18th Sep 2007 07:01
Assura Group Limited18 September 2007 Assura Group Limited Unaudited interim report for the six months ended 30 June 2007 Highlights Assura Group works in partnership with GPs and Health Professionals to deliverproperty, pharmacy and medical services in primary care. These unaudited interim results are in respect of the six month period to 30June 2007. • Group operating profit £8.3m (2006: £7.2m) • Interim dividend up 17% to 2.33p1 (2006: 2.00p) • Net assets up 7% to £286.5m equivalent to 123.2p per Share compared to 114.3p at 31 December 2006 • Eight joint ventures with GPs formed to provide out-patient and diagnostic procedures to a population of circa 1m patients • 15 (2006: 4) pharmacies open2 - EBITDA positive at branch level this year • Invested or committed £493m (2006: £385m) across 135 sites of which 21 are currently in solicitors' hands2 • On track to have joint ventures providing services to 1.5m patients and 20 pharmacies by end 2007 and to invest or commit £600m on property by 31 March 2008 1 Ex-dividend date 26 September 2007, record date 28 September 2007, payment date 19 October 2007. 2 As at 01 September 2007. Chief Executive's Statement For the six months ended 30 June 2007 This unaudited Interim Report is published in respect of the six months to 30June 2007. Results I am pleased to report a satisfactory first half of the year with good progressbeing made to generate current and future income streams out of property,pharmacy and medical services via joint ventures with GPs. During the period, total revenue amounted to £13.9m (2006: £5.9m) producing aGroup operating profit of £8.3m (2006: £7.2m). The resultant profit for theperiod was £26.6m (2006: £13.4m) reflecting a mark-to-market revaluation surplusof £18.3m (2006: £6.2m) in respect of an interest rate swap entered into by theCompany. Net asset value as at 30 June 2007 was up 7% to £286.5m (2006:£267.5m) equivalent to 123.2p per Ordinary Share on a fully diluted basiscompared to 114.3p at 31 December 2006. The pharmacy division is now generating profits at a branch level and themedical division has commenced out-patient services in a number of locations.As has been previously highlighted, it is not anticipated that either divisionwill make a significant contribution to Group profits until 2009 at theearliest. That being said, we continue to invest significantly in thedevelopment of these operating businesses in view of the many exciting andincreasing opportunities evolving out of the NHS. An interim dividend of 2.33p (2006: 2.00p) per Ordinary Share has been declaredto shareholders on the register as at 28 September 2007 (ex-dividend date 26September 2007). In the absence of unforeseen circumstances the Company intendsto pay a further interim dividend in respect of the period ending 30 September2007 and a final dividend in respect of the 15 month period to 31 March 2008. Operating review The Company is evolving very rapidly into a primary and community care providerorganisation. With strong asset backing from its property division it is able tooffer its GP partners, pharmacists and patients modern integrated facilitieswhich are suited to the evolving NHS and are capable of undertaking manyservices which have hitherto been carried out in hospitals e.g. out-patient anddiagnostic procedures. The Company's investment in its joint ventures with GPs,its provision of associated property infrastructure and the development of itspharmacy operating business will all take time to mature but strong progress isbeing made across a number of geographical locations. The Company now employsaround 250 (2006: 99) people and well over 50% by number and salary are employedin its medical and pharmacy divisions. The start-up losses associated with the development of the pharmacy and medicaldivisions continue to be funded out of the Company's existing resources. At thesame time, it is expected that the Company's current equity base combined withdebt funding can continue to finance the roll-out of these businesses as well asfund the total capital investment in property of at least £750m. The Company believes that by having a modern portfolio of property assetscapable of housing GPs and other health providers, locating its own pharmacieswithin these facilities and by entering into collaborative joint ventures withGPs to provide out-patient and related services as a 'willing provider'(i) itwill build a strong and effective group capable of becoming one of the leadingproviders of NHS services to patients. Property division As at 01 September 2007, the Company's property division had committed £493m(2006: £385m) across 135 sites including 21 which are currently in solicitors'hands. The yield on cost of all capital commitments continues to average over6% and whilst revaluation surpluses have been credited on completed properties,there remain, assuming current valuation yields(ii), significant potentialrevaluation surpluses on development properties currently under construction. The Company settled rent reviews on 11 properties during the first six months of2007 resulting in an aggregate annualised increase of 4.54% per annum on thepassing rent relating to those properties. As at 30 June 2007, the portfoliohad an average rent of £147.9 per square metre on GMS space and an averageweighted income un-expired term of 19 years. The shift in services from secondary care (hospitals) towards primary andcommunity care mandated by the government, continues to require large, modern,purpose-built premises. The Company's development team and pipeline continuesto grow in response to this and there are a growing number of schemes at anadvanced stage of negotiation or under construction. Pharmacy division The provision of pharmacy services in health centre locations is key toproviding a holistic primary care service and capturing a greater proportion ofprimary health care expenditure. The Company's pharmacy division now has 15 (2006: 4) pharmacies trading and afurther five are scheduled to be opened in the next three months taking thetotal to 20 by the end of 2007. In the first six months of 2007, the pharmacydivision generated a turnover of £5.1m (2006: £0.5m) and a gross margin of27.6%. Next year, the Company is intending to open or invest in another 20pharmacies taking the total, by 31 March 2009, to a minimum of 40 pharmacies. During 2008, the Company intends to develop a direct to consumer channel for thepharmacy business allowing patients to take delivery of their medicines at theirhome or place of work providing a convenient and efficient service in additionto physical branch locations. This concept is planned to be piloted across anumber of regions working closely with GPs and patient groups prior to rollingit out. These developments will transform the Company's pharmacy business intoa multi-channel operation offering patients a range of options as to howservices can be provided. Medical division The Company's medical division is at an early stage of development and is in theprocess of forming a number of joint ventures with GPs and locality groups toprovide out-patient and diagnostic services to patients in primary care andcommunity settings. The Company has formed eight joint ventures serving circa1m patients and is on track to have over 1.5m patients by the end of thisfinancial year. Out-patient services have commenced in Liverpool, Bath andMacclesfield and there are many other services being bid for or planned withinthe existing eight joint ventures and with other GP partners and locality groupselsewhere. The Company is very deliberately concentrating significant resources on buildingits joint venture businesses covering a growing number of potential patients.By giving its joint venture partners the tools required to become highlyeffective providers of consultant-led services in the community, the Companywill have a powerful business model for future NHS-based service provision.These businesses directly address the government requirement for more communitybased services, but they will take time to mature. The Company is working extensively with the Acute Trusts and PCTs in its jointventure locations as it is evident that whilst the NHS is embracing the conceptof 'willing providers' the processes within PCTs to establish its implementationand monitor progress are still at an early stage of formation. This isimproving all the time and the Company looks forward to the next 12 months witha great degree of confidence. Strategic outlook The Company has established its business model for primary care and the outlookfor growth in this sector is extremely strong. The Company is well placed togrow organically and via corporate acquisitions. After the period end, the Company acquired a 15% stake in Surgery HoldingsLimited for a consideration of £0.5m. This is a national independent consultantchambers organisation owned by NHS surgeons and the investment will support theCompany's provision of primary care based services by giving access to a fastgrowing network that currently comprises nine local consultant companies, acrossthe UK, comprising over 600 member consultants across a range of specialties. On 16 August 2007, the Company announced that, subject to completion of theWestbury/Stobart merger, there would be a compensation payment due to theCompany. This is likely to result in an exceptional profit after goodwillwrite-off and payment to sub-advisers of circa £7m. As part of theconsideration, the Company will retain circa 6m Stobart Group shares which aresubject to a minimum 12 month lock-up. Industry trends The last six months have seen an even greater emphasis on private sectorprovision in the NHS for both primary and secondary care. We see limitedpolitical risk in the overall direction of travel regardless of which politicalparty is in power. The Strategic Health Authority and Primary Care Trust reorganisations which tookplace last year are now starting to have a positive effect in most areas and weare seeing good progress being made in a number of locations and across all ofour three business divisions. Richard BurrellChief Executive Officer17 September 2007 Independent Review Report For the period from 1 January 2007 to 30 June 2007 Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 which comprises the Unaudited ConsolidatedIncome Statement, Unaudited Consolidated Balance Sheet, Unaudited ConsolidatedStatement of Changes in Equity, Unaudited Consolidated Cash Flow Statement, andthe related notes 1 to 21. We have read the other information contained in theinterim report and considered whether it contains any apparent mis-statements ormaterial inconsistencies with the financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of makingenquiries of Group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Ernst & Young LLPGuernsey, Channel Islands 17 September 2007 Unaudited Consolidated Income Statement For the period from 1 January 2007 to 30 June 2007 1/01/2007 1/01/2006 to to 30/06/2007 30/06/2006 Unaudited Unaudited Notes £ £ Revenue 4 13,918,979 5,878,239Cost of sales 5 (4,906,311) (956,163) Gross profit 9,012,668 4,922,076 Administrative expenses 6 10,496,338 4,225,670Other expenses 7 1,284,251 - 11,780,589 4,225,670 Group trading (losses)/profit (2,767,921) 696,406 Other operating income 8 11,176,738 7,644,565Share of post tax losses of associates and joint ventures 9 (112,945) -accounted for using the equity methodExceptional pharmacy establishment cost 10 - (1,105,000) Group operating profit from continuing operations 8,295,872 7,235,971 Finance revenue 11 18,895,158 6,969,872Finance costs 12 (563,824) (801,488) 18,331,334 6,168,384 Profit before taxation 26,627,206 13,404,355Taxation (1,113) (126) Profit for the period 26,626,093 13,404,229 Profit for the year attributable to:Equity holders of the parent 26,763,881 13,182,050Minority interest (137,788) 222,179 26,626,093 13,404,229 Earnings per share (pence)Basic earnings per share on profit for the period 15 11.85p 8.04pDiluted earnings per share on profit for the period 15 11.63p 8.04pDividend per share 13 4.00p 3.34p Unaudited Consolidated Balance Sheet As at 30 June 2007 30/06/2007 30/06/2006 31/12/2006 Unaudited Unaudited Audited Notes £ £ £Non-current assets Investment property 16 240,587,635 177,255,373 213,132,257 Development property 61,070,821 30,616,684 35,230,758 Investment in associates 1,680,618 2,148,555 1,069,744 Investment in joint ventures 588,720 - 868,805 Intangible assets 42,047,523 33,942,476 36,997,920 Property, plant and equipment 8,993,227 460,216 5,973,572 Other investments 258,645 - 250,000 Derivative financial instruments at fair 20,512,364 3,041,001 2,202,305 value 375,739,553 247,464,305 295,725,361Current assets Cash and cash equivalents 7,716,820 22,425,602 18,841,640 Debtors 9,824,701 7,511,975 9,891,396 Pharmacy inventories 867,862 250,000 567,290 Property work in progress 5,962,690 7,095,460 3,239,193 24,372,073 37,283,037 32,539,519Total assets 400,111,626 284,747,342 328,264,880Current liabilities Bank overdraft 3,375,358 - 2,134,942 Creditors 12,710,013 5,869,848 11,793,107 Corporate tax and other taxes 672,554 276,168 599,003 16,757,925 6,146,016 14,527,052Non-current liabilities Long term loan 95,596,811 12,500,000 44,948,569 Payments due under finance lease 1,289,180 1,426,565 1,289,180 96,885,991 13,926,565 46,237,749Total liabilities 113,643,916 20,072,581 60,764,801Net assets 286,467,710 264,674,761 267,500,079Represented by :Capital and reserves Share capital 17 22,593,170 22,593,170 22,593,170 Share premium - 226,983,651 226,678,243 Distributable 232,882,047 14,414,330 15,563,743 reserve Retained earnings 29,899,870 683,610 1,851,738 Revaluation reserve 523,226 - 106,000 Deferred consideration reserve 790,000 - 790,000 286,688,313 264,674,761 267,582,894Minority interests (220,603) - (82,815)Total equity 286,467,710 264,674,761 267,500,079 Basic net asset value per Ordinary Share 18 126.79p 117.15p 118.40pDiluted net asset value per Ordinary Share 18 123.20p 113.11p 114.32p The unaudited financial statements on pages 8 to 13 were approved at a meetingof the Board of Directors held on 17 September 2007 and signed on its behalf by: Dr John Curran Peter PichlerDeputy Chairman Director Unaudited Consolidated Statement of Changes in Equity For the period from 1 January 2007 to 30 June 2007 Share Share Distributable Retained Revaluation Minority Deferred Total Capital Premium Reserve Earnings Reserve Interest Consideration Reserve £ £ £ £ £ £ £ £ 1 January 2007 22,593,170 226,678,243 15,563,743 1,851,738 106,000 (82,815) 790,000 267,500,079Transfer from share - (226,678,243) 226,678,243 - - -premium1Dividends on Ordinary - - (9,359,939) - - - - (9,359,939)SharesProfit/(loss) - - - 26,763,881 - (137,788) - 26,626,093attributable toequity holders andminority interestCost of employee - - - 1,284,251 - - - 1,284,251share-basedincentives Revaluation of land & - - - - 417,226 - - 417,226buildings 30 June 2007 22,593,170 - 232,882,047 29,899,870 523,226 (220,603) 790,000 286,467,710 1 January 2006 14,240,385 122,239,453 - (18,327,822) - (222,179) - 117,929,837Issue of Ordinary 9,159,462 133,644,568 - - - - - 142,804,030SharesTreasury shares (806,677) - - - - - - (806,677)Issue costs onissuance ofOrdinary Shares - (3,900,370) - - - - - (3,900,370)Transfer from sharepremium - (25,000,000) 25,000,000 - - - - -Dividends on OrdinaryShares - - (4,756,288) - - - - (4,756,288)Profit/(loss)attributable toequity holders andminority interest - - - 13,182,050 - 222,179 - 13,404,229Transfer to retainedearnings - - (5,829,382) 5,829,382 - - - -Revaluation of land &buildings - - - - - - - - 30 June 2006 22,593,170 226,983,651 14,414,330 683,610 - - - 264,674,761 1 January 2006 14,240,385 122,239,453 - (18,327,822) - (222,179) - 117,929,837Issue of Ordinary 9,159,462 133,644,568 - - - - - 142,804,030SharesTreasury shares (806,677) - - - - - - (806,677)Issue costs on - (4,205,778) - - - - - (4,205,778)issuance of OrdinarySharesTransfer from share - (25,000,000) 25,000,000 - - - - -premiumMinority interest - - - - - 610,624 - 610,624acquired in yearDividends on Ordinary - - (9,436,257) - - - - (9,436,257)SharesProfit/(loss) - - - 18,900,446 - (471,260) - 18,429,186attributable toequity holders andminority interestCost of employee - - - 1,279,114 - - - 1,279,114share-basedincentivesRevaluation of land & - - - - 106,000 - - 106,000buildingsDeferred share-based - - - - - - 790,000 790,000consideration 31 December 2006 22,593,170 226,678,243 15,563,743 1,851,738 106,000 (82,815) 790,000 267,500,079 1 Following an application to the Royal Court of Guernsey, £226,678,243 wastransferred from Share Premium account to Distributable Reserve on 29 June 2007. Unaudited Consolidated Cash Flow Statement For the period 1 January 2007 to 30 June 2007 1/01/2007 1/01/2006 to to 30/06/2007 30/06/2006 Unaudited Unaudited £ £Operating activitiesRent received 6,834,635 3,982,373Revenue from pharmacies 5,132,901 486,208Fees received 2,317,106 680,079Bank and other interest received 585,099 456,552Expenses paid (9,920,381) (5,007,456)Purchases by pharmacies (3,714,227) (359,988)Interest paid and similar charges (1,774,297) (1,015,759) Net cash outflow from operating activities (539,164) (777,991) Investing activitiesPurchase of development and investment property (42,118,703) (41,452,523)Purchase of investments (8,645) -Purchase of property, plant, equipment and intangibles (7,652,656) (650,479)Acquisition of subsidiaries, net of cash acquired - (10,183,080)Cost of development work in progress (2,723,497) (15,574,774)Net loans advanced to associated companies (610,874) (780,582) Net cash outflow from investing activities (53,114,375) (68,641,438) Financing activitiesIssue of Ordinary Shares - 110,039,336Issue costs paid on issuance of Ordinary Shares - (4,183,666)Dividends paid (9,359,939) (4,756,288)Drawdown of term loan 50,648,242 51,000,000Repayment of term loan - (64,000,000) Net cash inflow from financing activities 41,288,303 88,099,382 (Decrease)/increase in cash and cash equivalents (12,365,236) 18,679,953 Cash and cash equivalents at 1 January 16,706,698 3,745,649 Cash and cash equivalents at 30 June 4,341,462 22,425,602 Notes to the Unaudited Financial Statements For the period from 1 January 2007 to 30 June 2007 1. The Company was incorporated on 7 October 2003 and commenced tradingfollowing Admission of its shares to the Official List of the London StockExchange on 21 November 2003. 2. The results for the six months to 30 June 2007 have been prepared onthe basis of the accounting policies set out in the Company's 2006 annual reportand financial statements. The results for the six months to 30 June 2007 and2006 are unaudited. The interim accounts do not constitute statutory accounts.The balance sheet as at 31 December 2006 has been extracted from the Company's2006 annual report and financial statements. The auditor has reported on the2006 accounts and the report was unqualified. 3. All revenue and operating profit arose from continuing operations. 4. Revenue 2007 2006 £ £Rent receivable 6,468,972 4,711,952Revenue from pharmacies 5,132,901 486,208Fund management and other fees receivable 2,317,106 680,079 13,918,979 5,878,239 5. Cost of sales 2007 2006 £ £Property management expenses 600,668 340,398Purchases by pharmacies 3,714,227 359,988Fund management direct costs 591,416 255,777 4,906,311 956,163 6. Administrative expenses 2007 2006 £ £Investment Manager's fees - 1,099,048Salaries and other staff costs 5,246,745 1,395,488Premises costs 1,462,772 164,762Other administrative expenses 3,786,821 1,566,372 10,496,338 4,225,670 Administrative expenses increased from 15 May 2006 when the Company acquired itsformer fund manager and, from that date, employed its own internal managementteam. 7. Other expenses 2007 2006 £ £Cost of employee share-based incentives 1,284,251 - 8. Other operating income 2007 2006 £ £Unrealised surplus on revaluation of investment property 11,176,738 7,644,565 9. Share of post tax losses of associates and joint ventures accounted forusing the equity method. 2007 2006 £ £Share of losses of associates and joint ventures 112,945 - 10. Exceptional pharmacy establishment cost 2007 2006 £ £Pharmacy establishment cost - 1,105,000 The Company entered into an arrangement with Pharma-e Limited, of which JohnCurran is a Director and shareholder, to compensate Pharma-e Limited forconsultancy services provided to the Group in conjunction with establishment ofthe pharmacy business of Assura Pharmacy Limited. The consideration was met bythe issue of 650,000 Ordinary Shares in the Company to Pharma-e Limited. 11. Finance revenue 2007 2006 £ £Bank and other interest 585,099 456,552Unrealised profit on revaluation of derivative financial 18,310,059 6,513,320instrument 18,895,158 6,969,872 The Company has entered into a long-term interest rate swap at a rate of 4.59%on a principal sum of £100m up to 30 June 2007, £150m up to 31 December 2007 and£200m from then until 31 December 2027. Based on the actual 20-year swap rate at30 June 2007, the fair value of this swap was £20,512,364 at 30 June 2007(£3,041,001 at 30 June 2006, £2,202,305 at 31 December 2006). 12. Finance costs 2007 2006 £ £Long-term loan interest payable 2,037,106 531,492Interest capitalised on developments (1,236,615) -Swap interest (438,016) (26,851)Non-utilisation fees 54,000 82,449Amortisation of loan issue costs 130,848 121,959Bank charges 16,501 92,439 563,824 801,488 13. Dividends paid on Ordinary Shares Number of Rate 2007 Rate 2006 Ordinary pence pence Shares £ £Final dividend for 2006 paid 4 May 233,998,471 4.00 9,359,939 3.34 4,756,2882007 (declared 27 March 2007) (142,403,847)Dividends paid 4.00 9,359,939 3.34 4,756,288 14. On 18 September 2007 an interim dividend for 2007 of 2.33p per OrdinaryShare, to be paid out of Distributable Reserves, was declared to shareholders onthe register at 28 September 2007 giving a total amount of £5,462,991 based on234,463,115 shares currently in issue. 15. The basic profit per Ordinary Share is based on the profit attributableto equity holders of the parent for the year of £26,763,881 (2006: £13,182,050)and on 225,931,703 Ordinary Shares (2006: 163,969,190), being the weightedaverage number of Ordinary Shares in issue in the respective year, excludingtreasury shares. The diluted profit per Ordinary Share is based on the profit for the year of£26,763,881 (2006: £13,182,050) and on 230,058,425 Ordinary Shares (2006:163,969,190), being the weighted average number of Ordinary Shares in issue inthe respective year. 16. The figures for investment properties at 30 June 2007, 30 June 2006 and31 December 2006 are based on valuations determined by Savills CommercialLimited. 17. Share capital £Consolidated and Company Authorised300,000,000 Ordinary Shares of 10p each 30,000,00020,000,000 Preference Shares of 10p each 2,000,000 32,000,000 Number of Share Shares Capital £ Ordinary Shares issued and fully paid 233,998,471 23,399,847 Treasury Shares (8,066,768) (806,677)Total Share Capital 225,931,703 22,593,170 The Treasury Shares were issued in May 2006 to the Assura Group LimitedEmployee Benefit Trust and are held for the purposes of the Assura Group LimitedExecutive Incentive Plan. 18. The basic net asset value per Ordinary Share is based on the net assetsattributable to the ordinary shareholders of £286,467,710 (30 June 2006:£264,674,671, 31 December 2006: £267,500,079) and on 225,931,703 (30 June 2006:225,931,703, 31 December 2006: 225,931,703) Ordinary Shares in issue at thebalance sheet date excluding treasury shares. The diluted net asset value per Ordinary Share is based on the net assetsattributable to the ordinary shareholders of £286,467,710 (30 June 2006:£264,674,671, 31 December 2006: £267,500,079) and on 232,516,379 (30 June 2006: 233,998,471, 31 December 2006: 233,998,471) Ordinary Shares in issue at thebalance sheet date. 19. On 16 August 2007 the Company announced the termination of theinvestment management services provided by Assura Fund Management LLP, asubsidiary of the Company, to The Westbury Property Fund Limited, subject toshareholder approval by the latter company. Termination of the services, if approved by the shareholders of The WestburyProperty Fund Limited, at an Extraordinary General Meeting being held on 19September 2007, is expected to result in a profit for the Group of circa £7mfrom the payment of a termination fee by The Westbury Property Fund and afterallowance for payments to sub-advisers, taxation and estimated goodwillimpairment. 20. A copy of this statement has been sent to every shareholder. Furthercopies are available from the Company's registered office or from the websitewww.assuragroup.co.uk. 21. The interim financial statements were approved at a meeting of the Boardof Directors held on 17 September 2007. -------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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