AT THE HEART
OF HEALTHCARE
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ANNUAL REPORT 2015
CONTENTS
Strategic report
1 Who we are
2 Property portfolio
4 Our milestones of the year
6 Chairman’s statement
8 Chief Executive’s strategic review
13 Our business model
14 Strategy
16 Meeting the NHS agenda
18 Focus
20 Expertise
22 Culture
24 Effectiveness
26 Key performance indicators
30 Risk management
36 Business review
44 Sustainability
46 Charities
Governance
48 Chairman’s introduction to governance
50 Board of Directors
52 Corporate governance
54 Audit Committee Report
56 Nominations Committee Report
57 Remuneration Report
73 Directors’ Report
76 Directors’ responsibility statement
Financial statements
77
Independent auditor’s report
80 Consolidated income statement
81 Consolidated balance sheet
82 Consolidated statement of changes in equity
83 Consolidated cash flow statement
84 Notes to the accounts
106 Company financial statements
112 Glossary
114 Corporate information
FINANCIAL
HIGHLIGHTS
Investment property
Adjusted EPRA NAV
£925.3m
44.9p
40.9%
3.4%
925.3
43.4
44.9
38.6
656.7
557.3
2013
2014
2015
2013
2014
2015
Net rental income
Underlying profit
£48.2m
£15.9m
27.5%
45.9%
48.2
15.9
37.8
33.7
10.9
8.8
www.assuraplc.com
2013
2014
2015
2013
2014
2015
WHO
WE ARE
Assura is a leading UK
healthcare REIT and our
vision is to be the UK’s best
developer and owner-manager
of primary care property
OUR INVESTMENT CASE
By following our strategies we can deliver
long-term shareholder value through:
OUR STRATEGIES
To achieve our vision we have four
strategic priorities:
Q Low volatility of property returns
Q Low default risk
Q Linkage to cost inflation
Q Scalable, internally managed model
Q Covered, progressive dividends
Q Excellent risk adjusted returns
Focus
Maintaining a strategic
focus on a highly
attractive market
Expertise
Responding to the
NHS agenda
Read more p18
Read more p20
Culture
Spearheading
investment in social
infrastructure
Effectiveness
Leveraging our team’s
skills to maximum
advantage
Read more p22
Read more p24
Assura plc Annual Report 2015 1
www.assuraplc.com PROPERTY PORTFOLIO
265 medical centres that are well
diversified by geography and size
Portfolio analysis by capital value
Number of
properties
Total
value
£m
Total
value
%
<£1m
£1–5m
£5–10m
>£10m
37
25.2
180
451.6
36
12
253.3
178.2
3
50
27
20
265
908.3
100
Portfolio analysis by region
Number of
properties
Total
value
£m
Total
value
%
North
South
Midlands
Scotland
Wales
109
411.2
74
55
9
18
221.4
201.2
23.9
50.6
45
24
22
3
6
265
908.3
100
Portfolio analysis by tenant covenant
GPs
NHS body
Pharmacy
Other
Total
rent roll
£m
Total
rent roll
%
38.1
10.2
4.3
3.0
69
18
8
5
55.6
100
2 Assura plc Annual Report 2015
A
Ardudwy Health Centre,
Harlech
Assura’s most sustainable property to
date, with an insulated timber frame and
biomass boiler that uses wood pellets to
heat the building, resulting in an efficient
and cost effective building.
B
Blaenavon Primary Care
Centre, Blaenavon
This visually striking building was
completed in September 2014. In
line with Assura’s ethos, the building
provides extensive new services for
the local area.
C
Park House Surgery,
Lanchester
Re-housing a small surgery located in
the local village, Park House Surgery
has been sensitively designed to reflect
its location in a conservation area.
D
Market Weighton Surgery,
Market Weighton
This spacious building opened in
September 2014 and enables GPs
to provide enhanced services from
high quality premises meeting the
healthcare needs of the community.
E
West Quay Medical Centre,
Barry
Acquired as part of the Metro portfolio,
this modern, purpose built premises
houses 10 GPs with a list size of over
13,000 patients.
F
Sudbury Community Healh
Centre, Sudbury
The 3,000+ square metre Assura
development replaced three outdated
healthcare buildings in Sudbury and
enables a wide range of services
to be provided from one location.
G
Aspen Centre,
Gloucester
Completed in July 2014 and acquired by
Assura as part of the Metro portfolio. The
large building houses three GP practices
with over 21,000 patients. The centre is
an excellent addition to our portfolio.
1
3
4
1
18
3
2
2
19
4
2
18
5
4
6
38
C
4
1
6
D
16
5
1
5
2
2
F
G
27
9
A
13
2
7
20
2
3
B
E
1
6
2
1
www.assuraplc.com Value of property:
>£10m
£5–10m
£1–5m
<£1m
Note: size of marker
indicates number of
properties of that category
in the applicable region
18
3
2
18
5
2
19
4
2
38
C
4
1
6
D
4
6
16
5
2
7
20
G
1
5
27
9
2
2
F
4
1
3
1
A
13
6
2
1
2
3
B
E
1
Assura plc Annual Report 2015 3
www.assuraplc.comFinancial statements Governance Strategic report OUR MILESTONES
OF THE YEAR
MP Realty acquisition
In June Assura acquired a portfolio of 28 high quality, modern
medical centres from MP Realty Holdings Group. The medical
centres had an average lot size of £3.9 million and an unexpired
lease term of 15 years. The portfolio was purchased for a mixture
of cash and shares in Assura and added £6 million to the rent roll.
Read more at www.assuraplc.com
One Life acquisition
In July Assura acquired the entire share capital of
Park Medical Services Limited which owned the One
Life Building in Middlesbrough. The 3,300 square
metre property accommodates a GP practice, a
pharmacy, a day case operating theatre, community
services, mammography and X-ray along with other
outpatient services. The centre was acquired for
£12.3 million and has a passing rent of £0.8 million
per year.
April
May
June
July
August
September
Jenefer Greenwood OBE
In June the Board and employees of Assura
congratulated Jenefer Greenwood, Non-Executive
Director, for her OBE, awarded in the Queen’s
Birthday Honours for services to the UK real
estate industry and for voluntary services to
young people.
Leylands Medical Centre acquisition
In August Assura acquired the freehold of
Leylands Medical Centre, Bradford. The property
was acquired for £2.6 million from the GPs
who originally developed the 960 square metre
medical centre. It has a passing rent of £0.16
million and is let to the GP partners and Lloyds
Pharmacy Limited, each on new 25 year
lease terms.
Brainwave
In April Assura commenced
its support of a Warrington
based charity, Brainwave.
The charity exists to help
children with disabilities
and developmental delay
to achieve their full potential.
Read more on p47
4 Assura plc Annual Report 2015
www.assuraplc.com
£175 million equity raise
In October Assura successfully
completed an equity raise of
£175 million net of costs. The
equity raise was well supported
by existing shareholders as
well as attracting several new
holders to the register.
Crossley Street Surgery acquisition
In January Assura acquired the Crossley
Street Surgery in Wetherby. The 540 square
metre Surgery was acquired for £2.2 million and
has a passing rent of £0.13 million. The lease
has 24 years remaining and is let to a single
GP practice and a pharmacy.
Completion of Sudbury development
In January Assura reached practical completion
of the Sudbury Community Health Centre
development. The 3,350 square metre facility
was developed at a cost of £8.2 million and
has a rent roll of £0.5 million. It is leased to
NHS Property Services on a 20 year lease.
The property offers a wide range of services
which are detailed on pages 16 and 17.
October
November
December
January
February
March
It’s a Knockout
In September the staff from
Assura participated in an
It’s a Knockout tournament
with a local charity, St Rocco’s
Hospice. The event saw
teams from businesses all
over Warrington take part
in several challenges whilst
raising money for the charity.
The team from Assura was
declared the winner!
Metro portfolio acquisition
In November we acquired the Metro portfolio of
11 high quality medical centres for £63.1 million.
At the same time we also agreed terms in
principle with the vendors for funding four further
medical centres to be developed by them on
behalf of Assura which are expected to have
a value on completion of £21 million.
Acquisition of Trellech Surgery
In January Assura acquired the Trellech
Surgery. The 473 square metre surgery was
acquired for £1.3 million and has a passing
rent of £0.08 million. The lease has 17.5 years
remaining and is let to a single GP practice.
Read more at www.assuraplc.com
Assura plc Annual Report 2015 5
www.assuraplc.comFinancial statements Governance Strategic report
CHAIRMAN’S STATEMENT
We have a unique proposition in our sector
as developer, landlord and asset manager
DEAR SHAREHOLDER
It has been another busy and successful
year for Assura. We have added significantly
to our property portfolio through both
acquisition and new developments. Thanks
to the support of our shareholders, we were
able to raise £175 million, net of expenses, in
a fund raise during the year. We had a clear
plan of how to use these proceeds and are
now well advanced in executing that plan.
Since the fund raise, we have made property
additions of £105 million and we have a
pipeline of further property acquisitions and
developments of £100 million. Our gearing
is now at 48%, well within our target range.
Uniquely in our sector we provide all of
the elements of the property service for
GPs, which enables us to offer a long-term
partner approach throughout the lifecycle
of a medical centre. This ability to “develop,
invest and manage” gives us a crucial
advantage in securing new development
opportunities and other asset management
initiatives. Our internally managed structure
provides a highly scalable model that means
as we grow, the benefits of scale accrue to
shareholders and drive our progressive
dividend policy.
The efficiency of this model has been a key
contributor to the results delivered this year.
We have increased our rent roll by 33% to
£55.6 million while reducing our European
Public Real Estate Association (“EPRA”) Cost
Ratio from 20% to 18%. This has enabled us
to deliver a growth in underlying profit of 46%
to £15.9 million.
In November 2014 we increased our
quarterly dividend by 11% to 0.5 pence per
share and we retain our policy to pay fully
covered dividends, which will grow broadly in
line with the geared underlying rental growth.
Since we resumed dividend payments three
years ago, we have grown the quarterly
dividend per share by 75%.
SIMON LAFFIN
CHAIRMAN
“ The results delivered this year
have contributed to a Total
Shareholder Return of 50%”
6 Assura plc Annual Report 2015
www.assuraplc.com liquidity in our shares. We successfully met
the criteria for inclusion in the EPRA/NAREIT
index in March 2015 and this provides
further exposure for the Group to this group
of specialist real estate focused investors.
Total Shareholder Return
50%
Our people and the Board
We have 30 people in Assura and I would
like to thank each and every one for their
hard work and contribution to the success
of the business. There have been no
changes to the Board during the year.
Dividend per share
1.85p
+36%
Net assets
£451.9m
+99%
New corporate structure
During the year we undertook a scheme of
arrangement to insert a new UK plc as our
ultimate holding company. This replaced a
Guernsey registered holding company and
aligned the Group with its UK tax jurisdiction
and should enable it to develop even better
commercial relationships with the NHS and
GPs, which are the Group’s principal customers.
The future
Over the past three years we have made
substantial progress in deploying capital in
this highly attractive sector. We have strong
brand recognition with GPs and proactively
engage with the NHS to make the case for
further investment in modern primary care
facilities, with a unique offering as developer,
landlord and asset manager.
The overwhelming need for replacement
and upgrade of GP surgeries is rising up the
priorities of the NHS. We remain well placed to
meet this substantial investment in our nation’s
primary care infrastructure.
SIMON LAFFIN
CHAIRMAN
20 May 2015
The results delivered this year have
contributed to a Total Shareholder Return of
50%. Over the past three years our strategy
of refocusing the business on the primary
care sector has delivered a Total Shareholder
Return of 118%.
Market developments
We have been engaging widely with the
NHS and Government during the year to make
the case for further investment in primary care
infrastructure, primarily through the British
Property Federation’s Healthcare Committee. It
is very encouraging that recent announcements
in the form of the NHS’s Five Year Forward View,
the creation of the Primary Care Infrastructure
Fund and the Better Health for London report
all recognise the key role investment in primary
care property can play in improving efficiencies
and health outcomes for the NHS. The current
Government is committed to increased funding
for the NHS and an increased role for primary
care service provision.
The provision of a broader range of services
from a modern facility with a larger number
of GPs to facilitate extended hours without
the need to refer patients to the more costly
secondary care sector is an achievable aim
in all of our new premises. We remain ready
to provide the expertise and the capital to
support this essential investment in our
primary care infrastructure and to do so
at competitive rental levels. It is a highly
efficient and cost effective model for the
private sector funding of state infrastructure.
Shareholders
We are committed to the highest standards of
financial transparency and believe a significant
investment in investor relations activity is a key
responsibility for any company. We have held
114 meetings with investors during the year
and I am delighted to welcome seven new
shareholders into our 20 largest investors. We
are very grateful to our shareholders for the
level of support demonstrated during the year
which enabled us to increase our equity base
by 90%. In addition the increasing profile of
the business has led to an improved level of
Assura plc Annual Report 2015 7
www.assuraplc.comFinancial statements Governance Strategic report CHIEF EXECUTIVE’S
STRATEGIC REVIEW
We have delivered growth in our
investment portfolio of over 40%
I am pleased to report a period of significant
growth for Assura, where we have delivered on
our long-held ambition to increase significantly
the scale of the business. In the year we have
completed £245 million of property additions,
which was the largest contributor to the
£269 million increase in investment property
in the year. This growth in our portfolio has
enabled us to increase our rent roll by 33% to
£55.6 million. We have successfully converted
this increased investment into growth in
underlying profit of 46% to £15.9 million and
increased the quarterly dividend by 11% to 0.5
pence per share which remains fully covered.
Included in the property additions during the
year were two significant portfolio acquisitions
completed through off market transactions for
an aggregate consideration of £170 million. The
portfolios represented 39 medical centres with
a total rent roll of £9.4 million and a weighted
average unexpired lease length in excess of
16 years. In addition we were able to secure
four future sites with an estimated value of
£21 million under a forward funding agreement
with the same vendors. The assets have been
rapidly integrated and the team has reviewed
for asset management opportunities which has
already generated a significant letting at one
of the sites of more than 2,100 square metres.
The equity fund raise of £175 million, net
of expenses, in October 2014 was key to
delivering this substantial investment. We are
grateful to our shareholders for their support
and the level of demand enabled us to secure
an increase in our equity base of 90%. Our
increased equity base has reduced our loan to
value ratio to 48%. We believe a range of 45%
to 55% provides us with the financial flexibility
to take advantage of future acquisition and
development opportunities and we will look
to maintain this level over the medium term.
GRAHAM ROBERTS
CHIEF EXECUTIVE
“46% increase in underlying
profit, 33% increase in our
rent roll”
8 Assura plc Annual Report 2015
www.assuraplc.com The longevity and security of our cash flows
and the inflation-tracking characteristics of
our income stream underpins our future
dividend growth.
We continue to see excellent risk adjusted
returns in primary care real estate and there
are positive signs of investment in new
developments returning to our sector.
Since the fund raise we have been focused on
the twin objectives of making further additions
to our property portfolio and reducing our
borrowings. Since October we have secured
further property additions of £105 million at a
yield on cost of 5.2% and a weighted average
unexpired lease term of 16.7 years. This
represents 25 properties with a wide
geographic spread. The attractiveness of our
sector is becoming increasingly understood and
so this has been achieved against a backdrop of
an increasingly competitive market. Our strong
brand recognition, long experience in the sector
and our reputation amongst the GP community
have all been factors in successfully securing
this pipeline of opportunities.
In addition to the completed transactions we
also have a further pipeline of development
opportunities and acquisitions of more than
£100 million. We remain focused on further
growth through acquisition and our dedicated
team of property professionals are active in
sourcing new opportunities across the country.
We are also committed to strengthening our
balance sheet and have redeemed borrowings
of £57 million and restructured facilities of
£177 million, reducing our ongoing interest
cost. Our current borrowings have a weighted
maturity of 11.9 years and a weighted average
cost of 5.28%.
Property returns
The enlarged property portfolio has
delivered a Total Property Return of 7.8%.
Assura is a constituent of the IPD Healthcare
Index and since its inception in 2007 we have
delivered a return of 7.6% against the index of
5.9%. This level of consistent outperformance
over a long period is a testament to the skills
and dedication of our property team and to
the specialist knowledge we have in our sector.
The IPD Index also captures the performance
of the primary care property sector as a
whole and since the launch of the index it has
delivered a very consistent level of return. The
relatively low volatility results in an excellent
risk adjusted return when compared with
other sectors as indicated in the chart below:
Risk reward spectrum
Seven-year Total Return vs standard deviation 2007–2014
(since the inception of the IPD Healthcare Index)
Residential index
Gilts
GP
Healthcare
Centres
Other
property
All Healthcare
Equities
Office
Industrial
All property
Retail
18
16
14
12
10
8
6
4
2
10%
n
r
u
t
e
R
l
a
t
o
T
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
0
Risk (standard deviation)
SOURCE: IPD
Assura plc Annual Report 2015 9
www.assuraplc.comFinancial statements Governance Strategic report
4
developments completed
£19.6m
cost
Property additions
£245m
CHIEF EXECUTIVE’S
STRATEGIC REVIEW
CONTINUED
The key driver of our property return is the
income from our long-term leases and in the
year we have delivered rental growth of 1.3%
from settled rent reviews which is ahead of
inflation. The majority of our rent reviews are
on an open market basis set by reference to
rental awards agreed with the District Valuer
on new schemes. The basis of these reviews
effectively means that they are influenced
by land and construction cost inflation over
the medium term. Over the last 12 months
this inflation has picked up. This increased
cost is not currently reflected in our passing
rents as rents are set by reference to
new developments and there has been a
slowdown in the approval of new schemes.
Our portfolio is well placed to capture
this rental growth once new developments
recommence and this gives us confidence
for the medium term prospects for rental
growth in our sector.
The balance of the return is generated from
our capital growth, which has seen a like for
like valuation growth of 5.2% in the past year.
This increase has primarily come from a
movement in our yields with our equivalent
yield moving by 30 basis points in the past
year. This relatively moderate repricing over
the past year still leaves our yields maintaining
a premium over fixed return gilts in excess
of 360 basis points.
We also add value through our development
activities. We have completed four
developments during the year with a total
development cost of £19.6 million. This has
added £1.4 million to our annual rent roll and
generated a margin over the revaluation yield
in excess of 100 basis points. The level of
development expenditure in the year is
significantly below the levels we would
normally expect. This reflects the delays
in the approval of new schemes following
the introduction in 2013 of the reforms to the
NHS in the Health and Social Care Act 2012.
Our in-house development capability gives
us the opportunity to source new premises
at levels significantly cheaper than we could
achieve through purchasing completed
properties from developers. On a typical
scheme we are able to source a development
at a 1% higher yield on cost than for an
equivalent property acquired in the investment
market by taking on the risk of development.
This provides an incremental return to our
shareholders. In addition, by being involved
as a developer, long-term landlord and
asset manager we are able to build effective
long-term relationships with our GPs and
this provides us with a unique positioning
and market insight in our sector.
Operational efficiency
The £245 million of property additions have
been integrated seamlessly without any
increase in headcount. This was facilitated
by the restructuring of our in-house property
management team during the year to create
a team with the sole focus of client interaction
and management. By understanding the
evolving needs and demands of our GPs we
can position ourselves to be at the forefront
of the significant investment required in
improving premises in the future.
We have created a separate team of
investment managers who have responsibility
for identifying value enhancing asset
management opportunities such as lease
extensions and redevelopments within our
existing estate as well as new acquisition
opportunities. This revised focus is already
starting to result in an increased pipeline of
potential acquisitions and a number of asset
management opportunities. This highlights
the advantages of our scalable internal
management model. We can integrate
acquisitions without significant additional
costs and we have the skills in-house to
maximise the value of the portfolio.
10 Assura plc Annual Report 2015
www.assuraplc.com This structure enables us to ensure that
we can maximise the efficiency with which
we can translate increased rental income
into underlying profit and hence dividends.
In the year we have delivered 46% growth
in underlying profit to £15.9 million. This
has been achieved from 41% growth in our
investment property value and a reduction
in our EPRA Cost Ratio from 20% to 18%.
The overall impact of all of these factors
is reflected in a 51% increase in our profit
before tax to £36.6 million and our dividends
increasing from £7.2 million to £14.4 million.
Market outlook
The primary care sector displays very
strong real estate fundamentals: excellent
occupier covenants, minimal development
risk, restricted supply with no speculative
development and long leases without breaks.
In addition the underlying open market rent
review mechanism most common in the
sector has provided inflation tracking returns
over the medium term.
A secure and predictable income stream with
an underpinning of inflation linkage is a highly
attractive proposition to the investor in all
economic conditions. In addition the sector
is experiencing increasing demand at a time
when supply has been heavily restricted by
the approval processes of the NHS. There
are increasing signs that this situation
is improving and the unblocking of the
significant investment required in primary
care property is becoming more likely.
Increasing demand
Assura as a developer and investor in primary
care property provides bespoke, purpose
built premises that meet 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 day1. 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 our modern
purpose built premises. In the 2014 BMA
Survey of GP practices 40% of GPs stated
that their premises were not fit for purpose2.
The demands on our 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% 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 to increase 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 £80 billion
to £120 billion in the last decade. This rate
of growth is not sustainable 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 is both a clinical and
financial imperative to meet the increasing
health needs of the population within
reasonable budgetary constraints. A study
from management consultants Deloitte LLP,
commissioned by the Royal College of GPs,
says that increasing the GP budget would
save £5 for every £1 put in3.
Underlying profit grown by
46%
1 RCGP, January 2015
2 BMA, July 2014
3 Deloitte LLP, November 2014
Assura plc Annual Report 2015 11
www.assuraplc.comFinancial statements Governance Strategic report CHIEF EXECUTIVE’S
STRATEGIC REVIEW
CONTINUED
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 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. 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.
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 at last
resolved and we have recently received our first
approval under the new process.
We are hopeful that approvals for new
schemes will be forthcoming in the near future
and we remain ready to provide the expertise
and the capital to support this essential
investment in the infrastructure of the NHS.
People
One of our core strategic priorities is Culture
and we are committed to the development and
training of our people. We have a small head
office team of 30 people and crucial to our
success is enhancing the skills of our teams.
We have six people currently undergoing
formal training. As a small team we outsource
a number of functions and this is something
that we constantly review. We have recently
decided to recruit an experienced solicitor
to join our senior leadership team as Head
of Legal and we continue to monitor our
resource requirements to make appropriate
investment where necessary.
Outlook
We enter the new financial year with a
strengthened financial position that has
enhanced our ability to take advantage of a
fragmented market place and the significant
opportunity to support the NHS in its future
plans for the increased provision of care in the
primary care setting. Primary care continues
to provide strong property fundamentals
with good prospects for capital and income
growth and the Board believes Assura’s
brand, expertise and scale position it well
to capitalise on this.
GRAHAM ROBERTS
CHIEF EXECUTIVE
20 May 2015
12 Assura plc Annual Report 2015
www.assuraplc.com OUR BUSINESS MODEL
Creating long-term shareholder value…
Uniquely in our sector we provide all of the elements of the property service for GPs, which enables us
to offer a long-term partner approach throughout their involvement in the lifecycle of their medical centre.
1. Strategic priorities
2. How we create long-term sustainable value
3. Outputs
Focus
Maintaining a strategic focus
on a highly attractive market.
Develop
Our team of development managers works with our design
and development partners to provide bespoke, community-led
property solutions for each of our healthcare partners.
We monitor and manage the process from design through
to delivery of the completed building.
Property return
7.8%
Expertise
Responding to the
NHS agenda.
Culture
Spearheading investment
in social infrastructure.
Effectiveness
Leveraging our team’s skills
to maximum advantage.
Invest
As a long-term investor we are committed to any new
development being constructed to the highest possible
standards and to its ongoing efficient operation and
maintenance. We support the evolving requirements of
the GPs through lease renewals, property extensions or
co-locating appropriate partners such as pharmacies.
Manage
Our team of property surveyors manages the medical centre
and its efficient operation through frequent liaison with our
tenants. This integrated approach enables us to capture
more development and other added value opportunities.
Our internally managed structure provides a highly scalable
model that means as we grow the benefits of scale accrue to
shareholders and help drive our progressive dividend policy.
% NHS covenant
87%
Average EPC rating
B
Accounting return
7.7%
Our business model is underpinned by robust internal systems and controls
Acting responsibly
As a leading investor in social
infrastructure and a member of
the Social Stock Exchange we
take our corporate and wider social
responsibilities very seriously.
Risk management
Risk management is essential to the way
we operate and is a key responsibility of
the Board. We monitor and manage both
external and internal risks and ensure
that those risks assumed are regularly
assessed by the Board.
Robust governance
The Board is committed to maintaining the
highest standards of corporate governance
and aligning the long-term interests of
shareholders and management through
its remuneration policy.
Read more on p22-23
Read more on p30-35
Read more on p60-61
Assura plc Annual Report 2015 13
www.assuraplc.comFinancial statements Governance Strategic report STRATEGY
… we develop, invest and manage
allowing us to achieve our vision
Focus
Assura has a deep understanding of the
economic dynamics of healthcare real estate.
By building on the knowledge and expertise of
our team and engagement with our healthcare
partners we believe we can generate superior
Total Property Return through a strategic focus
on a highly attractive market.
Read more on p18
Expertise
The Assura brand has a strong reputation for
innovation derived from our bespoke designs
for our medical centres. Our designs have an
emphasis on flexibility and adaptability to ensure
that the buildings can adapt to the changing
NHS agenda.
Read more on p20
Culture
We pride ourselves on our commitment to the
highest possible standards in everything we do,
our commitment to the sustainability agenda, the
personal development of our teams and our role in
spearheading investment in social infrastructure.
Read more on p22
Effectiveness
We are committed to supporting the NHS in
tackling the major underinvestment in UK primary
care property and utilising our skills and capital in
achieving this. We have the right team to source and
manage these opportunities and the right plans to
leverage our team’s skills to maximum advantage.
Read more on p24
For more details:
14 Assura plc Annual Report 2015
Performance in 2015
Priorities for 2016
Key risks
■ Delivered rental growth of 1.3% from
settled rent reviews.
■ 41% growth in investment property
to £925 million.
■ Total Property Return of 7.8%.
■ Outperformed the IPD Healthcare Index
by 1.9%.
■ Engaged with senior NHS leaders and
politicians to support transforming primary
care property.
■ Delivered four bespoke GP led developments.
■ Drive development
■ The development pipeline remains subdued
Property return
opportunities to support
rental growth evidence.
■ Investment managers
to focus on asset
enhancement
opportunities.
■ Continue to seek growth
opportunities through
acquisitions and purchase
and leasebacks.
and continued uncertainty over NHS approval
processes for new developments could lead
to further delays in re-building this pipeline.
■ The market is becoming increasingly competitive
though our strong brand and reputation as a
long-term investor in the sector means we are well
placed to secure further attractive opportunities.
■ Promote benefits of
■ Further changes to the organisational structures or
% NHS tenant covenant
investment in primary care
policies of the NHS could lead to delays to further
infrastructure for the NHS.
investment in primary care infrastructure. However,
■ Build on a strong brand
with GPs to be at the
forefront of new
development planning.
the current Government remains committed to
increased funding for the NHS and an increasing
role for primary care service provision.
■ Two out of our four completed developments
■ Develop zero carbon
■ Sustainable development and building design is
Average EPC rating
achieved BREEAM Excellent, with the
remainder achieving Very Good.
■ Continued membership of the Social
Stock Exchange.
■ Acquired MP Realty (£107 million) and Metro
(£63 million) portfolios.
■ EPRA Cost Ratio reduced from 20% to 18%.
medical centre of the
future for the NHS.
an area of constant change and we are required
to ensure we are fully up to date with the latest
■ Further investment in our
technologies and innovations.
team’s development.
■ Our membership of the Social Stock Exchange
requires a rigorous annual review and reporting
process that monitors our performance against key
criteria and there is a risk that we fail to meet the
requirements.
■ Seek further opportunities
■ Maintaining cost discipline as the business expands
Accounting return
to expand the portfolio.
will be crucial in ensuring that we continue to reduce
■ Promote the Company to
a wider shareholder base
to continue increase in
share trading volumes.
our overall EPRA Cost Ratio. Included within this
metric is the cost of vacant space and so letting this
available space will improve this cost metric.
■ We have been successful in securing both equity
and debt capital for supporting the expansion of the
business although there is no certainty that future
expansion will be supported in the same way. We
believe the fundamentals of the business remain very
strong and attractive to both equity and debt funders.
7.7%
8.7%
15.9%
7.8%
7.9%
7.2%
87.0%
86.0%
85.0%
B
B
A
KPIs
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
Read more on p26-29
Read more on p30-35
Read more on p26-29
www.assuraplc.com ■ Delivered rental growth of 1.3% from
settled rent reviews.
■ 41% growth in investment property
to £925 million.
■ Total Property Return of 7.8%.
■ Outperformed the IPD Healthcare Index
by 1.9%.
■ Engaged with senior NHS leaders and
politicians to support transforming primary
care property.
■ Delivered four bespoke GP led developments.
■ Two out of our four completed developments
achieved BREEAM Excellent, with the
remainder achieving Very Good.
■ Continued membership of the Social
Stock Exchange.
■ Acquired MP Realty (£107 million) and Metro
(£63 million) portfolios.
■ EPRA Cost Ratio reduced from 20% to 18%.
Focus
Assura has a deep understanding of the
economic dynamics of healthcare real estate.
By building on the knowledge and expertise of
our team and engagement with our healthcare
partners we believe we can generate superior
Total Property Return through a strategic focus
on a highly attractive market.
Read more on p18
Expertise
The Assura brand has a strong reputation for
innovation derived from our bespoke designs
for our medical centres. Our designs have an
emphasis on flexibility and adaptability to ensure
that the buildings can adapt to the changing
NHS agenda.
Read more on p20
Culture
We pride ourselves on our commitment to the
highest possible standards in everything we do,
our commitment to the sustainability agenda, the
personal development of our teams and our role in
spearheading investment in social infrastructure.
Read more on p22
Effectiveness
We are committed to supporting the NHS in
tackling the major underinvestment in UK primary
care property and utilising our skills and capital in
achieving this. We have the right team to source and
manage these opportunities and the right plans to
leverage our team’s skills to maximum advantage.
Read more on p24
For more details:
Performance in 2015
Priorities for 2016
Key risks
KPIs
■ Drive development
■ The development pipeline remains subdued
Property return
opportunities to support
rental growth evidence.
■ Investment managers
to focus on asset
enhancement
opportunities.
■ Continue to seek growth
opportunities through
acquisitions and purchase
and leasebacks.
■ Promote benefits of
investment in primary care
infrastructure for the NHS.
■ Build on a strong brand
with GPs to be at the
forefront of new
development planning.
and continued uncertainty over NHS approval
processes for new developments could lead
to further delays in re-building this pipeline.
■ The market is becoming increasingly competitive
though our strong brand and reputation as a
long-term investor in the sector means we are well
placed to secure further attractive opportunities.
2015
2014
2013
7.8%
7.9%
7.2%
■ Further changes to the organisational structures or
policies of the NHS could lead to delays to further
investment in primary care infrastructure. However,
the current Government remains committed to
increased funding for the NHS and an increasing
role for primary care service provision.
% NHS tenant covenant
2015
2014
2013
87.0%
86.0%
85.0%
■ Develop zero carbon
medical centre of the
future for the NHS.
■ Further investment in our
team’s development.
■ Sustainable development and building design is
an area of constant change and we are required
to ensure we are fully up to date with the latest
technologies and innovations.
■ Our membership of the Social Stock Exchange
requires a rigorous annual review and reporting
process that monitors our performance against key
criteria and there is a risk that we fail to meet the
requirements.
Average EPC rating
2015
2014
2013
B
B
A
■ Seek further opportunities
to expand the portfolio.
■ Promote the Company to
a wider shareholder base
to continue increase in
share trading volumes.
■ Maintaining cost discipline as the business expands
will be crucial in ensuring that we continue to reduce
our overall EPRA Cost Ratio. Included within this
metric is the cost of vacant space and so letting this
available space will improve this cost metric.
■ We have been successful in securing both equity
and debt capital for supporting the expansion of the
business although there is no certainty that future
expansion will be supported in the same way. We
believe the fundamentals of the business remain very
strong and attractive to both equity and debt funders.
Accounting return
2015
2014
2013
7.7%
8.7%
15.9%
Read more on p26-29
Read more on p30-35
Read more on p26-29
Assura plc Annual Report 2015 15
www.assuraplc.comFinancial statements Governance Strategic report 12
Services available in a
primary care setting
On-site
pharmacy
MEETING THE
NHS AGENDA
Large co-located GP
practices can vastly
increase the services
offered to patients in
their locality
Sudbury Community Health
Centre
Diagnostics and scanning
The building accommodates a diagnostic
suite including a full diagnostic imaging
facility (X-ray) and a docking port for a
mobile MRI scanning vehicle. The vehicle
can park in a designated area of the car
park and simply hook up to the specialist
electric port located on the exterior of
the building.
Musculoskeletal physiotherapy
A special gym area and consulting
rooms host general physiotherapy
and musculoskeletal physiotherapy, a
specialised area of physiotherapy treating
injuries and conditions which affect the
muscles, joints and soft tissues.
Phlebotomy
A blood taking clinic runs daily from
8.30am to 4pm.
Pharmacy
Pharmacy offers advice and prescriptions
as well as over the counter medicines for a
wide range of conditions. A range of other
services are also available at pharmacies,
such as asthma checks, smoking
cessation advice and flu vaccinations.
Community dentistry
This specialist clinic offers community
dental services to a variety of patients,
including people with learning disabilities
or complex medical conditions, people
who use mental health services, the
homeless or those with physical and
sensory impairments.
GP surgery
A full range of GP and nursing
consultations and treatments, including
vaccinations, immunisations, health
checks and a minor injury clinic.
Community midwifery
and nursing
The midwifery team provide antenatal and
postnatal care and support to women and
families. Antenatal clinics are held five
days a week and postnatal clinics twice
a week.
Audiology
This clinic gives hearing aid wearers
the opportunity to have their hearing
aid re-tubed and maintained, to get
replacement batteries and to discuss
hearing aid matters. A specialist sound
proof room is provided for hearing tests.
Paediatric physiotherapy
Children aged up to 18 can be referred to
this clinic for rehabilitation from a team of
specialist paediatric physiotherapists who
are experienced in assessing and treating
children to help them fulfil their potential.
Environmental services
Air source heat pumps
Heat from outside air is mechanically
extracted via roof mounted pumps and
filters to help heat the hot water supply
to the building.
Solar photovoltaic panels
Roof-mounted solar panels capture the
sun’s energy using photovoltaic cells. The
cells convert the sunlight into electricity,
which can be used to top up the energy
supply to the building.
Green roof
The roofs of the building are planted
with sedum and wild flowers to attract
invertebrates and aid biodiversity.
16 Assura plc Annual Report 2015
www.assuraplc.com
Green roof and
solar photovoltaic
panels
Mental health
services
GP surgery
Serving 8,600 patients in
the local community
Assura plc Annual Report 2015 17
www.assuraplc.comFinancial statements Governance Strategic report FOCUS
Maintaining a strategic focus
on a highly attractive market
Portfolio acquisitions
The previous owners of the MP Realty and
Metro portfolios placed significant weight
on selling to an investor that understood
the market place and would maintain the
relationships they had carefully built up with
their tenants over many years. Assura’s track
record of developing and investing in primary
care property demonstrated the necessary
understanding of the sector and requirements
of the GP tenants which convinced the sellers
that the portfolio would be in safe hands. The
transactions were partly settled in equity and
the vendors remain substantial shareholders.
Opportunities to improve
on-site services
Assura’s experience in the sector has
meant the portfolios have been integrated
quickly into existing processes. The focus
for the in-house team is now on identifying
opportunities to improve the facilities or letting
vacant space through securing tenants that
offer complementary services.
Close working relationships
The knowledge and expertise of the
investment team is vital in satisfying GPs
looking to sell their premises that Assura
is the preferred partner as landlord for
that practice. By building close working
relationships with GPs, Assura is able
to secure investment opportunities on
competitive terms. This has included purpose
built, multi-function premises such as the One
Life Building in Middlesbrough and smaller
premises in need of upgrade or replacement.
Read more at
www.assuraplc.com
18 Assura plc Annual Report 2015
www.assuraplc.com West Quay Medical Centre
Acquired as part of the Metro portfolio,
this modern, purpose built premises
houses 10 GPs with a list size of over
13,000 patients.
Left to right:
Alexander Taylor, Adam Lowe
“ WE UNDERSTAND
THE INCREASING TIME
PRESSURES ON GPs.
WE WORK CLOSELY
WITH THEM THROUGH
A SALE PROCESS
TO MAKE SURE
THERE IS A SMOOTH
TRANSITION”
ALEXANDER TAYLOR,
INVESTMENT MANAGER
Assura plc Annual Report 2015 19
www.assuraplc.comFinancial statements Governance Strategic report EXPERTISE
Responding to
the NHS agenda
Partnering
Assura has a close working relationship
with the primary care specialist architects
West Hart Partnership (WHP) which has been
built up over the last 11 years. Their deep
understanding of the healthcare market makes
them our natural choice and an integral part
of the development team on both new build
projects and asset enhancement initiatives.
Patient centric
The main purpose of a primary care centre is to
deliver improvements to the health outcomes
of their communities. WHP keep the patient
experience at the forefront of their mind when
planning a new centre. Their designs provide
ease of way-finding which reduces stress and
travel distances for patients from waiting areas
to clinical rooms. Natural light and ventilation
coupled with a design that has the community
space at its heart go a long way to successful
primary care design.
Design approach
WHP and Assura’s approach to design is
to evoke a sense of wellbeing and openness,
yet still meet the exacting standards required
by the latest legislation, environmental and
sustainability regulations. Each building is a
bespoke design. As well as meeting the needs
of the health professionals and occupiers, the
key to successful design is to meet the needs
of the patients and clinicians. These two groups
often have varying needs yet WHP and Assura
will, through their extensive experience, manage
to accommodate both groups.
By approaching the design, layout and
configuration from the inside to meet the users’
and occupiers’ needs results in one that every
local community can be proud of and WHP
have secured many design accolades and
awards for their schemes.
Read more at
www.assuraplc.com
20 Assura plc Annual Report 2015
www.assuraplc.com Architects’ impression
Created by specialist architects
West Hart Partnership, this
digital impression shows some
of the key features of modern
primary care premises.
“ THE KEY TO
SUCCESSFUL DESIGN
IS TO MEET THE NEEDS
OF THE PATIENTS
AND COMMUNITY”
STEVE HART AND JIM WEST,
WEST HART PARTNERSHIP
After working in the health sector for a number
of years we formed West Hart Partnership
in 1999. We are passionate about inspirational
and innovative design solutions and making
them a reality. We have an experienced and
capable team specialising in the varied and
demanding needs of the health sector.
Assura plc Annual Report 2015 21
www.assuraplc.comFinancial statements Governance Strategic report CULTURE
Spearheading investment
in social infrastructure
Social Stock Exchange
The Social Stock Exchange is a foundation of the
UK’s social investment infrastructure. Launched
in 2013, those companies that look to deliver a
measurable social or environmental impact, as
well as a financial return, can now find aligned
shareholders by applying to be members of the
Social Stock Exchange. Twelve companies have
been granted membership so far and collectively
they have a market capitalisation of in excess of
£1.2 billion, with many more members set to
be added in the coming months.
The application process is rigorous to ensure
that only those companies who have that
social or environmental impact at the heart
of their values proposition can be granted
membership. Being a part of the Social Stock
Exchange can often see member firms attract
more supportive shareholders whose interests
are typically aligned with those of the firm.
Investing for impact is now a rapidly growing
phenomena. It has been the preserve of high
net worth individuals or private equity funds for
decades, but innovations such as the Social
Stock Exchange help make it accessible to
all. The Global Impact Investing Network
estimated in a 2013 report that the size of the
impact investing market globally will grow to as
much as $1 trillion by 2020 and those already
investing in this sector should take pride in
knowing they are on the cutting edge of a
revolution in finance.
Read more at
www.assuraplc.com
22 Assura plc Annual Report 2015
www.assuraplc.com Clockwise from left:
Kirsty Brady, Anna McMullan,
Guy Redman, Jacqui Fishwick,
Zoe Bradbury, Francesca Harris.
INVESTMENT IN
PROFESSIONAL
DEVELOPMENT
“ ASSURA HAS ALWAYS
SUPPORTED MY
PROFESSIONAL
DEVELOPMENT”
ZOE BRADBURY
MANAGEMENT ACCOUNTANT
Assura is keen to invest in and develop its staff.
We currently have six members of staff training
for qualifications including the Assessment
of Professional Competence with the Royal
Institution of Chartered Surveyors, the Association
of Chartered Certified Accountants, the Chartered
Institute of Management Accountants and
Chartered Institute of Marketing. Our staff are
supported by the Company with time off for
courses and also guidance from colleagues
who have completed similar qualifications.
Living wall
The Vines Medical Centre in Maidstone
has a ‘living wall’ which provides an
evergreen wall of planting on the exterior
of the building which helps the building
blend in with its surroundings.
Assura plc Annual Report 2015 23
www.assuraplc.comFinancial statements Governance Strategic report EFFECTIVENESS
Leveraging our team’s skills
to maximum advantage
Internal management structure
Assura’s in-house team of property
professionals has the skills to identify and
maximise the opportunities in our sector.
A specialist dedicated team is on hand to
deal efficiently and effectively with all matters,
whether it be a day to day matter, a new
acquisition as a result of purchase and
leaseback or a development.
Our service
Our culture of providing first class service to
GPs and health professionals is at the forefront
of our business and we constantly review and
tailor the property team to deliver a service
worthy of recommendation.
Improving team structure
We have this year continued to invest in the
professional development of the property
team. In addition they are now structured into
North and South with each team having all
three disciplines of portfolio/property manager,
investment and development surveyors.
Having a regional focus will provide greater
continuity of care to our tenants in all aspects
of their premises needs.
The improved structure will promote more
efficient team working whilst ensuring our
occupiers, patients and local communities
reap the benefits.
Read more at
www.assuraplc.com
24 Assura plc Annual Report 2015
www.assuraplc.com “ THE DELIVERY OF EXCELLENT
SERVICE IS AN IMPERATIVE PART
OF THE ROLE”
ADAM WAHEED,
PORTFOLIO MANAGER
As a portfolio manager I am responsible for the strategic asset management
of my portfolio, from the enhancement of asset value, identifying additional
income streams through to the actual property and facilities management
of a property. The delivery of excellent service is an imperative part of the
role as it attracts attention from other potential occupiers, including GPs.
As a specialist manager in the healthcare industry we understand the needs
and requirements of our occupiers and are there to meet those needs.
Willington Surgery, Derbyshire
This state of the art surgery provides
the local village with an integrated
pharmacy along with additional health
and community services. The building
houses 5 GPs and has a list size of
over 8,000 patients.
Assura plc Annual Report 2015 25
www.assuraplc.comFinancial statements Governance Strategic report KEY PERFORMANCE
INDICATORS
Our vision is to be the UK’s best developer and
owner-manager of primary care property
Strategic priority
KPI and benchmark
Explanation
Performance
Focus
Maintaining a strategic focus
on a highly attractive market
Assura has a deeQ understanding of the
economic dynamics of healthcare real estate.
By building on the knowledge and exQertise of
our team and engagement with our healthcare
Qartners we believe we can generate suQerior
Total ProQerty Return through a strategic
focus on a highly attractive market.
Rental growth from rent reviews
1.3%
2015
1.9%
2014
2.4%
2013
Total Property Return
7.8%
2015
7.9%
2014
IPD five-year Total Return
7.2%
9.1%
IPD
ASSURA
7.2%
2013
Rental growth is the weighted average annualised uplift in rent
We have delivered rental growth of 1.3% which is ahead of
reviews settled in the year.
inflation over the period.
The rate of growth has been slowing, though with construction
cost inflation returning we believe medium-term prospects
will recover.
Total Property Return measures the overall return generated by
We have continued to deliver a Total Property Return in
our properties on a debt free basis. It is calculated as the net
excess of our net initial yield from delivering capital growth
rental income generated by the portfolio plus the change in our
from our investment portfolio.
market values, divided by opening property assets plus additions.
We measure our performance against the All Healthcare
Benchmark as calculated by IPD.
Over the last five years, our Total Return of 9.1% per annum
has outperformed the All Healthcare Benchmark of 7.2%.
This has been achieved with low volatility of returns and is
ahead of our estimated cost of equity.
Expertise
Responding to the NHS agenda
The Assura brand has a strong reQutation
for innovation derived from our besQoke
designs for our medical centres. Our
designs have an emQhasis on flexibility
and adaQtability to ensure that the buildings
can adaQt to the changing NHS agenda.
Lease length
14.4 years
2015
14.4 years
2014
14.8 years
2013
% of tenant covenant NHS/GP
87%
2015
86%
2014
85%
2013
Completed developments
£22.8m
2015 – 4 SITES
£24.5m
2014 – 8 SITES
Developments on site
£14.4m
2013 – 5 SITES
£22.2m
2015 – 5 SITES
£23.2m
2014 – 5 SITES
£34.9m
2014 – 9 SITES
The weighted average unexpired lease term (“WAULT”) provides
Our lease length of 14.4 years provides a high level
the average period until the first available break in our underlying
of income certainty to underpin investor returns.
property leases calculated on the basis of the weighted average
of the underlying rent.
The proportion of our rent roll that is paid directly by GPs or
NHS PropCo.
An effective government backing for 87% of our income
provides low default risk for our income at a premium to
the equivalent gilt rates.
The number and valuation on completion of completed
developments during the year.
The value of completed schemes has decreased slightly
during the year to £22.8 million. This reflects the reduced
number of developments being undertaken across the sector.
The number and estimated valuation on completion of
developments currently commenced at the year end.
The NHS reorganisation has inevitably led to a slowdown
in development activity and so the number of schemes we
have on site has reduced. Despite this we have continued to
work with the NHS on future developments and we currently
have an indicative pipeline in excess of 22 schemes and
£60 million, although the timing of final contracts and therefore
construction remains subject to NHS approval procedures.
26 Assura plc Annual Report 2015
www.assuraplc.com In order to be the best we need to demonstrate that we can
consistently outperform over time. In order to measure ourselves
against this objective we have a wide range of key performance
indicators, these can be distilled into three key areas. Firstly,
Total Property Return, which measures our success in choosing
the right investments and managing these over time. Secondly,
Total Accounting Return, which measures the returns we have
delivered to our shareholders in the form of dividends paid and
our growth in net asset value (“NAV”). Lastly, we consider Total
Shareholder Return as measured by the stock market, which
reflects the value of dividends paid and the relative movement
in our share price over the period.
These measures are complementary and should build on each
other although the share price movement is also affected by other
external factors outside of our control. By managing the Property
Return and Accounting Return over the medium term we should be
able to deliver a superior Total Shareholder Return to our investors.
This overriding objective is reflected in the long-term management
incentive scheme, the Value Creation Plan (“VCP”), which provides
incentives to management based on the Total Shareholder Return
delivered to investors over a five-year time horizon. This is explained
in more detail in the Remuneration Committee report on pages 57
to 72.
In order to achieve these objectives we have four strategic priorities
and how we monitor ourselves against them is outlined below:
Strategic priority
KPI and benchmark
Explanation
Performance
Focus
Maintaining a strategic focus
on a highly attractive market
Assura has a deeQ understanding of the
economic dynamics of healthcare real estate.
By building on the knowledge and exQertise of
our team and engagement with our healthcare
Qartners we believe we can generate suQerior
Total ProQerty Return through a strategic
focus on a highly attractive market.
Rental growth from rent reviews
1.3%
2015
7.8%
2015
9.1%
ASSURA
Total Property Return
IPD five-year Total Return
1.9%
2014
7.9%
2014
7.2%
IPD
2.4%
2013
7.2%
2013
Rental growth is the weighted average annualised uplift in rent
reviews settled in the year.
We have delivered rental growth of 1.3% which is ahead of
inflation over the period.
Total Property Return measures the overall return generated by
our properties on a debt free basis. It is calculated as the net
rental income generated by the portfolio plus the change in our
market values, divided by opening property assets plus additions.
The rate of growth has been slowing, though with construction
cost inflation returning we believe medium-term prospects
will recover.
We have continued to deliver a Total Property Return in
excess of our net initial yield from delivering capital growth
from our investment portfolio.
We measure our performance against the All Healthcare
Benchmark as calculated by IPD.
Over the last five years, our Total Return of 9.1% per annum
has outperformed the All Healthcare Benchmark of 7.2%.
This has been achieved with low volatility of returns and is
ahead of our estimated cost of equity.
Expertise
Responding to the NHS agenda
The Assura brand has a strong reQutation
for innovation derived from our besQoke
designs for our medical centres. Our
designs have an emQhasis on flexibility
and adaQtability to ensure that the buildings
can adaQt to the changing NHS agenda.
Lease length
14.4 years
14.4 years
14.8 years
2015
2014
2013
% of tenant covenant NHS/GP
87%
2015
86%
2014
85%
2013
Completed developments
£22.8m
£24.5m
£14.4m
2015 – 4 SITES
2014 – 8 SITES
2013 – 5 SITES
Developments on site
£22.2m
£23.2m
£34.9m
2015 – 5 SITES
2014 – 5 SITES
2014 – 9 SITES
The weighted average unexpired lease term (“WAULT”) provides
the average period until the first available break in our underlying
property leases calculated on the basis of the weighted average
of the underlying rent.
The proportion of our rent roll that is paid directly by GPs or
NHS PropCo.
Our lease length of 14.4 years provides a high level
of income certainty to underpin investor returns.
An effective government backing for 87% of our income
provides low default risk for our income at a premium to
the equivalent gilt rates.
The number and valuation on completion of completed
developments during the year.
The value of completed schemes has decreased slightly
during the year to £22.8 million. This reflects the reduced
number of developments being undertaken across the sector.
The number and estimated valuation on completion of
developments currently commenced at the year end.
The NHS reorganisation has inevitably led to a slowdown
in development activity and so the number of schemes we
have on site has reduced. Despite this we have continued to
work with the NHS on future developments and we currently
have an indicative pipeline in excess of 22 schemes and
£60 million, although the timing of final contracts and therefore
construction remains subject to NHS approval procedures.
Assura plc Annual Report 2015 27
www.assuraplc.comFinancial statements Governance Strategic report KEY PERFORMANCE
INDICATORS CONTINUED
Strategic priority
KPI and benchmark
Explanation
Performance
BREEAM Rating achieved on developments
‘Very Good’ or better
100%
2015
100%
2014
100%
2013
Average EPC rating
A
B
2014
2015
B
2013
Total Accounting Return
7.7%
2015
15.9%
2014
9.7%
2013
EPRA Cost Ratio
18%
2015
20%
2014
Total Shareholder Return
49.9%
2015
24.2%
2014
Underlying profit per share
2.1p
2015
2.1p
2014
23%
2013
18.6%
2013
1.7p
2013
Culture
Spearheading investment
in social infrastructure
We Qride ourselves on our commitment to
the highest Qossible standards in everything
we do, our commitment to the sustainability
agenda, the Qersonal develoQment of our
teams and our role in sQearheading
investment in social infrastructure.
Effectiveness
Leveraging our team’s skills to
maximum advantage
We are committed to suQQorting the NHS
in tackling the major underinvestment in UK
Qrimary care QroQerty and utilising our skills
and caQital in achieving this. We have the
right team to source and manage these
oQQortunities and the right Qlans to leverage
our team’s skills to maximum advantage.
28 Assura plc Annual Report 2015
BREEAM is the world’s foremost environmental assessment method
Two of our developments achieved a rating of Excellent
and ratings for buildings. BREEAM sets the standard for best practice
in the current year with the remaining two achieving a
in sustainable building design, construction and operation, and has
Very Good rating.
become one of the most comprehensive and widely recognised
measures of a building’s environmental performance.
An Energy Performance Certificate (“EPC”) is an assessment
The average rating has declined in the year which reflects
based on the construction and type of property and relevant
the fact that our data for the prior year included our most
fittings such as heating systems, insulation or double glazing.
sustainable medical centre ever built, in Harlech. This centre
achieved an exceptional level of sustainability and was our first
“zero carbon” building. If we exclude this medical centre our
performance for the prior year would have been for an average
“B” rating, which is our target level for new developments.
Total Accounting Return is the overall return generated by the
Our Total Accounting Return is in-line with our Total Property
Group including the impact of debt. It is calculated as the movement
Return of 7.8%, reflecting the one-off costs of equity issuance,
on EPRA NAV for the year plus the dividends paid, divided by the
debt restructuring and acquisitions incurred in the year offset
opening EPRA NAV for the year and is expressed as a percentage.
by property revaluation surpluses. This is ahead of our
Over time we would expect our Total Accounting Return to be a
estimated cost of equity. The prior year included a one-off gain
good proxy for our Total Shareholder Return.
from the sale of our LIFT investments, which added 5.1% to the
prior year return.
This is measured as the total administrative costs for the year
The integration of the 57 property additions has been
including the direct costs of vacancy divided by gross rental
achieved with no increase to headcount, which has
income. It is expressed as a percentage.
contributed to a reduction in the ratio to 18%.
Total Shareholder Return is calculated as the movement in the
Total Shareholder Return will differ from Total Accounting
share price for the period plus the dividends paid, divided by the
Return to the extent that there has also been a movement
opening share price for the year expressed as a percentage.
during the period of the ratio of the share price to the EPRA
NAV. During the year we rejoined the FTSE All Share Index
at the end of June 2014 and entered the EPRA/NAREIT index
The underlying profit per share is calculated as the underlying
in March 2015.
profit (see income statement definitions on page 87 for more detail
on this definition) divided by the average number of shares in issue
during the year.
The premium to EPRA NAV at 31 March 2015 was 38.5%
(31 March 2014: discount of 1.4%).
www.assuraplc.com Strategic priority
KPI and benchmark
Explanation
Performance
Culture
Spearheading investment
in social infrastructure
We Qride ourselves on our commitment to
the highest Qossible standards in everything
we do, our commitment to the sustainability
agenda, the Qersonal develoQment of our
teams and our role in sQearheading
investment in social infrastructure.
BREEAM Rating achieved on developments
‘Very Good’ or better
100%
2015
100%
2014
100%
2013
Average EPC rating
B
2015
A
2014
B
2013
BREEAM is the world’s foremost environmental assessment method
and ratings for buildings. BREEAM sets the standard for best practice
in sustainable building design, construction and operation, and has
become one of the most comprehensive and widely recognised
measures of a building’s environmental performance.
An Energy Performance Certificate (“EPC”) is an assessment
based on the construction and type of property and relevant
fittings such as heating systems, insulation or double glazing.
Two of our developments achieved a rating of Excellent
in the current year with the remaining two achieving a
Very Good rating.
The average rating has declined in the year which reflects
the fact that our data for the prior year included our most
sustainable medical centre ever built, in Harlech. This centre
achieved an exceptional level of sustainability and was our first
“zero carbon” building. If we exclude this medical centre our
performance for the prior year would have been for an average
“B” rating, which is our target level for new developments.
Effectiveness
Leveraging our team’s skills to
maximum advantage
We are committed to suQQorting the NHS
in tackling the major underinvestment in UK
Qrimary care QroQerty and utilising our skills
and caQital in achieving this. We have the
right team to source and manage these
oQQortunities and the right Qlans to leverage
our team’s skills to maximum advantage.
Total Accounting Return
7.7%
2015
15.9%
2014
9.7%
2013
EPRA Cost Ratio
18%
2015
20%
2014
23%
2013
Total Shareholder Return
49.9%
2015
24.2%
2014
18.6%
2013
Underlying profit per share
2.1p
2015
2.1p
2014
1.7p
2013
Total Accounting Return is the overall return generated by the
Group including the impact of debt. It is calculated as the movement
on EPRA NAV for the year plus the dividends paid, divided by the
opening EPRA NAV for the year and is expressed as a percentage.
Over time we would expect our Total Accounting Return to be a
good proxy for our Total Shareholder Return.
Our Total Accounting Return is in-line with our Total Property
Return of 7.8%, reflecting the one-off costs of equity issuance,
debt restructuring and acquisitions incurred in the year offset
by property revaluation surpluses. This is ahead of our
estimated cost of equity. The prior year included a one-off gain
from the sale of our LIFT investments, which added 5.1% to the
prior year return.
This is measured as the total administrative costs for the year
including the direct costs of vacancy divided by gross rental
income. It is expressed as a percentage.
The integration of the 57 property additions has been
achieved with no increase to headcount, which has
contributed to a reduction in the ratio to 18%.
Total Shareholder Return is calculated as the movement in the
share price for the period plus the dividends paid, divided by the
opening share price for the year expressed as a percentage.
The underlying profit per share is calculated as the underlying
profit (see income statement definitions on page 87 for more detail
on this definition) divided by the average number of shares in issue
during the year.
Total Shareholder Return will differ from Total Accounting
Return to the extent that there has also been a movement
during the period of the ratio of the share price to the EPRA
NAV. During the year we rejoined the FTSE All Share Index
at the end of June 2014 and entered the EPRA/NAREIT index
in March 2015.
The premium to EPRA NAV at 31 March 2015 was 38.5%
(31 March 2014: discount of 1.4%).
Assura plc Annual Report 2015 29
www.assuraplc.comFinancial statements Governance Strategic report RISK MANAGEMENT
Risk management is essential to
the way we operate and is a key
responsibility of the Board
The level and type of risk assumed is
regularly monitored by the Board and key
to this is having an appropriate internal
controls and risk management process,
which is subject to regular review by
the Board.
With a small head office team with a flat
structure and detailed day to day engagement of
Executive Directors, emerging risks are identified
and existing risks monitored constantly.
It is inherent in the nature of risk that it is not
possible to eliminate all risk. In fact it is not
desirable as assuming manageable risk is key
to enhancing profits and returns to investors.
The most significant judgements affecting
our risk exposure include our property sector
selection, our level of development risk and
our gearing.
Our focus on the primary care property
sector provides us with very predictable and
long-term cash flow and thus reduces the
overall level of risk.
Our developments are managed by our
specialist teams and only undertaken when
a committed long-term tenant is in place and
a fixed price contract has been agreed with
the main contractor. This reduces the risk
to a level we are happy to accept for the
available returns.
A key risk factor for any potential investor on
real estate is the level of gearing they wish
to take on. The security and longevity of our
cash flows support a relatively high level of
gearing. We believe a loan to value ratio of
45% to 55% is the right range over the
medium term.
Many of the key external risks are areas
where we have limited control, such as
government policy towards the NHS and
the strength of the economy. Although these
cannot be controlled we regularly review their
potential impact on our business and consider
how our strategy and its implementation can
be adjusted to mitigate any potential impact.
Our flat management structure and
relatively small team enables a regular
two-way information flow. This enables a
complementary top-down and bottom-up
approach to risk management.
Top-down enables the Board to review strategic
risks and for these to be communicated down.
Bottom-up enables the head office team to
apply operational risk management and for the
issues to be communicated up to the Audit
Committee and the Board.
A summary of the more critical risks
identified through that review and identified
by the Board as having potential to affect the
Group’s operating results, financial control and
reputation are summarised on pages 32 to 35.
30 Assura plc Annual Report 2015
www.assuraplc.com TOP-DOWN
BOTTOM-UP
Strategic risk management
Operational risk management
Review external environment
Set risk appetite and parameters
Determine strategic
action points
BOARD
AND AUDIT
COMMITTEE
Assess effectiveness
of risk management systems
Report principal risks
SENIOR
LEADERSHIP
TEAM
Consider completeness of identified
risks and adequacy
of mitigating actions
Consider aggregation of risk exposures
across the business
Direct delivery of
strategic actions
Monitor key risk indicators
Execute strategic actions
Report on key risk indicators
HEAD
OFFICE TEAM
Report priority and
emerging risks
Identify, evaluate, prioritise,
mitigate and monitor operational
risks recorded in risk register
Assura plc Annual Report 2015 31
www.assuraplc.comFinancial statements Governance Strategic report RISK MANAGEMENT CONTINUED
EXTERNAL RISKS
Risks and impacts
Key mitigation factors
Change from last year
Government
policy
Changes in NHS procurement
and funding could adversely
affect the Group. Reduced
funding for premises expenditure
in the primary care sector of the
NHS could lead to a reduction in
our development pipeline and
growth prospects. A change to
the reimbursement mechanism
for GPs could lead to a change
in the risk profile of our
underlying tenants.
The increased provision of healthcare
services in the community and a
closer coordination of primary and
elderly care provision is a stated policy
objective of the current government
and so a reduction in funding to this
sector is considered unlikely.
The organisational changes in the NHS
have led to a reduction in the number
of new developments being approved.
A new procedure for approval by the
NHS is now in place and we are
confident the increasing demands on
GPs and their premises will lead to an
increase in the funding for new
developments.
The Group actively engages with the
Government over policy that could
impact the business, both directly
and through the Healthcare Committee
of the British Property Federation.
The reimbursement mechanism is not
currently under review. Any change
would probably result in an increased
cost to the NHS in the future supply of
primary care properties, which could
reduce the opportunities to increase
healthcare provision in the community.
During the year there
have been very few
new developments
approved as the NHS has not
had clear approval processes
in place following the structural
reorganisation undertaken since
the Health and Social Care
Act 2012.
The recent announcement
by NHS England of the
£1 billion Primary Care
Infrastructure Fund highlighted
the importance of investment
in primary care premises.
£190 million of investment has
now been approved, which has
predominantly been allocated to
smaller scale improvement and
extension projects. There is an
expectation that larger scale
capital projects will be approved
in the current financial year and
this points to this risk reducing
over the coming year, though
it remains unchanged at the
current time.
Availability
and cost
of finance
Reduced availability of
real estate financing could
adversely affect the Group’s
ability to source new funding
and refinance existing facilities.
Reduced availability of new
financing could delay or
prevent the development
of new premises.
Increasing financing costs
could increase the overall cost
of debt to the Group and so
reduce underlying profits.
The Group predominantly has
long-term facilities, which reduce
the refinancing risk both in terms of
availability of finance and potential rate
increases. The Group has a policy of
active engagement in capital and
banking markets and engages with
a range of funders to ensure a breadth
of financing options. The current
appetite for lending into the sector
is very strong.
The Group regularly monitors and
manages its refinancing profile.
100% of drawn debt is fixed for
the duration of the loans.
The primary care
sector remains a very
attractive sector for
lenders given the quality of the
underlying cash flows. We have
continued to see strong interest
from a broad range of lenders
that we regularly interact with.
We expect to broaden the range
of lenders to the Company in the
year ahead at competitive rates
and see no immediate catalyst
to reverse this positive trend.
32 Assura plc Annual Report 2015
www.assuraplc.com EXTERNAL RISKS
Risks and impacts
Key mitigation factors
Change from last year
Investor
demand
Reduction in investor demand for
UK primary care property may
result in falls in asset valuations,
which could reduce the Group’s
future profits and net asset
values and could arise from:
■ Changes in NHS policy
■ Health of the UK economy
■ Availability of finance
■ Relative attractiveness of
other asset classes.
Threat of
new entrants
Increased competition from
new purchasers could lead to a
reduction in our ability to acquire
new properties.
The overall economic position
and its impact on the Group’s
operations are regularly assessed
and considered in reviewing the
Group’s strategy.
The Group’s focus on the primary
care sector provides a strong
covenant and long-term income,
which reduces the impact of the
wider economy.
The relative attractiveness of the
sector has increased during the year
as other prime markets have seen
significant price increases, which
are yet to feed into our sector.
We have seen evidence of new
entrants into the sector during the year.
Increased competition could lead to a
general increase in prices across the
sector. Our specialist knowledge and
strong brand recognition with GPs
reduces this overall risk.
The fundamentals for
our sector remain very
strong and the
longevity and security of our
cash flows has continued to
generate strong investor
demand for our shares in the
past year. The dividend yield
and the underlying strength of
the cash flows supporting it
remain attractive relative to other
asset classes and this has
contributed to the significant
share price appreciation in
the year.
The market for primary
care medical centres
has become more
competitive in the last year.
The relative attractiveness of our
asset class has led to a number
of new entrants acquiring assets
during the year. Despite this we
have made substantial additions
to our portfolio during the year
and we remain confident in our
ability to continue to do so.
Assura plc Annual Report 2015 33
www.assuraplc.comFinancial statements Governance Strategic report RISK MANAGEMENT CONTINUED
INTERNAL RISKS
Risks and impacts
Key mitigation factors
Change from last year
Development
Development risk could adversely
impact the performance of the
Group including:
■ Cost overruns and delays
on new projects
■ Delays in letting parts
of premises.
The Group has a dedicated
and experienced development
management team to manage
this exposure.
The Group’s policy is to engage in
developments that are substantially
pre-let with fixed price or capped
price build contracts.
The Group has substantial experience
of developments in the sector and has
strong relationships with suppliers.
The potential
impact of this has
reduced in the
year as the number of
developments has
declined. We remain
confident of our ability to
manage this risk through
our experienced team of
development surveyors
when the number of
developments increases.
Strategic focus
Expertise
Capital
structure,
gearing
Strategic focus
Effectiveness
Property valuations are inherently
uncertain and subject to
significant judgement.
A fall in property values
or income could adversely
affect the covenants on
facilities with lenders.
If covenants were breached
this could lead to forced asset
disposals which could reduce
the Group’s net assets
and profitability.
The Group engages two external valuers
to review property valuations on a regular
basis and these are formally reviewed by
the Board twice a year.
All financial forecasting, including
scenario analysis of prospective
transactions, incorporates
consideration of the impact on
gearing and covenant headroom.
Covenant headroom and gearing
are monitored with reference to
possible valuation movements
and future expenditure.
The Board regularly reviews the capital
structure of the Group.
Following the
successful equity
fund raising last
year the level of gearing
has reduced significantly.
The Board considers a net
loan to value ratio in the
range of 45% to 55% to be
optimal over the medium
term. The current position
of 48% is in line with
that policy.
34 Assura plc Annual Report 2015
www.assuraplc.com CORPORATE AND COMPLIANCE RISKS
Risks and impacts
Key mitigation factors
Change from last year
Communication
Failure to adequately
communicate the Company’s
strategy and explain performance
in respect of this may result in an
increased disconnect between
the investor perceptions of value
and actual performance.
Strategic priorities in corporate
communications, including
the Annual Report, are clearly
articulated and reiterated.
We have held a significant number
of investor meetings in the year.
The Group reports performance
transparently and communicates
regularly with investors and analysts.
Investor
communication
remains a key
priority and during the
year we held a significant
number of meetings,
especially in relation to
the equity fund raise.
Some 114 meetings have
been held during the year,
including 49 meetings with
new potential investors.
Strategic focus
Focus
People
Strategic focus
Culture
Failure to recruit, develop and
retain staff and Directors with the
right skills and experience may
result in underperformance.
Succession planning is regularly
evaluated.
Director and employee remuneration
and incentives are aligned with
appropriate peer groups and
periodically benchmarked.
The Group has a regular performance
appraisal process with a focus on
continuous personal development and
an employee engagement programme,
which promotes its corporate values
and culture.
Professional
development
and training are a
priority for the business
and six members of staff
are currently working
towards a professional
qualification. An enhanced
performance appraisal
process is currently being
rolled out and succession
planning is reviewed on a
regular basis.
Assura plc Annual Report 2015 35
www.assuraplc.comFinancial statements Governance Strategic report
BUSINESS REVIEW
Proceeds from equity raise
substantially invested and we are
well positioned for further growth
At 31 March 2015 our portfolio of completed
investment properties was valued at a total
of £908.3 million (2014: £631.6 million), which
produced a net initial yield (“NIY”) of 5.56%
(2014: 5.98%). Taking account of potential
lettings of unoccupied space and any uplift
to current market rents on review, our valuers
assess the net equivalent yield to be 5.77%
(2014: 6.07%). Adjusting this Royal Institute of
Chartered Surveyors standard measure to
reflect the advanced payment of rents, the
true equivalent yield is 5.98% (2014: 6.31%).
Our EPRA NIY, based on our passing rent roll
and latest annual direct property costs, was
5.43% (2014: 5.85%).
Net rental income
Valuation movement
Total Property Return
2015
£m
48.2
21.4
69.6
2014
£m
37.8
12.4
50.2
Expressed as a percentage of opening
investment property plus additions, Total
Property Return was 7.8% compared with
7.9% in 2014.
Our annualised Total Return over the last
five years as calculated by IPD was 9.1%
compared with the IPD All Healthcare
Benchmark of 7.2% over the same period.
The valuation gain in the year of £21.4 million
represents a 5.2% uplift on a like-for-like basis,
as well as movements relating to properties
acquired in the year, and has arisen as a result
of the downward pressure on yields with
increased competition for acquiring assets in
the sector. Despite the downward pressure,
the NIY on our assets continues to represent
a substantial premium over the 15 year gilt
which traded at 1.96% at 31 March 2015.
Investment and
development activity
Despite the recent hiatus in NHS development
approvals, we have invested substantially
during the year.
Although this growth has primarily been
through numerous acquisitions of completed
investment properties, we have still completed
four developments during the year with a total
development cost of £19.4 million. This has
added £1.4 million to our annual rent roll and
generated a 7.2% yield on cost.
We recorded an unrealised revaluation
deficit of £0.9 million during the year in respect
of investment property under construction
(2014: surplus of £1.3 million). Excluding
the £3.3 million revaluation deficit in respect
of the land at Scarborough, we recorded a
gain of £2.4 million.
Portfolio as at 31 March 2015
£908.3 million (2014: £631.6 million)
Our business is based on our investment
portfolio of 265 properties. This has a passing
rent roll of £55.6 million (2014: £41.8 million),
87% of which is underpinned by the NHS.
The WAULT is 14.4 years and 93% of the
rent roll will still be contracted in 2025.
Portfolio analysis by capital value
Number of
properties
Total
value
£m
Total
value
%
<£1m
£1–5m
£5–10m
>£10m
37
25.2
180
451.6
36
12
253.3
178.2
3
50
27
20
265
908.3
100
36 Assura plc Annual Report 2015
www.assuraplc.com
£276.7m
growth in completed
investment property
portfolio
3.4%
growth in EPRA NAV
per share
£37.2m
net profit for the year
Despite the reduction in developments being
approved we were able to source a number
of properties through forward funding
agreements. As at 31 March 2015, we had five
developments on site under such agreements,
with a total committed investment value of
£22.2 million, and a further two which we
would hope to be on site shortly (estimated
cost of £9.5 million).
The bulk of the growth in our investment
portfolio has come from the acquisition of
two portfolios and a number of standing
investments. The table below highlights
the main transactions:
Date
Jun-14
Portfolio/property
MP Realty
(28 properties)
Nov-14
Metro (11 properties)
Jul-14
One Life Building,
Middlesbrough
Dec-14
South Kirkby
Other (16 properties)
Total
Property
cost
£m
107.0
63.1
12.3
10.1
37.8
230.3
Portfolio management
We have continued to deliver rental
growth and have successfully concluded
on 137 rent reviews during the year to
generate a weighted average annual rent
increase of 1.27% (2014: 1.89%) on those
properties. Our portfolio benefits from a
21% weighting in fixed and Retail Price Index
(“RPI”) uplifts which generated an average
uplift of 3.06% during the year. The majority
of our portfolio is subject to open market
reviews and these have generated an
average uplift of 0.38% during the year.
We work very hard at developing and
maintaining customer relationships. This
approach is carried across the range of
services we provide both during development
and after completion, as a portfolio manager.
We have a dedicated team of asset managers
who are in regular communication with our
customers and we monitor progress through
regular customer satisfaction surveys. All
asset managers are appraised on their
success in a continuous improvement on
tenant interaction.
During the year we have successfully secured
six new tenancies with an annual rent roll of
£0.1 million covering 550 square metres. In
addition we have significantly extended the
lease on four properties.
Portfolio analysis by region
Portfolio analysis by tenant covenant
Number of
properties
Total
value
£m
Total
value
%
North
South
Midlands
Scotland
Wales
109
411.2
74
55
9
18
221.4
201.2
23.9
50.6
GPs
NHS body
Pharmacy
Other
45
24
22
3
6
265
908.3
100
Total
rent roll
£m
Total
rent roll
%
38.1
10.2
4.3
3.0
69
18
8
5
55.6
100
Assura plc Annual Report 2015 37
www.assuraplc.comFinancial statements Governance Strategic report BUSINESS REVIEW CONTINUED
Our EPRA Vacancy Rate was 3.2% (2014:
1.8%) which has increased during the year
due to the level of expansion space included
in portfolios acquired during the year. One of
our focuses for the coming year is to reduce
the vacancy rate.
Administrative expenses
The Group measures its operating efficiency
as the proportion of administrative costs to
the average gross investment property value.
This ratio during the year was 0.72% (2014:
0.82%) and administrative costs stood at
£5.7 million (2014: £5.0 million).
We also analyse cost performance by
reference to our EPRA Cost Ratios (including
and excluding direct vacancy costs) which
were 17.7% and 16.3% respectively (2014:
20.2% and 18.4%). This is now our key KPI
as reported on page 28.
Financing
From a financing perspective, the highlight of
the year was the successful equity issuance
in October 2014, which raised proceeds of
£175 million, net of costs.
Our focus since then has been on investing
the proceeds in primary care property but
we have also made some adjustments to our
lending arrangements to increase flexibility
and take advantage of long-term interest
rates which remain at historically low levels.
We have repaid our debt with Santander
along with the associated interest rate swap,
which was due for refinancing in November
2016, creating a large pool of unsecured
assets. When debt has been assumed
alongside acquired properties we have
negotiated an allowance from the vendor
to reflect the cost of assumed debt. These
allowances have been utilised in full during
the year to secure reduced interest rates
on these facilities.
Further to this, we announce today that we
have secured an increase in our available
revolving credit facility from £30 million to
£60 million for an initial five year term, with
interest variable at 170 basis points above
LIBOR further diversifying our available
funding sources.
We continue to hold discussions with lenders
to broaden our base of lenders, who have
maintained their appetite to lend into our
sector, and to ensure facilities are in place
to support future acquisitions. At 31 March
2015, we had undrawn facilities and cash of
£96.5 million.
Financing statistics
2015
2014
Net debt
£450.0m £414.8m
Weighted average
debt maturity
Weighted average
interest rate
% of debt at fixed/
capped rates
Interest cover1
Loan to value
11.9 years 10.9 years
5.28%
5.28%
100%
160%
48%
98%
150%
62%
1 Interest cover is the number of times net interest
payable is covered by underlying profit before
net interest.
Our loan to value ratio currently stands at
48%, which is a level that the quality of our
cash flows can comfortably support. 100%
of the debt facilities are fixed with a weighted
average debt maturity of 11.9 years compared
with a WAULT of 14.4 years, which highlights
the security of the cash flows of the business
however, our new RCF give us access to
variable rate funding.
Details of the facilities and their covenants
are set out in Note 19 to the accounts.
Net finance costs in the year amounted to
£26.6 million (2014: £21.9 million).
38 Assura plc Annual Report 2015
www.assuraplc.com Underlying profit per share omits accounting
adjustments and certain exceptional items
and has remained at 2.1 pence (2014:
2.1 pence) as the investment proceeds
are still in the process of being deployed.
Based on calculations completed in
accordance with IAS 34, share-based
payment schemes are currently expected
to be dilutive to EPS, with 20.7 million new
shares expected to be issued based on the
average share price for the three months to
31 March 2015. The following illustration is
an extraction. Further details are provided
in Note 9 on page 91.
EPS measure
Basic
Diluted
Continuing operations
Profit for year
EPRA
Underlying
4.9p
4.9p
2.1p
2.1p
4.7p
4.7p
2.0p
2.0p
Dividends
Total dividends paid in the year to 31 March
2015 were £14.4 million or 1.85 pence per
share (2014: 1.36 pence per share).
As a result of brought forward tax losses all
dividends paid during the year were normal
dividends (non-PID) with an associated
tax credit.
We remain committed to maintaining a
covered dividend that is progressive broadly
in line with underlying rental growth.
Underlying profit
Net rental income
Administrative
expenses
Net finance costs
Underlying profit
2015
£m
48.2
(5.7)
(26.6)
15.9
2014
£m
37.8
(5.0)
(21.9)
10.9
The movement in underlying profit can be
summarised as follows:
Year ended 31 March 2014
Net rental income
Administrative expenses
Net finance costs
Year ended 31 March 2015
£m
10.9
10.4
(0.7)
(4.7)
15.9
Underlying profit has grown 45.9% to
£15.9 million in the year to 31 March 2015
following the property acquisitions completed
during the year.
Underlying profit differs from EPRA earnings
as it excludes accounting adjustments such
as IFRS 2 charges for share-based payments
and one-off expenses that we consider to be
exceptional and not reflective of continuing
underlying performance.
Earnings per share
The basic earnings per share (“EPS”) from
continuing operations for the year was 4.9
pence (2014: 4.5 pence) and on profit for the
year was 4.9 pence (2014: 6.6 pence).
EPRA EPS, which excludes the net impact of
valuation movements and gains on disposal,
was 2.1 pence (2014: 1.7 pence).
Assura plc Annual Report 2015 39
www.assuraplc.comFinancial statements Governance Strategic report BUSINESS REVIEW CONTINUED
The table below illustrates how our cash flows
support the dividend we pay:
Net assets
EPRA NAV movement
Opening cash
Net cash flow from
operations
Dividends paid
Investment:
Property and business
acquisitions
Development
expenditure
Sale of properties
Sale of discontinued
operations
Other
Financing:
Proceeds from equity
issuance
Net borrowings
movement
Closing cash
2015
£m
38.6
2014
£m
35.7
16.9
(14.4)
7.9
(7.2)
(64.3)
(9.1)
(14.0)
4.2
–
0.1
173.5
(74.1)
66.5
(23.5)
3.3
27.4
–
–
4.1
38.6
Property additions during the year were
£230.3 million, although the cash outflow was
only £64.3 million after taking into account
shares issued as consideration (£28.3 million),
associated debt (£135.3 million) and net
working capital assumed (£2.4 million).
EPRA NAV at
31 March 2014
Underlying profit
Capital (revaluations
and capital gains)
Dividends
Equity issuance
Other
EPRA NAV at
31 March 2015
Pence
per share
£m
229.6
15.9
21.3
(14.4)
201.8
(1.8)
43.4
2.1
2.8
(1.9)
(1.4)
(0.1)
452.4
44.9
Our Total Accounting Return per share for
the year ended 31 March 2015 is 7.7% of
which 1.85 pence per share (4.3%) has been
distributed to shareholders and 1.5 pence
per share (3.4%) is the movement on EPRA
NAV including an element of dilution
associated with the equity issuance in
October 2014.
The equity issuance saw the Company
raise proceeds of £175 million net of issuance
costs. In addition, the Company issued
44,264,196 shares to the vendors of the
MP Realty portfolio in June 2014 and a further
18,834,148 shares to the vendors of the Metro
portfolio in November 2014. These shares
issued as part consideration were priced
based on the market value of the Company
shares at the time of completion.
In January 2015, Assura plc replaced
Assura Group Limited as the top company
in the Group. This was completed through a
scheme of arrangement, sanctioned by the
Royal Court of Guernsey, which saw shares
exchanged on a one-for-one basis. There was
no change in the number of issued shares.
The change was completed to align the
Group’s corporate structure with its tax
jurisdiction and should enable it to develop
even better commercial relationships with
GPs and the NHS, which are the Group’s
principal customers.
40 Assura plc Annual Report 2015
www.assuraplc.com EPRA performance measures
The European Public Real Estate Association
(“EPRA”) has published Best Practice
Recommendations with the aim of improving
the transparency, comparability and relevance
of financial reporting with the real estate
sector across Europe.
EPRA EPS
EPRA EPS (p)
Diluted EPRA
EPS (p)
2015
2.1
2014
1.7
2.0
1.7
This section details the rationale for each
performance measure as well as our
performance against each measure.
Definition Earnings from operational
activities.
Purpose
A key measure of a company’s
underlying operating results
and an indication of the extent
to which current dividend
payments are supported
by earnings.
The calculation of EPRA EPS and diluted
EPRA EPS are shown in Note 9 to the
accounts.
EPRA NAV
EPRA NAV (p)
2015
44.9
2014
43.4
2015
2.1p
44.9p
35.9p
2014
1.7p
43.4p
42.0p
5.43%
5.85%
5.43%
3.2%
5.85%
1.8%
Summary table
EPRA EPS (p)
EPRA NAV (p)
EPRA NNNAV (p)
EPRA NIY (%)
EPRA “topped-up”
NIY (%)
EPRA Vacancy Rate
EPRA Cost Ratio
(including direct
vacancy costs) (%)
EPRA Cost Ratio
(excluding direct
vacancy costs) (%)
17.7%
20.2%
Definition NAV adjusted to include
16.3%
18.4%
Purpose
properties and other investment
interests at fair value and to
exclude certain items not
expected to crystallise in a
long-term investment
property business.
Makes adjustments to IFRS NAV
to provide stakeholders with the
most relevant information on the
fair value of the assets and
liabilities with a true real estate
investment company with a
long-term investment strategy.
The calculation of EPRA NAV is shown in Note
10 to the accounts.
Assura plc Annual Report 2015 41
www.assuraplc.comFinancial statements Governance Strategic report BUSINESS REVIEW CONTINUED
Investment property
Less developments
Completed investment
property portfolio
Allowance for
estimated purchasers’
costs
Gross up completed
investment property
– B
Annualised cash
passing rental income
Property outgoings
Annualised net rents
– A
Notional rent expiration
of rent free periods or
other incentives
Topped up annualised
rent – C
2015
£m
925.3
(6.7)
2014
£m
656.7
(14.8)
918.6
641.9
52.7
36.7
971.3
678.6
55.6
(2.9)
41.8
(2.1)
52.7
39.7
–
–
52.7
39.7
EPRA NIY – A/B (%)
5.43
5.85
EPRA “topped up” NIY
– C/B (%)
5.43
5.85
EPRA NNNAV
EPRA NNNAV (p)
2015
35.9p
2014
42.0p
Definition EPRA NAV adjusted to include
Purpose
the fair values of (i) financial
instruments, (ii) debt and
(iii) deferred taxes.
Makes adjustments to EPRA
NAV to provide stakeholders
with the most relevant
information on the current
fair value of all the assets
and liabilities within a real
estate company.
The calculation of EPRA NNNAV is shown in
Note 10 to the accounts.
EPRA NIY and EPRA “toQQed-uQ” NIY
EPRA NIY (%)
EPRA “topped-up”
NIY (%)
2015
5.43
2014
5.85
5.43
5.85
Definition –
EPRA NIY
Annualised rental income based
on the cash rents passing at the
balance sheet date, less non-
recoverable property operating
expenses, divided by the market
value of the property, increased
with (estimated) purchasers’
costs.
Definition –
EPRA
“topped-
up” NIY
This measure incorporates an
adjustment to the EPRA NIY
in respect of the expiration of
rent-free periods (or other
unexpired lease incentives such
as discounted rent periods and
step rents).
Purpose
A comparable measure for
portfolio valuations, this measure
should make it easier for
investors to judge for themselves
how the valuation compares with
that of portfolios in other listed
companies.
42 Assura plc Annual Report 2015
www.assuraplc.com EPRA Vacancy Rate
EPRA Vacancy Rate
(%)
2015
2014
3.2
1.8
Definition Estimated rental value (“ERV”) of
vacant space divided by ERV of
the whole portfolio.
Purpose
A “pure” (%) measure of
investment property space that
is vacant, based on ERV.
ERV of vacant
space (£m)
ERV of completed
property portfolio (£m)
EPRA Vacancy
Rate (%)
EPRA Cost Ratios
EPRA Costs (including
direct vacancy costs)
(%)
EPRA Costs (excluding
direct vacancy costs)
(%)
2015
2014
1.9
0.8
57.9
42.8
3.2
1.8
2015
2014
17.7
20.2
16.3
18.4
Definition Administrative and operating
Purpose
costs (including and excluding
direct vacancy costs) divided by
gross rental income.
A key measure to enable
meaningful measurement of
the changes in a company’s
operating costs.
2015
£m
2.9
5.7
0.7
–
–
2014
£m
2.1
5.0
0.7
(0.5)
1.1
(0.2)
(0.2)
Direct property costs
Administrative
expenses
Share-based payment
costs
Property provision
Corporate finance fees
Net service charge
costs/fees
Exclude:
Ground rent costs
(0.3)
(0.4)
EPRA costs (inc direct
vacancy costs) – A
Direct vacancy costs
EPRA costs (exc direct
vacancy costs) – B
Gross rental income
less ground rent costs
(per IFRS)
Gross rental income
– C
EPRA Cost Ratio (inc
direct vacancy costs)
– A/C
EPRA Cost Ratio (exc
direct vacancy costs)
– B/C
8.8
(0.7)
7.8
(0.7)
8.1
7.1
49.8
38.6
49.8
38.6
17.7%
20.2%
16.3%
18.4%
Assura plc Annual Report 2015 43
www.assuraplc.comFinancial statements Governance Strategic report SUSTAINABILITY
As part of our strategic priority
of culture we pride ourselves on
our commitment to the sustainability
agenda, the personal development
of our teams and our role in
spearheading investment
in social infrastructure.
100%
of developments in the year achieved
a BREEAM rating of Very Good or Excellent
6
members of staff training to gain
professional qualifications
Founding member
of the Social Stock Exchange
44 Assura plc Annual Report 2015
Environmental policy
The Group is committed to minimising the
environmental impact of its activities and
achieving continual improvement in its
environmental performance by:
■ Openly addressing the environmental risks
of the work carried out, and identifying
and managing the environmental risks
associated with the business on an
ongoing basis
■ Setting and reviewing annual environmental
objectives and targets, and monitoring
performance
■ Complying with applicable environmental
legislation and other requirements relevant
to the Group’s operations
■ Gaining certification to the ISO14001: 2004
management standard and carrying out
regular internal and external audits to
ensure good performance and identify
opportunities for improvement
■ Working with partners, sub-contractors and
suppliers to promote good environmental
management and performance
■ Reducing the environmental impacts of
new developments by achieving a
BREEAM Excellent rating where possible
■ Reducing the environmental impacts of all
owned and leased premises by adopting
or promoting reasonable controls for
preventing pollution, improving resource
efficiency, reducing waste and reducing
the Group’s carbon footprint
■ Training employees appropriately and
promoting environmental awareness
and commitment amongst all staff.
This policy is reviewed and updated
annually by the Board of Directors and
is available to the public, on our website
www.assuraplc.com.
www.assuraplc.com The aim of the SSE is to provide stakeholders
with the information they need to identify and
compare organisations that deliver value to
society and the environment.
Health and safety
The Group is committed to maintain safe
working environments, and regularly undertakes
programmes to identify, evaluate and reduce
risk in the work place and on site. Risk reviews,
supported by executive management reporting,
are presented to the Board on a regular basis.
“ Assura operates in a
responsible, professional,
ethical and reliable manner”
Social and community matters
Assura operates in a responsible, professional,
ethical and reliable manner and is trusted as a
provider of services and facilities. Reflecting
our commitment to the sustainability agenda,
Assura has aligned itself with the wider
corporate and social responsibility interests
of the NHS. Accordingly, the Group has a
formal Environmental Management System
and has gained accreditation to the ISO14001:
2004 standard.
The Group’s role in developing new
medical facilities in the community, thereby
bringing services closer to the patient, helps
to improve quality of life. In developing a
new medical centre, the Group enters into
consultation with local communities. Many
of the Group’s developments are part of
regeneration schemes that also enhance the
non-medical facilities for local communities.
A current example of work in this area is the
recently completed development at Sudbury
which achieved a BREEAM Excellent rating.
This development has a biodiverse habitat
creation, a green roof, photovoltaic cells and
combined heat and power.
Assura supports a charity close to its head
office which is heavily involved with local
communities.
Assura became a founder member of the
Social Stock Exchange (“SSE”) during the year.
On 6 June 2013 the SSE was launched by David
Cameron to coincide with the Government’s
Social Impact Investment Conference organised
as part of the UK’s hosting of the G8.
The SSE showcases Social Impact
Businesses that have taken the step to
evidence their impact via the publication of an
Impact Report. A Social Impact Business is
one that uses commercial models to organise,
mobilise and manage a for-profit business
that delivers social and environmental change.
Assura plc Annual Report 2015 45
www.assuraplc.comFinancial statements Governance Strategic report CHARITIES
“ During 2014, Assura supported the
hospital support and rehabilitation
programme in Bangassou”
The project rehabilitated the University of Bangassou, where
there were 100 beds before lootings, which had left only 67.
The objective of the project was to provide the population
in the Bangassou and Ouango districts with free access
to quality healthcare services and to gain control over the
mortality and morbidity rates.
For further information, please go to
www.msf.org.uk
Médecins Sans Frontières
Médecins Sans Frontières/Doctors Without Borders
(“MSF”) is an independent international medical
humanitarian organisation that delivers emergency aid
in more than 60 countries to people affected by armed
conflict, epidemics, natural or man-made disasters
or exclusion from healthcare.
In emergencies and their aftermath, MSF rehabilitates and runs
hospitals and clinics, performs surgery, battles epidemics,
carries out vaccination campaigns, operates feeding centres
for malnourished children and offers mental healthcare.
Through longer-term programmes, MSF treats patients with
infectious diseases such as tuberculosis, sleeping sickness
and HIV/AIDS, and provides medical and psychological care
to marginalised groups such as street children.
Founded by doctors and journalists in 1971, MSF is now a
worldwide movement with offices in 19 countries and an
international coordination office in Geneva, Switzerland.
During 2014 Assura supported the hospital support and
rehabilitation programme in Bangassou. For decades,
the Central African Republic has faced political and military
instability, and the country now stands on the edge of a
chronic humanitarian and health emergency. Violence has
engulfed the country following a coup d’état in March 2013,
which saw Séléka rebels seize control of Bangui, removing the
president and replacing him in April with Michel Djotodia, the
leader of the rebel group. With the situation deteriorating at an
unprecedented pace, MSF teams are witnessing extreme
levels of violence and an urgent need for emergency aid.
46 Assura plc Annual Report 2015
www.assuraplc.com
Key to ongoing success of the three centres is the ability
for the charity to raise funds. As well as providing a financial
donation, Assura has supported several of Brainwave’s
events during the last 12 months.
For further information, please go to
www.brainwave.org
Brainwave
Brainwave is a charity that exists to help children with
disababilities and developmental delay achieve their
full potential. The children they work with have a range
of conditions including autism, brain injuries such
as cerebral palsy and genetic conditions such as
Down’s syndrome. The centre we are supporting
is in Birchwood, Warrington.
Thanks to its supporters and dedicated therapy teams,
Brainwave now impacts on the lives of over 600 children with
additional needs. Brainwave’s growth and regional outreach
have been driven by the commitment to bring measurable
improvements to the lives of children with physical, sensory,
learning, cognitive and behavioural difficulties.
Our charities for 2015/16
During the forthcoming year all of our chosen charities
will be local. We will continue to support Brainwave and
in addition we will be working jointly with the Warrington
Wolves Charitable Foundation and the Salford Red
Devils Foundation.
The two foundations work within their local communities and
through the umbrella of sport they work in four key areas:
health, education, young people and social welfare.
For further information, please go to
www.wolvesfoundation.com
www.salfordreddevilsfoundation.co.uk
Assura plc Annual Report 2015 47
www.assuraplc.comFinancial statements Governance Strategic report
CHAIRMAN’S INTRODUCTION
TO GOVERNANCE
The Board has engaged widely
with shareholders during the year
DEAR SHAREHOLDER
The Board is committed to maintaining the
highest standards of Corporate Governance.
The regulatory and reporting landscape for UK
listed companies continues to develop and we
are monitoring current and future requirements,
including the forthcoming enhanced disclosure
around our approach to risk management and
the revised statement of going concern and
statement of longer-term viability.
The Board continues to believe that it has
an effective, well-balanced structure, which
includes a group of Non-Executives who
collectively draw on a wealth and variety of
experience, thus providing for meaningful
discussion, constructive challenge and effective
decision making. In accordance with Corporate
Governance best practice, all Directors will
submit themselves for re-election at the 2015
Annual General Meeting (“AGM”).
The Board has engaged widely with
shareholders during the year; we are delighted
to welcome so many new shareholders to
our register and are grateful for the significant
support we received during our fund raising
in October 2014. Effective communication
with investors is a key strategic priority and no
fewer than 114 investor meetings have been
held during the year. All shareholders are
encouraged to attend the AGM in July where
the Directors and executive team will be
available to meet shareholders directly and
to discuss any matters of importance.
SIMON LAFFIN
CHAIRMAN
48 Assura plc Annual Report 2015
www.assuraplc.com BOARD STRENGTHS
Simon Laffin
Non-Executive Chairman
■ Experienced Chairman
■ Strategy
■ Finance
Non-Executive Chairman
Executive Director
Non-Executive Director
Graham Roberts
Chief Executive
■ Real Estate
■ Capital Markets
■ Investment
Jenefer Greenwood
Non-Executive Director
■ Real Estate
■ Customer Focus
■ Marketing
Jonathan Murphy
Finance Director
■ Corporate Finance
■ Accounting and Reporting
■ Risk Management
David Richardson
Senior Independent Director
■ Finance and Accounting
■ Merger and Acquisition
■ Corporate Governance
Composition of the Board
Length of tenure of Directors
Chairman
Executive
Independent Non-Executive
1
2
2
One year
Two years
Three years
–
1
4
Chairman’s responsibilities
Chief Executive’s responsibilities
■ The effective running of the Board, ensuring that the
Directors receive accurate and timely information
to enable debate and high quality decision making.
■ Promoting high standards of Corporate Governance.
■ Ensuring that the Board agendas take full account of the
important issues facing the Company and the concerns
of all Board members.
■ Ensuring, as Chairman of the Nominations Committee,
that there are Board succession plans in place in order to
retain and build an effective and complementary Board.
■ Running the Company’s business.
■ Implementing the business strategy.
■ Regularly updating the Board on progress against
approved plans.
■ Providing effective leadership of the Executive Board
to achieve the agreed strategies and objectives.
Assura plc Annual Report 2015 49
www.assuraplc.comFinancial statements Governance Strategic report BOARD OF DIRECTORS
Simon Laffin
Non-Executive Chairman
Graham Roberts
Chief Executive
Jonathan Murphy
Finance Director
Jenefer Greenwood
Non-Executive Director
David Richardson
Senior Independent
Director
EXPERIENCE
APPOINTED
BOARD MEETINGS
AND ATTENDANCE
Simon Laffin is the Non-Executive
Chairman of Assura. Simon is also
Non-Executive Chairman of Flybe
Group plc and a Non-Executive
Director of Quintain Estates &
Development PLC. Previously he
served as chairman of Hozelock
Group and a Non-Executive Director
of Mitchells & Butlers plc, Aegis
Group plc and Northern Rock plc
(as part of the rescue team).
Between 1995 and 2004 he was
Group Chief Financial Officer of UK
grocery retailer Safeway plc (which
he joined in 1990) and was latterly
also responsible for property. Prior
to that, he held a variety of finance
and management roles in Mars
Confectionery, Rank Xerox and BP.
He is a qualified accountant.
Graham Roberts is Chief Executive
of Assura. Graham was Finance
Director at The British Land
Company PLC from 2002 to 2011,
and before that was Senior Partner
for real estate at Arthur Andersen,
where he also led the public sector
assurance practice, which included
clients such as NHS Estates and a
number of NHS trusts.
His early career was at Binder
Hamlyn. He is currently a Non-
Executive Director at Balfour
Beatty plc and is Chairman of
their audit committee.
Jonathan Murphy is the Finance
Director of Assura. Jonathan was
previously Finance Director of the
fund management business of
Brooks Macdonald Group plc,
having joined as a result of the
acquisition of Braemar Group plc
in 2010, where he was Finance
Director for four years. Jonathan was
previously Managing Director for the
property management business of
Brooks Macdonald.
His earlier career included
commercial and strategic roles at
Spirit Group and Vodafone. Jonathan
qualified as a Chartered Accountant
with PricewaterhouseCoopers,
holding management roles in both
the UK and Asia. Jonathan holds
an MBA from IESE, the leading
European Business School
in Barcelona.
Jenefer Greenwood is a Chartered
Surveyor who started her career at
Hillier Parker in 1978, becoming
Executive Director and Head of
David Richardson is a Non-Executive
Director of Assura. David is currently
Chairman of BBGI SICAV SA and a
Board member of The Edrington
Retail on merger with CBRE. Jenefer
Group. Previously he spent 22 years
worked for Grosvenor Estate from
2003 until 2012.
Jenefer sits on the Investment
Advisory Board of INTERNOS Global
at Whitbread Plc where he was the
Strategic Planning Director for eight
years and the Finance Director for
four years.
investors and was appointed to the
At Whitbread he played a pivotal
Board of DCH Group in August 2014.
role in transforming the Group from
She has previously served on the
Board of The Crown Estate and
chaired its Remuneration Committee.
She has held positions as Chair of
the National Skills Academy for Retail
and President of the British Council
of Shopping Centres.
a brewing and pubs company into
a market leader in hotels, restaurants
and leisure clubs. Following this he
has held a number of Non-Executive
roles in FTSE listed companies
including Serco Group plc, Forth
Ports plc (now called Forth Ports Ltd),
Tomkins plc (now called Gates
Worldwide Limited), Dairy Crest plc
and De Vere Group plc. He is a
Chartered Accountant.
August 2011
March 2012
January 2013
May 2012
January 2012
14/14
Board meeting
6/6
Audit Committee
Remuneration Committee
3/3
Nominations Committee (Chair) 2/2
Board meeting
Nominations Committee
14/14
2/2
Board meeting
14/14
Board meeting
Audit Committee
14/14
6/6
Remuneration Committee (Chair) 3/3
Nominations Committee
2/2
Board meeting
Audit Committee (Chair)
Remuneration Committee
Nominations Committee
14/14
6/6
3/3
2/2
INDEPENDENT
Not applicable
Not applicable
Not applicable
Yes
Yes
50 Assura plc Annual Report 2015
www.assuraplc.com
Simon Laffin
Non-Executive Chairman
Graham Roberts
Chief Executive
Jonathan Murphy
Finance Director
Jenefer Greenwood
Non-Executive Director
David Richardson
Senior Independent
Director
EXPERIENCE
APPOINTED
BOARD MEETINGS
AND ATTENDANCE
Simon Laffin is the Non-Executive
Chairman of Assura. Simon is also
Non-Executive Chairman of Flybe
Group plc and a Non-Executive
Director of Quintain Estates &
Development PLC. Previously he
served as chairman of Hozelock
Graham Roberts is Chief Executive
of Assura. Graham was Finance
Director at The British Land
Company PLC from 2002 to 2011,
and before that was Senior Partner
for real estate at Arthur Andersen,
where he also led the public sector
Group and a Non-Executive Director
assurance practice, which included
of Mitchells & Butlers plc, Aegis
clients such as NHS Estates and a
Group plc and Northern Rock plc
number of NHS trusts.
(as part of the rescue team).
Between 1995 and 2004 he was
Group Chief Financial Officer of UK
grocery retailer Safeway plc (which
he joined in 1990) and was latterly
also responsible for property. Prior
to that, he held a variety of finance
and management roles in Mars
Confectionery, Rank Xerox and BP.
He is a qualified accountant.
His early career was at Binder
Hamlyn. He is currently a Non-
Executive Director at Balfour
Beatty plc and is Chairman of
their audit committee.
Jonathan Murphy is the Finance
Director of Assura. Jonathan was
previously Finance Director of the
fund management business of
Brooks Macdonald Group plc,
having joined as a result of the
acquisition of Braemar Group plc
in 2010, where he was Finance
Director for four years. Jonathan was
previously Managing Director for the
property management business of
Brooks Macdonald.
His earlier career included
commercial and strategic roles at
Spirit Group and Vodafone. Jonathan
qualified as a Chartered Accountant
with PricewaterhouseCoopers,
holding management roles in both
the UK and Asia. Jonathan holds
an MBA from IESE, the leading
European Business School
in Barcelona.
Jenefer Greenwood is a Chartered
Surveyor who started her career at
Hillier Parker in 1978, becoming
Executive Director and Head of
Retail on merger with CBRE. Jenefer
worked for Grosvenor Estate from
2003 until 2012.
Jenefer sits on the Investment
Advisory Board of INTERNOS Global
investors and was appointed to the
Board of DCH Group in August 2014.
She has previously served on the
Board of The Crown Estate and
chaired its Remuneration Committee.
She has held positions as Chair of
the National Skills Academy for Retail
and President of the British Council
of Shopping Centres.
David Richardson is a Non-Executive
Director of Assura. David is currently
Chairman of BBGI SICAV SA and a
Board member of The Edrington
Group. Previously he spent 22 years
at Whitbread Plc where he was the
Strategic Planning Director for eight
years and the Finance Director for
four years.
At Whitbread he played a pivotal
role in transforming the Group from
a brewing and pubs company into
a market leader in hotels, restaurants
and leisure clubs. Following this he
has held a number of Non-Executive
roles in FTSE listed companies
including Serco Group plc, Forth
Ports plc (now called Forth Ports Ltd),
Tomkins plc (now called Gates
Worldwide Limited), Dairy Crest plc
and De Vere Group plc. He is a
Chartered Accountant.
August 2011
March 2012
January 2013
May 2012
January 2012
Board meeting
Audit Committee
Remuneration Committee
Nominations Committee (Chair) 2/2
14/14
6/6
3/3
Board meeting
Nominations Committee
14/14
2/2
Board meeting
14/14
14/14
Board meeting
Audit Committee
6/6
Remuneration Committee (Chair) 3/3
2/2
Nominations Committee
Board meeting
Audit Committee (Chair)
Remuneration Committee
Nominations Committee
14/14
6/6
3/3
2/2
INDEPENDENT
Not applicable
Not applicable
Not applicable
Yes
Yes
Assura plc Annual Report 2015 51
www.assuraplc.comFinancial statements Governance Strategic report
CORPORATE GOVERNANCE
Statement of compliance with the
UK Corporate Governance Code
In accordance with the Listing Rules of the UK
Listing Authority, the Company confirms that
throughout the year ended 31 March 2015
and as at the date of this Annual Report it was
compliant with all the relevant provisions as
set out in the UK Corporate Governance
Code published in September 2012 (“the
Code”). The Board has taken account of
the flexibility in the Code in its application
to smaller companies.
Role of the Board
The Company has an effective Board which
is collectively responsible for the long-term
success of the Company by directing and
supervising the activity of the Company.
The Board has approved a schedule of
matters reserved for decision by the Board.
This includes all corporate acquisitions or
corporate disposals, debt raising above
£50 million, the remuneration policy, the
annual budget approval and amendments
to delegated authorities. The Board meets
at least six times per year for scheduled
meetings. It also meets as required to
consider any important or urgent business.
The Directors acknowledge their responsibility
for preparing the Annual Report and Accounts.
The Directors consider the Annual Report and
Accounts, taken as a whole, is fair, balanced
and understandable and provides shareholders
with the necessary information to assess the
Company’s performance, business model
and strategy.
Shareholder relations
The Board welcomes open communication with
its shareholders and works with its stockbrokers
Liberum Capital and Stifel to ensure that an
appropriate level of communication is
maintained. The dialogue with shareholders
is facilitated by a series of investor relations
mechanisms, including regular meetings
between senior members of the Company’s
executive management with institutional
investors and sales teams and industry/sector
analysts. Feedback from these meetings is
regularly relayed to the Board in order to ensure
that all Board members, and Non-Executive
Directors in particular, develop an understanding
of the views of major shareholders. This process
augments the regular dissemination of annual
reports and other market updates. Copies of
these announcements and any accompanying
presentational materials are available on the
Company’s website at www.assuraplc.com.
The Board responds to adhoc requests
for information from shareholders and all
shareholders have access to the Board
and senior management, with an opportunity
to raise questions, at the AGM and other
shareholder meetings.
July 2014 AGM – key highlights
■ All resolutions passed.
■ Full Director attendance.
■ 266.7 million to 420.2 million votes cast
for each resolution.
■ All Directors retired and were re-elected
to the Board.
■ Remuneration report and policy resolution
passed with 98.7% and 97.8% respectively
of votes cast in favour.
52 Assura plc Annual Report 2015
www.assuraplc.com BOARD STRUCTURE
Board
Audit
Committee
Nominations
Committee
Remuneration
Committee
Read more on p54
Read more on p56
Read more on p57
To assist in its Corporate Governance
responsibilities, the Board has established
standing Committees. All Non-Executive
members serve on all Committees. This is
appropriate given the relatively small size of
the Board. Each committee follows Terms
of Reference which are reviewed annually.
Other Director information
On appointment, new Directors receive a full
briefing on the role, duties and responsibilities
of a Director of a listed company, and on the
Company and its Board. An induction pack
with important information is provided.
Training needs are reviewed annually
as part of the Board evaluation.
Each Board member is permitted to
take professional advice on any matter
which relates to their position, role and
responsibilities as a Director at the cost
of the Company.
Assura plc Annual Report 2015 53
www.assuraplc.comFinancial statements Governance Strategic report CORPORATE GOVERNANCE CONTINUED
Audit Committee Report
■ To conduct an annual review of the need to establish
an internal audit function.
■ To discuss the issues arising from the interim and final audits.
■ To monitor and review annually the auditor’s
independence, objectivity and effectiveness.
■ To develop and implement the policy for provision
of non-audit services by the external auditor.
■ To make recommendations to the Board in relation
to the selection process for the appointment of the external
auditor, their fees and terms of engagement.
Key activities of the Committee
Financial statements and reports
■ Reviewed the Annual Report and Financial Statements
and half year financial report and made recommendations
to the Board regarding the approval of these documents.
Prospectus and working capital reports
■ Reviewed the two prospectuses published during the year
with particular emphasis on reviewing the work undertaken
by Deloitte LLP to review the assessment of the Board that
the Group’s working capital was sufficient to support the
business at the date of each prospectus.
Review of external audit
■ Reviewed, considered and agreed the scope of the audit
work to be undertaken by the external auditor.
■ Reviewed the effectiveness, performance and fees of the
external auditor.
Review of external valuers
■ Received presentations from both valuers and raised
queries on these.
■ Reviewed the effectiveness, performance and fees of the
external valuers.
Review of internal controls
■ Reviewed the effectiveness of the Company’s internal
controls and processes and the disclosures made in the
Annual Report.
■ Reviewed the appropriateness of the accounting policies
and the design and operation of the internal controls.
Others
■ Monitored compliance with the REIT rules.
■ Reviewed the effectiveness of the Committee.
■ Reviewed the requirement for an internal audit function.
■ Reviewed the approved treasury counterparties.
Audit Committee members
■ David Richardson (Chairman)
■ Simon Laffin
■ Jenefer Greenwood
Number of meetings in the year: six
Other attendees
Deloitte LLP
Savills and Jones Lang LaSalle
Graham Roberts – Chief Executive
Jonathan Murphy – Finance Director
Paul Carroll – Financial Controller
David Purcell – Group Finance Manager
Andrew Darke – Managing Director – Property
Responsibilities
Financial statements and reports
■ To monitor the integrity of the half year and annual
Financial Statements before submission to the Board,
reviewing significant financial reporting matters and
judgements focusing particularly on matters of material
financial impact.
■ To review the effectiveness of the Company’s system
of internal control.
54 Assura plc Annual Report 2015
www.assuraplc.com DEAR SHAREHOLDER
As Chairman of the Audit Committee, I have
pleasure in setting out below the formal
report on its activities for the year ended
31 March 2015.
■ Accounting for the property acquisitions
completed during the year.
■ Accounting for new equity issuance and the
insertion of a new UK plc as the ultimate
holding company for the Group.
It has been a busy year for the Group in
property acquisitions and each one has been
assessed to review whether the transaction
was a business combination or a property
acquisition. In all cases the transactions
involved acquiring income producing property
assets without associated employees or
ancillary income streams and each one has
been categorised as a property acquisition.
Property acquisitions during the year amounted
to £230 million. The way in which these were
accounted for and the impact their inclusion
had on the overall valuations of the Group’s
property portfolio is key to an understanding
of the financial statements for the year. We
discussed the accounting treatments with
Deloitte LLP, both before and after their audit
work, and the valuations with Messrs Jones
Lang LaSalle and Savills LLP at the conclusion
of their work. We satisfied ourselves that all
aspects were properly treated.
You will also note from the report that the
Company engaged Deloitte LLP during
the year to undertake the role of reporting
accountant in association with the two
prospectuses published during the year
in accordance with UK Listing Authority
requirements. In addition the insertion of a
new UK plc required clearance from HMRC
in relation to the REIT regime as this was the
first time a REIT had undertaken this type of
transaction. Deloitte LLP assisted the
Company in gaining this clearance.
The Board as a whole has determined that
the Financial Statements are “fair, balanced
and understandable”.
Significant financial
reporting matters
■ Valuation of investment properties
including those under construction.
■ Validity of the going concern basis and
the availability of finance going forward.
These issues were discussed with
management, the external auditor and external
consultants, such as valuers, where applicable.
We are satisfied that there were no matters
that we wish to draw to the attention of
the shareholders.
Internal audit
The Audit Committee is satisfied that the
current level of control and risk management
within the business adequately meets the
Group’s current needs and that therefore
there is no case for having an internal
audit department.
Audit/non-audit fees payable
to external auditor
Analysis of the fees paid to the Company’s
external auditor (divided between audit and
non-audit services) is disclosed in Note 4.a)
to the audited accounts.
During the year Deloitte LLP undertook a
piece of tax consultancy work in respect of
compliance with the REIT rules associated
with the insertion of the new UK plc and
obtaining clearance from HMRC. The fees
for this were £0.1 million. The external auditor
was engaged on an exceptional basis to
provide these services since they are widely
recognised as the market leader in this area.
Additionally, Deloitte LLP was engaged to
undertake the reporting accountant role in
the publication of the two prospectuses
during the year. All engagements were
commissioned on an arm’s length basis.
The Audit Committee carefully considered the
level of total non-audit fees in the current year
and satisfied itself that they were appropriate.
The Committee was therefore able to satisfy
itself that Deloitte LLP’s independence was
not prejudiced.
DAVID RICHARDSON
CHAIRMAN OF THE AUDIT COMMITTEE
Assura plc Annual Report 2015 55
www.assuraplc.comFinancial statements Governance Strategic report CORPORATE GOVERNANCE CONTINUED
Nominations Committee Report
Key activities of the Committee
Board and Committee changes
There have been no appointments to the Board or Board
Committees during the year.
Board performance evaluation
The Board has reviewed its performance, its Committees
and individual Directors based on an internal evaluation and
concluded that its access to relevant information is good,
discussions are carried out in an appropriate manner, the
strategy and goals of the Company have been clarified and
the Board is appraised promptly and fully of investor views.
The Nominations Committee also met in the absence of the
Chairman to appraise his performance. There were no major
changes adopted in the way the Board operates. The Board
also concluded that no further appointments were necessary
at this time.
Commitments of the Chairman
Simon Laffin is also Chairman of Flybe Group plc and
Non-Executive Director at Quintain Estates & Development
PLC. Mr Laffin manages his time effectively in order to
allocate sufficient time to each of his roles.
Policies
The Board believes that a diverse workforce and
management team improve the culture of the organisation
and add value to the business as a whole.
The Board targeted having at least 20% female
representation which was achieved in 2012.
The Committee will continue to consider gender diversity
when recommending any future Board appointments.
Final appointments will always be made on merit.
SIMON LAFFIN
CHAIRMAN OF THE NOMINATIONS COMMITTEE
Nominations Committee members
■ Simon Laffin (Chairman)
■ David Richardson
■ Jenefer Greenwood
■ Graham Roberts
Number of meetings in the year: two
Responsibilities
The Terms of Reference, which are reviewed annually, (and
are available to view on the Company website) require the
Committee to meet at least once per year.
Key issues
■ Re-election of all Directors at the July 2014 AGM.
■ Review of succession planning.
■ Review of Board composition, Committee composition
and Committee Chairmanship.
■ Consideration of training needs and skills updating.
■ Board performance evaluation.
56 Assura plc Annual Report 2015
www.assuraplc.com REMUNERATION REPORT
Remuneration Committee members
■ Jenefer Greenwood (Chairman)
■ Simon Laffin
■ David Richardson
Number of meetings in the year: three
Attendees
Graham Roberts – Chief Executive
Marcus Peaker – PwC
Responsibilities
The Terms of Reference, which are reviewed annually, (and
are available to view on the Company website) require the
Committee to meet at least once per year.
The Committee’s activities during the year included:
■ Considering objectives and targets for annual bonuses.
■ Considering annual pay awards and bonuses.
■ Approving increase in staff pension contributions
(company and personal).
■ Reviewing and agreeing changes to allocation
basis for the staff bonus pool.
■ Confirming second vesting of Executive Recruitment
Plan (“ERP”).
■ Reviewing the Directors’ Remuneration Policy.
■ Reviewing new disclosure requirements.
■ Reviewing and allocating staff awards under the VCP.
■ Amending the Threshold Price for future vesting of the
VCP, arising from equity issued in the year.
Assura plc Annual Report 2015 57
www.assuraplc.comFinancial statements Governance Strategic report REMUNERATION REPORT CONTINUED
PART 1: ANNUAL STATEMENT
– UNAUDITED
The Annual Report on Remuneration together
with this letter will be subject to an advisory
shareholder vote at the AGM in July 2015.
DEAR SHAREHOLDER
On behalf of the Board, I am pleased to
introduce the Directors’ Remuneration
Report for the year ended 31 March 2015.
This report has been prepared by the
Remuneration Committee (“the Committee”)
and approved by the Board. The report is
split into two parts:
■ Remuneration policy and practice
at a glance sets out a summary of the
Directors’ Remuneration Policy and the
key remuneration decisions made by the
Committee for the 2014/15 and 2015/16
financial years.
■ The Annual Report on Remuneration
sets out payments and awards made to
the Directors and details the link between
Company performance and remuneration
for the 2014/15 financial year.
The Directors’ Remuneration Policy, subject to
a binding vote, was approved by shareholders
at the AGM on 22 July 2014 and will last for a
period of three years from that date or until
another Policy is approved in a general
meeting. In line with the Regulations1, the full
Directors’ Remuneration Policy has not been
presented in this report given that the Policy
was approved at last year’s AGM and it is not
intended to move a similar resolution again at
the 2015 AGM. The Directors’ Remuneration
Policy is available to view in full on the
Company’s website at www.assuraplc.com.
Details of voting at last year’s AGM, where
97.82% and 98.68% of those voting
supported the resolutions to approve the
Directors’ Remuneration Policy and the
Annual Report on Remuneration respectively,
are set out on page 52 of this report.
Context to the Committee’s
decisions
The investment market remained stable in the
year but saw steadily increasing competition
for investment properties. As expected the
NHS approved no new medical centre
developments in England during the year for
the structural reasons highlighted previously.
As a result the Board identified that its ambition
to achieve economies of scale would best
be achieved through a portfolio acquisition.
In the end, two acquisitions formed the major
element of expansion as £245 million of
medical centres in total were added through
acquisition and development spend.
The Board was also alert to the opportunity
provided by such transactions to seek
shareholder support for a recapitalisation of
the business. This would provide funds for the
acquisitions and subsequent investment and
also reduce net debt and take the Group’s
loan to value ratio down to the optimal range
between 45% and 55%.
1 The Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013
58 Assura plc Annual Report 2015
www.assuraplc.com The Firm Placing and Placing and Open
Offer in October were oversubscribed and
the Group raised £175 million net. It was
envisaged that the combination of increased
scale, increased earnings, increased dividends
per share and reduction in financial risk profile
would significantly enhance shareholder value.
As a result the Board set stretching targets at
the beginning of the year for the Executive to
achieve the above strategy and the annual
bonuses awarded reflect the successful
achievement of those stretch targets.
Key reward decisions
Key decisions made by the Committee during
and in relation to the financial year include:
Following a detailed review of the impact of the
new capital raised during the first three years of
the operation of the VCP, the Committee has
determined that an adjustment should be
made to the VCP Threshold Price which affects
future vesting under the plan. The net effect of
the adjustment is to ensure that the potential
VCP benefit created at each Measurement
Date is aligned with the value created for
shareholders during the measurement period.
In conclusion
I trust you find this report helpful and
informative. I look forward to receiving your
support for the resolution on the Annual Report
on Remuneration at our forthcoming AGM.
JENEFER GREENWOOD
CHAIRMAN OF THE
REMUNERATION COMMITTEE
■ The Executive Directors earned a
bonus equal to 90% and 93% of the
maximum for 2014/15 (90% of salary for
the Chief Executive and 46.5% for the
Finance Director).
■ The salary of the Chief Executive, Graham
Roberts, has been increased by 2% for
2015/16. This compares with the average
increase for staff of 3%.
■ The salary of the Finance Director, Jonathan
Murphy, has been increased by 19% for
2015/16 and is now considered to be in line
with Policy. Jonathan’s salary was set below
policy on appointment and has been
progressively increased to align with policy
over his first few years in the role dependent
on performance.
■ Malus and clawback rules have been put
in place for both the existing annual bonus
and the existing Value Creation Plan (“VCP”)
in line with the revised UK Corporate
Governance Code and best practice
in this area.
Assura plc Annual Report 2015 59
www.assuraplc.comFinancial statements Governance Strategic report REMUNERATION REPORT CONTINUED
PART 2: REMUNERATION POLICY AND PRACTICE AT A GLANCE
The Executive Directors’ Remuneration Policy supports the strategic priorities, which are set out on page 13. The Policy and its
use of performance metrics appropriately support shareholder value creation by incentivising sustainable performance consistent
with the strategic drivers and appropriate risk management.
In line with the Regulations, the full Directors’ Remuneration Policy has not been presented here given that the Policy
was approved at last year’s AGM and it is not intended to move a similar resolution again at the 2015 AGM. The
Directors’ Remuneration Policy has been summarised below and is available to view in full on the Company’s website
at www.assuraplc.com.
Strategy linkage
Our goal is to maximise returns for shareholders over the long term. Our success is measured by three KPIs:
Total Property Return
Total Accounting Return
Total Shareholder Return
measuring income and capital
appreciation generated from
the portfolio
measuring total reported returns for the
Company after all overheads and
including the effect of leverage
which is the dividend and capital
appreciation experienced by
shareholders
Over the long term, delivering consistent strong performance in Total Property Return (“TPR”) and Total Accounting Return (“TAR”)
should culminate in a consistent and strong Total Shareholder Return (“TSR”). This is the dominant KPI and is the basis for
aligning Executives’ and shareholders’ interests through the VCP.
The remuneration structure is designed to attract and incentivise a top quality management team. We are both a small company
and a long-term investor, so the remuneration structure is geared to reward performance over a five-year horizon. This is reflected
in the approach adopted to each element of remuneration relative to the market: fixed remuneration is set at lower quartile to
median; the annual bonus at median; the VCP at upper quartile.
Targets for the annual bonus relate to actions primarily required to deliver the strategy and the desired long-term outcome but
which need to be completed in the next 12 months.
The VCP five-year plan commenced 1 April 2012, and rewards the Executive Directors (and participating members of staff) with
nil-cost options over shares, where the reward is up to 10% of any excess TSR created over an 8% threshold (below which there
is no reward). By linking the main element of reward to TSR rather than absolute or relative accounting returns, Executives’
interests are directly aligned with those of long-term shareholders.
The table below shows progress on the three KPIs over the year and over the last three years of the VCP measurement period:
Measure
Total Property Return
Total Accounting Return
Total Shareholder Return
60 Assura plc Annual Report 2015
Return
over
2014/15
7.8%
7.7%
49.9%
Return
since
1 April
2012
18.0%
36.0%
117.6%
www.assuraplc.com Summary of Executive Directors’ Remuneration Policy:
Element
Base salary
Policy summary description
Maximum opportunity
When making a determination as to the
appropriate salary level, the Committee
will consider a number of factors, including
individual performance and experience,
pay and conditions for employees across
the Group, the general performance of the
Company and the economic environment.
Objective research on companies within the
Company’s peers will be undertaken only
where considered relevant.
In the normal course of events, increases
in the Executive Directors’ salaries will not
exceed the average increase for employees.
Individuals who are recruited or promoted to
the Board may, on occasion, have their salaries
set below the targeted policy level until they
become established in their role. In such cases
subsequent increases in salary may be higher
than the average until the target positioning
is achieved.
The maximum payment in lieu of pension is 20%
of salary for the Chief Executive and 15% for other
Executive Directors.
Benefit values vary year on year depending on
premiums and the maximum value is the cost
of the provision of these benefits.
The maximum annual bonus is 100% of salary.
Currently, the maximum for the Chief Executive is
100% of salary and 50% for the Finance Director.
The maximum aggregate number of shares that
can be issued to satisfy awards under the VCP
to all participants is limited to 25 million.
Pension and benefits A market competitive benefits package is
provided, along with payments in lieu of pension.
Annual bonus
An annual bonus is payable each year, in cash,
based on achievement against a range of financial
and strategic targets.
Long term incentives Under the VCP, Executive Directors (and other
participants) will be able to earn shares (through
nil-cost options) equivalent to 10% of any Total
Shareholder Return (share price appreciation and
dividends) created above a pre-determined hurdle
(Threshold Price) at the three Measurement Dates
(in 2015, 2016 and 2017).
50% of the total accrued nil-cost options become
exercisable at the first Measurement Date, 50% at
the second and 100% at the third.
Any unvested accrued awards will lapse at the
third Measurement Date if the 8% p.a. return to
shareholders has not been sustained.
Shareholding
requirement
100% of salary.
n/a
Assura plc Annual Report 2015 61
www.assuraplc.comFinancial statements Governance Strategic report REMUNERATION REPORT CONTINUED
Total equity exposure of Executives at 31 March 2015
The Chief Executive and Finance Director together owned 3,788,281 million shares as at 31 March 2015 (March 2014: 2,087,935
million), representing 0.4% of the Company’s share capital. A table summarising their interests is included in the Annual Report on
Remuneration (Part 3 below). The chart below compares their respective interests at 31 March 2015 with the target shareholding
requirement set out in the Policy:
Graham Roberts (% of salary)
Jonathan Murphy (% of salary)
700
600
500
400
300
200
100
0
612
100
Shareholding
requirement
Value of beneficially
owned shares
700
600
500
400
300
200
100
0
100
53
185
Shareholding
requirement
Unvested ERP
shares
Value of beneficially
owned shares
Key reward decision for 2014/15
The key award decision related to the annual bonus. In determining the award for 2014/15, the Committee took into account the
Company’s financial performance and achievement against key short-term objectives established at the beginning of the year.
This involved establishing in advance what would constitute success for good, strong or outstanding performance. Bonus awards
for 2014/15 reflect the excellent progress in delivering the strategy during the year.
The Committee determined that a bonus payment equal to 90% and 46.5% of salary (equal to 90% & 93% of the maximum
for both Executive Directors) would be paid to Graham Roberts and Jonathan Murphy respectively following an assessment
of performance against 2014/15 objectives. A table showing the full details on the 2014/15 bonus assessment is set out in the
Annual Report on Remuneration (Part 3 below).
The Committee established at the outset of the year two critical success factors in particular: achieving a step change in scale
and reducing leverage. These were the dominant measures applied in assessing the bonus award. The bar charts below show
the performance achieved for these two measures against what the Committee assessed were good, strong or outstanding levels
of achievement:
Additions to portfolio (£m)
Reduction in leverage (%)
300
250
200
150
100
50
0
245
175
125
75
Good
Strong
Outstanding
Achieved
60
55
50
45
40
57
55
50
48
Good
Strong
Outstanding
Achieved
62 Assura plc Annual Report 2015
www.assuraplc.com
2014/15 single total figure of remuneration – Executive Directors
The single figure total remuneration of the Chief Executive calculated in accordance with the Regulations amounted to £677,000
(2013/14 : £680,000). The single figure total remuneration of the Finance Director was £383,000 (2013/14: £317,000). The analysis
of the constituent parts of this remuneration is provided in Part 3 below.
The following charts show the actual single figure of remuneration for the Executive Directors against the Remuneration
Policy scenarios applying for 2014/15 (as disclosed in the Directors’ Remuneration Policy in the 2013/14 Directors’
Remuneration Report):
Graham Roberts (£’000)
Jonathan Murphy (£’000)
1,000
800
600
400
200
0
742
15%
32%
392
933
24%
34%
677
42%
100%
53%
42%
58%
Minimum
On-target
Maximum
Actual single
figure (2014/15)
■ Fixed elements ■ Annual variable ■ Multiple reporting periods ■ ERP
1,000
800
600
400
200
0
216
100%
15%
333
20%
65%
405
24%
23%
53%
383
22%
22%
56%
Minimum
On-target
Maximum
Actual single
figure (2014/15)
Notes
1. The VCP is a five year plan with rewards only capable of vesting at the three Measurement Dates (in 2015, 2016 and 2017). As last year, the single figure
total remuneration for 2014/15 does not therefore have an element of long term incentive, whereas the policy includes the notional value of the VCP as
calculated in accordance with the regulations. In 2015/16 any vesting will include 50% of rewards relating to the achieved value creation over a three year
time horizon. The balance will be deferred and subject to future performance conditions. An indication of the potential reward in 2015/16 is included in the
statement of implementation of Remuneration Policy for 2015/16 below.
2. One third of Jonathan Murphy’s Executive Recruitment Plan (“ERP”) award vested in 2015 and therefore, consistent with 2013/14, has been included
in the single figure table and in the “Actual” column above. However, since the ERP was approved under the previous policy and not under the current
policy it is not included in the Remuneration Policy scenarios for 2014/15 above.
Assura plc Annual Report 2015 63
www.assuraplc.comFinancial statements Governance Strategic report REMUNERATION REPORT CONTINUED
Statement of implementation of Remuneration Policy for 2015/16
Executive Directors
Salary
In setting salary levels for 2015/16 for the Executive Directors, the Committee considered a number of factors, including individual
performance and experience, pay and conditions for employees across the Group, the general performance of the Company, pay
levels in other comparable companies and the economic environment.
The salaries for 2015/16 and the relative increases are set out below:
Executive Director
Graham Roberts
Jonathan Murphy
2014/15
salary
(£’000)
315
180
2015/16
salary
(£’000)
321
215
Sector comparison1 (£’000)
%
change
2%
19%
Lower
quartile
306
196
Median
385
249
Upper
quartile
400
275
Notes
1. The salary benchmarking data was provided to the Committee in March 2014 and was based on companies in the Real Estate Investment Trusts and
Real Estate Investment & Service sectors with a market capitalisation between £50 million and £775 million. Benchmarking data is only used as one point
of reference by the Committee in making its decisions to ensure any changes are within the approved Remuneration Policy.
The salary of the Chief Executive, Graham Roberts, has been increased by 2% for 2015/16. This compares with the average
increase for staff of 3%.
The salary of the Finance Director, Jonathan Murphy, has been increased by 19% for 2015/16 and is now considered in line with
Policy. Jonathan’s salary was set below policy on appointment and has been progressively increased to align with policy over his
first few years in the role dependent on performance.
Pension and benefits
Graham Roberts and Jonathan Murphy will receive payments in lieu of pension contributions equivalent to 20% and 13.5% of
salary respectively. Benefits will be provided in line with the Remuneration Policy.
Annual bonus
The maximum bonus opportunity for 2015/16 is 100% of salary for Graham Roberts and 50% of salary for Jonathan Murphy.
The performance objectives under the annual bonus plan for 2015/16 relate to value-added opportunities, within the portfolio and
from market activity, financial targets and customer satisfaction. The Committee is of the opinion that the precise performance
targets for the bonus plan are commercially sensitive and that it would be detrimental to the interests of the Company to disclose
them before the start of the financial year. Actual targets, performance achieved and awards made will be published at the end
of the performance period so shareholders can fully assess the basis for any pay-outs. The Committee will also follow the
same practice of the last three years and view the weightings for bonus purposes at the end of the year, having regard to
all known factors.
Long-term incentives
Awards of 400,000 and 175,000 performance units were made to Graham Roberts and Jonathan Murphy respectively under
the VCP in 2012/13. These are one-off awards to cover the period up to the end of the 2016/17 financial year.
64 Assura plc Annual Report 2015
www.assuraplc.com Decision to adjust the Threshold Price for the purposes of the VCP
Under the VCP, the Executive Directors and other participants will be able to earn shares (through nil-cost options) equivalent
to 10% of any excess TSR over a minimum 8% threshold. The total value that can be earned at each Measurement Date will be
the Measurement Price less the Threshold Price (i.e. the minimum return that must be achieved before value is created for
participants), multiplied by the number of shares in issue at that Measurement Date.
In accordance with the Rules of the VCP, the Committee has the discretion to amend certain terms of the plan in the event of a
variation of share capital. During the year, three significant capital raising events occurred – the first since the VCP was introduced.
The Committee felt that it was important that the VCP reflects the fact that these shares had been issued at a higher price than
the original Threshold Price. It therefore used its discretion to put these amounts into tranches with higher Threshold Prices.
This avoids executives getting an “unfair” benefit from capital raises. The paragraphs below summarise the alterations.
The Threshold Prices applicable to each tranche of shares at the first Measurement Date will be as follows:
Share capital at the start of the VCP
Capital issued for MP Realty portfolio acquisition
Capital issued following placing/offer to shareholders
Capital issued for Metro portfolio acquisition
Original
Threshold
Price
(pence per
share)
New
Threshold
Price
(pence per
share)
39.37
39.37
39.37
39.37
39.37
44.95
45.06
51.29
Shares
(m)
529.5
44.3
414.3
18.8
Tranche
1
2
3
4
The Threshold Price for each new capital event (i.e. tranches 2 – 4) has been calculated by using the price at which new capital
was raised (i.e. the Offer Price for tranche 3) or the price on the day of issue (tranches 2 and 4) and increasing this by the 8% p.a.
compound threshold return rate from the date of the event to the end of the 2015 financial year for the first Measurement Date.
The original Threshold Price of 39.37 pence will continue to apply to tranche 1 (“Base Price”).
Each tranche under the VCP will be tested on the first Measurement Date and will be subject to the original terms and conditions
of the VCP, except that as above each tranche will have its own Threshold Price.
At subsequent Measurement Dates (i.e. one and two years after the first Measurement Date), the methodology for determining
the Threshold Price for each tranche will be the same whereby the Threshold Price for each tranche will be the higher of:
■ The highest return achieved at any previous Measurement Date (treated as separate tranches); or
■ 8% p.a. TSR from the Base Price for tranche 1 or the capital raising price/price on the day of issue for Tranches 2, 3 and 4
(and others if further capital raising events occur).
Assura plc Annual Report 2015 65
www.assuraplc.comFinancial statements Governance Strategic report REMUNERATION REPORT CONTINUED
Each tranche has its own minimum return threshold which must be achieved before any awards earned and deferred at previous
Measurement Dates vest at the second or third Measurement Dates. This means that awards rolled over (i.e. accrued but not
vested) from previous Measurement Dates must sustain an 8% p.a. TSR from the Base Price for tranche 1 or the capital raising
price/price on the day of issue for tranches 2, 3 and 4.
It is the Committee’s view that these adjustments:
■ Are in the best interests of our shareholders on the basis that they will ensure that shareholders are protected from any
immediate value transfer as a result of the capital raising events; and
■ Will provide participants with the opportunity to share in any value created for shareholders on the new capital, in line with
the Rules of the VCP, provided the minimum level of return on all new shares (i.e. the 8% p.a. return threshold) is achieved.
The maximum aggregate number of shares that can be issued to satisfy awards under the VCP to all participants remains limited
to 25 million. No adjustments have been made to the cap on the number of shares that can be earned under the VCP as a result
of the changes to the share capital.
Indicative calculation of potential VCP vesting at first Measurement Date
The table below sets out the potential value creation under the VCP at the first Measurement Date, using for illustrative purposes
the average share price for the three months to 31 March 2015. The actual Measurement Price at the first Measurement Date will
be determined by the average share price over three months following the announcement of the Company’s financial results for
the 2014/15 financial year plus dividends paid on shares in issue. Following the first Measurement Date in 2015/16, full details
of the application of the performance conditions at the first Measurement Date and any benefit earned by participants will be
disclosed in the 2015/16 Annual Report on Remuneration.
Illustrative share price at first Measurement Date
Dividends paid per share in issue1
Measurement Price
Threshold Price
Value created
Tranche 1
(pence
per share)
Tranche 2
(pence
per share)
Tranche 3
(pence
per share)
Tranche 4
(pence
per share)
A
B
C=A+B
T
C-T
54.17
5.06
59.23
39.37
19.86
54.17
2.40
56.57
44.95
11.62
54.17
1.95
56.12
45.06
11.06
54.17
1.50
55.67
51.29
4.38
Notes
1. Dividends paid per share in issue assume a projected dividend payment to be made in July 2015 of 0.5 pence per share.
The total potential participant benefit available will be 10% of the above value created for each tranche multiplied by the number
of shares in each tranche, which amounts in total to £15.7 million. To date 85% of the total available performance units have been
awarded and so the illustrative number of shares over which nil-cost options would be granted is 85% of the above amount
divided by the share price, which is 24.6 million shares.
50% of any shares that are accrued at the first Measurement Date (in the form of nil-cost options) become exercisable at the first
Measurement Date (12.3 million shares in this illustration), 50% become exercisable at the second and 100% of accrued nil-cost
options at the third Measurement Date provided the minimum return thresholds for each tranche are achieved at each
Measurement Date.
66 Assura plc Annual Report 2015
www.assuraplc.com Non-Executive Directors
The following table sets out the fee rates for the Non-Executive Directors from 1 April 2015:
Chairman fee
Non-Executive Director base fee
Additional fee for Chairmanship of Audit and Remuneration Committees
Additional fee for Senior Independent Director
2014/15
2015/16
£’000
126.0
35.5
8.0
8.0
£’000
128.5
36.2
8.2
8.2
%
change
2
2
2
2
Consideration by the Committee of matters relating to Directors’ remuneration
The Members of the Committee during 2014/15 were Jenefer Greenwood (Committee Chairman), Simon Laffin and David
Richardson. The members of the Committee have no personal financial interest, other than as shareholders, in matters to be
decided, no potential conflicts of interest arising from cross directorships and no day to day involvement in running the business.
The Committee is responsible for recommending to the Board the remuneration policy for Executive Directors and the senior
management and for setting the remuneration packages for each Executive Director. The Committee also has oversight of the
remuneration policy and packages for other senior members of staff. The written Terms of Reference of the Committee are
available on the Company’s website and from the Company on request.
The Committee held three meetings during the year. Its activities during and for the financial year 2014/15 included:
■ Reviewing salary levels for the Executive Directors.
■ Considering objectives and targets for 2014/15 annual bonus payments and determining the bonus payments at year end.
■ Confirming second vesting of the ERP for Jonathan Murphy in January 2015.
■ Considering the impact of the capital raising events during the year on the VCP.
■ Approving the introduction of malus and clawback rules for both the annual bonus and the VCP in line with the revised
UK Corporate Governance Code and best practice in this area.
■ Amending the Threshold Price for future vesting of the VCP, arising from equity issue in the year.
Advisors to the Committee
The Committee received external advice in 2014/15 from PwC, who were appointed by the Committee and are considered
objective and independent. PwC are members of the Remuneration Consultants Group and, as such, voluntarily operate under
the code of conduct in relation to executive remuneration consulting in the UK.
The Committee reviewed the nature of the services provided and was satisfied that no conflict of interest exists or existed in the
provision of these services.
The Committee also sought the views of the Chief Executive, Graham Roberts, during the year. The Chief Executive is given
notice of all meetings and, at the request of the Chairman of the Committee, attends part of the meetings. The Chief Executive
may request that he attends and speaks at Committee meetings. In normal circumstances, the Chief Executive will be consulted
on general policy matters and matters concerning the other Executive Director and employees.
The total fees paid to PwC in respect of services to the Committee during the year were £27,500. Fees were determined based
on the scope and nature of the projects undertaken for the Committee.
Assura plc Annual Report 2015 67
www.assuraplc.comFinancial statements Governance Strategic report REMUNERATION REPORT CONTINUED
PART 3: ANNUAL REPORT ON REMUNERATION – UNAUDITED UNLESS STATED
This Annual Report on Remuneration contains details of how the Company’s Remuneration Policy for Directors was implemented
during the financial year ended 31 March 2015. This report has been prepared in accordance with the provisions of the Companies
Act 2006 and the Regulations. An advisory resolution to approve this report will be put to shareholders at the AGM.
Single total figure of remuneration – Executive Directors – audited
The remuneration of Executive Directors showing the breakdown between components with comparative figures for the prior year
is shown below. Figures provided have been calculated in accordance with the Regulations.
Executive Director (£’000)
Year
Salary
Taxable
benefits
Bonus
Pensions
Long-term
incentives
Graham Roberts
Jonathan Murphy1
2014/15
2013/14
2014/15
2013/14
315
309
180
153
15
15
11
11
284
294
84
73
63
62
24
19
–
–
84
61
Total
677
680
383
317
Notes
1. Jonathan Murphy joined the Company on 2 January 2013. His long-term incentive which vested on 29 January 2015 is the second of three due under his
ERP and comprised 153,334 shares at 54.5 pence per share.
Single total figure of remuneration – Non-Executives – audited
The remuneration of Non-Executive Directors showing the breakdown between components, with comparative figures for the
prior year, is shown below. Figures provided have been calculated in accordance with the Regulations.
Non-Executive Director (£’000)
Simon Laffin1
David Richardson
Jenefer Greenwood
Basic
fees
126
126
36
36
36
36
Additional
fees2
–
–
16
16
8
8
Total
fees
126
126
52
52
44
44
2014/15
2013/14
2014/15
2013/14
2014/15
2013/14
Notes
1. Simon Laffin’s fees and expenses were paid to Simon Laffin Business Services Limited.
2. Additional fees represent Senior Independent Director’s and Chairman of Board Committee fees.
Total pension entitlements
No Executive Director nor any member of staff is entitled to a defined benefit pension arrangement. Graham Roberts and
Jonathan Murphy received payments in lieu of pension contributions equivalent to 20% and 13.5% of salary respectively
for 2014/15.
68 Assura plc Annual Report 2015
www.assuraplc.com 2014/15 annual bonus plan outcome
In determining the award for 2014/15, the Committee took into account the Company’s financial performance and achievements
against key short-term objectives identified at the beginning of the year. This involved establishing in advance what would
constitute success for good, strong or outstanding performance. The performance targets and performance are summarised
below. It is the Committee’s approach to view the performance in the round at the end of the year, taking into account extraneous
events and changing priorities, where relevant.
The requirements to achieve a step change in scale and to reduce leverage at the same time were identified as the key critical
success factors.
For 2014/15 the maximum potential bonus awards were 100% of salary for the Chief Executive and 50% of salary for the
Finance Director.
Performance measures
Actual targets set at the beginning of the year
Actual performance outcome
Grow the scale of the portfolio
Good £75 million additions, Strong £125 million,
Outstanding £175 million
Outstanding: £245 million
Raise equity opportunistically reducing
leverage
Good 57% LTV, Strong 55%,
Outstanding below 50%
Outstanding: 48%
Deliver underlying income growth against
assets and liability management targets
Improve GP customer satisfaction
ratings; measured by ratio of satisfied
to dissatisfied
Increase diversification on share register
attracting increased private client and
wealth manager weightings
Good 100%, Strong 105%, Outstanding 110%
Good: 100%
Good 3.2x, Strong 3.5x, Outstanding 3.8x
Outstanding : 12.8x
Good 8%, Strong 10%, Outstanding 12%
Not met: 6%
In addition to the above, the Committee agreed personal objectives at the outset to the year. The Chief Executive’s related to
progressing initiatives with clinical and other health bodies to raise awareness of the importance of addressing the backlog in
primary care infrastructure development and unblocking the related development funding and approval process. The Finance
Director’s related to reviewing the Group’s capital structure and developing the finance team.
Improvements to earnings from actions unrelated to acquisitions were in line with budget. Customer satisfaction ratings on the other
hand improved significantly, well exceeding the outstanding target. The sixfold increase in the percentage of retail investors on the
share register over the year was creditable reflecting the focused programme undertaken but this lagged ambitious targets.
The Chief Executive was thought to have made strong progress in developing an industry dialogue with Government, the NHS
and clinical bodies around primary care infrastructure development. Announcements from Jeremy Hunt on the £1 billion primary
care infrastructure fund in December 2014 were welcome. The 5 Year Forward View published by Simon Stevens in October 2014
included a focus on upgrading the primary care estate. The Finance Director was considered to have developed a sound strategy
for debt management following the equity raise, keeping the board aware of all options and to have made good progress in
developing the finance team.
The Committee concluded the bonus for the Chief Executive should be 90% of maximum (90% of salary) and for the Finance
Director 93% of maximum (46.5% of salary), reflecting predominantly their contributions to exceeding the outstanding target for
increasing scale and lowering leverage.
Assura plc Annual Report 2015 69
www.assuraplc.comFinancial statements Governance Strategic report REMUNERATION REPORT CONTINUED
Vesting of long-term incentive awards – audited
There was no vesting under the VCP in 2014/15. Vesting in respect of the first Measurement Date is due to occur three months
after we announce our results for the financial year 2014/15.
Awards were made under the ERP to Jonathan Murphy in 2013 to facilitate his recruitment. The awards have no performance
criteria and vest in three equal instalments on the first, second and third anniversary of their award. One third of the awards
granted to Jonathan Murphy vested on 29 January 2014 and another third vested on 29 January 2015. The value of the element
which vested in January 2015 is shown in the table below:
Award
ERP awards
Performance measures
None
Number of nil-cost
options vested
153,334
Value of vested awards £’000
84
Notes
1. The value of nil-cost options is calculated using the closing middle market share price on 29 January 2015 of 54.5 pence per share, the date the awards
became exercisable.
Statement of Directors’ shareholding and share interests – audited
Directors’ share interests and, where applicable, achievement of shareholding requirements are set out below. In order that their
interests are aligned with those of shareholders, Executive Directors are expected to build up and maintain a personal
shareholding equal to 100% of their basic salary in the Company.
Shareholding and other interests at 31 March 2015
Shareholding
Director
Executive
Graham Roberts
Jonathan Murphy
Non-Executive
Simon Laffin
David Richardson
Jenefer Greenwood
Shares
required
to be held
(% salary)
Number
of shares
required
to hold
Number of
beneficially
owned
shares1
Number
of shares
in ERP2
Total
interests
held at
31 March
2015
Shareholding
requirement met?3
100%
100%
506,827
3,100,000
–
3,100,000
289,156
534,947
153,334
688,281
–
–
–
–
–
–
3,138,578
359,998
97,256
–
–
–
3,138,578
359,998
97,256
Yes
Yes
n/a
n/a
n/a
Notes
1. Beneficial interests include shares held directly or indirectly by connected persons.
2. ERP interests are subject to continued employment and represent the final third of those awards granted to Jonathan Murphy in 2013.
3. Shareholding requirement calculation is based on the share price at the end of the year (62.25 pence at 31 March 2015).
4. VCP interests are not included in this table because they are awards of performance units with a right to a number of nil-cost options over shares at each
Measurement Date provided the performance conditions are achieved. At the date of grant of the performance units, the number of nil-cost options that
could be earned is unknown.
The Company funds its share incentives through a combination of new issue and market purchased shares. The Company
monitors the levels of share grants and the impact of these on the ongoing requirement for shares. In accordance with guidelines
set out by the Investment Association the Company can issue a maximum of 10% of its issued share capital in a rolling 10-year
period to employees under all its share plans.
There has been no movement in Directors’ shareholdings and share interests from 31 March 2015 to the date of this report.
70 Assura plc Annual Report 2015
www.assuraplc.com Performance graph and table
The Committee believes that the current Executive Directors’ Remuneration Policy and the supporting reward structure provide
clear alignment with the Company’s performance. Following the sale of the Company’s Pharmacy business in 2011 and
conversion to a REIT in April 2013, the Committee believes it is appropriate to monitor the Company’s performance against the
FTSE All Share Real Estate Investment Trusts Index.
The graph below sets out the TSR performance of the Company compared to the FTSE All Share Real Estate Investment Trusts
Index and for comparison, the FTSE All Share Index over a six-year period as required by the Regulations and for the three-year
period elapsed of the VCP:
Six-year relative TSR performance
Three-year relative TSR performance
(VCP period to date)
350
300
250
200
150
100
50
0
March
2009
March
2010
March
2011
March
2012
March
2013
March
2014
March
2015
350
300
250
200
150
100
50
0
March
2012
March
2013
March
2014
March
2015
■ Assura ■ FTSE UK Real Estate Investment Trusts ■ FTSE All Share
The table below shows the Chief Executives’ remuneration packages over the past six years:
Year
2014/15
2013/14
2012/13
2011/12
2010/11
2009/10
2009/10
Name
Graham Roberts
Graham Roberts
Graham Roberts
Nigel Rawlings2
Nigel Rawlings
Nigel Rawlings (from 16/03/10)
Richard Burrell3 (until 15/03/10)
Single figure
of total
remuneration
(£’000)1
Bonus
pay-out
(as %
maximum
opportunity)
677
680
674
395
314
11
487
90
95
100
85
75
–
–
Long-term
incentive
vesting
rates
(as %
maximum
opportunity)
–
–
–
–
–
–
–
Notes
1. Includes base salary, taxable benefits, bonus payments for the relevant financial year, long-term incentive awards that vested for performance related to
the financial year and cash in lieu of pension.
2. Nigel Rawlings ceased to be a Director with effect from 30 April 2012. A bonus of £100,000 was a one-off award reflecting his contribution to selling the
Pharmacy business.
3. During the financial year 2009/10 Richard Burrell was Chief Executive from 1 April 2009 until 15 March 2010 when Nigel Rawlings assumed the position.
The amounts above are therefore reflective of the relative lengths of service.
Assura plc Annual Report 2015 71
www.assuraplc.comFinancial statements Governance Strategic report REMUNERATION REPORT CONTINUED
Percentage change in the Chief Executive’s remuneration
The table below compares the percentage increase in the Chief Executive’s pay (including salary and fees, taxable benefits and
annual bonus) with the wider employee population. The Company considers the full-time employee population, excluding the
Executive Board, to be an appropriate comparator group.
Chief Executive
Total employee pay
Average employee pay
Salary %
increase
Taxable
benefits
% increase
Bonus
% increase/
(decrease)
2
2
3
–
–
–
(3.4)
15.0
4.0
Relative importance of spend on pay
The table below sets out the overall spend on pay for all employees compared with the returns distributed to shareholders.
Significant distributions
Overall spend on pay for employees including Executive Directors
Distributions to shareholders by way of dividends
Notes
1. The above figures are taken from Notes 4 and 22 to the financial statements.
2013/14
£m
2.9
7.2
2014/15
£m
3.0
14.4
%
change
3.4
100
Payments to past Directors or for loss of office
During the year there were no payments to past Directors, and no payments for loss of office (2014: same).
Statement of implementation of Remuneration Policy for 2015/16 and consideration by the
Committee of matters relating to Directors’ remuneration
The details surrounding the statement of implementation of our Remuneration Policy for 2015/16 and consideration by the
Committee of matters relating to Directors’ remuneration can be found in “Remuneration Policy and practice at a glance”
on pages 60 to 67.
Statement of shareholder voting
The table below shows the binding vote approving the Directors’ Remuneration Policy and the advisory vote on the 2013/14
Directors’ Remuneration Report at the AGM held on 22 July 2014:
2014 AGM resolution
Annual Report on Remuneration
Directors’ Remuneration Policy
By order of the Board
Votes for
414,663,908
394,388,116
%
98.68
97.82
Votes
against
5,566,499
8,799,185
%
1.32
2.18
Votes
withheld
4,706
17,047,812
JENEFER GREENWOOD
CHAIRMAN OF THE REMUNERATION COMMITTEE
20 May 2015
72 Assura plc Annual Report 2015
www.assuraplc.com DIRECTORS’ REPORT
Financial and business reporting
The Directors present their Annual Report and
Accounts on the affairs of the Group, together
with the financial statements and auditor’s
report, for the year ended 31 March 2015.
The Corporate Governance Statement set
out on page 52 forms part of this report.
The Directors’ Report and the other sections
of this Annual Report contain forward-looking
statements. The extent to which the Company’s
shareholders or anyone may rely on these
forward-looking statements is set out in the
Glossary on page 113.
Principal activities
Assura plc is the UK’s leading primary care
property investor and developer. It owns and
procures good quality primary care properties
across the UK.
31 March 2015 (2014: £27.6 million), the Group
has surplus security comprising unmortgaged
property assets totalling £146.7 million at that
date (2014: £7.6 million).
The Group’s medical centre property
developments in progress are all substantially
pre-let.
The Group has adequate headroom in its
banking covenants. The Group has been in
compliance with all financial covenants on its
loans throughout the year.
The Group’s properties are substantially let
with rent paid or reimbursed by the NHS and
they benefit from a weighted average lease
length of 14.4 years. They are also diverse
both geographically and by lot size and
therefore represent excellent security.
The subsidiary and associated undertakings
principally affecting the profits or net assets
of the Group in the year are listed in Note 11
to the financial statements.
Business review
The Group is required to include a business
review in this report. The information that
fulfils the requirements of the business review
can be found on pages 36 to 43, which are
incorporated in this report by reference.
The Group’s financial forecasts show that
borrowing facilities are adequate and the
business can operate within these facilities
and meet its obligations when they fall due
for the foreseeable future. The Directors
believe that the business is well placed
to manage its current and reasonably
possible future risks successfully.
Accordingly, the financial statements have
been prepared on a going concern basis.
Going concern
Assura’s business activities together with factors
likely to affect its future performance are set out
in the business review on pages 36 to 43. In
addition, Note 26 to the financial statements
includes the Group’s objectives, policies and
processes for managing its capital, its financial
risk management objectives, details of its
financial instruments and its exposure to credit
risk and liquidity risk.
The Group has facilities froma number of
financial institutions, none of which are
repayable before May 2019 other than modest
annual amortisation and much of the debt
is not repayable before 2021. In addition to
surplus available cash of £65.3 million at
Internal controls and risk
management
The Board accepts and acknowledges that it is
both accountable and responsible for ensuring
that the Group has in place appropriate and
effective systems, procedures, policies and
processes for internal controls.
Throughout the period covered by this report
and up to the date of this report the Board
believes that there have been appropriate
internal controls and risk management
processes in place which have been reviewed
and updated as outlined in this report.
Assura plc Annual Report 2015 73
www.assuraplc.comFinancial statements Governance Strategic report DIRECTORS’ REPORT CONTINUED
Employees
Employees are encouraged to maximise
their individual contribution to the Group.
In addition to competitive remuneration
packages, they participate in an annual bonus
scheme which links personal contribution to
the goals of the business. Outperformance
against the annual targets can result in a
bonus of up to 20% for all staff below the
Senior Leadership Team. Employees are
provided regularly with information regarding
progress against the budget, financial and
economic factors affecting the business’s
performance and other matters of concern
to them. In addition, all staff are eligible to
participate in a defined contribution pension
scheme and the VCP. The views of employees
are taken into account when making
decisions that might affect their interests.
Assura encourages openness and
transparency, with staff having regular access
to the Chief Executive and being given the
opportunity to express views and opinions.
The Group is committed to the promotion
of equal opportunities, supported by its Equal
Opportunity and Valuing Diversity Policy.
The policy reflects both current legislation
and best practice. It highlights the Group’s
obligations to race, gender and disability
equality. Full and fair consideration is given to
applications for employment from disabled
persons and appropriate training and career
development are provided.
Share capital
The issued share capital of the Company
is 1,006,900,141 Ordinary Shares of
10 pence each.
Gender ratios
Board
1 4
Senior management team
2 5
Employee workforce
15 15
as at 20 May 2015
Dividends
Details of the dividend can be found in Note
22. The Group benefits from brought forward
tax losses which results in all dividends paid
during the year being paid as ordinary
dividends with an associated tax credit.
Supplier payment policy
The Group has not signed up to any specific
supplier payment code; it is Assura’s policy
to comply with the terms of payment agreed
with its suppliers. Where specific payment
terms are not agreed, the Group endeavours
to adhere to the suppliers’ standard payment
terms. As at 31 March 2015, the average
number of days taken by the Group to pay
its suppliers was 46 days (2014: 20 days).
Post balance sheet events
Subsequent to the year end, a subsidiary of
the Group has extended the existing revolving
credit facility from £30 million to £60 million
with the potential to extend further to
£90 million.
Directors’ liability insurance
The Company has arranged insurance cover
in respect of legal action against its Directors.
Company share scheme
The Assura plc Employee Benefit Trust
holds 3,911,551 (0.4%) of the issued share
capital of the Company on trust for the
benefit of employees of the Group and their
dependants. The voting rights in relation
to these shares are exercised by the
Trustees who will take into account any
recommendation made to them by the
Board of Assura plc.
Donations
In the year to 31 March 2015 Assura donated
£26,962 to charities (2014: £13,094), all of
which were UK registered charities, and no
contributions were made for political purpose
(2014: nil). More details of our chosen charities
can be found on pages 46 and 47.
74 Assura plc Annual Report 2015
www.assuraplc.com Interests in voting rights
As at 1 May 2015 the Company had been notified of the following interests representing 3% or
more of its issued Ordinary Share Capital.
Name of shareholder
31 March 2015
1 May 2015
Number
of shares
% of
Ordinary
Shares
Number
of shares
Invesco
266,111,749
26.43 266,111,749
Artemis Investment Management
164,976,078
16.38 166,227,603
Ameriprise Financial Inc.
Legal and General
BlackRock
Liontrust Asset Managers
Raymond Seymour
Investec Wealth & Investment
Alistair Campbell Blacklaws
50,090,422
38,894,880
38,360,446
37,196,877
36,401,976
35,081,499
32,615,065
4.97
3.86
3.81
3.69
3.62
3.48
3.24
50,332,473
39,553,749
40,046,970
34,983,829
36,401,976
32,225,104
28,012,565
% of
Ordinary
Shares
26.43
16.51
5.00
3.93
3.98
3.47
3.62
3.20
2.78
Price risk, credit risk, liquidity risk
and cash flow risk
Full details of how these risks are mitigated
can be found in Note 26.
Future developments
Details of future developments are discussed
on page 37 in the business review.
This confirmation is given and should be
interpreted in accordance with the provisions
of section 418 of the Companies Act 2006.
The Directors, on recommendation from the
Audit Committee, intend to place a resolution
before the AGM to re-appoint Deloitte LLP as
auditor for the year ending 31 March 2016.
Greenhouse gas emissions
The greenhouse gas emissions from
operating activities and property occupied by
the Company represented 71.7mt CO2e (2014:
71.5mt CO2e). These reported levels exclude
investment properties where we are not
the occupier.
Auditor
Each of the persons who is a Director at the
date of approval of this Annual Report
confirms that:
■ so far as the Director is aware, there is no
relevant audit information of which the
Company’s auditor is unaware; and
■ the Director has taken all the steps that he/she
ought to have taken as a Director in order to
make himself/herself aware of any relevant
audit information and to establish that the
Company’s auditor is aware of that information.
Amendments to the Articles
of Incorporation
The Articles of Incorporation of the Company
may be amended by special resolution of
the Company.
Annual General Meeting
The AGM of the Company will be held at the
offices of Addleshaw Goddard, 60 Chiswell
Street, London EC1Y 4AG on 21 July 2015
at 11am.
By order of the Board
JONATHAN MURPHY
COMPANY SECRETARY
20 May 2015
Assura plc Annual Report 2015 75
www.assuraplc.comFinancial statements Governance Strategic report DIRECTORS’ RESPONSIBILITY
STATEMENT
the Companies Act 2006. They are also
responsible for safeguarding the assets of the
Company and hence for taking reasonable
steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
■ the financial statements, prepared in
accordance with IFRSs as adopted by the
EU, give a true and fair view of the assets,
liabilities, financial position and profit of the
Company and the undertakings included in
the consolidation taken as a whole;
■ the strategic report includes a fair review of
the development and performance of the
business and the position of the Company
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face; and
■ the Annual Report and financial statements,
taken as a whole, are fair, balanced and
understandable and provide the information
necessary for shareholders to assess the
Company’s performance, business model
and strategy.
By order of the Board
JONATHAN MURPHY
COMPANY SECRETARY
20 May 2015
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulations.
Company law requires the Directors
to prepare financial statements for each
financial year. Under that law the Directors
are required to prepare the Group financial
statements in accordance with International
Financial Reporting Standards (“IFRSs”) as
adopted by the European Union (“EU”) and
Article 4 of the IAS Regulation and have also
chosen to prepare the Parent Company
financial statements under IFRSs as adopted
by the European Union. Under company law
the Directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
of the Company and of the profit or loss of
the Company for that period.
In preparing these financial statements,
IAS 1 requires that directors:
■ properly select and apply accounting
policies;
■ present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information;
■ provide additional disclosures when
compliance with the specific requirements
in IFRSs are insufficient to enable users
to understand the impact of particular
transactions, other events and conditions
on the entity’s financial position and
financial performance; and
■ make an assessment of the Company’s
ability to continue as a going concern.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and enable them to ensure
that the financial statements comply with
76 Assura plc Annual Report 2015
www.assuraplc.com INDEPENDENT AUDITOR’S REPORT
Opinion on financial
statements of Assura plc
In our opinion the financial statements:
■ give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 31 March 2015 and of the Group’s and the Parent Company’s profit for the year
then ended;
■ have been properly prepared in accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union; and
■ have been prepared in accordance with the requirements of the Companies Act 2006 and,
as regards the Group financial statements, Article 4 of the IAS Regulation.
The financial statements comprise the Consolidated and Parent Company Income Statements,
the Consolidated and Parent Company Statements of Comprehensive Income, the Consolidated
and Parent Company Balance Sheets, the Consolidated and Parent Company Cash Flow
Statements, the Consolidated and Parent Company Statements of Changes in Equity and the
related Notes 1 to 30 and A to G. The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European Union.
Going concern
As required by the Listing Rules we have reviewed the Directors’ statement contained within
the Directors’ Report on page 73 that the Group is a going concern. We confirm that:
■ we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate; and
■ we have not identified any material uncertainties that may cast significant doubt on the
Group’s ability to continue as a going concern.
However, because not all future events or conditions can be predicted, this statement is not
a guarantee as to the Group’s ability to continue as a going concern.
Our assessment of risks
of material misstatement
The assessed risks of material misstatement described below are those that had the greatest
effect on our audit strategy, the allocation of resources in the audit and directing the efforts of
the engagement team:
Risk
How the scope of our audit responded to the risk
Valuation of property
portfolio
The Group owns and
manages a portfolio of
primary care properties
(including a number of
development properties). The
valuation of the portfolio is
underpinned by a number of
judgements and assumptions.
The Group fair values the
Group’s portfolio at six-
monthly intervals. The portfolio
was valued by the investment
method of valuation with
development properties
valued by the same method
with a deduction of all
costs necessary to complete
the development together
with a developer’s margin.
We assessed management’s process for reviewing and challenging the work of the
external valuer.
We held calls with the third party valuers, Savills and Jones Lang LaSalle, appointed by
management for the valuation of the property portfolio and we assessed the reasonableness
of the significant judgements and assumptions applied in their valuations including outstanding
rent reviews and yields. Further, our in-house property specialists were present on these
calls in order to provide sector specific knowledge as part of our discussion and challenge
of the valuation.
We assessed the competence, independence and integrity of the external valuer, by
consideration of the professional qualifications and market standing as valuers of primary
care properties.
We benchmarked and challenged the key assumptions to external industry data and comparable
portfolios, in particular the yield.
We verified the integrity of a sample of information provided to valuers by management
relating to rental income, occupancy and life of the lease.
Assura plc Annual Report 2015 77
Financial statements Governance Strategic reportwww.assuraplc.com INDEPENDENT AUDITOR’S REPORT CONTINUED
Risk
How the scope of our audit responded to the risk
Accounting for
acquisitions
The Group has undertaken
a number of significant
transactions during the
current year of companies
which own a portfolio of
properties.
We challenged the assumption that the acquistions constitute asset purchases rather than
business combinations.
We challenged the fair value of consideration paid by reference to acquisition agreements and
other external evidence.
We performed procedures to assess the fair value of the assets and liabilities acquired and
assessed the accounting treatment adopted, with reference to the significant judgements and
estimates involved (as per Note 2).
We considered the date at which the transactions completed based on the acquisition or
disposal agreements and considered the impact of these transactions on revenue recognition.
We considered the adequacy of the disclosure of the transactions in the financial statements.
The description of the risks above should be read in conjunction with the significant issues considered by the Audit Committee
discussed on page 55.
Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole,
and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with
respect to any of the risks described above, and we do not express an opinion on these individual matters.
Our application
of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes
it probable that the economic decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning the scope of our audit work and
in evaluating the results of our work.
We determined materiality for the Group to be £1.5 million. In determining the materiality of the
Group, we have considered a number of factors including net assets, underlying profit and
profit before tax being the critical performance measures of the Group. The figure represents
less than 5% of pre-tax profit and less than 0.5% of equity.
We agreed with the Audit Committee that we would report to the Committee all audit
differences in excess of £30,000, as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds. We also report to the Audit Committee
on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
An overview of the scope
of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its
environment, including Group-wide controls, and assessing the risks of material misstatement
at the Group level. The Group is audited in its entirety by Deloitte LLP in Manchester. Our
audit work on the individual subsidiary entities was executed at levels of materiality applicable
to each individual entity which were lower than Group materiality.
At the parent entity level we also tested the consolidation process.
Matters on which we
are required to report
by exception
Adequacy of explanations
received and accounting
records
78 Assura plc Annual Report 2015
Under the Companies Act 2006 we are required to report to you if, in our opinion:
■ we have not received all the information and explanations we require for our audit; or
■ adequate accounting records have not been kept by the Parent Company, or returns
adequate for our aduit have not been received from branches not visited by us; or
■ the Parent Company financial statements are not in agreement with the accounting records
and returns.
We have nothing to report in respect of these matters.
www.assuraplc.com Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain
disclosures of Directors’ remuneration have not been made or the part of the Directors’
Remuneration Report to be audited is not in agreement with the accounting records and
returns. We have nothing to report in respect of these matters.
Corporate Governance
Statement
Under the Listing Rules we are also required to review the part of the Corporate Governance
Statement relating to the Company’s compliance with ten provisions of the UK Corporate
Governance Code. We have nothing to report arising from our review.
Our duty to read
other information
in the Annual Report
Under International Standards on Auditing (UK and Ireland), we are required to report to you if,
in our opinion, information in the Annual Report is:
Respective responsibilities
of Directors and auditor
Scope of the audit of the
financial statements
■ materially inconsistent with the information in the audited financial statements; or
■ apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the Group acquired in the course of performing our audit; or
■ otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies
between our knowledge acquired during the audit and the Directors’ statement that they
consider the Annual Report is fair, balanced and understandable and whether the Annual
Report appropriately discloses those matters that we communicated to the Audit Committee
which we consider should have been disclosed. We confirm that we have not identified any
such inconsistencies or misleading statements.
As explained more fully in the Directors’ Responsibility Statement, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors. We also comply with International Standard on Quality Control
1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control
procedures are effective, understood and applied. Our quality controls and systems include
our dedicated professional standards review team and independent partner reviews.
This report is made solely to the Company’s members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions
we have formed.
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an assessment
of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s
circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the Directors; and the overall
presentation of the financial statements. In addition, we read all the financial and non-financial
information in the Annual Report to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
RACHEL ARGYLE
for and behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Manchester, UK
20 May 2015
Assura plc Annual Report 2015 79
Financial statements Governance Strategic reportwww.assuraplc.com CONSOLIDATED INCOME STATEMENT
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2015
For the year ended 31 March 2015
Underlying
£m
Note
2015
Capital
and other
£m
Total
£m
Underlying
£m
2014
Capital
and other
£m
–
–
–
–
12.4
0.2
(0.7)
(0.4)
–
–
1.8
13.3
Continuing operations
Gross rental and related income
Property operating expenses
Net rental income
Administrative expenses
Revaluation gains
(Loss)/gain on sale of property
Share-based payment charge
Exceptional items
Finance revenue
Finance costs
Gain on derivative financial instruments
Profit before taxation
Taxation
Profit for the year from
continuing operations
Discontinued operations
Profit for the year and gain on disposal
from discontinued operations
Profit for the year attributable to
equity holders of the parent
Earnings per share
from underlying profit
– basic
from continuing operations – basic
– diluted
– basic
– diluted
on profit for year
3
4
12
23
7
5
6
6
8
27
9
9
9
9
9
51.1
(2.9)
48.2
(5.7)
–
–
–
–
0.4
(27.0)
–
15.9
2.1p
–
–
–
–
21.4
(0.1)
(0.7)
–
–
–
0.1
20.7
39.9
(2.1)
37.8
(5.0)
–
–
–
–
0.3
(22.2)
–
10.9
2.1p
51.1
(2.9)
48.2
(5.7)
21.4
(0.1)
(0.7)
–
0.4
(27.0)
0.1
36.6
0.6
37.2
–
37.2
4.9p
4.7p
4.9p
4.7p
Total
£m
39.9
(2.1)
37.8
(5.0)
12.4
0.2
(0.7)
(0.4)
0.3
(22.2)
1.8
24.2
(0.4)
23.8
11.2
35.0
4.5p
4.5p
6.6p
6.6p
There were no items of other comprehensive income or expense and therefore the profit for the year also reflects the Group’s total
comprehensive income.
80 Assura plc Annual Report 2015
80 Assura plc Annual Report 2015
www.assuraplc.com
www.assuraplc.com
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET
As at 31 March 2015
As at 31 March 2015
Non-current assets
Investment property
Investments
Property, plant and equipment
Deferred tax asset
Current assets
Cash, cash equivalents and restricted cash
Trade and other receivables
Property assets held for sale
Total assets
Current liabilities
Trade and other payables
Borrowings
Deferred revenue
Provisions
Non-current liabilities
Borrowings
Obligations due under finance leases
Derivative financial instruments at fair value
Deferred revenue
Provisions
Total liabilities
Net assets
Capital and reserves
Share capital
Own shares held
Share premium
Merger reserve
Reserves
Total equity
Net asset value per Ordinary Share – basic
– diluted
Adjusted (EPRA) net asset value per Ordinary Share – basic
– diluted
Note
12
11
13
25
14
15
12
16
19
17
18
19
16
20
17
18
21
21
10
10
10
10
2015
£m
925.3
0.4
0.1
1.3
927.1
66.5
8.3
5.4
80.2
1,007.3
18.9
8.0
12.7
0.1
39.7
505.5
3.0
–
6.9
0.3
515.7
555.4
451.9
100.7
(1.8)
–
231.2
121.8
451.9
44.9p
44.0p
44.9p
44.0p
2014
£m
656.7
0.5
0.1
0.7
658.0
38.6
5.5
11.6
55.7
713.7
14.8
5.9
9.9
0.1
30.7
444.4
3.0
1.8
6.8
0.4
456.4
487.1
226.6
53.0
(1.9)
77.1
–
98.4
226.6
42.8p
42.8p
43.4p
43.4p
The financial statements were approved at a meeting of the Board of Directors held on 20 May 2015 and signed on its behalf by:
GRAHAM ROBERTS
CHIEF EXECUTIVE
JONATHAN MURPHY
FINANCE DIRECTOR
www.assuraplc.com
Assura plc Annual Report 2015 81
Assura plc Annual Report 2015 81
Financial statements Governance Strategic reportwww.assuraplc.com
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2015
For the year ended 31 March 2015
1 April 2013
Profit attributable to equity holders
Total comprehensive income
Dividends
Employee share-based incentives
31 March 2014
Profit attributable to equity holders
Total comprehensive income
Issue of Ordinary Shares
Issue costs
Scheme of arrangement
Dividends
Own shares held
Employee share-based incentives
31 March 2015
Note
22
21
21
22
Share
capital
£m
53.0
–
–
–
–
53.0
–
–
47.7
–
–
–
–
–
100.7
Own
shares
held
£m
(1.9)
–
–
–
–
(1.9)
Share
premium
£m
77.1
–
–
–
–
77.1
–
–
–
–
–
–
0.1
–
(1.8)
–
–
160.8
(6.7)
(231.2)
–
–
–
–
Merger
reserve
£m
–
–
–
–
–
–
–
–
–
–
231.2
–
–
–
231.2
Reserves
£m
69.9
35.0
35.0
(7.2)
0.7
98.4
37.2
37.2
–
–
–
(14.4)
(0.1)
0.7
121.8
Total
equity
£m
198.1
35.0
35.0
(7.2)
0.7
226.6
37.2
37.2
208.5
(6.7)
–
(14.4)
–
0.7
451.9
82 Assura plc Annual Report 2015
82 Assura plc Annual Report 2015
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www.assuraplc.com
CONSOLIDATED CASH FLOW STATEMENT
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2015
For the year ended 31 March 2015
Operating activities
Rent received
Interest paid and similar charges
Fees received
Interest received
Cash paid to suppliers and employees
Net cash inflow from operating activities
Investing activities
Purchase of investment property
Development spend
Proceeds from sale of property
Proceeds from sale of LIFT investments
Proceeds from sale of businesses
Net loans received from/(advanced to) associated companies
Subsidiaries acquired
Net cash outflow from investing activities
Financing activities
Issue of Ordinary Shares
Issue costs paid on issuance of Ordinary Shares
Dividends paid
Repayment of loans
Long-term loans drawdown
Cash settlement of loan fair value adjustments
Swap cash settlement
Loan issue costs
Net cash inflow/(outflow) from financing activities
Increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
Note
24
27
11
22
19
19
14
2015
£m
50.8
(26.9)
1.0
0.4
(8.4)
16.9
(64.3)
(14.0)
4.2
–
–
0.1
–
(74.0)
180.2
(6.7)
(14.4)
(64.1)
–
(7.8)
(1.7)
(0.5)
85.0
27.9
38.6
66.5
2014
£m
39.3
(22.3)
0.9
0.8
(10.8)
7.9
(2.5)
(23.5)
3.3
21.7
6.0
(0.3)
(6.6)
(1.9)
–
–
(7.2)
(5.1)
9.2
–
–
–
(3.1)
2.9
35.7
38.6
www.assuraplc.com
Assura plc Annual Report 2015 83
Assura plc Annual Report 2015 83
Financial statements Governance Strategic reportwww.assuraplc.com
NOTES TO THE ACCOUNTS
NOTES TO THE ACCOUNTS
For the year ended 31 March 2015
For the year ended 31 March 2015
1. Corporate information and operations
Assura plc (“Assura”) is incorporated in England and Wales and the Company’s Ordinary Shares are listed on the London
Stock Exchange.
As of 1 April 2013, the Group has elected to be treated as a UK REIT. See Note 8 for further details.
Capital restructuring
On 28 January 2015, a scheme of arrangement proposed by the Group under Part VIII of the Companies (Guernsey) Law, 2008
became effective resulting in Assura plc replacing Assura Group Limited as the top company in the Group. The accounting for
group reorganisations is not within the scope of IFRS 3 and accordingly, as required by IAS 8, the Company has referred to current
UK GAAP for suitable guidance. This capital restructuring has been accounted for under merger accounting principles meaning the
consolidated accounts are presented as if the Group had always been constructed in this way. The consolidated income statement
shows the results for the year ended 31 March 2015, with comparatives for the year ended 31 March 2014.
2. Significant accounting policies
Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments
and investment properties, including investment properties under construction and land which are included at fair value. The
financial statements have also been prepared in accordance with IFRSs and interpretations adopted by the European Union
and in accordance with the Companies Act 2006.
Standards affecting the financial statements
The following standards and amendments became effective for the Company in the year ended 31 March 2015. The
pronouncements either had no material impact on the financial statements or resulted in changes in presentation and
disclosure only:
— IFRS 10 Consolidated Financial Statements
— IFRS 11 Joint Arrangements
— IFRS 12 Disclosure of Interests in Other Entities
— IAS 27 Separate Financial Statements (2011)
— IAS 28 Investments in Associates and Joint Ventures (2011)
— Amendments to IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities
— Amendments to IAS 36 Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets
— Amendments to IAS 39 Financial Instruments: Recognition and Measurement – Novation of Derivatives and Continuation
of Hedge Accounting
Standards in issue not yet effective
The following standards and amendments are in issue as at the date of the approval of these financial statements, but are not yet
effective for the Company. The Directors do not expect that the adoption of the standards listed below will have a material impact
on the financial statements of the Company in future periods but are continuing to assess the potential impact (effective for periods
beginning on or after the date in brackets):
– IFRS 9 Financial Instruments (1 January 2018)
– IFRS 15 Revenue from Contracts with Customers (1 January 2018)
– Amendments to IAS 1 Disclosure Initiatives (1 January 2017)
The financial statements are prepared on a going concern basis as explained in the Directors’ report on page 73 and are presented
in sterling.
The accounting policies have been applied consistently to the results, other gains and losses, liabilities and cash flows of entities
included in the consolidated financial statements. All intragroup balances, transactions, income and expenses are eliminated
on consolidation.
Significant judgements and key estimates
The preparation of the financial statements requires management to make judgements, estimates and assumptions that may affect
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
84 Assura plc Annual Report 2015
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
2. Significant accounting policies continued
Property valuations
The key source of estimation and uncertainty relates to the valuation of the property portfolio, where a valuation is obtained
twice a year from professionally qualified external valuers. The evidence to support these valuations is based primarily on recent,
comparable market transactions on an arm’s length basis. However, the assumptions applied are inherently subjective and so
are subject to a degree of uncertainty. Property valuations are one of the principal uncertainties of the Group.
Accounting for acquisitions and disposals
A degree of judgement is required in relation to acquisitions to determine whether they should be accounted for as business
combinations under IFRS 3 or as asset purchases. Consideration is taken of all the facts concerning the transaction in making the
appropriate judgement. In addition, the fair value of assets and liabilities acquired as part of the transaction must be determined,
which is based on external market evidence where available.
Basis of consolidation
Subsidiaries
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to
be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies
of the investee so as to obtain benefit from its activities.
In the Company financial statements, investments in subsidiaries are held at cost less any provision for impairment.
Where properties are acquired through the purchase of a corporate entity but the transaction does not meet the definition of a
business combination under IFRS 3, the purchase is treated as an asset acquisition. Where the acquisition is considered a business
combination, the excess of the consideration transferred over the fair value of assets and liabilities acquired is held as goodwill,
initially recognised at cost with subsequent impairment assessments completed at least annually. Where the initial calculation of
goodwill arising is negative, this is recognised immediately in the income statement.
Property portfolio
Properties are externally valued on an open market basis as at the balance sheet date and are recorded at valuation.
Any surplus or deficit arising on revaluing investment properties and investment property under construction (“IPUC”) is recognised
in the income statement.
All costs associated with the purchase and construction of IPUC are capitalised including attributable interest. Interest is calculated
on the expenditure by reference to specific borrowings where relevant and otherwise on the average rate applicable to short-term
loans. When IPUC are completed, they are classified as investment properties.
In determining whether leases and related properties represent operating or finance leases, consideration is given to whether the
tenant or landlord bears the risks and rewards of ownership.
Leasehold properties that are leased out to tenants under operating leases are classified as investment properties or development
properties, as appropriate, and included in the balance sheet at fair value.
Where an investment property is held under a head lease it is initially recognised as an asset as the sum of the premium paid on
acquisition and the present value of minimum ground rent payments. The corresponding rent liability to the head leaseholder is
included in the balance sheet as a finance lease obligation.
The market value of investment property as estimated by an external valuer is increased for the unamortised pharmacy lease
premium held at the balance sheet date.
Net rental income
Rental income is recognised on an accruals basis and recognised on a straight line basis over the lease term. A rent adjustment
based on open market estimated rental value is recognised from the rent review date in relation to unsettled rent reviews. Pharmacy
lease premiums received from tenants are spread over the lease term, even if the receipts are not received on such a basis.
The lease term is the non-cancellable period of the lease.
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
2. Significant accounting policies continued
Net rental income continued
Property operating expenses are expensed as incurred and property operating expenditure not recovered from tenants through
service charges is charged to the income statement.
Gains on sale of properties
Gains on sale of properties are recognised on the completion of contract, and are calculated by reference to the carrying value
at the end of the previous reporting period, adjusted for subsequent capital expenditure.
Financial assets and liabilities
Trade receivables and payables are initially recognised at fair value and subsequently measured at amortised cost and discounted
as appropriate.
Other investments are shown at amortised cost and held as loans and receivables. Loans and receivables are measured at
amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective
interest rate.
Debt instruments are stated at their net proceeds on issue. Finance charges including premiums payable on settlement or
redemption and direct issue costs are spread over the period to redemption at a constant rate on the carrying amount of the liability.
Financial instruments
Where the Group uses derivative financial instruments, in the form of interest rate swaps, to hedge its risks associated with interest
rate fluctuations they are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
re-measured at their fair value by reference to market values for similar instruments. The resulting gains or losses are recognised
through the income statement.
Cash equivalents are limited to instruments with a maturity of less than three months.
Tax
Current tax is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted.
Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are
not taxable (or tax deductible).
Deferred tax is provided on items that may become taxable at a later date, on the difference between the balance sheet value and
tax base value, on an undiscounted basis.
Income statement definitions
Underlying profit represents adjusted earnings, with further Company adjustments to exclude items such as property revaluations,
exceptional items and share-based payment charges. These adjustments have been made on the basis they are non-cash fair value
adjustments, which are not reflective of the underlying performance of the business.
Capital and other represents all other statutory income statement items that are not considered underlying, including
exceptional items.
Employee costs
Defined contribution pension plans
Obligations for contributions to defined contribution pension plans are charged to the income statement as incurred.
Share-based employee remuneration
Share-based employee remuneration is determined with reference to the fair value of the equity instruments at the date at which
they are granted and charged to the income statement over the vesting period on a straight line basis. The fair value of share
options is calculated using the Black Scholes option pricing model or the Monte Carlo Model and is dependent on factors including
the exercise price, expected volatility, option life and risk-free interest rate. IFRS 2 Share-based Payment has been applied to share
options granted.
Segmental information
In previous periods, the Group ran more than one operating segment. Following the sale of the majority of assets in the Non-Core
segment, the Group is now run as one business and as such no segmental analysis is presented for the current or prior year results.
86 Assura plc Annual Report 2015
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
3. Revenue
Rental revenue
Other related income
Gross rental and related income
LIFT interest (through discontinued operations)
Bank and other interest
Total revenue
4. Administrative expenses
Wages and salaries
Social security costs
Auditor’s remuneration
Directors’ remuneration and fees
Other administrative expenses
a) Auditor’s remuneration
Group audit including interim
Statutory audit
Total audit fees
Reporting accountant services
Tax services – advisory
Note 4(a)
page 68
The Group’s policy on non-audit fees is discussed in detail in the Report of the Audit Committee on page 55.
The average monthly number of employees during the year was 30 (2014: 30).
Key management are the Executive Directors and other key management personnel.
Key management staff
Salaries, pension, holiday pay, payments in lieu of notice and bonus
Cost of employee share-based incentives
Social security costs
2015
£m
50.1
1.0
51.1
–
0.4
0.4
2014
£m
39.0
0.9
39.9
0.6
0.3
0.9
51.5
40.8
2015
£m
1.6
0.3
1.9
0.3
1.3
2.2
5.7
2015
£m
–
0.1
0.1
0.1
0.1
0.3
2015
£m
1.7
0.7
0.3
2.7
2014
£m
1.6
0.3
1.9
0.3
1.2
1.6
5.0
2014
£m
–
0.1
0.1
0.1
0.1
0.3
2014
£m
1.6
0.7
0.3
2.6
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
5. Finance revenue
Bank and other interest
6. Finance costs
Interest payable
Interest capitalised on developments
Amortisation of loan issue costs
Amortisation of loan fair value adjustments
Change in fair value of interest rate swaps
Interest was capitalised on property developments at 5% (2014: 5%).
7. Exceptional items in prior year
Negative goodwill on acquisition of Trinity
Acquisition costs of Trinity
Corporate finance fees
Property provision
2015
£m
0.4
0.4
2015
£m
27.1
(0.4)
0.6
(0.3)
27.0
(0.1)
26.9
2015
£m
–
–
–
–
–
2014
£m
0.3
0.3
2014
£m
22.4
(0.6)
0.5
(0.1)
22.2
(1.8)
20.4
2014
£m
0.6
(0.4)
(1.1)
0.5
(0.4)
Acquisition costs and negative goodwill relate to the acquisition of the Trinity portfolio in the prior year. For further details see
Note 11.
£1.1 million of corporate finance fees were incurred in considering a takeover approach during the prior year.
See Note 18 for further information in respect of the property provision.
88 Assura plc Annual Report 2015
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
8. Taxation
Consolidated income tax
Deferred tax
Relating to origination and reversal of temporary differences
Income tax (credit)/charge reported in consolidated income statement
The differences from the standard rate of tax applied to the profit before tax may be analysed as follows:
Profit from continuing operations before taxation
Profit from discontinued operations before taxation
Net profit before taxation
UK income tax at rate of 21% (2014: 23%)
Effects of:
Non-taxable income (including REIT exempt income)
Expenses not deductible for tax purposes
Movement in unrecognised deferred tax
2015
£m
(0.6)
(0.6)
2015
£m
36.6
–
36.6
7.7
(8.9)
2.2
(1.6)
(0.6)
2014
£m
0.4
0.4
2014
£m
24.2
11.2
35.4
8.1
(7.8)
0.5
(0.4)
0.4
The Group elected to be treated as a UK REIT with effect from 1 April 2013. The UK REIT rules exempt the profits of the Group’s
property rental business from corporation tax. Gains on properties are also exempt from tax, provided they are not held for
trading or sold in the three years post completion of development. The Group will otherwise be subject to corporation tax at 20%
(2015: 21%).
The Group tax (credit)/charge relates to its non-property income. As the Group has sufficient brought forward tax losses, no tax is
due and so the amount represents the movement in deferred tax.
As a REIT, the Group is required to pay Property Income Distributions (“PIDs”) equal to at least 90% of the Group’s rental profit
calculated by reference to tax rules rather than accounting standards. In the year to 31 March 2015 the taxable rental profit of the
Group was £nil as a result of capital allowances available, and consequently no PID was required.
To remain as a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group’s
qualifying activities and the balance of business. The Group remains compliant at 31 March 2015.
A further reduction in the main rate of corporation tax has been substantively enacted; the rate reduced to 20% from 1 April 2015.
This change has been reflected in the calculation of deferred tax.
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
9. Earnings per Ordinary Share
Profit for the year from continuing operations
Acquisition costs and negative goodwill
Revaluation gains
Revaluation of derivative financial instruments
Loss/(gain) on sale of property
Adjusted (EPRA) earnings
Earnings
2015
£m
37.2
Earnings
2014
£m
23.8
Adjusted
(EPRA)
earnings
2015
£m
37.2
–
(21.4)
(0.1)
0.1
15.8
Adjusted
(EPRA)
earnings
2014
£m
23.8
(0.2)
(12.4)
(1.8)
(0.2)
9.2
Weighted average number of shares in issue – basic
Potential dilutive impact of VCP
Weighted average number of shares in issue – diluted
763,163,756 763,163,756
20,723,772
783,887,528 783,887,528
20,723,772
529,548,924 529,548,924
–
529,548,924 529,548,924
–
Earnings per Ordinary Share from continuing operations
Earnings per Ordinary Share from discontinued operations
Earnings per Ordinary Share – basic
Earnings per Ordinary Share from continuing operations
Earnings per Ordinary Share from discontinued operations
Earnings per Ordinary Share – diluted
4.9p
–
4.9p
4.7p
–
4.7p
2.1p
–
2.1p
2.0p
–
2.0p
4.5p
2.1p
6.6p
4.5p
2.1p
6.6p
1.7p
2.1p
3.8p
1.7p
2.1p
3.8p
Underlying profit per share of 2.1 pence (2014: 2.1 pence) has been calculated as underlying profit for the year as presented on the
income statement of £15.9 million (2014: £10.9 million) divided by the weighted average number of shares in issue of 763,163,756
(2014: 529,548,924). Based on the diluted weighted average shares, underlying profit per share is 2.0 pence (2014: 2.1 pence).
As set out on page 66, the current estimated number of shares over which nil-cost options may be issued to participants is
24.6 million. After allowing for shares held by the Employee Benefit Trust, this would amount to a potential issuance of a further
20.7 million shares over the course of the next three years.
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
10. Net asset value per Ordinary Share
Net assets
Own shares held
Derivative financial instruments
Deferred tax
NAV in accordance with EPRA
Number of shares in issue
Potential dilutive impact of VCP (Note 9)
Diluted number of shares in issue
NAV per Ordinary Share – basic
NAV per Ordinary Share – diluted
EPRA NAV
Mark to market of derivative financial instruments
Mark to market of fixed rate debt
EPRA NNNAV
EPRA NNNAV per Ordinary Share
Net asset
value
2015
£m
451.9
Net asset
value
2014
£m
226.6
Adjusted
(EPRA)
net asset
value
2015
£m
451.9
1.8
–
(1.3)
452.4
Adjusted
(EPRA)
net asset
value
2014
£m
226.6
1.9
1.8
(0.7)
229.6
1,006,900,141 1,006,900,141
20,723,772
1,027,623,913 1,027,623,913
20,723,772
529,548,924 529,548,924
–
529,548,924 529,548,924
–
44.9p
44.0p
44.9p
44.0p
42.8p
42.8p
Adjusted
net asset
value
2015
£m
452.4
–
(90.7)
361.7
35.9p
43.4p
43.4p
Adjusted
net asset
value
2014
£m
229.6
(1.8)
(5.5)
222.3
42.0p
The EPRA measures set out above are in accordance with the Best Practices Recommendations of the European Property Real
Estate Association dated December 2014.
Mark to market adjustments have been provided by third party valuers in the case of fixed rate debt or the counterparty in the case
of derivative financial instruments.
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
11. Investments
Below is a table listing all the principal subsidiaries of Assura plc:
Name of subsidiary
Assura Group Limited
Assura Health Investments Limited
Assura Medical Centres Limited
Assura Primary Care Properties Limited
Assura Properties plc
Assura Properties UK Limited
Medical Properties Limited
Metro MRH Limited
Metro MRI Limited
Metro MRM Limited
Trinity Medical Properties Limited
Place of
incorporation
Guernsey
England
England
England
England
England
England
England
England
England
England
Shareholding
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Business activity
Intermediate holding company
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
All acquisitions in the year to 31 March 2015 were deemed to be asset purchases.
The acquisition of Trinity Medical Properties Limited on 10 September 2013 was deemed to be a business combination and was
accounted for as such. Net assets acquired totalled £7.5 million and cash consideration was £6.9 million resulting in negative
goodwill of £0.6 million which was shown through exceptional items in the prior year. Cash flow was £6.6 million, net of cash
acquired. Transaction costs of £0.4 million were incurred.
The Group also holds the following investments:
GB Partnerships Investments Limited; 15% equity holding (book value £0.4 million, 2014: £0.5 million).
Virgin Healthcare Holdings Limited; made up of a 6% equity holding (book value £nil) and a £4 million loan note receivable
(book value £nil, 2014: £nil).
12. Property assets
Investment property and investment property under construction (“IPUC”)
Properties are stated at fair value, which has been determined for the Group by Savills Commercial Limited and Jones Lang LaSalle
as at 31 March 2015. The properties have been valued individually and on the basis of open market value in accordance with RICS
valuation – Professional Standards 2014 (“the Red Book”).
Initial yields mainly range from 5.25% to 5.50% (2014: 5.60% to 5.80%) for prime units. For properties with weaker tenants, poorer
units or held under short leaseholds, the yields range between 6.25% and 22.40% (2014: 6.50% and 18.30%).
A 0.25% shift of valuation yield would have approximately a £42.8 million (2014: £27.7 million) impact on the investment
property valuation.
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
12. Property assets continued
Opening fair value
Additions:
– acquisitions
– improvements
Development costs
Transfers
Transfer from assets held for sale
Capitalised interest
Disposals
Unrealised surplus/(deficit) on
revaluation
Closing market value
Add finance lease obligations
recognised separately
Closing fair value of investment
property
Investment
2015
£m
638.8
229.8
0.7
230.5
–
24.5
1.5
–
(2.0)
22.3
915.6
3.0
IPUC
2015
£m
14.8
0.5
–
0.5
14.0
(24.5)
4.7
0.4
(2.3)
(0.9)
6.7
–
Total
2015
£m
653.6
230.3
0.7
231.0
14.0
–
6.2
0.4
(4.3)
21.4
922.3
3.0
Investment
2014
£m
539.9
63.5
1.9
65.4
–
24.8
0.2
–
(2.6)
11.1
638.8
3.1
IPUC
2014
£m
14.3
–
–
–
23.7
(24.8)
0.2
0.6
(0.5)
1.3
14.8
–
Total
2014
£m
554.2
63.5
1.9
65.4
23.7
–
0.4
0.6
(3.1)
12.4
653.6
3.1
918.6
6.7
925.3
641.9
14.8
656.7
Market value of investment property as estimated by valuer
Add IPUC
Add pharmacy lease premiums
Add finance lease obligations recognised separately
Fair value for financial reporting purposes
Investment property held for sale
Vacant property held for sale
Land held for sale
Total property assets held for sale
Total property assets
2015
£m
908.3
6.7
7.3
3.0
925.3
–
0.6
4.8
5.4
930.7
2014
£m
631.6
14.8
7.2
3.1
656.7
2.0
0.1
9.5
11.6
668.3
Three property investments and eight land sites are held as available for sale (2014: two property investments and 10 land sites).
Fair value hierarchy
The fair value measurement hierarchy for all investment property and investment property under construction as at 31 March 2015
was Level 3 – Significant unobservable inputs (2014: Level 3). There were no transfers between Levels 1, 2 or 3 during the year.
Descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are
as follows:
Valuation techniques: market comparable method
Under the market comparable method (or market comparable approach), a property's fair value is estimated based on
comparable transactions.
Unobservable inputs
These include: estimated rental value (“ERV”) based on market conditions prevailing at the valuation date; estimated average
increase in rent based on both market estimations and contractual situations; equivalent yield (defined as the weighted average of
the net initial yield and reversionary yield); and the physical condition of the property determined by inspections on a rotational basis.
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
13. Property, plant and equipment
The Group holds computer and other equipment assets with cost of £0.5 million (2014: £0.5 million) and accumulated depreciation
of £0.4 million (2014: £0.4 million), giving a net book value of £0.1 million (2014: £0.1 million).
Additions during the year were £nil (2014: £nil) and depreciation charged to the income statement was £nil (2014: £nil).
14. Cash, cash equivalents and restricted cash
Cash held in current account
Restricted cash
2015
£m
65.3
1.2
66.5
2014
£m
27.6
11.0
38.6
Restricted cash arises where there are interest payment guarantees, cash is ring-fenced for committed property development
expenditure, which is released to pay contractors’ invoices directly, or under the terms of security arrangements under the Group’s
banking facilities or its bond.
15. Trade and other receivables
Trade receivables
Prepayments and accrued income
Other debtors
2015
£m
5.6
1.1
1.6
8.3
2014
£m
3.4
1.4
0.7
5.5
Trade and other receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.
The Group’s principal customers are invoiced and pay quarterly in advance, usually on the English quarter days. Other debtors are
generally on 30–60 days’ terms. No bad debt provision was required during the year (2014: £nil).
As at 31 March 2015 and 31 March 2014, the analysis of trade debtors that were past due but not impaired is as follows:
2015
2014
Past due but not impaired
Neither past
due nor
impaired
£m
>30 days
£m
>60 days
£m
>90 days
£m
>120 days
£m
5.0
2.8
0.4
0.1
–
–
0.2
0.1
–
0.4
Total
£m
5.6
3.4
The bulk of the Group’s income derives from the NHS or is reimbursed by the NHS, hence the risk of default is minimal.
The amount due over 120 days related to one property for which there was a legal dispute to clarify the terms of the lease.
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
16. Trade and other payables
Trade creditors
Other creditors and accruals
VAT creditor
Payments due under finance leases
2015
£m
2.5
13.5
2.9
–
18.9
2014
£m
1.6
11.7
1.4
0.1
14.8
Finance lease arrangements are in respect of investment property held by the Group on leasehold property. The amounts due after
more than one year, which total £3.0 million (2014: £3.0 million), have been disclosed in non-current liabilities on the consolidated
balance sheet. The maturity of trade and other payables and the minimum payments due under finance leases are disclosed in
Note 26.
The fair value of the Group’s lease obligations is approximately equal to their carrying value.
17. Deferred revenue
Arising from rental received in advance
Arising from pharmacy lease premiums received in advance
Current
Non-current
18. Provisions
At 1 April
Utilisation of provision
Released
At 31 March
Analysed as:
Current
Non-current
2015
£m
12.3
7.3
19.6
12.7
6.9
19.6
2015
£m
0.5
(0.1)
–
0.4
0.1
0.3
0.4
2014
£m
9.5
7.2
16.7
9.9
6.8
16.7
2014
£m
1.0
–
(0.5)
0.5
0.1
0.4
0.5
Provisions relate to the onerous property lease on the former Pall Mall office and represent management’s best estimate of the
Group’s liability. A proportion of the provision was released in the prior year following a subtenant not exercising a break clause.
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Assura plc Annual Report 2015 95
Assura plc Annual Report 2015 95
Financial statements Governance Strategic reportwww.assuraplc.com
NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
19. Borrowings
At 1 April
Amount issued or drawn down in year
Amount repaid in year
Assumed with acquisition of properties/subsidiaries
Amortisation of loan fair value adjustments
Cash settlement of loan fair value adjustments
Loan issue costs
Amortisation of loan issue costs
At 31 March
Due within one year
Due after more than one year
At 31 March
The Group has the following bank facilities:
2015
£m
450.3
–
(64.1)
135.3
(0.3)
(7.8)
(0.5)
0.6
513.5
8.0
505.5
513.5
2014
£m
392.1
9.2
(5.1)
53.7
(0.1)
–
–
0.5
450.3
5.9
444.4
450.3
1. 10-year senior secured bond for £110 million at a fixed interest rate of 4.75% maturing in December 2021. The secured bond
carries a loan to value covenant of 75% (70% at the point of substitution of an investment property or cash) and an interest
cover requirement of 1.15 times (1.5 times at the point of substitution).
2. Loans from Aviva with an aggregate balance of £406.6 million at 31 March 2015 (2014: £284.5 million), including £127.6 million
of loans following the various acquisitions during the year. The Aviva loans are partially amortised by way of quarterly instalments
and partially repaid by way of bullet repayments falling due between 2021 and 2044 with a weighted average term of 13 years
to maturity; £8.0 million is due within a year. These loans are secured by way of charges over specific medical centre investment
properties with cross-collateralisation between the loans and security. The loans are subject to fixed all-in interest rates ranging
between 4.11% and 6.66%, and a weighted average of 5.43% and do not have loan to value covenants. The loans carry a debt
service cover covenant of 1.05 times, calculated across all loans and secured properties.
The principal amount of the debt assumed with the various acquisitions during the year was £128.8 million. The debt has been
recorded on the balance sheet at £135.3 million, which represents the fair value as determined by the Group at the point of
acquisition. In December 2014, an amount equal to the unamortised fair value provision of £7.8 million was paid to Aviva to
reset the interest rate on all mortgages assumed with the acquisitions completed in the 2014 and 2015 financial years. The
interest rate on loans with principal outstanding of £177.5 million was reset, with the weighted average rate on these loans
reducing from 5.54% to 5.12%.
3. Five-year club revolving credit facility with RBS and Barclays for £30.0 million at an initial margin of 1.85% above LIBOR, expiry
in May 2019. The facility reduces to £27.5 million and £25.0 million in years four and five respectively, with the loan to value
covenant also reducing from 65% to 60% in these years. The facility is also subject to a historical interest cover requirement
of at least 175% and a weighted average lease length of nine years. The margin increases to 2.2% where amounts are drawn
and the loan to value ratio is in excess of 60%. The facility attracts a non-utilisation fee equal to 40% of the applicable margin.
The facility was undrawn at 31 March 2015.
As at 31 March 2014, the Group had drawn £57.4 million under an investment facility from Santander. This loan had an interest rate
of 1.95% above LIBOR, with an interest rate swap taken out on £50.0 million at 2.575% to hedge against movements in LIBOR.
The debt was repaid in full on 4 November 2014 along with the associated swap liability.
The Group has been in compliance with all financial covenants on all of the above loans as applicable throughout the year.
96 Assura plc Annual Report 2015
96 Assura plc Annual Report 2015
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
20. Derivative financial instrument at fair value through profit or loss
Liability at 1 April 2014
Movement in year
Settled during year
Liability at 31 March 2015
Interest rate
swaps
(Santander)
£m
1.8
(0.1)
(1.7)
–
The swap liability was settled in full on 4 November 2014 at the time of the associated debt being repaid.
The table above includes the net position of derivative financial instruments at the balance sheet date. These are presented under
the following captions on the consolidated balance sheet:
Non-current liabilities
2015
£m
–
–
2014
£m
1.8
1.8
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly; and
Level 3: techniques that use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.
At 31 March 2015 and 31 March 2014 and throughout the two-year period the financial liabilities measured have been determined
and valued as Level 2.
During the reporting years ending 31 March 2015 and 31 March 2014, there were no transfers between Level 1 and Level 2 fair
value measurements, and no transfers into and out of the Level 3 fair value measurements.
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Assura plc Annual Report 2015 97
Assura plc Annual Report 2015 97
Financial statements Governance Strategic reportwww.assuraplc.com
NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
21. Share capital
Ordinary Shares issued and fully paid
At 1 April
Issued 13 June 2014
Issued 15 October 2014
Issued 6 November 2014
At 31 March
Own shares held
Total share capital
Number of
shares
2015
529,548,924
44,264,196
414,252,873
18,834,148
1,006,900,141
(3,911,551)
1,002,988,590
Share
capital
2015
£m
Number of
shares
2014
Share
capital
2014
£m
53.0
529,548,924
53.0
4.4
41.4
1.9
–
–
–
100.7
(1.8)
529,548,924
(4,064,885)
98.9
525,484,039
–
–
–
53.0
(1.9)
51.1
On 13 June 2014, 44,264,196 Ordinary Shares were issued as part consideration for the acquisition of the MP Realty portfolio.
Based on the closing share price on 12 June 2014 of 42.75 pence per Ordinary Share the shares were valued at £18.9 million
and this has been allocated accordingly between share capital (£4.4 million) and share premium (£14.5 million). Issue costs totalling
£0.2 million were incurred and have been allocated against share premium.
On 15 October 2014, 414,252,873 Ordinary Shares were issued by way of a Firm Placing, Placing and Open Offer and Offer for
Subscription at a price of 43.5 pence per Ordinary Share. Gross proceeds to the Company were £180.2 million, which has been
allocated accordingly between share capital (£41.4 million) and share premium (£138.8 million). Issue costs totalling £5.8 million
were incurred and have been allocated against share premium.
On 6 November 2014, 18,834,148 Ordinary Shares were issued as part consideration for the acquisition of the Metro portfolio.
Based on a closing share price on 5 November 2014 of 50 pence per Ordinary Share the shares were valued at £9.4 million
and this has been allocated accordingly between share capital (£1.9 million) and share premium (£7.5 million). No issue costs
were incurred.
On 28 January 2015, a scheme of arrangement proposed by the Group under Part VIII of the Companies (Guernsey) Law, 2008,
as sanctioned by the Royal Court of Guernsey became effective resulting in Assura plc replacing Assura Group Limited as the
top company in the Group. The scheme was implemented through all shareholders at 27 January 2015 exchanging shares on
a one-for-one basis. The newly issued shares in Assura plc were admitted to trading on the London Stock Exchange at 8.00am
on 28 January 2015. The share capital of Assura plc is 1,006,900,141. The accounting for group reorganisations is not within the
scope of IFRS 3 and accordingly, as required under IAS 8, the Company has referred to current UK GAAP for suitable guidance.
This capital restructuring has been accounted for under merger accounting principles meaning the consolidated accounts are
presented as if the Group had always been constructed this way.
Movements in the above table prior to 28 January 2015 relate to Assura Group Limited, with all subsequent movements relating
to Assura plc.
Assura plc was incorporated on 10 December 2014 with total share capital of £50,000, being two Ordinary Shares of 10 pence
and 499,998 redeemable preference shares of 10 pence. These shares were redeemed and cancelled following the scheme
of arrangement.
Own shares held comprise shares held by the Employee Benefit Trust.
98 Assura plc Annual Report 2015
98 Assura plc Annual Report 2015
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
22. Dividends paid on Ordinary Shares
Payment date
21 January 2015
5 November 2014
23 July 2014
23 April 2014
22 January 2014
23 October 2013
24 July 2013
24 April 2013
Pence per
share
Number of
Ordinary
Shares
0.5 1,006,900,141
988,065,993
573,813,120
529,548,924
529,548,924
529,548,924
529,548,924
529,548,924
0.45
0.45
0.45
0.45
0.3025
0.3025
0.3025
2015
£m
5.0
4.4
2.6
2.4
–
–
–
–
14.4
2014
£m
–
–
–
–
2.4
1.6
1.6
1.6
7.2
A dividend of 0.5 pence per share was paid to shareholders on 30 April 2015.
A quarterly dividend for 2015/16 of 0.5 pence per share is currently planned to be paid on 22 July 2015 to shareholders on the
share register at 10 July 2015.
The dividends paid do not include any PIDs as defined under the REIT regime.
All dividends up to and including 21 January 2015 were paid by Assura Group Limited. Following the scheme of arrangement,
all dividends from 30 April 2015 will be paid by Assura plc.
23. Share-based payments
As at 31 March 2015, the Group had two long-term incentive schemes in place – the Value Creation Plan (“VCP”) and the Executive
Recruitment Plan (“ERP”).
The long-term incentive arrangements are structured so as to align the incentives of relevant Executives with the long-term
performance of the business and to motivate and retain key members of staff. To the extent practicable long-term incentives
are provided through the use of share-based (or share-fulfilled) remuneration to provide alignment of objectives with the Group’s
shareholders. Long-term incentive awards are granted by the Remuneration Committee which reviews award levels on a case
by case basis.
As at 31 March 2015 the Employee Benefit Trust held a total of 3,911,551 (2014: 4,064,885) Ordinary Shares of 10 pence each
in Assura plc. Previous long-term incentive plans have lapsed without vesting.
Value Creation Plan
As at 31 March 2015, a total of 848,950 performance units (2014: 822,080) had been granted to employees (including 575,000
units granted to Executive Directors as detailed in the Remuneration Committee Report). No payment has been made for the grant
of these awards and the performance units have no value at grant.
Participants have the opportunity to receive 10% of the total value created for shareholders above a threshold price determined
at three measurement dates in a five-year measurement period. Before any awards vest, which are granted as nil-cost options on
conversion of any value created, a minimum level of Total Shareholder Return of 8% per annum compound growth from the base
price at each measurement date must be achieved.
Further details in respect of the VCP are provided in the Remuneration Committee Report on page 60.
Executive Recruitment Plan
During a prior year, a nil-cost contingent award of 460,002 Ordinary Shares was made under the ERP. The scheme is in respect
of one Executive Director and full details are provided in the Remuneration Committee Report on pages 63 and 68.
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Assura plc Annual Report 2015 99
Assura plc Annual Report 2015 99
Financial statements Governance Strategic reportwww.assuraplc.com
NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
23. Share-based payments continued
All schemes
The fair value of equity settled units granted during 2013 was estimated as at the date of grant using the Monte Carlo Model, taking
into account the terms and conditions upon which units were granted. The following table lists the inputs to the models used for
the year ended 31 March 2013, being the last point at which a valuation was required under IFRS 2:
Dividend yield (%)
Expected share price volatility (%)
Risk-free interest rate (%)
Expected life of units (years)
2013
3.5
20.7
0.74
4.5
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be
the actual outcome.
The fair value of the units granted in 2013 was £2,475,000 based on the market price at the date the units were granted. This cost
is allocated over the vesting period. The cost allocation for all outstanding units in the period was a charge of £623,500 (2014:
charge of £655,500).
For share options outstanding as at 31 March 2015, the weighted average remaining contractual life is 0.83 years
(2014: 1.83 years). No share options were granted during 2015 (2014: none).
24. Note to the consolidated cash flow statement
Reconciliation of net profit before taxation to net cash inflow from operating activities:
Net profit before taxation
Profit from continuing activities
Profit from discontinued activities
Adjustment for non-cash items:
Decrease/(increase) in debtors
Increase/(decrease) in creditors
Decrease in provisions
Revaluation gain
Interest capitalised on developments
Gain on revaluation of financial instrument
Loss/(gain) on disposal of properties
Amortisation of acquired loans fair value adjustment
Profit on disposal of LIFT business
Negative goodwill on acquisition of Trinity
Share of profits of associates and joint ventures
Employee share-based incentive costs
Amortisation of loan issue costs
Net cash inflow from operating activities
2015
£m
2014
£m
36.6
–
36.6
0.9
0.3
(0.1)
(21.4)
(0.4)
(0.1)
0.1
(0.3)
–
–
–
0.7
0.6
16.9
24.2
11.2
35.4
(1.1)
(0.7)
(0.5)
(12.4)
(0.6)
(1.8)
(0.2)
(0.1)
(10.5)
(0.6)
(0.2)
0.7
0.5
7.9
100 Assura plc Annual Report 2015
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
25. Deferred tax
Deferred tax consists of the following:
At 1 April
Income statement movement
At 31 March
The amount of deductible temporary differences and unused tax losses are as follows:
Tax losses
Other timing differences
2015
£m
0.7
0.6
1.3
2015
£m
212.0
6.0
218.0
The majority of tax losses carried forward relate to capital losses generated on the disposal of former divisions of the Group.
The following deferred tax assets have not been recognised due to uncertainties around future recoverability:
Tax losses
Other temporary differences
2015
£m
42.4
1.2
43.6
2014
£m
1.1
(0.4)
0.7
2014
£m
207.0
7.5
214.5
2014
£m
41.4
1.5
42.9
26. Derivatives and other financial instruments
The Group holds cash and liquid resources as well as having debtors and creditors that arise directly from its operations.
The main risks arising from the Group's financial instruments and properties are credit risk, liquidity risk, interest rate risk and
capital risk. The Board regularly reviews and agrees policies for managing each of these risks and these are summarised below.
Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into
with the Group.
In the event of a default by an occupational tenant, the Group will suffer a rental income shortfall and may incur additional costs,
including legal expenses, in maintaining, insuring and re-letting the property. Given the nature of the Company’s tenants and
enhanced rights of landlords who can issue proceedings and enforcement by bailiffs, defaults are rare and potential defaults are
managed carefully by the credit control department. The maximum credit exposure in aggregate is one quarter’s rent of circa
£15 million; however, this amount derives from all the tenants in the portfolio and such a scenario is hypothetical. The Group’s credit
risk is well spread across circa 585 tenants at any one time. Furthermore the bulk of the Group’s property income derives from the
NHS or is reimbursed by the NHS, which has an obligation to ensure that patients can be seen and treated and steps in when GPs
are unable to practise, hence the risk of default is minimal.
The maximum credit risk exposure relating to financial assets is represented by their carrying values as at the balance sheet date.
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Assura plc Annual Report 2015 101
Financial statements Governance Strategic reportwww.assuraplc.com
NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
26. Derivatives and other financial instruments continued
Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments.
Investments in property are relatively illiquid; however, the Group has tried to mitigate this risk by investing in modern purpose built
medical centres which are let to GPs and NHS PropCo. In order to progress its property investment and development programme,
the Group needs access to bank and equity finance, both of which may be difficult to raise notwithstanding the quality, long lease
length, NHS backing and geographical and lot size diversity of its property portfolio.
The Group manages its liquidity risk by ensuring that it has a spread of sources and maturities.
The Group has entered into commercial property leases on its investment property portfolio. These non-cancellable leases have
remaining terms of up to 30 years and have a weighted average lease length of 14.4 years. All leases are subject to revision of rents
according to various rent review clauses. Future minimum rentals receivable under non-cancellable operating leases along
with trade and other receivable as at 31 March are as follows:
Receivables as at 31 March 2015
Non-cancellable leases
Trade and other receivables
Receivables as at 31 March 2014
Non-cancellable leases
Trade and other receivables
On
demand
£m
–
–
–
Less than
3 months
£m
14.0
8.3
22.3
On
demand
£m
–
–
–
Less than
3 months
£m
10.6
5.5
16.1
3 to 12
months
£m
41.9
–
41.9
3 to 12
months
£m
32.0
–
32.0
1 to 5
years
£m
223.9
–
223.9
1 to 5
years
£m
170.4
–
170.4
>5 years
£m
573.2
–
573.2
>5 years
£m
449.9
–
449.9
Total
£m
853.0
8.3
861.3
Total
£m
662.9
5.5
668.4
The table below summarises the maturity profile of the Group’s financial liabilities, including interest, at 31 March 2015 and
31 March 2014 based on contractual undiscounted payments at the earliest date which the Group can be required to pay.
The total contracted discounted payments are higher than the total minimum rentals receivable due to the rent receivable not
including any residual values on properties at the end of the lease contract. In practice, the Group expects a significant renewal
of leases at the end of the lease term.
Payables as at 31 March 2015
Non-derivative financial liabilities:
Interest bearing loans and borrowings
Trade and other payables
Total financial liabilities
On
demand
£m
Less than
3 months
£m
3 to 12
months
£m
–
–
–
10.2
14.2
24.4
25.4
3.5
1 to 5
years
£m
172.5
0.1
>5 years
£m
650.0
2.9
Total
£m
858.1
20.7
28.9
172.6
652.9
878.8
102 Assura plc Annual Report 2015
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
26. Derivatives and other financial instruments continued
Payables as at 31 March 2014
Non-derivative financial liabilities:
Interest bearing loans and borrowings
Trade and other payables
Derivative financial liabilities:
Interest rate swap
Total financial liabilities
On
demand
£m
Less than
3 months
£m
3 to 12
months
£m
8.2
11.7
19.9
0.3
0.3
19.9
3.1
23.0
0.8
0.8
–
–
–
–
–
–
1 to 5
years
£m
163.5
0.1
163.6
3.5
3.5
>5 years
£m
Total
£m
529.4
3.0
532.4
–
–
721.0
17.9
738.9
4.6
4.6
20.2
23.8
167.1
532.4
743.5
Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s cash deposits and, as debt is
utilised, long-term debt obligations. The Group’s policy is to manage its interest cost using fixed rate debt, or by interest rate
swaps, for the majority of loans and borrowings although the Group will accept some exposure to variable rates where deemed
appropriate. The swaps are revalued to their market value by reference to market interest rates at each balance sheet date.
The ageing analysis of the financial assets and liabilities excluding trade receivables and payables of the Group at 31 March 2015
was as follows:
Floating rate asset
Cash
Fixed rate (all liabilities)
Long-term loans:
Bond
Aviva
Payments due under finance leases
Within
1 year
£m
1 to 5
years
£m
> 5 years
£m
Total
£m
66.5
–
–
66.5
–
(8.0)
(0.1)
–
(37.2)
(0.1)
(110.0)
(361.4)
(2.8)
(110.0)
(406.6)
(3.0)
In November 2011 the Group issued a £110.0 million 10-year senior secured bond at 4.75%.
Aviva loans were increased during the period to £406.6 million (2014: £284.5 million). The Aviva loans are partially amortised
by way of quarterly instalments and partially repaid by way of bullet repayments falling due between 2021 and 2044. £8.0 million
is due within a year. These loans are secured by way of charges over specific medical centre investment properties with cross-
collateralisation between the loans and security. The loans are subject to fixed all-in interest rates ranging between 4.11%
and 6.66%.
In November 2011 the Group entered into an interest rate swap with Santander for a principal of £50.0 million at 2.575% plus
1.95% margin for five years. This was settled in full in November 2014 when the associated debt was repaid.
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Assura plc Annual Report 2015 103
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Financial statements Governance Strategic reportwww.assuraplc.com
NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
26. Derivatives and other financial instruments continued
The ageing analysis of the financial assets and liabilities excluding trade receivables and payables of the Group at 31 March 2014
was as follows:
Floating rate asset/(liability)
Cash
Santander – investment facility
Interest rate swap
Fixed rate (all liabilities)
Long-term loans:
Bond
Aviva
Payments due under finance leases
Within
1 year
£m
38.6
(0.6)
–
1 to 5
years
£m
–
(56.8)
(1.8)
> 5 years
£m
–
–
–
Total
£m
38.6
(57.4)
(1.8)
–
(5.3)
(0.1)
–
(32.6)
(0.1)
(110.0)
(246.6)
(2.9)
(110.0)
(284.5)
(3.1)
Sensitivity analysis
The Group has largely eliminated its exposure to interest rate movements affecting income by the use of fixed rate debt and interest
rate swaps. The Group is 100% fixed such that a 0.25% movement in interest rate would have no impact on underlying profits.
Cash
Interest rate swap
Long-term loan
Payments due under finance leases
Book value
2015
£m
66.5
–
(513.5)
(3.0)
2014
£m
38.6
(1.8)
(450.3)
(3.1)
Fair value
2015
£m
66.5
–
(604.2)
(3.0)
2014
£m
38.6
(1.8)
(455.8)
(3.1)
The Group is exposed to the valuation impact on investor sentiment of long-term interest rate expectations, which can impact
transactions in the market and increase or decrease valuations accordingly.
Capital risk
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain
or adjust the capital structure, the Group may make disposals, adjust the dividend payment to shareholders, return capital to
shareholders or issue new shares.
The Group monitors capital structure with reference to loan to value (“LTV”), which is calculated as net debt divided by total
property. The LTV percentage on this basis is 48% at 31 March 2015 (62% at 31 March 2014).
Investment property
Investment property under construction
Held for sale – investment property
Held for sale – land
Total property
Loans
Finance lease
Cash
Net debt
LTV
2015
£m
918.6
6.7
0.6
4.8
930.7
2015
£m
513.5
3.0
(66.5)
450.0
2014
£m
641.9
14.8
2.1
9.5
668.3
2014
£m
450.3
3.1
(38.6)
414.8
48%
62%
104 Assura plc Annual Report 2015
104 Assura plc Annual Report 2015
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NOTES TO THE ACCOUNTS CONTINUED
For the year ended 31 March 2015
27. Discontinued operations
During the year to 31 March 2014, the Board announced plans to sell the investments held in LIFT companies, as it was concluded
that shareholder value would be best realised through any proceeds being re-invested in primary care property assets. Contracts
were exchanged on 24 November 2013, with the sale completed in two tranches: the first on 23 January 2014 and the second
on 13 February 2014.
The following table shows the calculation of gain on disposal, relative to the net assets at the effective date of the transaction
(30 September 2013, being the date from which the purchasers were entitled to interest and equity returns):
Gross consideration
Costs
Net proceeds
LIFT investments at 30 September 2013
Additional investment
Gain on disposal of discontinued operations
Prior to the sale, the Group increased its investment in one LIFT company for consideration of £0.3 million.
The results of the LIFT segment for the year to 31 March 2014 are presented below:
Share of profits of associates and joint ventures
Finance revenue
Profit before tax
Gain on disposal of discontinued operations
Profit for the period from discontinued operations
The net cash flows attributable to the LIFT segment were as follows:
Operating activities
Investing activities
Net cash inflow
£m
22.4
(0.7)
21.7
(10.9)
(0.3)
10.5
2014
£m
0.1
0.6
0.7
10.5
11.2
2014
£m
0.6
21.4
22.0
28. Commitments
At the year end the Group had five (2014: five) developments on-site with a contracted total expenditure of £22.2 million
(2014: £21.5 million) of which £6.1 million (2014: £12.5 million) had been expended.
29. Related party transactions
Details of transactions during the year and outstanding balances at 31 March 2015 in respect of associates and joint ventures
are detailed in Notes 11 and 27 as applicable.
Details of payments to key management personnel are provided in Note 4.
30. Post balance sheet events
Subsequent to the year end, a subsidiary of the Group has extended the existing revolving credit facility from £30 million to
£60 million with the potential to extend further to £90 million.
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Assura plc Annual Report 2015 105
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COMPANY INCOME STATEMENT
COMPANY INCOME STATEMENT
As at 31 March 2015
For the period ended 31 March 2015
Revenue
Dividends received from subsidiary companies
Total revenue
Operating profit
Profit before taxation
Taxation
Profit attributable to equity holders
01/01/2015
to
31/03/2015
£m
10/12/2014
to
31/12/2014
£m
30.0
30.0
30.0)
30.0
–
30.0
–
–
–
–
–
–
All amounts relate to continuing activities. There were no items of other comprehensive income or expense and therefore the profit
for the period also reflects the Company’s total comprehensive income.
106 Assura plc Annual Report 2015
106 Assura plc Annual Report 2015
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COMPANY BALANCE SHEET
COMPANY BALANCE SHEET
As at 31 March 2015
As at 31 March 2015
Non-current assets
Investments in subsidiary companies
Current assets
Cash and cash equivalents
Other receivables
Amounts owed by subsidiary companies
Net assets
Represented by:
Capital and reserves
Share capital (Note 21 to the Group accounts)
Own shares held
Merger reserve
Reserves
Total equity
31/03/2015
£m
31/12/2014
£m
Note
B
C
D
E
396.7
396.7
1.0
–
26.6
27.6
424.3
100.7
(1.8)
295.4
30.0
424.3
–
–
–
0.1
–
0.1
0.1
0.1
–
–
–
0.1
The financial statements were approved at a meeting of the Board of Directors held on 20 May 2015 and signed on its behalf by:
GRAHAM ROBERTS
CHIEF EXECUTIVE
JONATHAN MURPHY
FINANCE DIRECTOR
Company registered number: 9349441
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COMPANY STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2015
For the period ended 31 March 2015
10 December 2014
Profit attributable to equity holders
Total comprehensive income
Issue of Ordinary Shares
31 December 2014
Profit attributable to equity holders
Total comprehensive income
Cancellation of opening shares
Scheme of arrangement (Note 21 to the
Group accounts)
Share issue costs
Own shares held
31 March 2015
Share
capital
£m
–
–
–
0.1
0.1
–
–
(0.1)
100.7
–
–
100.7
Own shares
held
£m
–
–
–
–
–
–
–
–
–
–
(1.8)
(1.8)
Merger
reserve
£m
–
–
–
–
–
–
–
–
296.0
(0.6)
–
295.4
Reserves
£m
–
–
–
–
–
30.0
30.0
–
–
–
–
30.0
Total
equity
£m
–
–
–
0.1
0.1
30.0
30.0
(0.1)
396.7
(0.6)
(1.8)
424.3
108 Assura plc Annual Report 2015
108 Assura plc Annual Report 2015
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COMPANY CASH FLOW STATEMENT
COMPANY CASH FLOW STATEMENT
For the year ended 31 March 2015
For the period ended 31 March 2015
Operating activities
Operating activities
Dividends received from subsidiaries
Net cash inflow from investing activities
Investing activities
Net loans advanced to subsidiaries
Net cash outflow from investing activities
Financing activities
Issue costs paid on issuance of Ordinary Shares
Net cash outflow from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at start of period
Cash and cash equivalents at end of period
01/01/2015
to
31/03/2015
£m
10/12/2014
to
31/12/2014
£m
Note
30.0
30.0
(28.4)
(28.4)
(0.6)
(0.6)
1.0
–
1.0
C
–
–
–
–
–
–
–
–
–
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Assura plc Annual Report 2015 109
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NOTES TO THE COMPANY ACCOUNTS
NOTES TO THE COMPANY ACCOUNTS
For the year ended 31 March 2015
For the period ended 31 March 2015
A. Accounting policies and corporate information
The accounts of the Company are separate to those of the Group.
The accounting policies of the Company are consistent with those of the Group which can be found in Note 2 to the
Group accounts.
Following the scheme of arrangement as detailed in Note 21 to the Group accounts, the Company became the top company
in the Assura plc group structure.
B. Investments in subsidiary companies
Cost
Provision for diminution in value
31/03/2015
£m
396.7
–
396.7
31/12/2014
£m
–
–
–
During the period, the Company acquired Assura Group Limited and its subsidiaries following the scheme of arrangement described
in Note 21 to the Group accounts.
Details of principal subsidiaries as at 31 March 2015 are shown in Note 11 to the Group accounts.
C. Cash and cash equivalents
Cash held in current account
D. Other receivables
Unpaid share capital
E. Loans to subsidiary companies – current
Amounts owed by Group undertaking
The above loans are unsecured, non-interest bearing and repayable upon demand.
31/03/2015
£m
1.0
31/12/2014
£m
–
31/03/2015
£m
–
31/12/2014
£m
0.1
31/03/2015
£m
26.6
31/12/2014
£m
–
The recoverable amount of loans receivable from subsidiaries is reviewed annually by reference to the subsidiary balance sheet and
expected future activities, with a provision recorded to the extent the loan is not considered recoverable. No provision has been
deemed necessary.
F. Related party transactions
Group undertakings
31 March 2015
31 December 2014
The above transactions are with subsidiaries.
Interest
receivable
£m
Dividends
received
£m
Amounts
owed by
£m
Amounts
owed to
£m
–
–
30.0
–
26.6
–
–
–
110 Assura plc Annual Report 2015
110 Assura plc Annual Report 2015
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NOTES TO THE COMPANY ACCOUNTS CONTINUED
For the period ended 31 March 2015
G. Risk management
Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with
the Company.
Credit risks within the Company derive from non-payment of loan balances. However, as the balances are receivable from
subsidiary companies the risk of default is considered minimal.
The maximum credit risk exposure relating to financial assets is represented by the carrying value as at the balance sheet date.
The Company balance sheet largely comprises illiquid assets in the form of investments in subsidiaries and loans to subsidiaries,
which have been used to finance property investment and development activities. Accordingly the realisation of these assets may
take time and may not achieve the values at which they are carried in the balance sheet.
The Company’s other assets are cash of £1.0 million (31 December 2014: £nil). The Company had no trade and other payables
at 31 March 2015 (31 December 2014: £nil).
There are no differences between the book value of cash and trade payables, nor is there any meaningful interest rate sensitivity.
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GLOSSARY
Adjusted Earnings per Ordinary Share
from Continuing Operations (“Adjusted EPS”)
is the profit attributable to equity holders of the
parent adjusted for non-recurring items including
goodwill impairment, revaluation losses on
derivative financial instruments (including
associates) and movements in deferred tax
divided by the weighted average number of
shares in issue during the period.
Average Debt Maturity is each tranche of
Group debt multiplied by the remaining period
to its maturity and the result divided by total
Group debt in issue at the year end.
Average Interest Rate is the Group loan
interest and derivative costs per annum at the
year end, divided by total Group debt in issue
at the year end.
Building Research Establishment
Environmental Assessment Method
(“BREEAM”) assesses the sustainability
of buildings against a range of criteria.
Clinical Commissioning Groups (“CCGs”)
are the groups of GPs and other healthcare
professionals that took over commissioning
of primary and secondary healthcare from
PCTs in England with effect 1 April 2013.
Company is Assura plc.
Debt Service Cover is the number of times net
interest payable plus debt amortisation is covered
by underlying profit before net interest.
Direct Property Costs comprise ground rents
payable under head leases, void costs, other
direct irrecoverable property expenses, rent
review fees and valuation fees.
District Valuer (“DV”) is the District Valuer
Service being the commercial arm of the
Valuation Office Agency (“VOA”). It provides
professional property advice across the public
sector and in respect of primary healthcare
represents NHS bodies on matters of valuation,
rent reviews and initial rents on new
developments.
Dividend Cover is the number of times the
dividend payable (on an annual basis) is covered
by underlying profit.
Earnings per Ordinary Share from
Continuing Operations (“EPS”) is the profit
attributable to equity holders of the parent
divided by the weighted average number of
shares in issue during the period.
European Public Real Estate
Association (“EPRA”) is the industry
body for European REITs.
112 Assura plc Annual Report 2015
EPRA Net Asset Value (“EPRA NAV”)
is the balance sheet net assets excluding own
shares held, mark-to-market derivative financial
instruments (including associates) and
deferred taxation.
EPRA NNNAV is the EPRA NAV adjusted to
reflect the fair value of debt and derivatives.
Equivalent Yield (true and nominal) is a
weighted average of the Net Initial Yield and
Reversionary Yield and represents the return
a property will produce based upon the timing
of the income received. The true equivalent
yield assumes rents are received quarterly
in advance. The nominal equivalent assumes
rents are received annually in arrears.
Estimated Rental Value (“ERV”) is the
external valuers’ opinion as to the open market
rent which, on the date of valuation, could
reasonably be expected to be obtained on a new
letting or rent review of a property.
Gross Rental Income is the gross accounting
rent receivable.
Group is Assura plc and its subsidiaries.
IFRS is International Financial Reporting
Standards as adopted by the European Union.
Interest Cover is the number of times net
interest payable is covered by underlying profit
before net interest.
Interest Rate Swap is a contract to exchange
fixed payments for floating payments linked to
an interest rate, and is generally used to manage
exposure to fluctuations in interest rates.
IPD is the Investment Property Databank Limited
which provides performance analysis for most
types of real estate and produces an
independent benchmark of property returns.
IPD Healthcare is the Investment Property
Databank’s UK Annual Healthcare Property
Index.
IPD Total Return is calculated as the change
in capital value, less any capital expenditure
incurred, plus net income, expressed as a
percentage of capital employed over the period,
as calculated by IPD.
London Interbank Offered Rate (“LIBOR”) is
the interest rate charged by one bank to another
for lending money.
Local Improvement Finance Trusts (“LIFT”)
are public-private consortia that develop
primary care and community based facilities
and services.
Loan to Value (“LTV”) is the ratio of net debt
to the total value of property and LIFT assets.
www.assuraplc.com Mark to Market (“MtM”) is the difference
between the book value of an asset or liability
and its market value.
Net Initial Yield is the annualised rents
generated by an asset, after the deduction of
an estimate of annual recurring irrecoverable
property outgoings, expressed as a percentage
of the asset valuation (after notional purchaser’s
costs). Development properties are not included.
Net Rental Income is the rental income
receivable in the period after payment of direct
property costs. Net rental income is quoted on
an accounting basis.
NHS Property Services Limited (“NHS
PropCo”) is the company, wholly owned and
funded by the Department of Health, which, as of
1 April 2013, has taken on all property obligations
formerly borne by the PCTs.
Primary Care Property is the property
occupied by health services providers who
act as the principal point of consultation
for patients such as GP practices, dental
practices, community pharmacies and high
street optometrists.
Property Income Distribution (“PID”) is the
required distribution of income as dividends
under the REIT regime. It is calculated as 90%
of exempted net income.
Real Estate Investment Trust (“REIT”) is a
listed property company which qualifies for and
has elected into a tax regime, which exempts
qualifying UK profits, arising from property rental
income and gains on investment property
disposals, from corporation tax, but requires
the distribution of a PID.
Rent Reviews take place at intervals agreed
in the lease (typically every three years) and
their purpose is usually to adjust the rent to
the current market level at the review date.
Rent Roll is the passing rent being the total of all
the contracted rents reserved under the leases.
Reversionary Yield is the anticipated yield,
which the initial yield will rise to once the rent
reaches the ERV and when the property is fully
let. It is calculated by dividing the ERV by
the valuation.
Retail Price Index (“RPI”) is the official
measure of the general level of inflation as
reflected in the retail price of a basket of goods
and services such as energy, food, petrol,
housing, household goods, travelling fares, etc.
RPI is commonly computed on a monthly and
annual basis.
RPI Linked Leases are those leases which
have rent reviews which are linked to changes
in the RPI.
Total Accounting Return is the overall return
generated by the Group including the impact of
debt. It is calculated as the movement on EPRA
NAV for the year plus the dividends paid, divided
by the opening EPRA NAV.
Total Property Return is the overall return
generated by properties on a debt free basis.
It is calculated as the net rental income
generated by the portfolio plus the change in
market values, divided by opening property
assets plus additions.
Total Shareholder Return (“TSR”) is the
combination of dividends paid to shareholders
and the net movement in the share price during
the year. It is calculated as the movement in the
share price for the period plus the dividends paid,
divided by the opening share price.
Underlying Profit is the pre-tax earnings
measure adjusted for non-cash fair value
adjustments and non-recurring items such
as revaluation gains, revaluation of derivatives,
share-based payment charge and gains on sale
of property.
Weighted Average Unexpired Lease Term
(“WAULT”) is the average lease term remaining
to first break, or expiry, across the portfolio
weighted by contracted rental income.
Yield on cost is the estimated annual rent of a
completed development divided by the total cost
of development including site value and finance
costs expressed as a percentage return.
Yield shift is a movement (usually expressed in
bps) in the yield of a property asset, or like-for-like
portfolio over a given period. Yield compression is
a commonly-used term for a reduction in yields.
Forward-looking statements
This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking
in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements.
Many of these risks and uncertainties relate to factors that are beyond Assura’s ability to control or estimate precisely, such as future market conditions,
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. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of the date of this document. Assura does not undertake any obligation
to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information
contained in this document relating to the Company should not be relied upon as a guide to future performance.
Assura plc Annual Report 2015 113
Financial statements Governance Strategic reportwww.assuraplc.com CORPORATE
INFORMATION
Registered Office:
The Brew House
Greenalls Avenue
Warrington
Cheshire
WA4 6HL
Company Secretary:
Jonathan Murphy
Auditor:
Legal Advisors:
Stockbrokers:
Deloitte LLP
2 Hardman Street
Manchester
M60 2AT
Addleshaw Goddard LLP
100 Barbirolli Square
Manchester
M2 3AB
Stifel
150 Cheapside
London
EC2V 6ET
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Bankers:
Aviva plc
Barclays Bank plc
Santander UK plc
The Royal Bank of Scotland plc
114 Assura plc Annual Report 2015
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NOTES
Assura plc Annual Report 2015 115
Financial statements Governance Strategic reportwww.assuraplc.com NOTES
116 Assura plc Annual Report 2015
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from pulp sourced from well managed forests and
other controlled sources. Both the paper and the
print factory are FSC® (Forest Stewardship
Council®) certified.
Design, consultancy and
production by Luminous
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Assura plc
The Brew House
Greenalls Avenue
Warrington
WA4 6HL
T: 01925 420660
F: 01925 234503
E: info@assura.co.uk
www.assuraplc.com
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