really about sort of risk profiling. So if we feel there's heightened risk around a lease renewal, then we're happy to pass that on. But just to put that in context, the last set of assets that we disposed of still had a very good lease length, just under 10 years. So this isn't about selling off short-term leased assets. This is about us taking a risk approach to the long-term viability of our portfolio and making selective disposals where we see necessary. Now the first half of your question was about how we screen for acquisitions. Well, really, this is very much the same process but in reverse. So is that asset going to have a long-term role in the community? What are the patient numbers at that site? How many clinicians are there or what range of services are provided? Do we think they've got sufficient space, might they need more space in that location, and therefore, could this be a good asset to acquire and invest in over the longer term? So we're looking for, screening for opportunities where we see a positive impact to the local community in terms of health delivery. We also apply a screen around our ESG criteria. So we'll make sure that, that building meets our sustainability criteria or can be improved, so it can be one or the other. And we'll also look to see whether we feel that asset plays an important role in supporting health and wellness in that local community as well. So we'll also apply that screen. As well as, of course, we apply full financial analysis and assessment of the likely returns. So it's very much a hybrid approach looking at all of these various factors.

And we've got 2 or 3 more questions popped up and one from Ryan. I'll come back to that in a minute. But firstly, from John, in your results presentation at the year-end, you highlighted a number of emerging opportunities for the business. Do these change the risk profile of the income stream at all? Do you want to take that, Jonathan? And perhaps, Jayne can?