This article first appeared on GuruFocus .
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Adjusted Earnings:Increased to 98 million, driven by a full six-month contribution from the Assura acquisition, which added 50 million of income.
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Adjusted Earnings Per Share (EPS):Increased by 9% to 3.8p for the first half.
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Like-for-Like Rental Growth:Generated an extra 4 million of income, an increase of 6% over previous passing rent, or just over 3% on an annualised basis.
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EPRA Cost Ratio:Fell to 8.7% in the first six months, down from around 10%, reflecting scale benefits and cost synergies.
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Cost Synergies:Delivered over 8 million, or 92%, of the cost savings synergies identified from the Assura combination.
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Valuation Surplus:The underlying portfolio generated a valuation surplus of 18 million, driven by rental growth which generated 29 million of value, offset by a yield expansion deficit of 11 million.
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Investment Portfolio Value:Remained unchanged at 6 billion.
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Adjusted Net Tangible Assets (NTA):Unchanged at 104p per share.
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Net Initial Yield:Remained stable at 5.4%.
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Occupancy:Maintained at 99%.
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Government-Backed Income:76% of income is government-backed.
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Average Cost of Debt:Remained broadly unchanged at 3.8%, expected to fall to 3.5% in the second half.
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Debt Refinancing:A total of $1.2 billion was refinanced, including an $800 million term loan and a new 400 million two-year term loan, with credit margins 40 basis points cheaper.
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Bridging Facility:Just under 260 million remains outstanding, expected to be repaid from deleveraging proceeds.
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Dividend:2026 marks the 30th consecutive year of dividend growth, with a fully covered projected dividend of 7.3p.
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Release Date: July 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Adjusted earnings per share increased by 9% to 3.8p, supporting a fully covered projected dividend for 2026 of 7.3p.
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Rental growth on rent reviews delivered a 6% uplift on settled reviews, with an annualized growth rate of 3.2%, slightly ahead of guidance.
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Over 90% of cost synergies from the Assura merger have been delivered, contributing to a reduced EPRA cost ratio of 8.7%.
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The planned private hospital joint venture with a global institutional investor is on track, expected to repay bridging facilities and reduce leverage.
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Refinancing of $1.2 billion in debt achieved with credit margins 40 basis points lower, reflecting scale benefits and improved access to capital.
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Portfolio fundamentals remain strong with 99% occupancy, a 10-year weighted average lease term, and 76% government-backed income.
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New development pipeline shows strong rental evidence, with rents rebased at higher levels (e.g., 280 per sqm), supporting future growth.
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The company has achieved 30 consecutive years of dividend growth, demonstrating a strong track record of shareholder returns.
Negative Points
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Net debt to EBITDA and interest cover are at elevated levels due to merger-related leverage, though expected to improve with deleveraging.
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The average cost of debt remains at 3.8%, with potential exposure to rising interest rates, though partially mitigated by rental growth.
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The LTV is currently above the target range, with a short-term expectation of low 50s, requiring continued capital recycling to reach below 50%.
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Valuation surplus was modest at 18 million, with yield expansion of just one basis point, indicating limited yield compression in the current market.
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The private hospital joint venture completion is still pending, with final terms and values not yet disclosed, creating some uncertainty.
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The company faces challenges in converting rental reversion into actual rental growth across the wider portfolio, requiring ongoing effort.
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The cost ratio, while low, is not the lowest in the sector, and further improvements may be limited without additional scale.
Q & A Highlights
Q: Is hitting your LTV target of 40% to 50% contingent on obtaining an investment grade credit rating? A: Mark Davies (CEO) clarified that the investment grade rating is not contingent on LTV, as rating agencies like Fitch focus more on net debt to EBITDA, where the company performs well. Richard Howell (CFO) added that Fitch recently reconfirmed Assura's credit rating at BBB+ with a negative outlook, which is likely to change to stable as deleveraging initiatives are delivered.
Q: What is your confidence in achieving values around NAV for disposals required to reach the 40% to 50% LTV range, given a higher cost of capital? A: Mark Davies (CEO) expressed confidence that the market will not be disappointed with the values at which assets are transferred into the joint ventures. He noted strong demand for healthcare infrastructure assets due to high barriers to entry, and expects to sell assets at close to book value, with more details to be announced in the coming weeks.
Q: With a very efficient EPRA cost ratio, is further improvement dependent on increased scale or are there other internal proactive measures? A: Mark Davies (CEO) attributed recent improvements primarily to the merger's scale benefits, noting the company has the second-lowest cost ratio in the sector. He emphasized that continued growth from the existing portfolio could drive further efficiency, but the merger has already made the business significantly more efficient.
Q: Given the 50/50 ownership in the private hospital JV, will you need to dispose of more assets from the rest of the portfolio, and is there scope to place them into the USS JV? A: Mark Davies (CEO) confirmed the USS JV is a well-established partnership with an efficient cost of capital, and the new developments will take it to over 300 million. He indicated plans to engage with USS about adding more assets, potentially expanding the JV's remit, and noted new entrants like local authority pension funds as alternative options for capital recycling.
Q: Should we expect a further benefit in H2 from annualising the 92% of cost synergies delivered, or has H1 already reflected the majority of the run rate savings? A: Richard Howell (CFO) confirmed there is more to come in the second half, particularly around property costs. The company recently internalised Assura's outsourced facilities management function, which is expected to yield significant cost savings, with an update expected at the full-year results in early 2027.
Q: Could you provide guidance on where the cost of debt will trend over the next few years? A: Mark Davies (CEO) noted the current average cost of debt is 3.8%, expected to fall to 3.5% after deleveraging. He highlighted access to a wider pool of capital, including the bond market, and the 40 basis point reduction in credit margins, expressing confidence in maintaining a strong investment grade rating and stable future debt costs. Richard Howell (CFO) added that rental growth should more than offset any future interest rate increases.
Q: How do you feel about asset valuations in light of net yields below the all-in cost of new debt? A: Mark Davies (CEO) stated that a 5.4% net initial yield on high-quality healthcare infrastructure assets demonstrates real value and potential upside from rental growth and yield compression. He emphasised the company's strong capital structure, with a good maturity profile and access to capital, which mitigates concerns about refinancing at today's higher debt costs.
Q: How competitive was the process to find a JV partner, and how many parties expressed interest? A: Mark Davies (CEO) explained that the process was kept tight and exclusive, with proactive approaches from credible counterparties due to the high-profile nature of the merger. He noted that high-quality global institutional investors typically do not participate in wide beauty parade processes, and the company is now in advanced, exclusive discussions, on track to complete the JV earlier than the original 18-month timeline.
Q: Are stronger rental evidence and higher rental values being supported by the district valuer across the wider portfolio? A: Richard Howell (CFO) confirmed that asset management and development activities are seeing rents rebased 15% to 30% higher than current passing rent. The combined portfolio's evidence is being leveraged through the rent review team to convert this reversion into rental growth, with significant potential remaining. Mark Davies (CEO) added that many new schemes are inflation-linked, providing certainty and longevity to future cash flows.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
