Assura PLC

LSE:AGR

Earnings Call Transcript 2022-Q2

[Jonathan Stewart Murphy, CEO & Executive Director]

Good morning. Before I begin the results, I would like to reference the news we announced this morning as to the prospective equity raise from shareholders. We are looking to raise up to GBP 190 million to support our further growth plans. We have received expressions of interest that exceed our target, and we anticipate making a further announcement later today. I will begin by introducing the key highlights, looking at the impact of COVID and updating you on our SixBySix strategy. Jayne will then cover the financials and a quick strategy update before I return to look at the market and the outlook going forward. But first, I would like you to hear from Liev, one of our new starters who joined us, joined the pandemic, bringing skills from a very different sector. [Presentation]

[Jonathan Stewart Murphy, CEO & Executive Director]

Well, I guess that's the energy, adaptability and resilience of youth. It's also great to see the start of the office returning as the focal point and how important that is for the learning and development of our newer team members. Turning to results. I'm pleased to be reporting on a strong first half. This comes at a time when the challenges facing the NHS are a bit large. The daily news flow is dominated by the backlog in care, the increasing health demands of an aging population, the demand for face-to-face GP appointments and the anticipated pressures of a normal winter flu season. COVID has also highlighted the urgent need for us to provide additional capacity, both in our hospitals and in the community. Whilst we are fully aware that the key challenge in delivering this additional capacity is the workforce required, our own contribution is to continue to deliver the right buildings in the right locations with the appropriate facilities. Given this crucial role, we decided 4 years ago to build out our development capability. We increased the size of the team, invested in innovation and sustainability, and we also acquired the talented development teams of Apollo and GPI. This has established us as the market leader and means we are ideally placed to deliver the new capacity so urgently needed by the NHS. This progress is reflected in our strong first half with GBP 117 million of property additions, and we have both replenished and increased our pipelines as we enter the second half. As we expand, we generate scale benefits underpinning the continued growth of our profits and dividends. The impacts of the pandemic continue to be felt across all areas of our lives, including the way we work, the way we travel, the way we see our doctor. In health care, this has led to a surge in health inequalities and waiting lists and ultimately is having a detrimental impact on the nation's health. The backlog is now reaching such proportions that the Health Secretary is unable to make any commitment on when or even if it can be reduced. To address this worsening situation, more capacity is required in the system. Realistically, this increase can only be met through the relocation of services out of hospital. This was recognized in the budget with additional funding for diagnostics and surgical units. The underinvestment in the U.K.'s health care estate has been woefully understated and confirmed by survey after survey and even the NHS' own reports. The community estate is unsuited and insufficient to meet this urgent need for additional capacity. This was brought into stark focus during COVID as older converted residential properties were not able to meet the requirements for social distancing, access controls, digital consultations and the infection control regimes. Having said that, if ever there was an advert for the value of community-based care delivered in accessible and convenient locations, then it has been the vaccination program. The right location to get the right care delivered to patients, the very essence of what Assura is here to do. This belief has been ever present throughout our 18-year life and highlights how many of the trends that accelerated during COVID were already underway, increased telehealth more out of hospital care, the need for more investment in workforce and premises. These were already crucial, but COVID has shifted them right into the spotlight. Last year, I outlined our new social impact strategy SixBySix, alongside our ambition to be the U.K.'s leading property business driving social impact, with our purpose, values and culture aligning us uniquely with the NHS. There are 2 key aims to this. One, to maximize our impact on society; and two, to minimize our impact on the environment. To support our social impact goals, we started the Assura Community Fund which enables us to make grants to charities, improving health in the communities our buildings serve. In March, I described how as a business based in Warrington in the Rugby League Heartland, we were proud to be working with the Rugby League World Cup as their community health partner. We've used this partnership to engage health projects working through and with community Rugby League clubs, a program of GBP 100,000 worth of grants has now been awarded to support health improving projects impacting more than 6,000 people. They ranged from projects helping young people to build confidence and self-esteem to some holiday food programs and schemes helping unemployed adults with long-term health conditions to build new skills. In addition, our annual national program for the Assura Community Fund has just awarded GBP 400,000 of grants to health projects up and down the country. Now turning to our second key aim in minimizing our impact on the environment. We have committed to reach net 0 carbon building emissions by 2030. However, to ensure we can achieve this, we've also established a number of short-term targets. Firstly, we aim to be delivering net 0 carbon buildings by 2026. This is a huge undertaking. But to test how we can realize this in practice, we have 2 pilot schemes in progress. These are exploring exciting new ideas such as passive house, module construction and the increasing use of timber frame structures. New buildings are not the real problem though. Most carbon emissions are generated by existing buildings, and so our biggest challenge is improving our existing estate. We have 625 assets across the U.K., and this will involve hundreds of improvement projects. But thanks to the relationships we have built up with individual surgeries. The capability of the team to design and deliver the projects and our capital strength to fund them, we are the ideal company to partner with the NHS to achieve its own net 0 carbon objectives. In the last few weeks, we have initiated 30 projects to be completed this financial year, and we expect to undertake substantially more next year. Our initial estimates are that this will require GBP 25 million to GBP 30 million of investment over the next 5 years or just over 1% of the current asset value. We have recently appointed a team of advisers to support us. [ Evora ] will help us with our sustainability strategy and implementation plans. Civic engineers will work with us on our net 0 carbon design guide, and Planet Mark will provide training and accreditation, all bringing their skills and expertise to help us accelerate our plans. Today is the Built Environment Day at COP 26, and we are proud sponsors of the build better now, immersive virtual reality exhibition, showcasing inspiring global ideas for a more sustainable built environment. These important activities are supporting the values and goals of the NHS. They motivate our team and as evidenced by the success of our sustainability bond, they bring in ESG-focused capital. In short, social impact both delivers gains to our communities and underpins our future commercial success. Now I would like to pass to Jayne to take you through our financials and provide a brief strategic update. Jayne?

[Jayne Marie Cottam, CFO & Executive Director]

Good morning, everybody. It's good to join you again virtually. But 1 day, you never know once again, many challenges in this first half, but resilience and adaptability has been the order of the day. And this has enabled us to move effectively to a hybrid way of working, which means we can meet with the team. We can see some of our customers and our investors, which is a real pleasure. It seems like an awfully long time since we saw anybody. We had another busy 6 months here at Assura, securing property additions of GBP 117 million. We've continued to drive our sustainability and social impact agenda with a successful sustainable bond issue back in June. And the Apollo team are now well and truly settled in. And I'm pleased to report that the extended team are working beautifully. And so with this in mind, let me take you through a review of the past 6 months. The securing of the property additions has given us net rental income growth of 12% to GBP 61.1 million. Our adjusted EPRA earnings increased from GBP 35.8 million to GBP 40.9 million, an increase of 14%. Our adjusted EPRA earnings per share increased by 7% to 1.5p for the 6 months. And the Board decided to increase the dividend by 4%, bringing it to 1.45p per share. The value of our portfolio is now GBP 2.6 billion, and we have seen further yield compression of 2 basis points, bringing our net initial yield to 4.56% and a valuation gain in the period of GBP 28 million. Our EPRA net tangible assets per share rose by 2% to 58.4p, and our loan-to-value is now 39%. Looking at the graph on the left, we have consistently delivered growth of our portfolio year-on-year, taking it from GBP 1.1 billion in 2016 to GBP 2.6 billion, reflecting an increase of over 300 properties to today's portfolio of [ GBP 625 ]. The chart on the right highlights the growth in the annual rent roll in the period and shows which part of the business has generated this growth. As you can see, rent reviews and asset enhancements are responsible for GBP 1 million, developments for GBP 1.3 million, and our acquisitions have added GBP 4.5 million, taking our rent roll from GBP 121.7 million to GBP 127.5 million at the period end. We have a sustained track record of delivering consistent growth in our portfolio. Our expertise, along with our focus on maintaining our excellent brand and reputation means we can source our additions in a variety of ways from off-market referrals through to agents. We have added over GBP 900 million of acquisitions and almost GBP 200 million of developments at strong yields on cost with long and [ X5 ] lease terms over the last 4 years. As you are aware, we have focused on our development strategy. And more recently, we are seeing the results of this focus as we move from largely acquisition-led growth to a more balanced growth between acquisitions and developments. Our aim is to continue this strategy, and I'll come on to that in a little bit more detail later. The benefits of our scale and the work we have assiduously undertaken with our debt are evidenced in this chart. As we moved to unsecured financing, gained our A- rating, established our sustainable credentials, we have opened up access to multiple sources of debt capital. This has led us to being able to borrow at some exceptionally attractive rates. I'm particularly pleased with our 2 latest bonds. These total GBP 600 million raised at a blended rate of 1.56%, fixed for 10 to 12 years. And as you can see from the chart, whilst our portfolio yields have tightened, the gap between our net initial yield and our average cost of debt has widened over the period. On the 30th of September, our net debt stood at just over GBP 1 billion with a loan-to-value of 39% as we locked in money at excellent rates. Our weighted average interest rate has fallen from 2.47% to 2.3%, and our debt maturity has increased from 8 to 8.5 years. In June, we accessed the public bond markets again with our first sustainable bond as we continue on our journey to meet our SixBySix targets of maximizing our impact on society whilst minimizing our impact on the environment and move the business on to a fully sustainable footing, our financing has been evolving. We raised GBP 300 million at an all-in rate of 1.625%. However, it is worth noting that the margin on our debt has fallen since the earliest social bond issuance. We raised last year at a margin of 128 basis points on our 10-year debt. Our latest bond had a margin of 85 basis points for 12-year debt, and all our bonds continue to trade well in the secondary market. I believe these rates are industry-leading, and I want to look at the evolution of our development strategy. In March 2017, we had a development team of only 2 people with a pipeline of GBP 122 million. If we fast forward to today, we have a development team of 10 people and our largest ever pipeline of GBP 480 million. So how do we get here? We made a strategic decision to expand our development capabilities. We recognize the potential in the market due to the chronic underinvestment in primary care premises. We acquired the expertise of 3 development businesses along with their pipeline of opportunities. And we have already delivered GBP 185 million worth of completed developments over the last 4 years. So to look at this in a little more detail, the GBP 480 million pipeline breaks down into 3 component parts. We are on site with 12 schemes for a value of GBP 72 million, which will complete over the next 12 to 18 months. We have an immediate pipeline of GBP 145 million for 20 schemes, and we should have a spade in the ground within 12 months. And finally, our extended pipeline of GBP 263 million, which is where we are the preferred bidder and are working through the various approval processes with an expectation to be on site after 12 months. The graph gives you a clear picture of just how far we've come over the last few years. And beyond what you see here, there are, of course, many conversations, a number of which will inevitably be turned into firm opportunities in due course. We talked about our development strategy, but what are the benefits of having our development capability in-house. Primarily, we have access to a growing pipeline of opportunities, and these developments are the highest quality assets in our market with typical leases of 21 years. The schemes are relatively low risk. There is no speculative development. We operate under fixed price contracts, and we do not buy land or start on site until we have a signed agreement for lease. In return for operating in this way, we are able to capture the development profit. For forward fund developments, we can typically capture an additional 10 to 15 basis points on the yield. However, where we develop in-house, we can capture up to 100 basis points on the yield which is clearly great for shareholders. The rent set are relative to construction costs, and we talk about having a linkage to construction cost inflation with our rent reviews. And that is because these schemes provide a new high rent level for their area. This provides rental growth for existing buildings. This process necessitates direct conversations with the NHS, building relationships and providing opportunities for further growth. And finally, our strategy supports our commitment to innovation and sustainability as we move forward with our net 0 carbon agenda. We will be running a capital markets event in a few weeks' time, where we'll provide an update on how we are advancing our net zero carbon development pledge. So in conclusion, we have had a successful first half with continued growth driving increasing dividends for investors. We have again demonstrated our consistent track record of growing our portfolio whilst maintaining our discipline on pricing and moving towards more balanced growth between acquisitions and developments. We've continued to raise sustainable financing at attractive rates, and we are delivering the benefits from our in-house development strategy. And with that, I will hand you back to Jonathan.

[Jonathan Stewart Murphy, CEO & Executive Director]

Thank you, Jayne. I will now take a more detailed look at the market and our outlook for the year ahead. Our average rental growth for the period was 2.1%, split 2.7% for RPI and fixed and 1.5% for open market rents. We settled 144 reviews across the estate. You will have heard us talk many times about the linkage between construction cost inflation and open market rental growth. Like all businesses, over the past 6 months, we have been impacted by supply chain disruptions and significant price increases in certain categories. Such increases will ultimately flow into higher rents, though there is a lag between the evidence of new developments and higher rents being achieved. But this is a timing issue, and we are confident in the outlook moving forward. The fundamentals of our sector remain robust and have continued to attract new investment. As a result, we have continued to achieve valuation gains with our net initial yield strengthening by a further 2 basis points to 4.56%. We continue to see opportunities and will selectively add further to our portfolio. Perhaps it is not so surprising given the impact of COVID, but I cannot think of a time when the NHS was so dominant in the political and public discourse. One of the most sensitive subjects has been the importance of face-to-face appointments. The tone of the debate is naturally highly charged, but it has recently become some automotive and can be divisive as a result. Emotions aside, there is no question that the demand for face-to-face appointments remains high, and so there is a need for a hybrid or multichannel approach going forward. We are working with some of our larger customers to understand exactly what the implications will be for their buildings. We will then take these insights right across our portfolio. The key focus for politicians over recent months has been the unseen impact on mental health, especially amongst the young, and this has been very evident in applications to our community fund for help in this area. We feel the negative impacts are going to be with us for a very long time, and we'll see requirements for urgent investment in the mental health estate. Today, as I said earlier, is the Built Environment Day at COP 26, and so the challenges of sustainability are to the [ 4 ]. We will continue to be a leader in this area and to support the NHS in its net 0 carbon goals. The real test for any government's commitment is where they put their money. The recent budget increased general funding for the NHS in addition to new support for diagnostics, surgery hubs, IT and digital. The health and social care levy makes it clear that this government sees further NHS funding as a key priority and a political imperative. Given these 2 factors, it is difficult to imagine any future government coming to a different conclusion. With these funding pledges and the underlying challenges they seek to address, I want to give you an insight into some projects we are undertaking to address these needs. First, diagnostics and projects with trusts. As you probably know, last year, Professor Mike Richards published his report highlighting the potential and value of community diagnostics. Our existing network of centers and relationships means that we are ideally placed to support this. However, this is an area that requires specialist equipment and expertise in diagnostics. And so we are looking to form partnerships to deliver a comprehensive solution to the NHS. This is a good example of how the delivery of services away from hospital sites must play a key role in freeing up hospital capacity. We have several opportunities working with NHS Trusts that we are pursuing the support to this trend. In Northumbria, we are close to securing planning for a new training and clinical facility for the local trust with the potential to accommodate primary care. In Birmingham, a new state-of-the-art facility for an ambulance trust is well advanced and will open next year. And we hope to finalize a further major scheme for another hospital trust this year. Second, mental health, where I have stressed before, the pressing need for greater access to these services at the moment, such services are being provided in largely inappropriate spaces. There is an excellent opportunity for us to use our specific skills and experience to deliver the right premises in the right places to meet these needs. In the first half, we acquired a site in Greater Manchester and have just acquired a further building in Kent. Third, primary care at scale is a key strategic opportunity for us. We can help these emerging organizations in developing their estate strategies, meeting their property management requirements and enhancing and developing new assets to support their growth. I am pleased to report that in the period, we have made our first acquisitions and have several more in the pipeline. Lastly, in addition to these NHS opportunities, we continue to selectively pursue partnerships with private sector providers. The response to clearing the current backlog and treatments in the NHS can only realistically be tackled through joint endeavor with the private sector. We recently completed a facility for Ramsay Health Care in Preston and are working with Genesis Cancer Care across several locations. During the first half, we have also continued to identify opportunities to increase our pipelines. Our total development pipeline now stands at an impressive GBP 480 million as we have continued to build on our market-leading position. We are on site with 12 projects with a gross development spend of GBP 72 million. We have an immediate pipeline of GBP 145 million and an extended one of GBP 263 million. In acquisitions, we have a pipeline of GBP 102 million. We expect to complete in the next 6 months and continue to identify new opportunities. In asset enhancements, we start the second half with a pipeline of 56 lease regears, 5 new tenancies and 19 capital projects. The benefits of these strong pipelines can be seen here as we illustrate the impact of all the various strands of activity we have within the business at this time. Once completed, our total rent roll will increase to over GBP 155 million. Our strong development program, both our immediate and extended pipeline, will add around GBP 20 million to our rent roll over several years. Our acquisition pipeline will add GBP 5.5 million in the near term while a further GBP 4.5 million will come from our asset enhancement work and rental growth. So in summary, we have made excellent first half progress across the business, strengthened our pipelines, successfully issued our first sustainability bond and continue to generate scale benefits for our investors. Looking ahead, we continue to embed our SixBySix strategy into the DNA of our business. Our ambition is for this to become part and parcel of the character of Assura and to define our image in the market. Such a cultural shift will take time to be fully realized, but we are accelerating our plans to make it a reality. This cultural shift brings us even closer to the current needs of the NHS. And when combined with Assura's multifaceted capabilities, you can see why we've had such a successful partnership with the NHS. Their needs continue to evolve, and COVID has shown that the pace and scale of the challenge is increasing. This means that we will have to redouble our efforts across all aspects of the business to capture the available opportunities. We look forward with confidence and optimism to navigating this changing landscape and delivering value to all our stakeholders. Now before we move to questions, I would like to leave the last word to one of our customers, Dr. Manghnani from Birkenhead Medical Center on Merseyside. [Presentation]

[Jonathan Stewart Murphy, CEO & Executive Director]

Thank you for joining us this morning. I hope you enjoyed listening to Dr. Manghnani and Liev, so a special thank you to them for their contributions this morning. We're now moving to the questions. You have an opportunity to submit your question online. We have a number already received, and we will work through them to the best of our abilities.

[Jonathan Stewart Murphy, CEO & Executive Director]

So the first question is from [ Eduardo Gill ] from [ Greenscreen ]. So Eduardo, quite a few questions from you. If we fail to get through all of them, rest assured, we'll come back to you separately with responses to everything you've asked us will get addressed. But I'll just pick a couple to start us off for the benefit fairness. So one of your questions is, when you mention Assura is well positioned to deal with emerging trends such as digital and remote diagnosis, could you elaborate on that? So what I'm trying to get across there, Eduardo, is the fact that we have, as you would have heard from Dr. Manghnani video, the ability to adapt our buildings, it is possible to flex for requirements. So for example, there's one of our assets where we've taken out a couple of consulting rooms and replaced them with banks of boots for video conferencing for the GP. So that sort of minor amendment is relatively easy to do. The other thing I would highlight is, as a developer on new designs, we have the opportunity to shape and mold how that design looks and feels and to adapt to emerging trends. So you might have seen our surgery of the future concept, that was all about responding to future trends. And actually, we've got one of our developments, which is starting shortly, where together with the NHS we are co-funding a study that is going to look at exactly how that building is used. It's going to be a sort of pilot for a hybrid digital and physical delivery model and us and the NHS of running an academic study to look at exactly how that building is used. So that gives you an idea, hopefully, of how and when we talked about being able to respond to those trends. That's the sort of thing that we're talking about. So your next question was regarding the equity raise, how quickly will the money be invested? And what will be the impact on our earnings? And will it be dilutive in the short term? So the short answer is, yes. It will be diluted in the short term inevitably. But the good news is the use of proceeds is very short. We have GBP 102 million of acquisitions that we expect to deliver within 6 months. And of the on-site pipeline of GBP 72 million, by definition, we're already -- that's already underway and under construction. And so we would expect that money also to be delivered in, invested in very short order. So in summary, yes, there will be a short-term dilution, but we expect to get that money invested in relatively short order. So within 6 to 9 months, the majority of the funds will be invested. So next question is from Andrew Saunders from Shore Capital. And Andrew's question is, can you outline the drivers behind your acquisition and disposal strategy? Should we expect this to play a reduced part of the growth strategy relative to new development going forward? So absolutely. So development is an area that we very deliberately and consciously have been growing over recent years. We invested in our team. We've made the acquisitions of Apollo and GPI over recent years, and we're very deliberately trying to grow that part of the growth pipeline. The reason for that is it gives you visibility. So acquisitions are inevitably short term. They're constantly replenishing. And the development pipeline gives you a medium-term visibility of growth. It's very low risk and enables us to lock in a pickup in the development yield. So it's an area that we're absolutely looking to expand. Now that doesn't mean that we're not going to continue acquiring, we absolutely will. Acquisitions remain a core part of our strategy. It's just we're looking to rebalance it. And in an ideal world, it would be great if we could have a 50-50 balance that's unlikely to happen in practice because developments take longer to come through. But that gives you an idea of the scale of our ambition on the development side. So the next question is from Andrew Gill from Jefferies. Development CapEx in H1 was around the same level as the previous interim, should we expect an acceleration from here? And what percentage of the development pipeline is for primary care?So maybe I'll ask Jayne to take that question, Jayne.

[Jayne Marie Cottam, CFO & Executive Director]

Thanks, Jonathan. Yes, in terms of the development CapEx, yes, it has been similar. We came into this year with 16 schemes on site. We've now got 12 and the number of completions. A few delays have meant that the spending was the same. We don't give forecast in terms of what to expect going forward. But if you look at our immediate pipeline, we've got GBP 145 million worth for 20 schemes, which is due to be on site within the next 12 months. So you can definitely see the activity going up from there. And in terms of the percentage of development pipeline for primary care, in the immediate panel, we have one -- sorry, and with the on-site, we have one scheme, which is the ambulance hub the rest of our primary care. And in the immediate pipeline, GBP 145 million, we have one theme for Ramsay and the rest are primary care.

[Jonathan Stewart Murphy, CEO & Executive Director]

Great. Thanks, Jayne. So next question is from Miranda from [indiscernible]. And it is given the difference in potential returns between the development pipeline of GBP 480 million, can you split it between forward funding and direct developments. We haven't given the precise split, but we have in the past given a rough indication. It is broadly 50-50. It's actually, it's a good idea, we probably should give that detail in the pack going forward. So we'll take that away as an action, Miranda and give you the detailed split next time. But for now, I think it's fair to assume broadly a 50-50 split is a reasonable assumption to make.Next question is from Chris Fremantle from Morgan Stanley. And this is interview with today's equity pricing at today's values, can you give us an idea of the peak LTV ratio and the peak net debt EBITDA. If we were not to proceed with today's placing, obviously, we're hoping we will. I just want to understand how much you realistically need the money you're raising to your existing program or whether this is, in fact, giving you [ 5 parts ] for future investments. So if I can let Jayne cover off the peak LTV and our overall approach to LTV, and then I'll come back to that second question about 5 parts. So Jayne?

[Jayne Marie Cottam, CFO & Executive Director]

Yes. In terms of our LTV, we kept our guidance the same. We can go up to 50%. However, we would only expect to go up to that in exceptional circumstances. In reality, we like to be in and around 40%. We're at 39% at the moment. We could go up to 45%, again, if we really want to take over the 40%, but we're comfortable in and around 40%, which is why we're raising the equity today.

[Jonathan Stewart Murphy, CEO & Executive Director]

Great. And in terms of your question around fire [indiscernible]. So clearly, today, with a 39% loan-to-value ratio, if we weren't to go ahead with those placing then clearly, we would be moving in to the low [ 40s ] on our LTV. We still have some capacity. We'd be able to deliver the near-term pipeline without any issues, but we would start bumping up against the limits once we got into our immediate pipeline and extended pipeline. So the raise today is all about delivering. Yes, it's about delivering the near-term opportunities, but it's also making sure that we are ideally placed to take advantage of those future opportunities, which we are absolutely seeing accelerating the market at the moment.So next question is from James [ Peel Hunt ]. A detailed one from the appendix, which is always good. Slide 22 seems to show around GBP 21 million of additional rent from the development pipeline, assuming a cost of GBP 480 million, that would equate to a yield of 4.5%. This is about, right? What kind of yield would similar assets trade toward the market got, a very detailed question there. Is that sort of level, that sort of assumption right for our development pipeline. So my answer there would be yes. Why would I say that? Well, we've given guidance in the past that on our in-house developments, we see an uplift in the yield of about 100 basis points. And on forward funds, we -- it's a very tight, and we expect a very tight margin. So -- and it's about a 50-50 mix. So if you look at brand new assets today, the valuation yield is 4.5%, but really brand-new assets today are probably nearer the 4% mark, so clearly 4.5% is a sensible place to be. So next question is from Tom at Liberum. And this is about asking for any color on the amount of rental broking cap rates you're underwriting in your developments, please. I think we talked about the development of a similar question to James. Rental growth, yes, happy to cover off rental growth. So you'll see an impact of 2.1% in the first half, that's broken down between the 30% of our portfolio that is fixed or index and then the 7% of the portfolio, which is linked to open market reviews. The first half performance for open market was around 1.5% for the first half. We always have to be a little bit careful with any interim numbers because the sample size is inevitably not a full year sample. So you do get -- you can get a little bit of a distortion. So that's not a necessarily a definitive guide to where we'll be for the full year. But clearly, the trend is a rising trend for revenues, and there's absolutely nothing that we see in the market that goes against that. And in fact, because of the current level of construction cost inflation, as we move forward, we are -- we're seeing actually higher rents coming through on some of our new schemes in some cases, some quite significant uplift. But of course, as always, with our sector, it's a 3-yearly rent review cycle. So you've got to allow time for those to come through. And you also need a rent review in each of the geographical locations that you're looking for a rental uplift. So it's never a uniform rising tied it's the sort of little pocket tend to get and it builds up a picture from that. So hopefully, Tom that's given you an insight on our rent review. So what looks to be the last question on the list now is from Julia at AIG, which is, please could you elaborate on the funding plans in order to support your development pipeline. Your current LTV is close to 40% and net debt to EBITDA over 9%, which is a threshold for the rating. Is there a rationality still aim for A minus writing? Jayne's already touched on that, but I'll allow her to just find a little bit more color for you there, Julia.

[Jayne Marie Cottam, CFO & Executive Director]

Yes. Thanks, Julia. Yes, our LTV is close to 40%, but you can see that we've actually gone out of our equity raise today. Post the equity raise, it will be reduced to 31% and even post the use of proceeds a bit 36%. Whilst we have the parameters within our rating, we are able to go above them, but we would expect to bring them down over time, which is no difference to the guidance we give our investors around our LTV. And we will still aim for the A- rating. You can see that we raised GBP 300 million earlier this year at 1.625% with a margin of 85 basis points. So the A- rating is working very well for us.

[Jonathan Stewart Murphy, CEO & Executive Director]

And actually, there's another question just come through, which is from Charlotte at Panmure. Can you confirm that your net 0 carbon commitment to the business as a whole i.e., existing and new assets is 2030 and for new developments is 2026. So yes, Charlotte, you're absolutely right. So we've committed to the U.K. Green Building Council of our portfolio being net 0 carbon by 2030. But in order to move towards that we've set 2 short-term targets for 2026, one of those is that our portfolio will have at least a B rating by 2026. To achieve that, we currently estimate we will need between [ 300 and 400 ] individual improvement projects across our portfolio. So a massive project. We've got 30 of those starting in the next few weeks, and we expect to pick that to pick up pace as we move into the new financial year, and we've just appointed a panel of advisers to help us drive that forward. So absolutely committed to the existing assets. On the new assets, what we said is by 2026, we have set ourselves a target of being able to deliver a genuine net 0 carbon new build. And then the idea is that from 2026 onwards, we'll then be able to roll out that approach. And that model going forward, so to ensure that all the future new builds after that are delivered as a genuine net 0. And just to be clear, we're using the green building council definition. So that does include the embodied carbon in the construction process. So that was a very extensive list of questions today. Thank you very much for your time this morning. Thank you very much for submitting the questions if you have done. Hopefully, we have given you the requisite answers that you're looking for. Very happy, of course, for any follow-up questions to come through, and we will deal with them in due course. So thank you very much for your time. Thanks for attending and look forward to seeing you all before too long. Thank you very much.