Assura Limited (AGR) Earnings Call Transcript & Summary

Welcome to Assura's Results Presentation. Nice to see you all again. So we'll just run through the normal routine today. So I'll give you an overview for the year. Jayne will then give you a strategic and financial update, and then I'll come back to give you the outlook for the business. We will, of course, also leave plenty of time for questions at the end. So this past year has had 2 very distinct periods. The first half was one of our most productive ever with GBP 130 million of acquisitions, GBP 78 million of disposals, 10 new developments completed and a record level of rental growth. However, as circumstances shifted in the second half, like all property businesses, we faced headwinds of rising inflation and interest rates and resulting valuation falls. Overall, though, the year has been one of excellent progress, and Assura remains a business delivering for its investors with a 6% increase in earnings per share. We achieved significantly improved rental growth with net rental income up 9%. And with over 1/5 of our rent roll with RPI indexation, our growth prospects are underpinned. This confidence in our prospects is reflected in us announcing today a 5% increase in our dividend from next quarter, the tenth consecutive year of dividend growth. This all took place at a point in time when it has become impossible for anyone to ignore the chronic need for investment in health care infrastructure, and barely a day goes by without the pressures of underinvestment producing alarming headlines. How this reality is met will drive our government's policy response, but it also must drive our response in the way we develop and run our business, in our progression and innovation, our financial ingenuity and everything else that is at our core. But before I look at this in more detail, let's look at the highlights of our performance in the year. We made net investments of GBP 130 million after GBP 78 million of disposals that were completed in September at above book value. Our developments continue to be an engine for growth with 10 completions and 11 currently on site. We also delivered organic growth through asset enhancements and rent reviews adding GBP 2.8 million to our rent roll, key contributors to that 9% growth in net rental income. Our focus on new markets also paid dividends with the completion of our first Ambulance Hub and several NHS and independent provider schemes underway. In Ireland, we continue to progress with 2 completed assets, 2 under construction and 3 more in our immediate pipeline. All this progress was made possible through our strong financial position and our exceptional debt book, which Jayne will cover in more detail later. These achievements are set against the more challenging backdrop that I referenced earlier. Reflecting an outward move in initial yields of 39 basis points, our portfolio valuation fell by 6% over the year. This was markedly lower than other property sectors. And our disposal in September of GBP 78 million of assets at above book value highlights the resilience of our GBP 2.7 billion portfolio. Higher interest rates and higher inflation are now a confirmed reality. But our debt is fixed at 2.3%, and we have no debt refinancings due for 3 years. We are, however, adjusting our plans to reflect this higher cost of capital. You can see this in our focus on asset enhancement and sustainability improvements across our entire portfolio. These factors have also led to a slowdown in new development activity in the second half. We have reduced the number of projects starting, though we are prioritizing Ireland where 3 of our 5 pipeline schemes are situated. With very few opportunities currently in the market, we have nothing in our acquisitions pipeline. All of this planned activity is fully funded from current cash reserves and available facilities. Finally, despite the rental growth challenges, we have achieved 3.8% in the year, which, while still below headline CPI rates is a strong improvement from prior years. 22% of our leases are directly indexed and the reversion on these elements at the year-end was just shy of GBP 5 million. Whilst inflationary pressures persist, our shareholders are provided with an excellent base for future returns. Against this backdrop, our unwavering commitment to our values and purpose is crucial if we are to continue to lead within our field. We could scale back on this commitment. However, we could, at the same time, jeopardize our commercial success as the wider property market is already diverging between sustainable buildings and so-called stranded assets. We intend to be a leader in sustainable health care buildings and have now launched our net zero design guide, which is our blueprint for all future developments. As part of our ambition to be net zero by 2040, we continue to invest in sustainability improvements across our portfolio. At the year-end, we had 53% of our portfolio as an EPC of B or better, and we have planned improvement projects for over 100 of our buildings, including the rollout of our new solar panel scheme. In addition, we intend to practice what we preach as we move later in the summer to a new more sustainable office where we intend to make significant improvements in our operations. More of this later. These values are also extended to our suppliers. For example, we recently outsourced our facilities management function to Mace. This proved to be a complex selection process that looked at a wide range of factors. However, underlying all considerations, their common commitment to social impact and sustainability had to be a key driver in the selection of such an important partner. We also continue to support social impact directly through the Assura Community Fund. At this point, we have donated more than GBP 1.8 million to projects supporting health and wellness in communities served by our buildings, and we retain our ambition for 6 million people to be impacted by 2026, our SixBySix. Now I will pass over to Jayne to give you the financial and strategic update. Jayne?

Thank you, Jonathan. Good morning, everybody. It's great to be here again presenting to you our end of year results. As Jonathan indicated, this year has very much been a tale of 2 halves with a uniquely strong performance in the first half and a more challenging market backdrop in the second. However, despite the impact of rising interest rates, our fairly modest valuation movement and a slowdown in activity, the inherent strength of our business has meant that we have been able to weather the storm, and overall, we have had a very strong performance. Additions across acquisitions and developments are GBP 200 million for the year, encompassing our strongest first half performance ever. This sits alongside our asset enhancement and sustainability program of GBP 15 million. We also recycled capital, selling our portfolio for GBP 78 million, and we have continued with the program to bring the buildings to an EPC of B and are moving on with our net zero carbon ambitions. In the second half, whilst continuing our development program, we have focused primarily on rental growth, asset enhancement and sustainability improvements. Our net rental income increased by 9% with our overall net rental growth coming in at 3.8%. We've underpinned all of this activity with our disciplined approach to capital allocation, management of our costs, together with our strong balance sheet. Now let me take you through our performance for the last 12 months in a little more detail. By securing property additions of GBP 200 million, we grew our net rental income by 9% from GBP 126.5 million to GBP 138 million with our current passing rent roll increasing to GBP 143 million, up by 6%. By continuing to manage our costs, we maintained our EPRA cost ratio at 13%, and this is one of the best in the industry. Our debt costs are fixed at 2.3% with no long-term financing required for a number of years. EPRA earnings grew from GBP 86.2 million to GBP 96.8 million, an increase of 12%, and EPRA earnings per share increased by 6% to 3.3p per share for the 12 months. These secure and dependable cash flows are underpinned by 81% of income being government-backed, 8% coming from in-house pharmacy and the remainder from strong private counterparties. Our dividend policy is to pass on a majority of this earnings growth to our shareholders. And in the year, our fully covered dividend grew by 5% to 3.1p per share. Today, we are announcing an increase in the quarterly dividend of a further 5% to 0.82p per share from July. So let's look more closely at rent reviews and their contribution to our top line growth. The chart on the left shows an increase in our gross rents over the last 5 years to GBP 144.4 million today. Whilst this growth is a mix of our various activities, acquisitions, developments and asset enhancements, I'd like to concentrate for the moment on rental growth. For us, it has been a good year for rent reviews with our RPI and fixed uplift linked leases seeing an annualized increase of 5.7% as the indexation starts to come through. Our open market reviews have reached a net 1.5%, which is an increase on last year. On a blended basis, we have had a net increase of 3.8% overall. We settled 352 reviews during the year with an uplift of GBP 2.8 million on our rent roll and an absolute uplift of 7.2% on the GBP 38.7 million of rents reviewed. With 33% of our leases having indexed or fixed uplifts and new development setting the open market rental turn across the country, we are positive about the prospects for our rental growth. But this, of course, will take some time to come through. During the year, we have deployed our cash efficiently into the acquisitions and developments. You see here that our acquisitions totaled GBP 135 million: GBP 58 million was invested in developments, GBP 50 million for asset enhancements, with the disposals of GBP 78 million, reducing our net investment to GBP 130 million. Our total property additions, the majority of which were completed in the first half, were at an average yield on cost of 4.9% and a weighted average unexpired lease length of 14.5 years. Our current rent roll has seen growth of GBP 7.8 million to GBP 143.4 million, and developments on site will contribute a further GBP 6 million in due course. Our portfolio is now 608 assets with a value of GBP 2.7 billion. Earlier in the year, it was noted that we have some yield expansion. This amounted to a shift of 39 basis points, bringing our net initial yield to 4.87%. At the end of the year, we had cash of GBP 118 million, and this along with our undrawn revolving credit facility of GBP 125 million, will ensure support for our development program in the foreseeable future. So let's take a look at our balance sheet. Our strong balance sheet puts us in a good financial position during these trickier times. The financial metrics highlighted on the left-hand bar charts show the favorable position we are in. The interest cover at 4.5x against a covenant of 1.75x means we have plenty of headroom. Below that, you can see the net debt to EBITDA. This is a metric that the rating agency use when assessing our financial position. At 9x, this is within the Fitch guidelines. Our A minus credit rating from Fitch was reaffirmed earlier this year. This is of considerable value to us as this rating enables us to access a wide range of funding options as well as demonstrating the strength of our business. On the 31st of March, our net debt stood at GBP 1.1 billion. And as I've mentioned, this is all fixed at an average rate of 2.3% with a 7-year weighted average maturity. 80% of our drawn debt is maturing beyond 2028, and I'll come on to this shortly. Our loan-to-value is 41%, and we remain comfortable in this range. Therefore, our guidance on this has not changed. Although if it were necessary, we are able to increase up to 50%. And our current headroom before we get to 45% is GBP 175 million. This slide shows our debt maturity in more detail. It indicates that we have no refinancing requirements for a number of years with only around GBP 170 million due to refinance before 2027. If you look on the right-hand side, you can see that our longest debt maturity periods are fixed at the lowest rates. With all GBP 660 million of debt due after 2030 at an average rate of 1.7%. This includes the social and sustainability bonds we issued in the last few years which, due to the strength of our credit, we were able to raise at 1.5% and 1.625% respectively. Clearly, this is a very strong position with our fixed rate debt, our cash, our credit facilities and the plans we currently have in place we have little exposure to higher interest rates in the near term. Here, we see a chart we have shown you several times before, highlighting where our rent roll on a pro forma basis could end up once all our known activity is completed. As you can see, our focus on activities that can add the most value to our portfolio is taking priority. Organic growth through developments, rental growth and asset enhancements will drive both returns and values as we move forward. And looking at the chart, given the activity within the business at this time, we expect our on-site developments to add GBP 6 million to our rent roll. Our rent reviews will add around GBP 9 million. and our on-site asset enhancements, including extensions and vacant space will add GBP 1 million to increase our rental to almost GBP 160 million in the coming years. The table below highlights those index-linked rent reviews, which will be settled in the future. A number of our reviews are 3 or 5 yearly. But based on current indexation, this provides an estimated GBP 4.8 million of rental growth on GBP 30.4 million of rent, which is an uplift of 16%. Therefore, we do expect to see some healthy rental growth as we move forward. So in conclusion, we have had a contrasting year with 2 very different periods. However, we have again demonstrated a consistent track record of growing our portfolio whilst maintaining our capital discipline. And the quality of our debt book and facilities available, as I've said, put us on a very fortunate and stable footing for the future. The support of our investors and our lenders over recent years has helped to put us in this strong position, and we are announcing our tenth year of dividend growth. Looking ahead, we will need continuous judicious management throughout the business in order to drive returns through asset enhancement, completion of our developments and continuation with our net zero carbon ambitions. And with that, I will now hand you back to Jonathan. Jon?

Thank you, Jayne. As we move into a new year, by completing our current developments and selectively pursuing new projects, we will be providing investors with certainty of income growth, supporting the NHS in its need for essential new capacity and bringing forward evidence which will drive future rental growth. As our investment activity slows, the relative importance of our development pipeline grows, we see this illustrated here with projects underway that will deliver an incremental GBP 5.5 million of rent on completion, of which just over 2/3 has direct indexation. Over the past 5 years, we have been building the leading development team in our sector. This has proved key throughout the development of our growth into Ireland, our work with NHS Trusts and with independent providers. The growth in our total development pipeline is illustrated here in excess of GBP 600 million. Our priority is on delivering the projects we have at the moment on site. In addition, we have 5 further projects, which will begin within 12 months for a total spend of GBP 37 million. The overall scale of opportunities continues to grow, but with reductions in both projects on site and our immediate pipeline, the size of the extended pipeline has increased significantly. This reflects the impact of increasing construction and financing costs on the viability of schemes. These cost rises are bringing rent increases of at least 30% and as a result, rent negotiations are both challenging and protracted. In certain locations, there is a willingness to meet these higher rents, though currently, these are being held up by extended approval time lines from the NHS. Regrettable though these cost increases are, they are an economic reality, and it will be impossible for any developer to deliver the schemes at below cost. However, given this reality and how widely and quickly it is spreading through other sectors, we are confident that in due course, the schemes will be recognized as value for money and accepted as viable. However -- we'll just wait for the test. I'm working on the principle it is a test. We'll just wait and see. We'll just check whether this is a test or whether we need to evacuate, No one gave us a heads up this was coming. So... Okay. We might be looking at evacuation here. So -- but let's just -- well, it's up to you, obviously, if you -- it's an odd time to do a test is it Because it's not a set time, so it doesn't feel like a test this does it? So I think we might have to pause there or come back. Apologies, everyone, for the interruption. And for those of you online, just a temporary pause in the proceedings due to a false alarm with a fire, but we're now back on track. So apologies for the disruption to the presentation. So we were just on the slide where we were talking about the development pipeline and in terms of the pressures that we're seeing in terms of cost increases and the timing on when we expect that to be resolved. So in terms of recognizing as value for money. So in terms of our experience with the NHS, predicting the timing of when they'll accept these rental increases is nigh and impossible to predict. The capability we have built up over the years and our leading position in the sector means we are ideally placed to deliver these opportunities when the rental levels allow. We continue our expansion into new markets, and these represent a substantial proportion of our planned activity. Ireland has 2 schemes on site for GBP 10 million and 3 schemes in our immediate pipeline for GBP 23 million. These are all essential community facilities with long-term government-backed income with the benefit of indexation. Working directly with NHS Trusts, we have 3 schemes on site for GBP 38 million and a further 1 of GBP 12 million due to start shortly. In the independent sector, alongside our partners, we have 2 schemes on site for GBP 52 million and several opportunities in our extended pipeline. Whilst recognizing its primacy given the clinical and financial pressures in the NHS, the independent sector is one on which focus from many directions is turning. There is increasing scope for expansion for us here, and we intend to pursue these opportunities as a priority. Asset enhancements are also a priority for us. These schemes require limited capital, provide higher returns and maximize the value of already existing assets. There is undoubted potential in our 608 properties across the U.K. As NHS budgets come under greater pressure, this potential for smaller scale projects becomes even more important. To achieve our net zero carbon goals as a country, the focus must shift away from demolition and rebuilds to retrofitting and improvements. Two of these schemes are illustrated here: One in West Byfleet in Surrey fitting out currently vacant space and one in South Bar House in Banbury, installing air-source heat pumps and solar panels. In both cases, we achieved increased rents, extended the lease and improved the sustainability of the buildings, highlighting the benefits of increased focus on this area. Currently, we have 8 schemes on site with a spend of GBP 9 million and a pipeline of a further 17 schemes for a spend of GBP 14 million. Turning now to sustainability and our ultimate ambition of net zero, which is a huge challenge, and we are under no illusions as to how difficult it will be to deliver. Our net zero pathway, as shown here, moves us into the action phase that will deliver net zero by 2040. When I mentioned this to you last year, I made no secret of the fact that we did not even know where we were starting from. We had 600 buildings across the U.K., and most of them were managed by our customers. And so we had very little data to be working with. However, we have now completed a huge data collection exercise for more than half of our portfolio, which reliably gives us the information we need for the overall position. We also needed to understand the specific improvements required across our buildings. And so we have undertaken 56 net zero carbon audits. This gives us the information we need for the rest of the portfolio. So these 2 exercises have given us our starting point and the actions needed to reach our goal: certifiable net zero. In this, our first year of action, we will complete more than 75 projects, including PV installations, air-source heat pumps, LED rollout and a number of technology-based initiatives to reduce energy consumption. Confident in these actions, we look forward to updating you on our progress. However, our ambitions remain at risk from the outdated rules of the NHS, where sustainability elements are excluded from any consideration of rental levels. This is clearly incompatible with the NHS' own targets to achieve net zero by 2045. The contradiction, as you can understand, is that our plans will not be deliverable unless these improvements are recognized in higher rents over time. Investing in net zero highlights our approach to building long-term value for the business through innovation and responsible business practices. As a partner to the NHS, it is crucial we share their values and beliefs, and this commitment is reflected in our approach to sustainability. We intend to both prove the benefits of this investment and to build our capabilities in this area. Our first net zero scheme is in Fareham, and the renovation of what was unbelievably derelict [indiscernible] house into a children's facility -- children's therapy facility, which is well underway. With full use of our net zero design guide, we have achieved an impressive 46% reduction in the operational carbon used. Importantly, this commitment also extends to our own operations, and we will be moving shortly to a more sustainable office building, where we will test new technologies for improving sustainability. This will include, for example, the use of recycled materials, improvements to the building fabric, smart technology and on-site renewables. However, the biggest challenge for sustainability is not technological but human. It is changes in our behavior and those of our customers that are the hardest part of the challenge. Our new office will allow us to discover just how well we can change our teams and other users of the building's behavior in reducing water and energy consumption. Once we have gathered these learnings, we will share them with our customers and a wider audience. So alongside our work in sustainability, we have also been looking at other innovative ideas, such as employee welfare and digital health. In Cramlington, our building will be our first built to the Well Standard with extensive outdoor space and a nature trail. In Winchester, we are co-funding a study into how our customers will be using the building to test digital solutions for health. Both of these demonstrate our appetite to identify new ways to support health and well-being through our experience, imagination and innovation in our buildings. Now -- I spoke earlier about the unrelenting pressures on the NHS and about how investment in health care, whether people, buildings or technology had quite simply failed to keep up with its needs. And I do think we are -- we have reached a tipping point. Standing here, is there really anything different about this time? Are we really going to see any change As for anything to be different, so much needs to change. Honestly, I don't know, but at this moment in time, I think we might, as the public voice is ever louder and the challenges with access to the NHS are starting to be a vote loser. It certainly is positive that we have had engagement with the government as part of the new primary care recovery plan. This, whilst not exactly revolutionary, does try to provide additional capacity in primary care with an increase in the workforce, improved incentives for bringing doctors out of retirement, and it gives an expansion to the role of pharmacies. It also explicitly highlights the need for investment in buildings and recommends a new priority within planning guidelines for primary care provision. In addition, labor is calling for an expansion in out-of-hospital care and investment in the workforce and infrastructure. There is also a shift in emphasis with the softening of objections to the involvement of the private sector. So overall, the political tone is more positive than it has been for many years. If political priorities are shifting, is the NHS ready to deliver? It's far too early to say. New structures for the health system are only just bedding in. There is a chance that by bringing primary and secondary care together with a more coordinated approach with less emphasis on hospitals and more on prevention and community treatment, it is possible. In addition, we are seeing a growing role for the independent sector with private provision in primary care expanding outside London for the first time and increasing levels of activity in private hospitals. This shift feels as though it is here to stay. Whatever the scenario, additional capacity in out-of-hostel care and a move to a more preventative model is essential. And Assura has the capability from its many years of health care experience to provide it, however it is funded. In summary, Assura has again demonstrated the strength and remarkable resilience of our business. As we have continued to identify new opportunities with over GBP 130 million of net investment and record levels of rental growth. This has enabled us to increase net rental income by 9%. And thanks to our market-leading debt book, this has converted into a 6% growth in earnings per share. Our confidence in the outlook and growth prospects for the business mean we are able to pass this on to shareholders with a 5% increase in the dividend. While the NHS pauses its investment due to budget pressures, the political backdrop remains positive for more out-of-hospital care. We are preparing now for this necessary and inevitable investment, whether publicly or privately funded, by investing in our long-term capabilities, especially around sustainability. Assura aims to be at the front in its sector, supporting health and well-being through innovative, sustainable buildings, whilst continuing to deliver for its shareholders. Now that completes this morning's presentation. and we'd like to move to any questions we might have.

So if we -- there's a mic available, so if anyone would like to just raise their hand. And if you could just introduce yourself for the benefit of the webcast, that would be really helpful. Thank you.

Denese Newton from Stifel. You also talked quite a lot about opportunities in the private sector. And I just wondered in terms of rent setting, because you had difficulties to get the NHS to agree to commercially viable rents, is that less of a problem in the private sector? And then my second question was you mentioned about partners, so presumably partners in development. Could you give us some more detail on who those partners are and what they add?

Yes. Thank you. So in terms of rent setting, it's a very different arrangement. So in terms of dealing with rents with the NHS, it's a very bureaucratic and long-winded process, whereas agreeing rents with the private sector is a much more normal commercial negotiation. So -- it is harder on the one hand because it's a very commercial negotiation, but it's much easier on the other hand, because it's much more quickly resolved and you reach a solution much faster. So in this market, as we're starting to see the market stabilize, our outlook is that, that will -- the rental levels will be established in the private provision much faster than they will be in the NHS because of that lack of sort of bureaucratic complications, if you like. And in terms of the partners, so I was referring to the occupiers in the building, so the 2 live schemes that we have at the moment. One is a brand-new facility for Ramsay Health Care and the other one is a cancer treatment center for Genesis Cancer Care. So those are the 2 partners that we're referring to.

It's Paul May from Barclays. Just a couple of questions from me. First one on the dividend and how you're thinking about that as you look forward to higher financing rates and whether that comes into the equation in terms of how you grow the dividend from today. Then on yield expansion and potential for sort of further yield expansion from here given where financing rates are, looking at it in a slightly different way, are you seeing any opportunities coming up, particularly from, say, GPs who are the predominant owners of centers? And whether as they come to remortgage, is that something where you could see opportunities for further acquisitions moving forward? And then the final one, just on the viability of the extended schemes. Obviously, you mentioned the negotiation with the NHS around rents. Do they push back at all on the value of the land and whether you need to adjust the value of the land down in order for those schemes to be viable moving forward.

Great. Thank you. So I'll take those in reverse order, if that's all right. So in terms of the viability of extended schemes, yes, that's a very -- that's a sort of protracted and extended negotiation that we have, largely driven by construction costs and financing costs. But clearly, the cost of land is an element. But our schemes, it's a relatively small proportion, so typically only about 20% of the total cost in our schemes is the land. So in some cases, we have had to go back and renegotiate. Often when we're on our schemes, we're working with the public sector already with the lands. Often we're buying from a local authority or perhaps another NHS entity. And there are a couple of schemes where we had agreed a price that we're now not able to meet as part of that, and we're having to renegotiate. But it's not a wholesale reduction in land values like you might see in other sectors. In terms of -- your second question was about yield expansion and opportunities. So I referenced the pipeline in the presentation and I highlighted that we are seeing a lack of opportunities in the market at the moment, and therefore we have nothing in our acquisitions pipeline at the moment. And that reflects the fact that, so far, we haven't seen a lot of opportunities coming forward. So there isn't any real pressure on GPs to sell. In the last 6 months, I can actually -- there's one example where we have secured a schema at a very attractive price. And that was because the GPs had some very specific circumstances that meant that they had to sell that asset. They were -- they had a partner retiring and there was a tax issue for them that meant they wanted it done in a certain time frame. But that's only one, I'm afraid. So a little -- there is a lack of opportunities to buy cheaply, if that's what you're referring to at the moment. But obviously, we will continue to monitor the market, and should opportunities arise, then clearly we'd be very keen to take advantage of those. Then your third question was our approach to dividend and the pressure that we might see from rising interest rates on our earnings. So I might just ask Jayne to explain where we are on that refinancing cycle.

So obviously, as you know, we are in our tenth year of dividend growth, and it's always our aim to have a progressive and growing dividend. Our debt refinancing, we've got nothing in the near term that's going to cause us any issues. And as you've seen from what we presented, we are way beyond 2030 as well with the majority of the debt. However, we have got some inherent rental growth. I talked about what we're seeing with the index-linked leases coming through and the pro forma rent rolls. So you can see we've got some growth with the activity that we have. So it is our aim to continue to grow earnings and then continue to grow the dividend as we move forward.

Andrew Saunders, Shore Capital. If I could just go back to the discussion about acquisitions. What do you think the long-term outlook for these looks like given the GP ownership group who obviously are big owners of these assets are likely to be working longer given the changes to pension rules.

Yes. I mean, the long-term trend is very clear, which is a move away from GP ownership. So our market share has doubled in the last 5 years, and obviously, PHP have grown over that time period as well. So the percentage of the market owned by the listed players has grown and the percentage owned by the doctors has reduced. I think that will carry on. You make a very valid point that some of the short-term pressure for that might be extended out because of an extension to their working lives and that -- because retirement is typically the trigger for the disposal. So yes, you might see some short-term delays to some of that transition. But the overall trend is very clear, which is a move away from majority GP-owned to, say, to a more mixed model. And I don't see any change to that anytime soon.

Edoardo from Green Street. In terms of the 30% uplift required to make development attractive, do you see a similar relationship in Ireland and whether the Irish sort of health care system is more open-minded into getting there quicker than in the U.K.?

So it is a very similar situation in Ireland in terms of obviously having the same pressures that we are in terms of higher financing costs and higher construction costs. Those are less pronounced. So the schemes that we are moving forward are still under the old rates before that inflation, and those are still viable because there's been less of the construction cost inflation in Ireland. It's a slightly -- it's a very well-developed market. It's a more competitive construction market, and we're still able to achieve the required margins on those schemes. Looking forward, I think there is the same pressure. So I think you will see rental progression in Ireland as a result of those cost pressures as well. So the impact on our operating assets is very different. So in Ireland, the schemes are all index linked, so effectively, the starting rent is the negotiation. But obviously, your rental growth from that point is effectively baked in with the indexation. So we will see some pressure on some new schemes coming forward because of those higher costs. But it is -- there's less pressure than there is in the U.K.

And second question for me, in terms of your pharmacy portfolio, have you had any interest from potential buyers interested in those types of assets? Just curious about that.

Yes. So in terms of pharmacies, we haven't had any direct approaches. I guess, given the proposal to extend significantly the role of pharmacies, there's definitely potential for there to be more value in those assets. And so we might well see some buyers. But so far, we haven't seen anyone come forward. And in fact, the biggest pressure we've been seeing in the pharmacy sector is really one of the big operators, which is Lloyd's pharmacies who are effectively exiting the market. So that's been what we've seen is effectively a change of ownership structure in the market with Lloyd's exiting. Some of these changes might lead to a reverse of that and it certainly is a more attractive market, I think, on an outward view. If there aren't any more questions, we'll just check whether there are any questions on the webcast.