Proposed Share Issue and Notice of GM

RNS Number : 0555A

Assura PLC

24 September 2015

 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, JAPAN, NEW ZEALAND, HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE'S REPUBLIC OF CHINA OR THE REPUBLIC OF SOUTH AFRICA (THE "EXCLUDED TERRITORIES") AND SHOULD NOT BE DISTRIBUTED IN, FORWARDED TO OR TRANSMITTED INTO THOSE COUNTRIES OR INTO ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL SECURITIES LAWS OR REGULATIONS.

THIS ANNOUNCEMENT DOES NOT CONSTITUTE A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT.

INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION CONTAINED IN THE PROSPECTUS TO BE PUBLISHED BY ASSURA PLC (THE "COMPANY") IN DUE COURSE IN CONNECTION WITH THE ADMISSION OF ITS NEW ORDINARY SHARES TO LISTING ON THE PREMIUM SEGMENT OF THE OFFICIAL LIST OF THE UNITED KINGDOM LISTING AUTHORITY AND TO TRADING ON THE LONDON STOCK EXCHANGE PLC'S MAIN MARKET FOR LISTED SECURITIES (TOGETHER "ADMISSION").

NOTHING IN THIS ANNOUNCEMENT SHALL CONSTITUTE OR FORM PART OF, OR SHOULD BE CONSTRUED AS, AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY OR SUBSCRIBE FOR ANY SECURITIES REFERRED TO HEREIN NOR SHOULD IT FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY CONTRACT OR COMMITMENT WHATSOEVER.

PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

24 September 2015

Assura plc

("Assura", the "Group", or the "Company")

Proposed Firm Placing, Placing and Open Offer and Offer for Subscription

and

Notice of General Meeting

The Board of Assura today announces a share issue to raise gross proceeds of £278.1 million (approximately £270 million net of expenses) through the issue of 556,200,000 New Ordinary Shares by way of a Firm Placing and Placing and Open Offer, and additional gross proceeds of up to £30.9 million through the issue of up to 61,800,000 New Ordinary Shares by way of an Offer for Subscription (together the "Share Issue"), all at 50 pence per New Ordinary Share (the "Offer Price").  Assuming full take-up of the Offer for Subscription the gross proceeds for the Share Issue will be £309.0 million (approximately £300 million net of expenses).

The Offer Price represents a premium of 11 per cent to the adjusted EPRA NAV per existing Ordinary Share of Assura ("Existing Ordinary Share") of 44.9 pence (44.0 pence on a fully diluted basis) as at 31 March 2015.

Qualifying Shareholders are being offered the opportunity to participate in the Open Offer on the basis of 1 Open Offer Share for every 5 Existing Ordinary Shares held by them at 5.00 p.m. on 22 September 2015 ("Record Date").

The Firm Placing and Placing and Open Offer have been fully underwritten by Liberum Capital Limited ("Liberum") and Stifel Nicolaus Europe Limited ("Stifel"). The Offer for Subscription is not being underwritten.

The New Ordinary Shares will, when issued and fully paid, rank in full for all dividends or other distributions declared, made or paid after Admission and in all other respects will rank pari passu with the Existing Ordinary Shares, including for the Group's next quarterly dividend, which is expected to be paid in November 2015.

Assura will shortly be publishing a prospectus (the "Prospectus") in connection with the Share Issue and will be convening a General Meeting to approve certain matters necessary to implement the Share Issue.

Highlights of the Share Issue

Issue of 353,910,881 New Ordinary Shares through the Firm Placing, raising gross proceeds of £177.0 million at the Offer Price. The Firm Placed Shares are not subject to clawback and are not part of the Placing and Open Offer.

Issue of 202,289,119 New Ordinary Shares through the Placing and Open Offer, raising gross proceeds of £101.1 million at the Offer Price.

Under the Open Offer, Qualifying Shareholders will have an Open Offer Entitlement of 1 Open Offer Share for every 5 Existing Ordinary Shares held.

Qualifying Shareholders are also being offered the opportunity to subscribe for New Ordinary Shares in addition to their Open Offer Entitlements under the Excess Application Facility.

Issue of up to 61,800,000 New Ordinary Shares through the Offer for Subscription, in order to raise gross proceeds of up to £30.9 million at the Offer Price.

It is expected that the Offer for Subscription will open on 25 September 2015 and management presentations in certain cities during the offer period will be available, subject to demand.

The Share Issue is conditional on the passing of the Resolutions to be proposed at the General Meeting, which is expected to be held on 12 October 2015. If the Resolutions are passed and the other conditions to the Share Issue are satisfied, it is expected that dealings will commence at 8.00 a.m. on 14 October 2015.

Reasons for the Share Issue

The Board believes that the Share Issue will enable the Group to:

• Fund the near term pipeline of acquisitions and developments with a cost of approximately £125 million:
  • The Company has identified £96 million of acquisition opportunities, which are anticipated to be under contract before 31 March 2016
  • In addition, the Company anticipates approximately £27 million of developments will have commenced or be expected to be underway over the next 12 months and the Group currently has one scheme for development on site with a completed value of approximately £5 million

• Assuming full take-up of the Offer for Subscription, management intends to apply £175 million of the proceeds in reducing the Group's borrowings. After the impact of estimated early repayment costs this will reduce the Group's total debt by approximately £135 million and result in an overall loan to value ratio of approximately 35 per cent., including the investment in property acquisitions and development spend of the remaining £125 million proceeds.

At the time of its equity issuance in October 2014, the Board outlined that its medium term target for gearing was between 45 per cent. and 55 per cent. The Board has since undertaken a detailed review of this policy and has concluded that a lower level of gearing would be beneficial in certain circumstances. Accordingly, the Directors believe that a new gearing policy of between 40 per cent. and 50 per cent. should be adopted. The Board considers that the reduced volatility to investors, the greater operational flexibility and the potential for a wider refinancing and significant reduction in weighted average cost of debt resulting from a lower loan to value ratio would be beneficial.

Dividend increase

The expansion of the property portfolio over recent years has enabled a significant increase in the fully covered dividend per Ordinary Share, which was increased by 11 per cent. to 0.5 pence per Ordinary Share on a quarterly basis in January 2015.

The Group's next dividend payment in November 2015 will be 0.5 pence per Ordinary Share and the New Ordinary Shares to be issued pursuant to the Share Issue will qualify for this dividend. The associated record date is expected to be 23 October 2015.

As a result of the successful investment of the proceeds from the share issuance in October 2014 in further primary care centres and in restructuring its borrowings, the Group's underlying capacity for dividend payments has been increased. Therefore, subject to completion of the Share Issue, the Board intends to consider increasing the quarterly dividend by 10 per cent. to 0.55 pence per Ordinary Share or 2.20 pence per Ordinary Share on an annualised basis with effect from January 2016. At the proposed Offer Price of 50 pence per New Ordinary Share this would provide a dividend yield of 4.4 per cent.

The Board intends to retain its commitment to a fully covered and progressive dividend policy broadly in line with underlying rental growth. 

General Meeting

The Share Issue is subject to a number of conditions, including Assura Shareholders' approval of the Resolutions to be proposed at a General Meeting, which is expected to be held at the offices of Addleshaw Goddard LLP, Milton Gate, 60 Chiswell Street, London EC1Y 4AG at 11.00 a.m. on 12 October 2015. The Notice of this General Meeting will be included in the Prospectus.

Prospectus 

The Prospectus concerning the Share Issue will shortly be sent to Shareholders and will also be made available on the Company's website, www.assuraplc.com. Further details are set out in this announcement and will be set out in the Prospectus. A copy of the Prospectus will be submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM.

Group and sector background

·   Assura is a developer and investor in primary care premises for the NHS. It provides bespoke, purpose built premises to satisfy the evolving needs of GPs as they look to meet the increasing health requirements of the UK population.

·   Assura maintains a unique position in the listed primary care sector in that it provides in-house all of the elements of the property service requirements for GPs and other tenants. This enables it to adopt a long-term partner approach throughout the involvement in the lifecycle of a medical centre.

·   The sector remains highly fragmented with the majority of medical centres owned by GPs or other private owners. The Group is well placed to benefit from consolidation in the sector due to its status as a listed REIT and its internally managed operating model.

·  Assura's internally managed structure provides a scalable model that means, as the property portfolio increases in scale, the benefits accrue to Shareholders and help support the progressive dividend policy.

•   Successful acquisition track record:
  • in addition to securing new developments, Assura has an extensive track record in delivering accretive acquisitions and has acquired £355 million of assets and completed £60 million of developments since April 2012 with an average yield on cost of 5.9 per cent. and a blended WAULT of 18.2 years; and
  • Assura completed an equity fund raise in October 2014 for £175.0 million, net of expenses, which enabled it to complete £245.0 million of property acquisitions (including development spend) in the year to March 2015. Since this year-end, it has continued to make good progress in adding to its portfolio and has completed the acquisition of 35 medical centres for a total gross consideration of £61.2 million. 

• The implementation of a focused strategy by the management team over the last three years has increased the adjusted net asset value per Ordinary Share by 24 per cent. to 44.9 pence per Ordinary Share as at 31 March 2015 and the underlying earnings per Ordinary Share from continuing operations by 40 per cent. to 2.1 pence per Ordinary Share. The valuation of the Group's portfolio as at 21 August 2015 provides a further increase of 2.4 pence in the adjusted net asset value per Ordinary Share net of recent acquisition costs.

·  The primary care sector displays strong real estate fundamentals:

o  excellent occupier covenants (backed by the NHS);

o  limited development risk;

o  restricted supply with little speculative development;

o  long leases typically without breaks or rent free periods;

o  high occupancy levels and low volatility of returns;

o  the underlying open market rent review mechanism most common in the sector has provided inflation tracking returns over the medium term; and

o  recent land and construction cost inflation provides potential for future rental growth.

Commenting on the Share Issue, Graham Roberts, Chief Executive Officer, said:

"Our business is focused on helping the NHS in improving patient care whilst adapting to ever increasing demand from an ageing population and medical progress. Investing in primary care infrastructure is a recognised priority for the NHS and the support from so many institutions in this fund raise sends a clear message that long term investors want to participate in this significant endeavour." 

For more information, please contact:

Assura plc                                                                            Tel: [phone]

Graham Roberts

Jonathan Murphy

Carolyn Jones

Liberum Capital Limited                                                  Tel: [phone]

Peter Tracey       

Richard Crawley

Jamie Richards

Tom Fyson

Stifel Nicolaus Europe Limited                                      Tel: [phone]

Mark Young

Roger Clarke

Stewart Wallace

Tom Yeadon

Finsbury                                                                               Tel: [phone]

Gordon Simpson

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Record Date for entitlements under the Open Offer	5.00 p.m. on 22 September 2015
Announcement of the Share Issue and despatch of the Prospectus, Application Forms and Forms of Proxy	24 September 2015
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer and the Offer for Subscription	11.00 a.m. on 9 October 2015
General Meeting	11.00 a.m. on 12 October 2015
Admission and commencement of dealings in the New Ordinary Shares	8.00 a.m. on 14 October 2015

The times and dates set out in the table above and mentioned throughout this announcement are indicative only and may be adjusted by the Company (in consultation with Liberum and Stifel), in which event details of the new times and dates will be notified to the Financial Conduct Authority, the London Stock Exchange and, where appropriate, Shareholders.

1.    Introduction

The Company has today announced that it proposes to raise gross proceeds of £278.1 million (approximately £270 million net of expenses) through the issue of 556,200,000 New Ordinary Shares by way of a Firm Placing and a Placing and Open Offer and additional gross proceeds of up to £30.9 million through the issue of up to 61,800,000 New Ordinary Shares by way of an Offer for Subscription, all at 50 pence per New Ordinary Share.

2.    Assura and its market

Assura business model

Assura maintains a unique position in the listed primary care sector in that it provides in-house all of the elements of the property service requirements for GPs and other tenants. This enables it to adopt a long-term partner approach throughout the involvement in the lifecycle of a medical centre. This process starts with Assura's development managers who monitor and manage the process from design through to delivery of the completed building. As a long-term investor, Assura is committed to each new development being completed to a high standard, as well as its ongoing efficient operation and maintenance. Assura's team of property surveyors manages the medical centre and its efficient operation through frequent liaison with tenants.

This integrated approach of "develop, invest and manage" provides Assura with continuing interaction with GPs and hence a better understanding of their evolving needs, which can be an advantage in securing new development opportunities. Assura is confident it has a good development pipeline and that market conditions are supportive of new developments in the medium term. In addition to securing new developments, Assura has an extensive track record in delivering accretive acquisitions and has acquired £355 million of assets since April 2012 with an average yield on cost of 5.9 per cent. and a blended WAULT of 18.2 years. Securing further acquisitions is a key priority and management is in regular dialogue with other investors in the sector to identify and secure future opportunities. The Group's ability to source acquisitions is supported by its bespoke database of every GP Practice in the UK, regular medical conference attendance, referrals from existing GP tenants and Assura's strong brand with GPs and the NHS.

Assura's internally managed structure provides a scalable model that means, as the property portfolio increases in scale, the benefits accrue to Shareholders and help support the progressive dividend policy.

Assura completed an equity fund raise in October 2014 for £175.0 million, net of expenses, which enabled it to complete £245.0 million of property acquisitions (including development spend) in the year to March 2015. Since this year-end, it has continued to make good progress in adding to its portfolio and has completed the acquisition of 35 medical centres for a total gross consideration of £61.2 million and as a result, the Group's annual rent roll is approximately £59.4 million. In addition the Group has a near term pipeline of acquisitions and developments of £125 million. The Company has identified £96 million of acquisition opportunities, which are expected to be under contract before 31 March 2016. In addition, the Company anticipates £27 million of developments will have commenced or be expected to be underway over the next 12 months.

The Directors believe there are strong risk adjusted returns available in primary care real estate and there is a compelling investment opportunity for additional capital to be deployed. The Company's acquisitions and developments over the previous three years have enhanced underlying earnings per Ordinary Share by 40 per cent., supporting growth in annual dividends per Ordinary Share of 65 per cent. on an annualised basis.

Market backdrop

Assura, as one of the leading primary care property investors and developers in the UK, benefits from a secure and predictable income stream with an underpinning of inflation linkage, which together contribute to a strong risk-adjusted return.

The sector remains highly fragmented with the majority of medical centres owned by GPs or other private owners. The Group is well placed to benefit from consolidation in the sector due to its status as a listed REIT and its internally managed operating model.

Increasing demand

Assura, as a developer and investor in primary care property, provides bespoke, purpose built premises that satisfy the evolving needs of GPs as they look to meet the increasing health requirements of the UK population.

GPs are the cornerstone of the UK health model and provide consultations with over 1.3 million patients every day. Many of these consultations take place in outdated and unsuitable premises that are not able to provide the broad range of additional services that are available in the Group's modern, purpose built premises.

The demands on the health service are increasing. An ageing population places greater demands on our GPs. There are 4.2 million people aged over 75 in England and this age group has twice as many GP consultations as the average person. Population forecasts predict a 30 per cent. increase in this demographic over the next ten years and this will have a corresponding increase in the demands on GPs.

In addition to an ageing population the number of people with long-term conditions is also increasing and the number of people living with more than one long-term condition is forecast by the Department of Health to rise from 1.9 million in 2008 to 2.9 million in 2018.

These increasing demands on primary care will be in the context of wider demands on the NHS in the decades to come. The NHS budget has increased from £82.9 billion to £120 billion in the last decade. This rate of growth is difficult to sustain and efficiencies need to be found to support the funding of the NHS.

The migration of services out of the acute, secondary sector and into the community, primary care sector could support meeting the increasing health needs of the population within reasonable budgetary constraints.

The increasing role of the primary care sector and the importance of greater service provision in the community is highlighted in the NHS England Five Year Forward View. This document sets out the strategic priorities for the NHS and commits to invest more in primary care in order to generate overall savings in the NHS budget. This commitment has been continued with the announcement in December 2014 of the £1 billion Primary Care Infrastructure Fund, which provides capital for GP premises to support the greater provision of services, extended opening hours and new ways of working.

A further development is the increasing coordination of health and social care and the greater involvement of GPs in this service provision, as evidenced by the recent announcement of the devolved healthcare budget for Greater Manchester. This provides a unified funding model for primary care, secondary care and social care and is likely to be a model employed elsewhere in the country. The Directors believe that a GP led model of integrated primary and social care in the community would be attractive to the NHS and enable these services to be delivered in an integrated and cost effective manner. Primary care investment has received cross party support.

Restricted supply

The reorganisation of the NHS that was implemented in April 2013 led to a reduction in the number of approvals of new developments as the new organisational structures took time to be bedded in. Recent announcements by the NHS point to the approval process being resolved and the Group has recently received its first approval under the new process.

The Directors are hopeful that approvals for new schemes will be forthcoming in the near future and the Group is ready to provide the expertise and the capital to support this essential investment in the infrastructure of the NHS. The pace of acceleration in development approvals will rely on the level of CCG engagement; however, there will likely be a time lag between approval and delivery of new schemes of potentially 18 to 24 months.

The Board believes that the Group is well positioned to capitalise from this evolution of policy, given the expertise and experience of its in-house design and development team and its track record of successfully delivering enhanced primary care properties to GPs.

Rent reviews

In the primary care sector rent reviews are agreed with the District Valuers, effectively acting for the NHS and ensuring value for money for the public purse, typically on a three year cycle. The majority of these reviews are based on open market rents agreed on primary care premises in the period under review. These are heavily influenced by the rents set on new developments. New development rents are estimated based on an open book review of the costs of a development allowing for an agreed developer's margin. As a result, in a period of increasing land values and construction cost inflation, such as is being currently experienced, these rising input costs result in increasing rental levels being set on new developments and hence provide evidence for the wider primary care market.

Delays in the rent review process and the reduced number of developments currently being undertaken are resulting in fewer points of evidence for these increasing costs feeding through into higher rents. This has been a contributory factor in a slowing in the rate of open market rental growth across the sector. Once the development pipeline grows across the whole sector the Board believes that the upward pressure on rents should begin to build again.

The underlying open market rent review mechanism has provided inflation tracking returns over the medium term. The Board believes that open market reviews are a lagging indicator and, as the economy continues to recover, this should feed through into rent reviews in the future.

As a result, the main drivers of rental growth in the financial year ended 31 March 2015 were RPI and fixed lease (+3.06 per cent.) compared with +0.38 per cent. seen from open market reviews.

3.    Market outlook

The requirement for investment in primary care premises is increasing as the demands on the NHS are rising. GPs are experiencing an increase in the number of consultations and this is expected to increase further based on the increasing healthcare demands of an ageing population. There is currently a reduction in the number of approvals for new premises following the reorganisation of the NHS in 2013 which changed the process for investment in primary care premises, although there are positive signs that the importance of fresh investment in primary care infrastructure is now widely recognised, and that the NHS is looking to address this. Despite these delays in approving new developments, the sector continues to provide strong property fundamentals with good prospects for capital and income growth.

 4.    Transformation in Assura's business to date

The implementation of a focused strategy by the management team over the last three years has increased the adjusted net asset value per Ordinary Share by 24 per cent. to 44.9 pence per Ordinary Share as at 31 March 2015 and the underlying earnings per Ordinary Share from continuing operations by 40 per cent. to 2.1 pence per Ordinary Share. The valuation of the Group's portfolio as at 21 August 2015 provides a further increase of 2.4 pence in the adjusted net asset value per Ordinary Share net of recent acquisition costs. The Group's annualised dividend has increased by 65 per cent. to 2.0 pence per Ordinary Share over the last three year period.

Over the same three year period to 31 March 2015, the investment property valuation increased by 72 per cent. to £925.3 million and since the year-end, the investment portfolio has increased by the completion of a number of acquisitions with an aggregate consideration of £61.2 million. In aggregate, the increase of £456.4 million since 31 March 2012, together with developments with an aggregate cost of £54.5 million, has led to an enlarged portfolio of assets of £994.2 million in primary care property as at 21 August 2015, or an increase of over 84 per cent. since 31 March 2012. This growth has been achieved through a combination of acquisitions (£354.8 million), completed developments (£60.4 million) and revaluations less disposals (£41.2 million). The weighted average unexpired lease length of the portfolio is 14.2 years.

The Group's active capital discipline and recycling has also resulted in £15 million of non-core disposals and the disposal of LIFT assets for £22.4 million since 2012.

The growth in the portfolio has been achieved without a significant increase in the overheads of the business and in the period from 1 April 2012 to 31 March 2015 the administrative overheads of the Group as a percentage of the average portfolio value has declined from 0.87 per cent. to 0.72 per cent. and the EPRA cost ratio has fallen from 23 per cent. to 17.7 per cent.

As an internally managed business, management has built a focused, scalable platform with capacity to manage a larger portfolio of assets with only marginal increases in associated overheads. Management estimates that for every additional £100 million of assets under management, £80,000 to £100,000 of incremental overheads would be expected to be incurred. This has enabled the growth in the portfolio to be achieved while increasing the underlying earnings per Ordinary Share.

The Group has completed a number of acquisitions where the consideration was in both cash and shares. This highlights the ability of the Group to fund acquisitions through the issuance of new Ordinary Shares.

The REIT conversion in April 2013 was an important milestone for the Group. This is an important government-backed tax regime that enables the Group to compete effectively with other tax efficient investors. It also confirms the Group's commitment to remain as a property investor.

The Group raised £175.0 million net of expenses from an equity issuance in October 2014 for the purposes of further investment in primary care centres and reducing the overall level of gearing. Since this date the Group has acquired 61 properties for a gross consideration of £166 million. £16 million has also been invested into three completed developments at a 7.2 per cent. yield on cost. In addition the Group has restructured £177.0 million of loans from Aviva with a reduction in interest rates of 42 basis points and redeemed a £57.0 million facility with Santander. In May 2015 the Group secured a new five year £60.0 million revolving credit facility with a club of three banks. This facility was increased in August 2015 to £120.0 million with the same banks and on the same terms subject to sufficient property being available as security for charging against the facility.

On 27 January 2015, the Group changed its corporate structure by inserting Assura plc as a new English incorporated parent company at the head of the Group by way of scheme of arrangement. The Directors believed that moving to a UK domicile aligned the Group with its UK tax jurisdiction and continue to believe that the reorganisation should enable the Group to develop even better commercial relationships with the NHS and GPs, the Group's principal customers.

The appetite for lending into the primary care property sector has remained positive over recent years and there has been significant activity from both the traditional banks and other non-bank lenders such as insurers. The Group has a predominance of fixed rate debt, which is well suited to the long-term and secure nature of its income stream. The Directors believe there are significant operational advantages in both operating at a lower gearing level and in maintaining a higher proportion of more flexible shorter-term facilities and this is an area of funding that the Directors are looking to expand. At 31 March 2015, the average weighted maturity of the outstanding debt was 11.9 years at an average rate of 5.28 per cent.

5.    The Share Issue

The Company is proposing to raise up to approximately £309.0 million (before expenses) through the Share Issue. The Company intends to issue 353,910,881 New Ordinary Shares through the Firm Placing, 202,289,119 New Ordinary Shares through the Placing and Open Offer and up to 61,800,000 New Ordinary Shares through the Offer for Subscription, all at the Offer Price of 50 pence per New Ordinary Share.

Firm Placing

The Firm Placees have agreed to subscribe for 353,910,881 New Ordinary Shares at the Offer Price representing gross proceeds of approximately £177.0 million at the Offer Price. The Firm Placed Shares are not subject to clawback and are not part of the Placing and Open Offer.

Placing and Open Offer

202,289,119 of the New Ordinary Shares proposed to be issued by the Company are being offered to Qualifying Shareholders by way of the Open Offer (representing gross proceeds of approximately £101.1 million at the Offer Price). Overseas Shareholders in certain jurisdictions will not be able to participate in the Open Offer. The Open Offer provides an opportunity for Qualifying Shareholders to participate in the Share Issue by subscribing both for their Open Offer Entitlement and for any Excess Open Offer Entitlement, subject to availability.

Qualifying Shareholders will have an Open Offer Entitlement of 1 Open Offer Share for every 5 Existing Ordinary Shares registered in the name of the relevant Qualifying Shareholder on the Record Date.

Qualifying Shareholders may also apply, under the Excess Application Facility, for any whole number of New Ordinary Shares. Applications for Excess Shares will be satisfied only to the extent that corresponding applications by other Qualifying Shareholders are not made or are made for less than their pro rata entitlements. If applications under the Excess Application Facility are received for more than the total number of Open Offer Shares available following take-up of the Open Offer Entitlements, such applications will be scaled back at the discretion of the Directors (in consultation with Liberum and Stifel), who will have regard to the pro rata number of Excess Shares applied for by Qualifying Shareholders under the Excess Application Facility.

Open Offer Entitlements will be rounded down to the nearest whole number and any fractional entitlements to Open Offer Shares will not be allocated but will be aggregated and made available in the Excess Application Facility.

The Open Offer is being made on a pre-emptive basis to Qualifying Shareholders and is not subject to scaling back. The Open Offer Shares have been placed conditionally with certain investors at the Offer Price, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. Any New Ordinary Shares that are available under the Open Offer and are not taken up by Qualifying Shareholders pursuant to their Open Offer Entitlements and under the Excess Application Facility will be issued in the Placing.

Offer for Subscription

Up to 61,800,000 New Ordinary Shares are available under the Offer for Subscription at the Offer Price, representing gross proceeds of up to £30.9 million at the Offer Price. The Offer for Subscription is only being made in the UK but, subject to applicable law, the Company may allot New Ordinary Shares on a private placement basis to applicants in other jurisdictions.

In the event of excess applications under the Offer for Subscription, the basis of allocation will be determined at the discretion of the Directors (in consultation with Liberum and Stifel) who will have regard to the pro rata number of New Ordinary Shares applied for by potential investors under the Offer for Subscription.

The Offer for Subscription is separate to, and does not form part of, the Firm Placing or the Placing and Open Offer.

Conditions of the Share Issue

The Share Issue is conditional, amongst other things, on:

·   the satisfaction of certain conditions contained in the Sponsor and Underwriting Agreement between the Company, Liberum and Stifel, which are typical for an agreement of that nature;

·   Liberum and Stifel not having terminated the Sponsor and Underwriting Agreement in accordance with its terms;

·    the approval of the Resolutions by Shareholders at the General Meeting (or any adjournment thereof); and

·    Admission occurring on or before 8.00 a.m. on 14 October 2015 (or such later date as the Company, Liberum and Stifel may agree jointly, but not later than 21 October 2015).

The Firm Placing and Placing and Open Offer have been fully underwritten by Liberum and Stifel on the terms of the Sponsor and Underwriting Agreement. The Offer for Subscription is not being underwritten.

6.    Reasons for the fundraising and use of proceeds

To capitalise on current opportunities, the Company wishes to raise capital to reduce borrowings to enable a more flexible funding structure operating at a lower overall level of gearing and to make further investments into primary care properties.

Fund acquisition and development pipeline: £125 million

The Group has a near term pipeline of acquisitions and developments with a cost of approximately £125 million. The Company has identified £96 million of acquisition opportunities, which are anticipated to be under contract before 31 March 2016. In addition, the Company anticipates £27 million of developments will have commenced or be expected to be underway over the next 12 months and the Group currently has one scheme for development on site with a completed value of approximately £5 million. The acquisition opportunities predominantly represent individual sites where deals are being negotiated directly with the current owner. Assura restructured its property team during 2015 to allow additional resource to be focused solely on acquisition activity and this, together with the recruitment of one additional investment manager, is resulting in a strong pipeline of acquisition opportunities.

There are positive signs that the importance of fresh investment in primary care infrastructure is now widely recognised, and that the NHS is looking to address this. The launch of the £1 Billion Primary Care Infrastructure Fund, the Five Year Forward View and The Better Health for London report all recognise the role investment in primary care property needs to play in improving efficiencies and health outcomes for the NHS. Whilst there is a lead time between initiation and completion, the Board looks forward to seeing developments return as a significant contributor to growth in the future. The Group has recently had its first scheme approved under the new NHS rules and has submitted its first tender to a publicly advertised scheme for 4 years.

In addition to the near term pipeline of development projects of £27 million, the Group has further opportunities with a value in excess of £29 million. However, the timing of these projects is less certain and they are not anticipated to commence in the current financial year.

The above acquisitions and developments are expected to generate yield on costs or consideration broadly in line with that of the Group's most recent acquisitions, developments and forward funding agreements.

Management is in regular dialogue with other investors in the sector to identify and secure future opportunities for portfolio purchases. The Group's ability to source acquisitions is supported by its bespoke database of every GP practice in the UK, regular medical conference attendance, referrals from existing GP tenants and Assura's strong brand with GPs and the NHS.

Reduce level of borrowings: £175 million

At the year ended 31 March 2015, the Group had a loan to value ratio of 48 per cent. Following recent acquisitions the level of debt of £530 million results in a loan to value ratio of 52 per cent. based on the recent portfolio revaluation. At the time of its equity issuance in October 2014, the Board outlined that its medium term target for gearing was between 45 per cent. and 55 per cent. The Board has since undertaken a detailed review of this policy and has concluded that a lower level of gearing would be beneficial in certain circumstances. Accordingly, the Directors believe that a new gearing policy of between 40 per cent. and 50 per cent. should be adopted. The Board considers that the reduced volatility to investors, the greater operational flexibility and the potential for a wider refinancing and significant reduction in weighted average cost of debt resulting from a lower loan to value ratio would be beneficial.

Assuming full take-up of the Offer for Subscription, management intends to apply £175 million of the proceeds in reducing the Group's borrowings. After the impact of estimated early repayment costs this will reduce the Group's net borrowings by approximately £135 million. This will reduce the Group's total debt to approximately £395 million and result in an overall loan to value ratio of approximately 35 per cent., including investment in property acquisitions and development spend of the £125 million proceeds. This will result in a significant reduction in the weighted average cost of debt.

No notice has yet been served to redeem any loans and so the exact loans to be repaid and the amount of any associated redemption fees or refinancing costs have not yet been finally determined. The Company's balance sheet as at 31 March 2015 did not contain any provisions for potential future redemption or refinancing costs. The precise impact is therefore not known and would be subject to negotiation.

The Board considers that a loan to value ratio of between 40 per cent. and 50 per cent. would be the optimal capital structure for the Group in the medium term. However, the Board would contemplate increasing this for short periods if a sufficiently value enhancing opportunity presents itself. The Board anticipates drawing down on new debt facilities as and when attractive acquisition opportunities arise.

Future acquisitions and developments, outside the immediate pipeline, will be funded from the Group's variable rate Revolving Credit Facility, and therefore the Group's level of variable rate financing is expected to increase over the medium term.

7.    Director participation

The Directors are interested in an aggregate of 7,230,779 Ordinary Shares (representing approximately 0.7 per cent. of the Existing Ordinary Shares). All the Directors intend to participate in the Share Issue and have, in aggregate, indicated that they intend to apply to subscribe for 593,334 New Ordinary Shares.

8.    Dividend policy

The expansion of the property portfolio over recent years has enabled a significant increase in the fully covered dividend per Ordinary Share, which was increased by 11 per cent. to 0.5 pence per Ordinary Share on a quarterly basis in January 2015.

The Group's next dividend payment in November 2015 will be 0.5 pence per Ordinary Share and the New Ordinary Shares to be issued pursuant to the Share Issue will qualify for this dividend. The associated record date is expected to be 23 October 2015.

As a result of the successful investment of the proceeds from the share issuance in October 2014 in further primary care centres and in restructuring its borrowings, the Group's underlying profitability and capacity for dividend payments has been increased. Therefore, subject to completion of the Share Issue, the Board intends to consider increasing the quarterly dividend by 10 per cent. to 0.55 pence per Ordinary Share or 2.20 pence per Ordinary Share on an annualised basis with effect from January 2016. At the proposed Offer Price of New Ordinary Shares of 50 pence per New Ordinary Share this would provide a dividend yield of 4.4 per cent.

The Board intends to retain its commitment to a fully covered and progressive dividend policy broadly in line with underlying rental growth.

9.    General Meeting

The Notice convening a General Meeting, which is expected to be held at the offices of Addleshaw Goddard LLP, Milton Gate, 60 Chiswell Street, London EC1Y 4AG at 11.00 a.m. on 12 October 2015, will be set out in the Prospectus. The purpose of the General Meeting is to consider, and if thought fit, pass the Resolutions, which are necessary in order to approve and implement the Share Issue.

The Resolutions will propose that (i) the Directors be authorised to allot and issue up to 618,000,000 New Ordinary Shares in connection with the Share Issue and (ii) that the participation of Invesco Asset Management Limited ("Invesco") in the Firm Placing be approved as a related party transaction for the purposes of the Listing Rules.

The Share Issue will not proceed unless each of the Resolutions is passed by the requisite majority.

10.  Related Party Transaction

Invesco is a related party of the Company for the purposes of Chapter 11 of the Listing Rules as a result of it being entitled to exercise or control the exercise of over 10 per cent. of the votes able to be cast at general meetings of the Company.

The subscription by Invesco for 29,750,334 New Ordinary Shares at the Offer Price under, and on the terms and conditions of, the Firm Placing, is classified as a related party transaction for the purposes of Chapter 11 of the Listing Rules.

One of the Resolutions to be proposed at the General Meeting will propose that the Invesco participation in the Firm Placing ("Invesco Participation") be approved as a related party transaction. Invesco will not vote on this Resolution and has undertaken to take all reasonable steps to procure that its associates (as defined in the Listing Rules) will not vote on this Resolution.

11.  Board intentions and recommendation

The Board considers the terms of the Share Issue and the Invesco Participation to be in the best interests of Assura and the Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions, as the Directors intend to do in respect of their own beneficial holdings and those of their connected persons, which amount in aggregate to 7,230,779 Ordinary Shares, representing approximately 0.7 per cent. of the Company's issued ordinary share capital as at 23 September 2015 (being the latest practicable date prior to the making of this announcement).

The Board which has been so advised by Liberum and Stifel considers the terms of the Invesco Participation to be fair and reasonable as far as Shareholders as a whole are concerned. In providing this advice to the Board, Liberum and Stifel have taken into account the Board's commercial assessment of the Invesco Participation.

 Important Notice

This announcement is not for release, publication or distribution, directly or indirectly, in or into the United States, Canada, Japan, New Zealand, Hong Kong Special Administrative Region of the People's Republic of China, the Republic of South Africa or any other jurisdiction where it would be unlawful to do so (the "Excluded Territories").

This announcement is an advertisement and does not constitute a prospectus or prospectus equivalent document. Investors should not subscribe for or purchase any securities referred to in this announcement except on the basis of information in the Prospectus to be published by the Company in connection with the Share Issue.  Nothing in this announcement should be interpreted as a term or condition of the Share Issue. Copies of the Prospectus will, following publication, be available from the Company's website.

This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security in the capital of the Company in any jurisdiction. Any decision to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities in the Company should only be made on the basis of information contained in and incorporated by reference into the Prospectus, which contains further details relating to the Company in general as well as a summary of the risk factors to which an investment in the securities of the Company is subject.

This announcement, the Prospectus and any materials distributed in connection with this announcement or the Prospectus are not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any Excluded Territory where such distribution, publication, availability or use would be contrary to law or regulation or would require any registration or licensing within such jurisdiction.

This announcement is not an offer of securities or an invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities in any Excluded Territory. The Company's securities have not been and will not be registered under the United Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state or other jurisdiction of the United States and, may not be offered, sold, pledged, re-sold, taken up, delivered, distributed or otherwise transferred, directly or indirectly, within the United States (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any applicable state or local securities laws. There will be no public offer of the securities in the United States.

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable restrictions.

Liberum and Stifel (together, the "Sponsors") are both regulated and authorised in the United Kingdom by the FCA. The Sponsors are acting exclusively for the Company and for no one else in connection with the Share Issue and will not regard any person (whether or not a recipient of this announcement or the Prospectus) as a client in relation to the Share Issue and will not be responsible to anyone other than the Company for providing the protections afforded to clients of the Sponsors or for providing advice in relation to the Share Issue, the contents of this announcement and the accompanying documents or any matters or arrangements referred to herein or therein.

The Sponsors may, in accordance with applicable legal and regulatory provisions, engage in transactions in relation to the securities and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise. Except as required by applicable law or regulation, the Sponsors do not propose to make any public disclosure in relation to such transactions.

This announcement should not be considered a recommendation by the Sponsors or any of their respective directors, officers, employees, advisers or affiliates in relation to any purchase of or subscription for securities. Neither of the Sponsors nor any of their respective directors, officers, employees, advisers or affiliates accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy, fairness, sufficiency or completeness of the information or the opinions or the beliefs contained in this announcement (or any part hereof). None of the information contained in this announcement has been independently verified or approved by the Sponsors or any of their respective directors, officers, employees, advisers or any of their affiliates. Save in the case of fraud, no liability is accepted by the Sponsors or any of their respective directors, officers, employees, advisers or affiliates for any errors, omissions or inaccuracies in such information or opinions or for any loss, cost or damage suffered or incurred howsoever arising, directly or indirectly, from any use of this announcement or its contents or otherwise in connection with this announcement. No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by the Company or either of the Sponsors. Subject to the Listing Rules, the Prospectus Rules and the Disclosure Rules and Transparency Rules, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Group since the date of this announcement or that the information in it is correct as at any subsequent date.

The statements contained in this announcement that are not historical facts are "forward-looking" statements. These forward-looking statements are subject to a number of substantial risks and uncertainties, many of which are beyond the Company's control and actual results and developments may differ materially from those expressed or implied by these statements for a variety of factors. These forward-looking statements are statements based on the Company's current intentions, beliefs and expectations about, among other things, the Company's results of operations, financial condition, prospects, growth, strategies and the industry in which the Company operates. Forward-looking statements are typically identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "intends", "estimates", "plans", "assumes" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. By their nature, forward-looking statements involve risks and uncertainties, including, without limitation, the risks and uncertainties to be set forth in the Prospectus, because they relate to events and depend on circumstances that may or may not occur in the future. In addition, from time to time, the Company or its representatives have made or may make forward-looking statements orally or in writing. Furthermore, such forward-looking statements may be included in, but are not limited to, press releases or oral statements made by or with the approval of an authorised executive officer of the Company. No assurance can be given that such future results will be achieved; actual events or results may differ materially from those expressed in or implied by these statements as a result of risks and uncertainties facing the Company and its subsidiaries. Many of these risks and uncertainties relate to factors that are beyond the Company's ability to control or estimate precisely, such as changes in taxation and fiscal policy, future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this announcement and the Company undertakes no duty to update any of them publicly in light of new information or future events, except to the extent required by applicable law, the Prospectus Rules, the Listing Rules and the Disclosure Rules and Transparency Rules.

No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per Ordinary Share for the current or future financial years would necessarily match or exceed the historical published earnings per Ordinary Share. Prices and values of, and income from, shares may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. Persons needing advice should consult an independent financial adviser.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

This announcement has been prepared for the purposes of complying with applicable law and regulation in the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom.

 

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