Assura declares £63.3m loss
ASSURA Group has confirmed its intention to convert to a Real Estate Investment Trust (REIT) as it reported a pre-tax loss of £63.3m for the year to March 31 (2011: £8.1m profit) and a £32.2m decline in its net asset value to £192.2m.
The loss was due largely to the company exiting a derivative with National Australia Bank which cost it £54.7m. The company also incurred a further £20.3m of exceptional costs, though, including losses emanating from a number of joint ventures.
Chairman Simon Laffin said the interest rate swap was “one of a number” of legacy issues that the new management team at the company had to address during the past 12 months as it has embarked on a restructuring of the firm’s operations. It also sold off its pharmacy and LIFT consultancy businesses for £36.3m, acquired the AH Medical portfolio of properties for £28m and completed a £110m, ten-year bond refinancing.
Laffin argued that the cost of the swap “had become excessive compared to the liability that it was intended to hedge”.
“In the context of falling interest rates and the need to secure refinancing, the board had no option but to close this out at a cash cost of £69m.”
It raised £33.5m from shareholders in order to do so, but managed to secure a £110m, ten-year bond in order to do so, which means the firm’s average cost of debt is now fixed at 5.26%.
At year end, the company achieved a 12.2% rise in income to £34.9m (£31.1m) and had a portfolio with a value of £549m (£519m), although its net asset value had slipped to 36.3p per share (55.5p).
It added that its core portfolio of 158 medical centres has an average lease length of 15.8 years. It also completed 99 rent reviews covering 29% of its portfolio during the year, leading to a 3.4% lift in rents charged.
Assura’s board has also identified £26.3m of non-core assets in its portfolio, including its former 55,000 sq ft Daresbury HQ “and some legacy assets that relate to businesses we have exited”, according to chief executive Graham Roberts. These include development land worth £9.1m and three shopping malls within hospitals valued at £5.3m.
The company said these are available for sale, but Roberts added that these are “secondary assets” for which investors currently find difficult to find bank finance.
As a result, these could prove difficult to offload in the current market.
“The timing of their sale will depend on market conditions and asset-specific considerations,” he added.
Assura’s board argued that its core business was underpinned by a government-backed rental stream and a secure source of long-term finance that will allow it to start paying progressive dividends.
Mr Roberts said: “Primary care is an attractive asset class with rental growth and capital appreciation.
“Assura’s track record and skills mean it is well-placed to benefit from increased development activity when it comes. In the meantime, income from our core portfolio remains one of the strongest in the property sector.”
