Assura PLC

LSE:AGR

Good morning, everyone. Nice to see you all again. And welcome to our half year presentation. It's certainly been a transformative 6 months for Assura, both through our recent acquisition and through an extremely productive period for our existing and ongoing business. The priority for today's presentation will be to convey to you the substantial and varied opportunities in health care markets, where we are certain that Assura is best placed to take full advantage of them as a clear leader.

As usual, I'll provide you with a brief summary of the key highlights before Jayne takes you through our overall performance, and then I'll return to look at the opportunities across our markets in detail together with our outlook for the business. As always, we'll leave plenty of time for questions.

The standout achievement in the period has been our acquisition of the GBP 500 million portfolio of private hospitals. This is a portfolio of the highest quality run by leading U.K. operators. It is London-focused with long leases and annual indexation. It is clear that we bought well, evidenced by the immediate uplift in value achieved in September.

Since we last met, we have seen the election of a new Labour government and the publication of the Darzi review of the NHS. This review pulled no punches and identified the NHS as being in a state of acute crisis and in need of a once-in-a-generation uplift in investment to give the system a chance to reverse its decline.

We have also made significant changes to our funding structure with the launch of our GBP 250 million JV with USS with the scope to fund essential future investment in NHS assets. In addition, we have completed successfully the first stage of our disposal program with 12 assets sold for GBP 25 million at book value. Two further portfolios are at an advance stage of negotiation.

As part of the hospitals acquisition, we have secured debt funding of GBP 266 million and issued GBP 100 million of shares to the vendor. The combined impact of all of these elements is an impressive set of numbers, with 8% growth in net rental income, 4% growth in our earnings and a small increase in our NTA. This last one is particularly significant as it follows 5 consecutive reporting periods of valuation declines. This reflects stabilizing yields in primary care and a GBP 25 million net gain from the hospital portfolio.

For a number of years, we have been talking to you about the considerable breadth of opportunities in health care. We have now realized one of these opportunities with our GBP 500 million investment in private hospitals. This is a market with strong future growth potential and attractive investment characteristics.

Assura's long-term relationships in health care, our development and asset enhancement capabilities, together with our focus on social impact and sustainability ensures that we are in a unique position to capitalize on these opportunities. This deal also brings several financial benefits such as long-term secure and growing income through index-linked reviews and earnings enhancement to support a covered and progressive dividend policy.

This slide also shows how far we have come in this journey. In the past 5 years, we have doubled our rent roll. Our growth has been across all markets. But at the moment, our revenue diversification is particularly strong in private hospitals, where we now have a 25% mix. One of the key benefits of this is the certainty of our income growth with close to 50% of our GBP 179 million of rent roll underpinned by fixed or indexed uplifts.

There has been a significant surge in health care demand across all market sectors, driven by an aging population and the increasing complexity, effectiveness and cost of treatments. However, the rate of growth can vary across markets.

The current challenges in the NHS have resulted in our GBP 376 million of pipeline of 33 GP-led schemes being put on hold. Conversely, there is increasing activity in the private hospital market. This is partly due to delays and general failings in the NHS, but it also reflects a shift in attitudes towards private health care, which is now seen as both legitimate and essential.

This growing demand makes private hospitals more attractive for investment and expansion. While NHS investment is on hold, we can deliver several schemes for the private market, providing much needed capacity within the system. As a result, our investors benefit from a less cyclical pattern of demand, providing reliable and consistent returns. This shows the clear benefit of being a diversified health care REIT.

Now I'd like to pass over to Jayne to take you through the key commercials in the first half. Jayne?

Thank you, Jonathan. Good morning, everybody. It's good to see you all again. These are half year results, and as Jonathan has indicated, it has been an exciting time. Our business continues to go from strength to strength, and our planned strategy to expand into other health care markets took a leap forward during the summer.

The acquisition of 14 private hospitals for GBP 500 million along with the joint venture with the Universities Superannuation Scheme delivered an excellent 6 months of progress. This move means that Assura is now a fully diversified health care REIT, and we'll have the ability to take advantage and grow the business as we see changes in the U.K. health care market develop.

We have seen rental growth of 3%, leading to a growth in EPRA profit to GBP 52.7 million. It is our belief that we are close to the bottom of the market. And for us, that means valuations are moving in the right direction. And our disposal program is underway and has seen GBP 25 million of completion post the period end.

Now let me take you through the results for the period. The key movements in our numbers for the first half relate to the 2 transactions we completed. Our rent roll now stands at GBP 179.1 million, an increase of GBP 1.7 million for rental growth, GBP 29.4 million for the private hospital portfolio, but reduced by GBP 3.4 million, reflecting the USS share of assets going into the JV.

The recycling of the capital from the USS joint venture into the private hospitals has helped to drive net rental income growth and we saw an increase of 8% to GBP 76.7 million. Our EPRA earnings increased by 4% to GBP 52.7 million. Our EPRA EPS remained largely flat at GBP 0.0172 per share due to the dilution from shares issued in the period.

Our fully covered dividend increased by 4% following the uplift in July, and we've kept our EPRA cost ratio at 12%. Our NTA increased slightly to GBP 0.494 per share. We have seen a 5% or GBP 25 million uplift in the value of our acquired hospitals, and this is testament to how well we bought.

The average value on the rest of our portfolio is flat at 5.2%, which compares to 5.45% on the MSCI All Property Index. In addition, the values have our equivalent yield at 5.53% as we see the positive movement in rental growth. We are very positive about the future valuation prospects for our assets and the fantastic space in which we operate.

Looking at the chart on the right, you can see the progress of our EPRA NTA. Whilst the issue of the shares to Northwest diluted our NTA by GBP 0.007, the subsequent revaluation of the portfolio showed a gain of GBP 0.008, therefore, eliminating the NTA dilution. Our EPRA earnings increase the NTA by GBP 0.017, with dividends reducing it by GBP 0.017, leaving our NTA at GBP 0.494 per share.

So here, you can see what will happen to our portfolio loan-to-value once we dispose of the assets in our pipeline. We are currently at 49% loan-to-value. However, with a GBP 25 million sale to a private buyer and GBP 27 million into the USS JV, we are already under 48%. We have GBP 110 million worth of assets for disposal under discussion, and this will bring a mix of either outright disposals or assets into the JV. And we expect these to be at or above net book value. These disposals will mean our pro forma LTV will be 46% and that is within only 3 to 6 months.

In addition, we have a further GBP 90 million worth of assets identified for potential disposal, and this would bring us to 45% loan-to-value. This demonstrates delivery of reducing our LTV ahead of the promised 18 to 24 months.

The acquisition of the private hospitals completed in August following a thorough process of due diligence. We have acquired 14 of the highest quality private hospitals in the U.K., spread both geographically and in terms of tenants. 64% of the assets are based in London and the South East, with the rest being in prime locations around the U.K. The addition of this portfolio brings relationships with all of the top 5 private health providers, and Jonathan will give you some more color on this later.

The 14 assets cost GBP 500 million and were bought at a yield on cost of 5.9% with a weighted average unexpired lease term of 26 years. All assets have annual index-linked leases and are fully repairing and insuring. This means there are a few additional costs associated with the management of the portfolio. With rent cover at 2.3x and rising, we're clear that we have both excellent tenant coverage with strong trading performance.

We financed the acquisition with a GBP 266 million term loan, a drawdown on our revolving credit facility, cash and we issued to Northwest GBP 100 million worth of Assura shares. This innovative approach to funding the transaction created the most appropriate balance of both debt and equity.

The GBP 266 million term loan was provided by Barclays at a margin of 110 basis points, which is extremely competitive. The loan is at a floating rate. However, we have hedged this at an all-in rate of around 5.2%.

We informed the market that completing this transaction would raise our LTV to around 48%. We've made it abundantly clear that we aim to bring the LTV down below 45% over the next 18 to 24 months and net debt-to-EBITDA below 9x. And as you can see from the completed transactions and the deals in our pipeline, we are moving towards meeting those targets.

With regards to our overall funding structure, our average interest rate increased from 2.3% to 3%, reflecting the drawdown of both the loan and the revolving credit facility. The average term of our debt is 5.1 years. And our first refinancing will be October '25 for GBP 70 million. Our debt book remains extremely well priced with over GBP 600 million post 2030 at 1.7%.

Back in May, we announced our joint venture with USS, and I'd just like to recap the terms and look at how this is developing. The JV is for up to an agreed GBP 250 million with USS owning 80% of the company. We initially seeded the portfolio with 5 of our assets with the balance of 2 assets subject to a slight delay in transferring due to some legal points. However, this transfer has now happened post 30th of September.

The types of assets that will be going into the fund will be restricted to those with GP or NHS covenants with guaranteed index-linked uplifts. And we have an agreement to complete the fund within 3 years. However, this could happen much sooner. USS can grow the fund to GBP 400 million. However, there is no obligation to us beyond GBP 250 million.

Assura retained a 20% interest and receives fees for managing the assets. This strategy diversifies our funding sources and has enabled us to recycle the capital into the private hospital portfolio at better yields.

In the period, we have completed 3 developments at Southampton, Cramlington and Bury St Edmunds as well as our asset enhancement program. These added GBP 1.9 million to our rent roll. We are on site with a further 5 developments, 3 of these are in Ireland, one is a GP medical center in Winchester and the other is a children's therapy center in Fareham.

Our asset enhancement program at our Greyswood Surgery in London is a perfect example of how minimal capital can not only improve our buildings, but also our rents. We are adding valuable clinical space for a capital spend of GBP 1.2 million. This is such an improvement for the GPs and is a good return for us with a 7.5% return on capital employed on the enhancement. In return, we will receive rent on the new space, but also a 10% uplift on the existing space, which will help to set the rental tone for other assets in the area.

This building will be vastly improved and the EPC will also move to a B rating, saving money for the practice. Taken together, these on-site activities will add GBP 2.6 million to our rent roll with 82% of the leases being index-linked.

We settled 129 reviews in the period, achieving a GBP 1.7 million uplift in rental income. Of the GBP 20.4 million of rents reviewed, this equates to an 8.2% uplift. Following the hospital acquisition, our mix of rent reviews has changed and now 49% of the portfolio is subject to index-linked or fixed uplifts, with the remaining 51% being open market reviews. Having some of the rents with index-linked uplifts gives certainty on cash flow, with the majority of the reviews subject to caps and collars of 1% to 4%.

The chart on the left shows the upward trajectory of our rent roll due to rent reviews over the last few years. Given the hospital rents increase on the 1st of January and with the reviews we expect before the year-end, we can see the rise in our rents will exceed those in prior years. So as you can see, it has been a really busy first half with our joint venture, the acquisition of the private hospital portfolio and the continuation of business as usual with rent reviews and the development completions.

The strength of our balance sheet is reflected in the cost of our debt at 3%, which remains industry-leading. Our A- rating was reaffirmed by Fitch, and the disposals are bringing down our loan-to-value. We also announced today that we will be looking to broaden the geographical ownership of our shares with a secondary listing on the Johannesburg Stock Exchange. Given our performance over the past 6 months, we look forward with real anticipation to building further upon these achievements.

And with that, I will hand you over to Jonathan. Jonathan?

Thank you, Jayne. Now I'd like to explore the factors driving such impressive growth in our markets. Demographic changes are the most significant driver of increased health care needs. The number of over 70s are projected to increase by over 37% by 2040, with those over 80 predicted to increase by over 60%. Despite these long predicted challenges, the U.K. has consistently failed to invest ahead of what will certainly be an overwhelming surge in demand.

The recently published Darzi report estimated that we have invested GBP 37 billion less capital than the OECD average over the last 12 years. This delayed investment is already having day-to-day impacts, with a GBP 13.8 billion backlog in maintenance and impacts on patient care, with services disrupted at 13 hospitals a day last year.

The impact of this can also be seen in ever-increasing waiting lists, which have now reached 7.6 million. That's more than 1 in 7 of the population in England. This is a key contributor to the growing use of private hospitals. However, the underlying increase in demand is even more significant. This is evident in the 21% forecast increase in demand for beds in the NHS by 2030. That's equivalent to over 64 new hospitals. No amount of promises by our Prime Ministers past or present will be enough to achieve this target. The demand on NHS community care and on the private sector will, therefore, simply continue to rise.

In this current landscape of increasing demand, there is a multibillion pound investment opportunity across the 4 markets of U.K. GP surgeries, NHS trusts, private hospitals and Ireland. It is important that we make it clear that these newer opportunities are not instead of our original GP market, but very much as well as. And indeed, these markets are complementary and supportive of each other.

So in light of this, let's look at the opportunities in the U.K. GP market. Since we spoke last, we have seen the outcome of the general election with an incoming Labour government that clearly sees improving the NHS as a key priority for the country's health and, indeed, for the success of their political ambition.

Wes Streeting's 3 key priorities for the NHS are all supportive of urgent investment in primary care. Firstly, a commitment to allocating a larger share of the NHS budget to primary care; secondly, a shift from analog to digital; and thirdly, a change in emphasis from treating sickness to a focus on prevention.

NHS data shows that primary care treatment can be up to 10x less expensive than hospital treatment. Therefore, investment in modernized and upgraded buildings is crucial. The immediate response in the recent budget is hugely encouraging, a GBP 22 billion increase in general funding, a GBP 3.1 billion increase in capital funding and a specific fund of GBP 100 million to support extensions and improvements to GP surgeries. We look forward to learning more about the details of how these funds will be allocated, but the positive momentum for our business is clear.

In order to recognize the full potential for Assura within the primary care estate, it is essential to understand its current condition. NHS data shows that around 40% of the 9,000 medical centers in the U.K. are not fit-for-purpose and need replacement, requiring approximately 1,000 newbuild properties.

To put this in context, if Assura built 15 centers per year over the next 10 years, it would involve an investment of around GBP 1 billion, serving approximately 3 million patients and costing the NHS GBP 60 million per year in rent. To enable this investment to happen, we would need to see an increase of rents of up to 30%, which would unlock the growth potential in our existing estate.

In addition, this rental growth can be unlocked through asset enhancements, and this is also a key focus for us. Both of these elements secured funding in the recent budget, and this only reinforces our positive view on the prospects for growth underpinned by sustained real terms increases in rents.

Beyond this substantial opportunity in primary care, we are also keenly focused on growing within the private hospital market. This market is supported by robust and established U.K. businesses with demand that continues to grow year-on-year.

Our investment in this sector will provide secure, long-term and indexed cash flows, delivering excellent risk-adjusted returns. Over the past 20 years, private health care has grown by over 6% a year into a GBP 6.8 billion market. This is remarkable, but even more remarkable is the potential for this growth rate to be sustained.

You can see why for us this is such a compelling prospect. Our positive outlook for this market is informed by the broad-based nature of its growth. Self-pay revenue has shown an impressive growth of 321%. Some of this is clearly due to NHS waiting lists. But there is also an increasing acceptance of the principle of paying for specific types of health treatments.

PMI revenue has shown steady and sustainable growth of 115% over the period and still represents the largest proportion of the market at 43%. NHS referred revenue has seen the most substantial increase of 947%, highlighting the critical role of private hospitals in augmenting capacity in the system.

There is no ideological objection to the role of the private sector in supporting the NHS from this Labour government. In fact, the largest expansion in private health care occurred in the last Labour government when, as you can see here on the chart, the private market grew by a compound rate of over 8%.

Let's look now at the contribution these assets are making to their local health economy. The main focus of the private sector is on the delivery of routine procedures. These can be delivered at scale through specialized facilities located close to their target customers. Typically, each site generates revenue between GBP 15 million to GBP 30 million with higher operational efficiency, allowing them to maintain healthy EBITDA margins of more than 20%.

The growth in revenues we have already highlighted has translated into a strong and improving rent cover level of 2.3x in our portfolio, a performance which gives weight to the value of our investments with long-term returns.

Operational efficiency is achieved by focusing on a few specialist services tailored to local demand. Often the facility is the leading provider in its area and a key contributor to the local health economy. These quality businesses offer a strong and enduring financial covenant.

Additionally, they've typically operated from their locations for decades, benefiting from high barriers to entry and a stable competitive environment. This makes them highly attractive to other providers in the unlikely event of a tenant default.

Our recently acquired portfolio has over 64% of its rental income from London assets, a highly desirable market that enjoys strong PMI and self-pay volumes due to the demographics these hospitals serve. Alongside our London hospitals, our regional hospitals, which are tailored to their local markets, can be equally as profitable. Having a portfolio of different assets in these different markets gives us extremely valuable diversification.

Let us take 3 examples from our recent acquisition to illustrate our point. Parkside Hospital in Wimbledon, it's the largest single asset in our portfolio. It sits on a substantial site opposite Wimbledon Common. It generates almost all of its activity from private pay and PMI, with a focus on diagnostics and cataract operations.

In contrast, 2 regional assets, the Lincoln Hospital in Lincoln and the Claremont Hospital in Sheffield, provide a different range of procedures and have a higher proportion of NHS business. This shows an adaptation to local health requirements and makes them leaders in their respective fields as well as providing much needed capacity for the NHS.

To take one example, Claremont Hospital is the market leader in its region. Spire recently invested GBP 2.6 million to increase capacity by adding a new operating theater. The rent cover at this site is already strong and is set to increase further without any contribution from us as landlord.

Today, I have focused on 2 key markets. However, there is a rising demand and multibillion pound investment opportunity across all 4. Currently, our focus and approach differs in each one. However, they are all based on leveraging our depth of health care knowledge, our development capabilities and our sustainability skills.

In the U.K. GP market, we are maximizing the value of our GBP 2.3 billion of medical centers through rental growth and asset enhancement, whilst working towards unlocking unrealized long-term investment.

Through our joint venture with USS, we have access to capital to support investment in essential social infrastructure with NHS trusts. In the private market, we have established relationships with all of the key players and have positioned ourselves firmly as their specialist partner with our impressive health care expertise.

In Ireland, where the HSE continues to promote investment in primary care centers, we can leverage our development and asset enhancement skills on new and existing assets. Assura prides itself in doing things differently. We are clear in our purpose. We build for health. This ensures that we consider the potential health impact of every single action on our stakeholders. This approach to ESG, the bigger picture is fundamental to our long-term commercial success. The bigger picture has 3 key pillars: healthy environment, healthy communities and healthy business.

In terms of a healthy environment, we have delivered 98 improvement projects in the last 3 years, reducing energy consumption by 3.6 million kilowatt hours. We continue to support healthy communities through our actions and the Assura Community Fund. Over the past 4 years, the fund has donated over GBP 2 million and generated over GBP 8 million in social value. For our healthy business pillar, we focus on generating attractive returns for our investors, while providing innovation, expertise and excellent customer service.

As a testament to our approach, we are proud to have achieved the significant milestone of being the first FTSE 250 business to achieve B Corp accreditation. We received overwhelming support from our shareholders at our AGM, who recognized the reality that a responsible business can be a more successful business.

So in summary, we have had a transformative 6 months permeating all areas of the business, bringing real progress while funding future growth. We entered a new JV and issued debt and equity to support our acquisition, and we are on track with our disposal targets.

The political backdrop with its promised budget funding gives us a real chance to unlock GP developments and build further rental growth. Alongside this, having acquired the portfolio of private hospitals, it is pleasing to note the growth in this market is running at 6% a year and we anticipate strong future prospects.

As a diversified health care REIT, we aim to be at the front of our sector. We will support health and well-being through innovative, sustainable buildings built both for the NHS and the private sector. We have increased our dividend by 4% and our shares offer a current dividend yield of over 8%, and we'll continue to focus on delivering returns for our shareholders.

Our outlook is positive. And with the broad scale and scope of possibilities we see in the future of health care together with firm backing from a new government, it is exciting to look forward in anticipation of further progress to come.

Now that concludes this morning's presentation and we'd be happy to take any questions you might have. So we'd like to start with questions in the room. There is a microphone. So if you could raise your hand to receive the microphone. It would be great if you could also introduce yourself for the benefit of the people on the screen. And then we'll go on to questions from the webcast later. So thank you.

It's John Cahill from Stifel. A pretty big year for Assura. 2024 coming to a close. And next year, obviously, for the NHS is going to be a key with the 10-year review that comes out in the spring. I appreciate we don't know what's in that. We know what we would like to see. But I wonder if you could share your thoughts on what we might actually see announced. And then slightly specifically, is there any chance we might see some sort of review of the District Valuer system?

Yes. Two really interesting questions. If you take the 10-year plan first, so, clearly, we're not aware -- it's not being written as we speak. So clearly, we don't have the detail to share. But what's clear for us is from those statements from Wes Streeting, which I shared before, those 3 priorities, more care in the community, analog to digital and prevention rather than treatment. All of those things are really supportive of more treatment in primary care, because if you're treated in primary care, it's up to 10x cheaper than being treated in a hospital. So that's a clear priority.

There's more money, but they also want more efficiency and more productivity, and so community care in a primary care setting is a really important driver for that. So we're very confident that there will be increased money for primary care in that 10-year plan, that we haven't seen it yet. And as part of that, they'll have to invest in the infrastructure.

If we want to provide this broader range of services and more diagnostics, more testing in the community, we need to have the buildings and the equipment to do it. And they recognize that. So we are confident that there will be more funding for us. So obviously, we'll wait to see what March brings, but that is our expectation.

In terms of the DVs, really difficult one to answer explicitly. We're having lots of conversations with lots of different parts of the NHS. And some of them are starting to realize that actually by holding down rents, they're stopping investment, which is bad for the system. But that isn't everywhere in the NHS. So we will continue to make that case and we are confident that we will win that in certain areas. Whether it's a blanket across the NHS change to the system, it's too early to tell, but we are making progress.

I was doing an event in the House of Lords just the other week and we were making explicitly that point, and we were really landing that with the Labour peers in the room because they hadn't quite realized that that structure was actually holding back improvements that the NHS could have at relatively little cost.

The numbers I quoted before, to build -- GBP 1 billion of new facilities would require only GBP 60 million of additional investment from the NHS. These are relatively small numbers. So we are optimistic, which is, I think, a prerequisite for this game anyway. But yeah.

It's Tom Musson from HSBC. Just has there been much of a reaction as far as you can tell from the private health operators after the announced increase to national insurance? Just in particular, how that may have affected the projections I think you make internally on rent cover?

Yes. So clearly, that's only a very -- obviously, a very recent announcement. So I haven't had specific conversations with them in the last 2 weeks. But I know from talking to them more generally about the inflation that we've seen in the system over the last few years, which has been very significant, as you know, they were very confident in discussions with me that they have pricing power and the ability to pass that on to -- especially, in self-pay and the PMI sector.

So in terms of an overall increase in their cost base, 1.2% on their employee costs, given the scale of inflationary cost increases they were able to pass on, I think we'd be very confident that they would be able to pass that on in full.

Maxwell Nimmo, Deutsche News. Maybe just kind of following on from that on the rent cover point. Within that portfolio, 2.3% is the average. Can you kind of give us a range of where the kind of top and bottom is on that across the different sort of providers?

And then second question, if I may. So around half the portfolio now is away from OMR rents, and as you say, this is not a replacement for what you do. But do you have kind of soft thresholds in your head of how far you would like to be with OMRs versus RPI versus the other options?

Yes. So in terms of the rent cover, we don't disclose individual asset rent cover because I think that's quite commercially sensitive for the operators. But I can tell you what we do, is we look at it from each operator on an operator-by-operator basis. And within the portfolio, we will make sure that the overall rent cover by occupier within their portfolio of assets is comfortable.

And if it isn't, clearly, we would have the option of looking to rebase and rebalance the rents, which is what the previous occupier –-previous owners, Northwest, had done with some of their assets. They effectively re-geared the leases and they reallocated some of the rents across different assets. So when we acquired them, they were already rebalanced. And 2.3% is an extremely strong position. And given those growth numbers I gave you, we're very confident in progressing from there.

So just to clear on my head. Yes, so a lot of them rebased already.

Yes.

So there won't be some that are in there -- I'm not asking for names of operators or anything, but there will be some that are very low in that range...

No, no, there is a range. I mean we do have the odd one that has an extremely high cover, over 5x in some cases. So there is a range, but it's all within a very comfortable -- there isn't an individual asset in the portfolio that gives us any concerns, if that's what you were trying to ask.

And there was a second question, which was on, what's the overall percentage...

Yes, the thresholds of [indiscernible] kind of. You're sort of 50-50 now, aren't you, roughly?

Yes, 50-50. So we said last time -- and our position hasn't really changed on this -- that, clearly, the portfolio has shifted a lot in the last few years. And you saw that in the chart I put up there, where we doubled our rent roll in the last 5 years. And the big move really was private hospitals going to 25%.

Now 6 months ago, I didn't give -- there was no target for that, but a GBP 500 million opportunity arose, which was a fantastic portfolio with really strong performance metrics and strong occupiers, and we saw that as an opportunity we wanted to take. So we moved our private hospital percentage up.

So if we fast forward another 6 months, 18 months, it will be literally based on what the opportunity set is in front of us. We don't really have any restrictions on what we can do. Clearly, by definition, we're relatively capital constrained. So we're not going to make a massive move, but it is going to move around a little bit.

And we don't have any concerns about the private nudging up or the GPs nudging down. We see both markets as really attractive. And it will be, as I say, based on the opportunities we see in each one.

Callum Marley from Kolytics. A couple of questions with links to the slides. So on Page 13, you comment on new development setting rent evidence. And then on Slide 53, you show open market rents growing at 1.9%. Do you have any sense of where they might be heading at year-end based on the new evidence?

And then Slide 53, again, where you kind of showed the 2 lines, RPI and open market review, they seem to be kind of converging. Is it fair to make the argument that maybe now is time to be weighted more towards open market especially if it's trending up and RPI is trending down back to 2%?

Yes. Do you want to take the first question about the second half, and then I'll come back to the overall position.

Yes. So obviously, we don't give forecasts. We did, however, obviously, on the rent review slide show where we expect our overall rent roll to be. We are positive about the direction of travel. We're at 1.9% and growing. But there is a backlog and it takes time. And we've got some older rent reviews in there. So if some of those come forward, you could see at that level you may get a -- it may suppress it a bit. But we're not expecting a dramatic movement either way.

In terms of the rental tone from the asset enhancement, it's not completed yet. It's due to complete. And it's only after it's completed, it will set a -- it will complete shortly, but set a new rental tone. But again, it will take time to come through. It depends when the other reviews are in that patch.

And in terms of that overall split as to whether we'd like to have more OMR right now, I guess there are 2 elements to that. One is quantum and one is timing. So if you look at the 2 opportunities and you compare OMR to RPI, the potential upside on OMR is larger but the timing is more uncertain.

So what we've deliberately done is we've locked in guaranteed uplifts on RPI that we can give you year after year. So you have that minimum return coming through. But we're still chasing the bigger prize of the OMR growth, which we think has potential to be larger. But we don't know when you're going to get that or when we're going to get that.

So what we're able to do is give you immediate return now while still pursuing that. And that will come, but I'm not sure exactly what year it will come. And we think that is the benefit of having this diversified approach of the private hospitals and the GPs, both with excellent growth prospects, but probably going to deliver that growth in different time periods. That's our thinking.

It's James Carswell from Peel Hunt. You talked a little bit about the opportunity to modernize kind of the GP surgery estate. Obviously, the District Valuer isn't very helpful. I'm just thinking in the private hospital, I mean, just looking at some of the pictures, some of them look like they're older kind of traditional buildings that have been repurposed. Is there also an opportunity to do developments and modernize that estate? Or do those kind of older buildings work very well for the private hospitals?

Yes. So I mean, yes and yes is the short answer. So the one thing I would highlight is actually if you went inside those buildings, they're a lot more invested than perhaps they look. I mean, Parkside is the classic one. The external probably doesn't look that impressive. But if you walk around inside also and if you visit the site, you appreciate the sheer size of that site. It's a really unique London asset. And it's really well invested on the inside and they're continuing to invest.

There's new technology and new machines going in there as we speak and they're refurbishing the bedrooms effectively floor by floor. So they are well invested generally, but there is some potential.

So there is -- within the portfolio, there's a couple that have some definite asset enhancement potential. So for example, the Edinburgh asset is at full capacity. Could we possibly look at building an extension there? That's something we're actively looking at. So there is opportunity. But there is -- but the existing assets are extremely well invested. And I guess the other key thing is it's at their cost, not our cost, the improving the existing asset.

I'm [ Ann Rowe ] from Barclays. A couple of questions on developments. So you mentioned the various cost pressures. But are you seeing any improvement in your development yield on cost? Is the NHS tone improving at all? And then do you have any internal hurdle rates on that, that you need to meet?

Looking at your report, I think that the development pipeline increased in the half, but nothing further came on site. So maybe if you could comment on how discussions are progressing and any time lines there?

Great. Okay. Well, I'll take that. So in terms of are we seeing an improving position, I think I highlighted in the sort of general political backdrop that I was talking about that really we would need a 30% increase in rents to make the current pipeline viable. We're not seeing that; hence, why it's in pipeline and not being brought forward. So there is still a significant gap.

Is there an improving tone? Well, we are having conversations, very active conversations in certain geographies. So there are 2 or 3 regions in the country where we are very close with the local ICB to break ranks effectively with the central -- we're willing to break ranks with the central team that's trying to control rents because they want the assets investing in. So could that happen? Yes. But is it certain? No. So that's why I'm a little bit more cautious.

In terms of timing, we've always said that we want 100% uplift in yields to make it worthwhile. You can see our valuation yield is 5%. So if we're not getting a 6% plus return on developments, we wouldn't be looking at it at the moment.

Edoardo Gili from Green Street. Two questions from me. The first one is how big do you think the investable universe is for private hospitals? If you were to double your exposure currently, how long would it take and how would you get there?

Okay. So we have a GBP 700 million gross exposure to the private hospital market at the moment. In terms of investable universe, there are a number of portfolios that are of that scale or larger. So we could obviously -- clearly, mathematically, we could double the size of the portfolio very easily if one of those portfolios became available and we could fund it. Well, it's a different question, sub-questions within that.

So it's very investable and very able to expand if one of those portfolios becomes available. But it's a slightly binary conversation because there's only 4 or 5 holders. So if one became available, we'd definitely be interested. But they may not become available. If they don't, there is the sort of more organic growth that we've been doing with Ramsay, where we've been building new facilities, looking at extensions and going down that route. So there's a deliverable steady sort of organic growth and there's the potential for another leap forward if a portfolio becomes available.

So the sale and leaseback opportunity would not be your sort of #1 route to grow your hospital portfolio?

That's not our -- based on the conversations we've had, because we have gone around and met them all. That's the beauty of this market is there's 5 people to talk to. So the way the economics are today, that sale and leasebacks are not looking attractive to both parties, clearly, that could change.

But at the moment, that's not our priority. At the moment, it's more about enhancing existing assets, potentially newbuilds, small newbuilds, not large-scale projects or picking up portfolios. And sale leasebacks would be third at the moment.

Understood. And secondly, you're diversifying away from primary care. Why aren't you looking at care homes as well in the health care space?

Yes. Well, I mean -- so obviously, you've got a -- there's only a certain amount of sort of strategic bandwidth one has at any one point in time, I guess. And the GBP 500 million deployment was a very material move for us and it's in line with our objective. So we're focusing on delivering that.

We're now describing ourselves as a diversified health care REIT. That obviously means that we are open to other markets. But we're very happy with the 2 markets we've got -- 4 markets and the 2 that I highlighted in the presentation. But of course, health care is a broader market and happy to look at that. But we've got enough to be getting on with in the short term on those 2.

I am Veronica from Tribe Impact Capital. I have a question given the outlook presented for the business and the understanding of the significant environmental impact that the build industry has. Do you have any plans on developing a science-based target for the near- or long-term plans in order to align the company and its operations with the Paris Agreement?

So the short answer is yes. We are already underway. In fact, we were hoping that we would be further advanced because we're in active conversations with starting that process and getting all of our targets verified. We just haven't actually in that -- we haven't yet got that process underway, but we will do and we're firmly committed to doing that. I don't have a precise time line, but I can certainly come back to you afterwards and keep you updated on how we're getting on. But it's absolutely our intention to do that.

So maybe we can move to some questions from the webcast.

Three questions at the moment. The first one is from [ Nicholas ] at STANLIB. The historical growth rate of dividend per share has been the main attraction for the share for a few years. In the context of rising finance costs and planned disposals, what is the outlook for dividend per share growth over the next 2 years?

Yes. So I guess in terms of -- obviously, there were various elements of shareholder return. Clearly, share price is one of them. But yield is definitely one of them. But that's obviously got 2 elements, your entry point and your growth potential.

As of last night, our dividend yield is in the high 8s and consensus has our dividends -- our earnings rather growing between 3% and 4% for the next 3 years. So if you take those 2 numbers together, that to me sounds like an incredibly attractive overall yield. If you go -- if you rewind 3 or 4 years, we were offering a dividend yield between 4% and 5%. But the earnings growth was a little bit higher, maybe 4% to 5% instead of 3% to 4%. Well, clearly, those 2 things are -- you need to take the 2 together. So I still think it's a very attractive entry point.

Next one is Elliot from CCLA. How much of the yield expansion comes from the acquisition versus on a like-for-like basis?

Yes. The yield expansion is very -- I think it was 3 basis points. So it's sort of in the margin of error really. There's been a little bit of a shift in the portfolio because, clearly, we've done some disposals and we've bought the hospitals. We don't disclose separately the metrics for the hospitals. But as I say, 3 basis points, it's pretty much in the roundings, to be honest.

Final one currently is from [ Shayana ] at Gravis. As a key landlord for the NHS, have Assura been actively engaging with the Labour party. Has Wes Streeting invited Assura to any sector discussions with you?

So yes, yes. Yes absolutely, we have -- I referenced the event in the House of Lords that we did a few weeks ago, which was explicitly about engaging with Labour peers to make them more aware of our plans. Clearly, this is an ongoing -- you don't just engage around election time. We engage all the way through the cycle. So we've been very much engaging with Wes Streeting's team.

I have not actually met Wes Streeting in a one-to-one meeting and, frankly, it's not likely to happen in the next little while just because getting into his diary is an extreme challenge. But we are influencing it in a broader way, which is the priority.

Nothing else? Brilliant. Okay. Well, if there's no further questions, thank you. Thank you very much for your time and attention. Really appreciate it. Thanks, everybody.

Thanks, everyone.