NHS split ‘holding back GP stock renewal’

Assura produced strong annual results on Friday but said the healthcare property sector was still waiting for reorganisation of the NHS estate to 'settle down' before deals could be unlocked for new GP surgeries.

The Warrington-based healthcare property company saw a 23.9% increase in underlying profit from continuing operations to £10.9m, compared to £8.8m in 2013. Overall pre-tax profit rose by 88% to £24.2m, mainly due to rent from acquisitions and receipts from disposals.

Net asset value was also up, by 12.4% to 43.4p a share. The total rent roll at March 2014 was £41.8m, compared to £35.9m a year earlier. There was a £99m increase in total property assets to £668m, up from £569m.

Chairman Simon Laffin said in his statement to the London Stock Exchange on Friday: "Over the last two years, we have demonstrated our ability to make strong, reliable progress in this highly attractive sector. We have strong brand recognition with GPs and proactively engage with the NHS to make the case for further investment in modern primary care facilities, with a unique offering as developer, landlord and asset manager.

"Whilst the current economic and political climate had depressed both open market rent reviews and new developments, the board believes that open market reviews are a lagging indicator and as the economy continues to recover, this will feed through into rent reviews in the future. Once the NHS reorganisation settles down, we also believe that the overwhelming need for replacement and upgrade of GP surgeries will reassert itself and demand will recover."

After years of planning, the NHS separated property from the organisation in 2013, transferring 4,000 assets valued at £3bn into the new NHS Property Services.

Laffin continued: "It remains a disappointment to us that continued disruption from the NHS reorganisation is causing a significant slowdown in the approval procedure of new premises for GPs. There is near universal agreement that more care should be delivered by primary health providers, as it is both more efficient and preferred by patients, but the truth is that GPs often simply do not have the facilities to be able to offer this. When the Government does turn its mind to tackling this issue, as surely it must, it will find a private sector willing to supply the capital at highly competitive rental levels, which are themselves regulated by government employees. It is a highly efficient and cost effective model for private sector funding of state infrastructure."

The company has five developments on site and a further 28 potential schemes identified with a total value exceeding £75m. Assura is working with a new five-year £30m revolving credit facility with RBS and Barclays announced today at an initial margin of 185 basis points over LIBOR.

Assura announced a 49% increase in its dividend, paying a quarterly dividend of 0.45p a share.

Shares in Assura were unchanged at 43p, valuing the business at £230m.