Assura Limited (AGR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Assura's annual results presentation. I'm joined today by Jayne, our CFO; and Patrick Lowther, our Head of Strategy and Markets. I will start with a brief overview before Jayne covers the strategic and financial report. Patrick will introduce some of the new and exciting areas we're moving into. Then I will conclude with an outlook for the business. This is another good set of results for Assura. For me, it's my 10th. However, the difference this time and over the past 2 years has been the dizzying array of challenges we have faced, a once in a century pandemic, supply chains disrupted, the emerging impact of climate change and now an inflationary surge to the backdrop of a major geopolitical crisis right here in Europe. In response to this deluge, our team has certainly had to adapt. We have continued improving the community health infrastructure for the NHS with strong and sustained growth in cash flows and dividends for our investors. I can honestly say, our business model has never been required to be more resilient. However, not only have we demonstrated resilience, but against all the odds, we have continued to innovate and to explore and expand into new markets and geographies to cement our position as the leading developer in the sector. We have also achieved outstanding results in financing whilst taking a decisive lead in sustainability. In new markets, we have made progress in all the areas that we have been working towards, working with NHS trusts, mental health, primary care at scale and independent sector providers. We have now added a further element with geographic expansion with our first transaction in the Republic of Ireland. We will expand on this new venture later. Patrick will also cover our success in embarking on a relationship with the West Midlands Ambulance Trust, a very different area of NHS infrastructure. In financing, we successfully raised GBP 300 million from our bond in July and GBP 185 million from our equity raise in November. In sustainability, we have made good progress towards achieving our SixBySix goals, which are now updated with the ambition to be fully net 0 carbon by 2040. A highlight for the year was our first-ever sustainability bond. This followed the success of our innovative social bond last year. The GBP 300 million 12-year bond was 3x oversubscribed and achieved a rate of 1.625%, a testament to Jayne and her team. We followed this up in November with a GBP 185 million equity raise, where we saw strong support from our existing shareholders as well as bringing a few new names onto the register. However, both these financings were made good by virtue of our deployment of the capital. The team has done an outstanding job with GBP 271 million invested at an average yield of 4.6% and a WAULT of 19 years. This deployment covers all 3 of our key growth drivers: developments, acquisitions and asset enhancements. In developments, we now have a record level of 17 schemes on site for a total cost of GBP 166 million and an immediate pipeline of GBP 158 million. Acquisitions have exceeded our target by more than 50%, with GBP 152 million invested in the second half. The investment team has also matched this effort by sourcing new opportunities of GBP 119 million. In asset enhancements, we have experienced greater delays than normal in securing NHS approvals. Notwithstanding this, the team has built a pipeline of 23 projects for a total spend of GBP 18 million. A key part of our progress over the year has been in adapting to the constantly and rapidly changing needs of the NHS in a number of key areas. First, working with Trust has enabled the delivery of services away from hospital sites to free up capacity. As Patrick will explain in more detail, we are on site in Northumbria with a training and clinical facility for the local trust. Second, mental health, where the need for access to services has never been greater. At the moment, these are being provided in largely inappropriate spaces. There is an excellent opportunity for us to use our specific skills and experience to deliver more suitable premises to better meet these needs. We have invested GBP 48 million across 7 projects this year and continue to identify new opportunities. Third, primary care at scale is an area where we can help emerging GP networks in developing their estate strategies, meeting their property management needs and developing new buildings or extending existing ones to support growth. We are working with the 2 leading GP networks and have 6 deals in the pipeline, many with associated asset enhancement opportunities. In addition, we continue to pursue partnerships with independent sector providers, the response to clearing the current backlog can only realistically be tackled through joint endeavor with the independent sector. For Ramsay Health Care, we have now completed our development in Preston and are building a new facility in Kettering. We have also just agreed terms for building a new cancer treatment center for Genesis Cancer Care at the Royal Surrey County Hospital site. We can now add to our growth plans our geographic expansion into Ireland. We have been keenly monitoring this market for several years. We believe our unique development expertise, our sets of knowledge and our innovative approach to social impact and sustainability will work equally well in this new market. Following months of focused activity from Patrick and many meetings with the HSE, we are now confident of building on our first acquisition to create a meaningful pipeline over the next few years. Reflecting this range and volume of opportunities, we continue to strengthen our team, a team which has grown from 43 to 85 in my 5 years as CEO. We have brought in the diverse talents of Apollo and GPI as well as enriching our own team organically. It is now 2 years since we launched our SixBySix plans, and we have made real progress towards our twin goals of maximizing social impact while minimizing our impacts on the environment. On sustainability, we committed to developing only net 0 carbon buildings and having all our buildings with an EPC of B by 2026. We have continued to refine our plans And working with our sustainability advisers, Evora, we have now developed a strategy to be net 0 by 2030 for our managed buildings and by 2040 for our whole portfolio. This is no small undertaking. And whilst the NHS shares our ambitions and has set itself the target of being the world's first net 0 carbon health system by 2045, it will require our help in shaping and influencing its behaviors. In addition, we need to ensure the investment we are making in this is fairly reflected in rental values. To achieve this across our 645 assets will involve hundreds of improvement projects. But thanks to the relationships we have built up with individual surgeries, the capability of the team to design and deliver these projects and our capital strength to fund them, we are in an ideal position to help the NHS to achieve its goals. Already in the 3 months to March, we have completed over 30 projects, and we expect to undertake substantially more this financial year, including trials for achieving net 0 carbon on our refurbishments. In terms of social impact, we build the buildings where over 6.8 million patients access their community health needs in order that these patients are confident and comfortable bringing their health concerns to their GPs. In addition to the Bayer essential structure, we are rigorous in exploring ways to improve the design and function of our buildings. This includes our ideas such as the designing for everyone principles we pioneered in our scheme in Cinderford, which we are now rolling out on all our future developments. Our approach also extends to our work in the community, whether supporting social prescribing activities, providing outdoor spaces such as allotments, or the fantastic work done by the charities we support through the award-winning Assura Community Fund. This year, we passed the milestone of having distributed grants in excess of GBP 1 million. We are acutely aware that mental health services are under some of the greatest pressure in the NHS and delays for receiving the sometimes life-saving treatments are both rising and alarming. COVID has added to the often unseen impacts on mental health, especially amongst the young. Reflecting this more than 40% of the grants made have been to projects supporting young people's mental health. As a business based in Warrington in the Rugby League heartland, we are proud to be working with the Rugby Lead World Cup as their community health partner. We've used this partnership to engage in health projects, working through and with community Rugby League clubs. A program of GBP 100,000 worth of grants has now been awarded to support these projects. This has impacted more than 6,000 people. They range from projects helping young people to build confidence and self-esteem, to summer holiday food programs and schemes helping unemployed adults with long-term health conditions to build new skills. For us, an approach to social impact and sustainability that includes all our stakeholders, patients, doctors, our team, our suppliers aligns us with the values and vision of the NHS and directly underpins our commercial success. This can be explicit, as in the success of the sustainability bond, or more subtle as in securing a new mandate where a GP welcomes our commitment to investing in local skills and apprenticeships. This long-term partnership approach has enabled us to grow profits by 7% a year for the last 6 years. Now I would like to hand over to Jayne to provide you with the financial and strategy update. Jayne?

Thank you, Jonathan. Good morning, everybody. I am very pleased once more to be presenting Assura's year-end results, which I am happy to say, in this post-COVID environment, are excellent. A busy year has passed, a year in which we have continued our growth. It's been a story of identifying new assets, new relationships and new territories and has pushed boundaries for us. It has been a really exciting time. We have acquired GBP 234 million worth of acquisitions. GBP 37 million worth of developments have completed, and we have had GBP 15 million worth of disposals and continued a strong asset enhancement program. Much of this has been possible due to the continued support of our lenders and shareholders. In June, we raised GBP 300 million in our first sustainability bond at a fantastic 12-year fixed rate of 1.625%. Following this, in November, we asked our shareholders to support us with further equity of GBP 185 million. At the outset, we were able to present a very strong use of proceeds case and in return, received an enthusiastic and generous response. I am pleased to say that we have deployed this capital ahead of our own expectations. And so with this in mind, let me take you through the last 12 months. Our property additions have given us net rental income growth of 13% to GBP 126.5 million. Our EPRA earnings have grown from GBP 75.4 million to GBP 86.2 million, an increase of 14%. Our EPRA earnings per share increased by 11% to 3.1p for the year, and our dividend growth in the year was 4%. The value of our portfolio is now almost GBP 2.8 billion, and we've seen further yield compression of 10 basis points, bringing our net initial yield to 4.48%, an evaluation gain in the year of GBP 69 million. Our EPRA net tangible asset per share rose by 6% to 60.7p, and our loan to value is now 36%. Alongside these excellent results, we are announcing a dividend increase of 5.4% to 3.12p per share. Our portfolio has grown to 645 properties with a value of GBP 2.8 billion. As the graph on the left shows, this is a compound annual growth rate of 16% with an increase of GBP 1.65 billion since 2016. The rent roll chart on the right shows an increase in the year of GBP 40 million or 12%. As you can see, rent reviews and asset enhancements are responsible for GBP 2.2 million, developments for GBP 1.5 million, and our acquisitions have added GBP 11.2 million, whilst disposals have reduced our rent roll by GBP 0.9 million, taking it from GBP 121.7 million to GBP 135.7 million at the year-end. The scale we have achieved, along with our conservative balance sheet, enables us to finance our business at considerably lower cost. As you're aware, it's been our strategy over the past 5 years or so to maintain a lower leverage, therefore, benefiting us with a lower cost of debt on an unsecured basis. And we are pleased to be able to claim that our cost of debt is one of the lowest in the industry. If we take a moment to look at both of our recent debt raises, we raised GBP 300 million for 10 years at 1.5%. And then within 9 months, we raised a further GBP 300 million for 12 years at 1.625%. Our scale yields multiple benefits to us. I've shown this chart before, but it highlights how we have gone from strength to strength throughout our growth. And as you can see, whilst our portfolio yields have tightened, you can also see the gap between our net initial yield and our average cost of debt has widened over the same period. At the 31st of March, our net debt stood at GBP 1 billion with a loan to value of 36%. Our weighted average interest rate has fallen from 2.47% to 2.3%, and our debt maturity is 8 years. We've continued to develop our financing structure with the introduction of our first sustainability bond. The all-in rate of 1.625 for our bond was impressive. However, it is the underlying margin that has seen significant improvement from 128 basis points on our social bond to 85 basis points on this latest bond. This gives us a clear signal of how investors view the strength of our business. As we move to accomplishing our SixBySix targets of maximizing our impact on society whilst minimizing our impact on the environment, we will also be adapting our financing in support of these targets. We have over GBP 360 million of cash and undrawn facilities available to us, ensuring we have significant firepower to continue with our growth plans. Our loan-to-value policy remains unchanged. We are happy to go above 40%, but would expect to bring it down over time. We have GBP 205 million of headroom before we reach 40% and GBP 485 million before we reach 45%. I'd like now to look at our rent reviews. We have completed over 300 in the year with an average uplift of 1.9%. We've had an increase of 2.7% on our RPI and fixed uplifts and 1.4% on our open market reviews. Getting through our open market rent reviews has been a challenge, as you can appreciate over the last couple of years. However, we've managed to start clearing that backlog. The chart on the right shows how we are getting through the reviews with approximately GBP 38 million of our rent roll having been reviewed this year. This has given us an uplift of GBP 2.2 million on these rents or 5.2% in absolute terms. Given how difficult to have said the reviews have been over the last 2 years, I thought I would take a moment to give you an idea of the process. From the rent review date, it typically takes 9 to 18 months to complete. We have rent review managers who focus solely with our agents to identify areas of rental growth and provide evidence from other medical centers to instigate the review. This evidence is based upon comparable buildings in the surrounding area, including new buildings. We've spoken many times about how our rent reviews have a linkage to construction cost inflation and how this takes time to flow through to rental growth. These new medical centers set the tone for the uplift, and we negotiate with the district value for a fair market rent whilst also ensuring it is value for money for the taxpayer. Once the district valuer has made their recommendation, the NHS will agree the rent, and it will be put into place. At the point, the new rent is agreed, we will also settle any back rent that is due. If we feel that the district value has not been fair in their assessment, then we do have the option to challenge the rent and take it to arbitration. However, this is not something we do that often. Whilst this can be a long and drawn-out process at times, we are always able to capture any cash owed and we work on hundreds of reviews at any 1 time. Let's just look now in a little more detail at that linkage to construction cost inflation and the impact that it has on our rent reviews. If we look at a recently agreed rent on a building in East Anglia at GBP 225 a square meter, a previous development there several years ago attracted a rent of GBP 162 a square meter with a build cost of GBP 2,000 a square meter. Fast forward to today, and the build costs have increased by around 75%. However, out of this, we have been able to capture an uplift in the rent of 40%. You will, of course, ask why did we not capture that full 75% increase, and the reason for that is the yield shift on our assets over that period. We've experienced a movement of 150 basis points in our portfolio net initial yield, and that has had a direct impact on the uplift we received. However, 40% is still very healthy and set new tone for rents in the area. Similarly, in South Wales, build costs have increased by 31% over a 5-year period, and we have captured a 26% uplift in the rent. We are seeing pockets of this rental growth across a number of areas, and we are optimistic about the prospects for future rental growth. So before I hand you over to Patrick, I would like to close by saying we have once again demonstrated our consistent track record of growing our portfolio whilst maintaining our approach to capital discipline. We have been able to raise debt at very attractive rates. We have received excellent support from our shareholders. We have a strong pipeline of investment and development opportunities, and we have both the headroom and the firepower to deliver on our growth against a challenging economic backdrop. And with that, I will now hand you over to Patrick. Patrick?

Thank you, Jayne. Good morning, everyone. As we've heard from Jonathan and Jayne, activity has been widespread across the property teams. In just 12 months, we have added 47 buildings, supporting the health care needs of over 1 million more patients on top of the 6.8 million already served by our buildings. At the same time, whilst proactively managing the assets, we have recycled capital back into both the portfolio and new growth areas. Increasingly, our strategy to drive sustainable growth centers on leveraging our customer relationships to produce property solutions that solve challenges in the wider health system, relieving pressures on hospitals, the replacement of outdated infrastructure and support of a system which is required to respond and resolve the ever-increasing waiting lists, whereby approximately 1 in 9 people are awaiting routine operations today. It is now more than ever the case that for the NHS, not just to survive, but actually to thrive. There is a growing role for a range of health care operators, both public and independent to unite in driving patient outcomes and efficiencies. I would now like to come on to some of the ways in which we are playing our own part as this evolution takes place. The first and really topical example comes into play in those urgent life-threatening moments when we need the NHS to respond immediately. And that means, of course, we need an ambulance service. Our remarkable ambulance service have a target response rate of 7 minutes. Sadly, as we have been constantly hearing, this time has been increasing, at times to unacceptable levels of hours, not minutes, with occasionally catastrophic results. As Jonathan mentioned, during the last 12 months, we formed a relationship with the West Midlands Ambulance Trust and are developing a highly specified and well-located modern facility, which will replace their outdated infrastructure and help in generating faster response times. This will benefit a population of over 5.5 million. The building will also be 1 of 10 across the U.K., to house a hazardous response team referred to by colleagues as the SAS of emergency teams because these individuals are required to respond in the most disastrous situations, including building collapse and nuclear incidents. With over 300 staff on site, this will be the largest hub of its kind in the country. And I think as an excellent example of how we're expanding our knowledge base over a range of key local health care buildings, bridging our core primary care estate with the hospital sector and positioning us well for future opportunities. The way in which the NHS attracts, retains and develop its staff to provide the highest level of patient care is a constant challenge, named more so than in Cramlington. We're in partnership with the Northumbria Healthcare Foundation Trust. We are developing a new 80,000 square foot facility, but we'll have the ability and scope to house the center of training and true clinical excellence. It is the Trust's aspiration that somebody could join as an apprentice clinician and progress up to director level, developing high standards of clinical excellence in their journey and contributing to the consistent care of the area's 0.5 million population. Now this is vital of the point when the British Medical Association is referring to the fact that after years of significant underinvestment, sites are still too small and without sufficient space for the training of new doctors and nurses. It was only in last week's press that again, they pointed out to the fact that in December, the NHS had 110,000 unfulfilled jobs, including 8,000 doctors and 40,000 nurses. A project like this also gives Assura an opportunity to create an impact that goes far beyond the bricks and mortar. For example, we're contributing GBP 200,000 to a nature reserve, which will be for the benefit and well-being of the Trust's hardworking staff. And this is just one of an ever widening range of projects planned in partnership with a Trust Community Engagement team. Coldharbour, here, yet again, we confront the same challenges this time working with one of London's busiest trusts, Kings College Hospital. In December, we acquired a building that has enabled the trust to, in part, move away from the same congested, outdated and inefficient state to what you can see here on the video. The new building is equipped with clean and bright clinical and treatment areas to relieve pressures on A&E, a gym to support patients with their rehabilitation needs, plenty of light and open office space, accommodating departments from a range of their different service provisions, including their excellent R&D team. And it's investments on this scale, working with similar major health care providers that will put Assura towards the front line in responding to their future requirements. The really fighter role played by the independent sector in supporting the NHS was highlighted during COVID with over 3 million patients treated at cost by the sector. And we believe its ongoing support will be essential if we are to reduce the strain on our hospital system. With cancer care waiting times getting ever longer, the growing backlog of life-critical procedures has been well documented. We are now on site with the development in Guildford, which is in part due to a relationship we have been developing over the last 2 years with Genesis Care, a world leader in the field of cancer treatment. Here, Genesis will be working by way of an innovative agreement with the adjoining NHS Hospital Trust to treat patients in a facility, which will be 1 of only 3 buildings in the U.K. to offer the next generation of cutting-edge treatment to patients. It is strong public and independent partnerships such as this in world-class facilities and set against rising demand that gives us a very secure footing when we come to underwrite similar acquisitions and developments in the future. Now we've been following the progress in Ireland since 2018, when the Irish government announced the major overhaul of their hospital-centric system called Sláintecare. This program envisages substantial investment into the primary care infrastructure, and we made the decision to enter the market last year with our acquisition of the Castlebar Primary Care Center. This award-winning building was originally designed to relieve pressures on the local Mayo Hospital. The pressures have continued to grow, and it was only just last week that we received confirmation from the HSE, Ireland's equivalent to the NHS, that they now require an additional 30,000 square foot, effectively doubling the size of the building, to relieve further pressures from the hospital associated with chronic illnesses, mental health and diagnostics. While it's not possible to pinpoint just how many schemes will be ultimately delivered with the ebb and flow of the government's ambition, we are confident the opportunity is very real. Our success will be accelerated by the relationships we have started to develop on the ground. These relationships with local experts cover areas of development design and project management and importantly, the ongoing management of our assets. I myself will be overseeing the entire project. And I firmly believe that over the coming years, Ireland will really complement our U.K. business, leveraging all our expertise and driving relatively higher index-linked income returns. Unlocking the power of innovation is a great part of all businesses. Technology can be both friend and foe. And increasingly, our GPs have been working to find their own balance between virtual and in person. Through our investment into Pi Labs, one of the leading proptech venture capital funds in Europe, we are increasingly given access and insight to entrepreneurial teams who are resting with some of our sector's key challenges. Over the last 12 months, we shortlisted 3 teams, supporting a scenario such as how we might use technology to develop our net 0 carbon strategy. The key flow team are supporting us on a project aiming to give us a much deeper insight into how we use data to recycle waste as part of our growing development activity. And with the team that built IT, we have trialed a new way of generating customer feedback, which has resulted in a tripling of responses compared with traditional surveys. This is still early days for us. However, we are determined to make the most of these relationships to fulfill the ever-growing need to find answers to processes through technology. So in summary, there has really indeed been plenty of activity over the last 12 months, and the property teams are focused on carrying forward the momentum to really build on the achievements of the past year. And now I'd like to hand you back to Jonathan. Thank you.

Thank you, Patrick. The fundamentals of our sector remain robust and have continued to attract new investment. As a result, we have continued to achieve valuation gains with our net initial yield strengthened by a further 10 basis points to 4.48%. We continue to see opportunities, and we'll selectively add further to our portfolio though we are also likely to increase our capital recycling going forward. The after effects of the pandemic continue to linger across all areas of our lives. And in health care, this has led to a surge in health inequalities and waiting lists, which is having a detrimental impact on the nation's health, an impact that is felt even more strongly because of the years of underinvestment in the U.K.'s health care estate. This has been woefully understated and confirmed by survey after survey and even by the NHS' own reports. It is 5 years now since the state's review led by Sir Robert Naylor, which called for GBP 10 billion to be invested. As Sir Robert said at the time, it will not be possible for the NHS to achieve its vision without changes in the estate. 5 years on, we have barely even started. And in fact, the fabric of much of the older estate has deteriorated to an even lower level. You may have read in last week's times a report on how many NHS hospitals have been allowed to crumble into this repair with ceilings collapsing and power cuts disrupting surgery. They reported that the number of clinical incidents linked to the failure to repair all buildings had tripled in the past 5 years. This is even despite the government having the health infrastructure plan for 40 new hospitals. In primary care, there is no long-term investment plan. Even though the fact is such a plan would arguably have the most transformative impact on the whole nation's physical and mental health. The current situation requires the delivery of new capacity, both in our hospitals and in the community. However, saying that, the community estate is unsuited and insufficient to meet this urgent need. This was brought into stark focus during COVID as older converted residential properties were not able to meet the new requirements for social distancing, for access controls, digital consultations and infection control regimes. The seriousness of the state we are in is reflected in Assura's record levels of activity with 17 schemes underway. It's just 17 schemes across the primary care estate of over 8,000 buildings is a drop in the ocean. So given the stark reality of what I have described, how best are we able to support the NHS in responding to these urgent challenges? Let's start with one obvious way, which is to increase capacity in community diagnostics and dedicated surgical units. We are ideally placed to support this through our existing buildings being expanded or adapted or in delivering new facilities. As an example, we have just bought a building to serve as a dedicated surgical unit in Sheffield and are evaluating several more of these opportunities. Another way is responding to the needs in primary care. The government has now admitted it will fall well short of its plans to increase the GP workforce. In fact, the number of full-time equivalent GPs is falling as many take early retirement, and even newly qualified GPs are choosing to work part time. We have always said that workforce is the key challenge facing primary care, and this remains the case. However, unfit and outdated workplaces only make the challenge of recruitment and retention harder. We recently conducted a YouGov poll, and this confirmed that 73% of NHS staff thought the age or condition of their building impacted their ability to clear the backlog in treatments. A more fundamental response is also underway by the NHS moving to integrated care systems, which will try to knit together the various strands of health and social care delivery to optimize efficiency and health outcomes. We are identifying ICS groups that are most advanced in their planning and are looking to work with them on delivering the improved premises. Against this challenging backdrop, the recent budget did increase funding for the NHS, and the health and social care levy makes it clear that this government sees further funding as a key priority and a political imperative. It is difficult to imagine any future government coming to a different conclusion. Becoming the leading community health care developer has been a key strategic priority for us for several years. I am pleased to report further progress in the year as we have expanded our capabilities into such varied new areas as the ambulance hub. We've also had our busiest year ever with 17 schemes now on site and further strengthened our pipelines to an impressive GBP 522 million. It has also been a uniquely challenging year for the team as we have seen supply chain disruption, price volatility on key materials and delays on essential service connections due to COVID. This has meant that some schemes have been delayed. And on average, we have lost 6 to 8 weeks on our planned completion timetables. The team has managed these challenges extremely well, and we'll continue to closely monitor every scheme on a site-by-site basis. This will ensure we can respond promptly to any future disruption or delay. As I mentioned earlier, since the equity raise, we have outperformed our targets for deploying capital. The teams have continued to identify new opportunities, and we entered the new financial year with strong pipelines across the board. In developments, we have an immediate pipeline of 20 schemes for GBP 158 million, which we anticipate will start on site this year. In acquisitions, we have a pipeline of GBP 119 million we expect to complete in the next 6 months, and we continue to identify new opportunities. In asset enhancements, we entered the new year with a pipeline of 23 capital projects for a total spend of GBP 18 million. The benefits of these strong pipelines can be seen here as we illustrate the impact of all the various strands of activity we have within the business. Once completed, our total rent roll will increase to over GBP 167 million. Our strong development pipelines will add around GBP 20 million to our rent rollover several years. Our acquisition pipeline will add GBP 6 million in the near term, while a further GBP 5 million will come from our asset enhancement work and rental growth. In summary, as I'm sure you can imagine, we are pleased to have achieved such a successful year across all areas. We completed 2 major financings, deployed this capital ahead of our plans, made progress in new markets and took decisive steps in our sustainability plans. However, as I have made clear, it has been an extremely challenging backdrop. The NHS is seemingly always strained the limits of its capabilities from our ever-increasing health care demands. In the past 2 years, COVID has brought a new raft of challenges. They have faced, amongst other things, a desperate need for additional quality space to enable them to deliver their unique services to the standards they are accustomed to. There are times when the slow rate of progress makes the scale of the challenges seem overwhelming. However, we have learned that the only response is to meet this with increased determination to broaden our ambition and to expand our skills. We start the new financial year with strong pipelines, plans and capabilities and most importantly, the financial strength to deliver on these. And so we look forward to sustaining the momentum we have built in the year and continuing to deliver for all our stakeholders. Now before we move to questions, I would like to leave the final word to one of our customers, Dr. Russell Brown from Manor Park Medical Practice.

My name is Dr. Russell Brown, I'm the senior partner at Manor Park Medical Center. We've been working with Assura for the last few years to try and develop a new building. And why we've been working with Assura? We've been working with Assura because much as I'm a generalist, they are a specialists. They help us navigate the local structures and procedures with local government and planning regulations, which is something I've had no experience of doing. And then they have the experience of both building and managing facilities, which means that I can get on with what I'm good at, which is providing high-quality local health services in buildings which are fit for the future.

So thank you, everybody. So we'll now move on to the questions. So I'll just take you through the questions we received today. Please do carry on to submit your questions online, and we will do everything we can to get through all of them. So first question is from Alexander from PGIM. "You have GBP 240 million of cash versus GBP 40 million last year. When do you expect to return to a normal level of cash? And is GBP 40 million a normal level? Your stated LTV policy is 40% to 50%. Would you be comfortable moving into that range? So Jayne, would you be comfortable taking that question for us?

Yes, no problem at all. Thank you, Alexander. In terms of our cash, we actually look at our overall liquidity position. So you'll see we have cash and available facilities at the moment of GBP 369 million. Now a lot of that has to do with timing of our equity raise, but also our GBP 300 million bond raise that we did back last summer. We don't actually set a normal or a target range. It's just as the markets are open and as needs required for the business, but we would expect to spend that money and then we'll go back out over time. In terms of our LTV policy, as I stated in the presentation, we are happy to go with 40%. We would expect to bring that over time. And just to clarify, to 40% from where we are now. We have GBP 205 million of headroom. And to 45%, we have GBP 485 million on worth of headroom. So plenty of firepower to meet all of our pipeline needs at this moment.

Great. Thank you, Jayne. So next question is from Hugh from Liberum. "Are you currently going through the mentioned arbitration process on rents with any district valuers?" So I'll just quickly respond to that. So we've got one live arbitration case at the moment, and we will selectively take further ones to dispute where necessary to push through the right rents. And the second half of the question is, "Could you remind us where covenant levels are in relation to the LTV?" So perhaps, Jayne, if you could take that one.

Absolutely. In terms of our LTV, our banking facilities, the LTV covenant is set at 60% in terms of our bonds. This is slightly wider at 65%, and we're currently up 36% on our LTV.