Assura Annual Report 2017

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FY2017 Annual Report · Assura

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Annual Report and
Accounts 2017

Investing
to help develop
the NHS of the future

Financial highlights

Investment property (£m)

£1,344.9m

up by 21.2%

2015

2016

2017

Net rental income (£m)

£67.9m

up by 16.3%

2015

2016

2017

EPRA EPS (p)

2.4p

up by 20.0%

2015

2016

2017

EPRA NAV (p)

49.4p

up by 7.2%

925.3

1,109.4

2015

2016

1,344.9

2017

44.9

46.1

49.4

Profit before tax (£m)

£95.2m

up by 230.6%

48.2

58.4

2015

2016

35.6

28.8

67.9

2017

95.2

Total dividends paid (p)

2.25p

up by 9.8%

2.1

2.0

2015

2016

2.4

2017

1.85

2.05

2.25

Contents

Strategic report
2 Our business at a glance
4 Chairman’s statement
6 CEO review
10 Our business model and strategy
12 Our business model in action
18 Strategy at a glance
20 Summary of our strategy in action
22 Key performance indicators
24 Resources and relationships
28 Risk management
30 Principal risks and uncertainties
34 Business review

Governance
40

Chairman’s introduction
to governance

42 Leadership
44 Board of Directors
46 Effectiveness
48 Nominations Committee Report
50 Audit Committee Report
52 Remuneration Report
66 Directors’ Report
69

Directors’ Responsibility
Statement
Independent Auditor’s Report

Financial statements
75
76
77

Consolidated income statement
Consolidated balance sheet
Consolidated statement of changes
in equity
Consolidated cash flow statement

78
79 Notes to the accounts
98 Company financial statements

Additional information
104 Glossary
107 Corporate information

www.assuraplc.com

Investing to help develop
the NHS of the future

Assura is the UK’s leading healthcare Real
Estate Investment Trust, helping GPs and the
NHS bring care closer to home by creating
the modern, fit-for-purpose buildings that
doctors say they urgently need, in the right
places for patients.

By designing GP surgery premises for the
job they’ll be doing in future, we can help
the NHS deliver on its plans to ease pressure
on hospitals – by giving family doctors the
infrastructure they need to offer extended
appointment hours, digital consultations
and more services, tests and treatment
in the community.

Whether we’re developing new buildings
or investing to make existing spaces work
better, we’re helping to create a primary
care estate today that’s in shape for
the NHS of tomorrow.

Available online at: www.assuraplc.com

Strategic reportGovernanceFinancial statementsAdditional information2

Assura plc Annual Report and Accounts 2017

Our business at a glance

Investing to support the
primary healthcare
infrastructure.

Aspen Centre, Gloucester
3,481 sq.m

The Aspen centre contains Barnwood Medical
Practice, Heathville Medical Practice and
London Medical Practice, which together have
a list size of over 21,000 patients. The centre
offers a broad range of services to the local
community, including consultant rooms,
high-tech treatment rooms, a day site operating
theatre, training rooms and conference facilities.

Frome Medical Centre, Frome
4,087 sq.m

Frome Medical Centre, completed in 2012,
serves over 29,000 patients and is adjacent
to the community hospital.

Moor Park Health and Leisure Centre,
Blackpool
5,217 sq.m

Fleetwood Health and Wellbeing Centre,
Fleetwood
5,857 sq.m

This multi-purpose centre is home to two GP
practices, a library and the local leisure centre.

The practice serves 11,000 patients and the
building hosts a number of ancilliary services.

One Life Building, Middlesbrough
3,327 sq.m

Todmorden Medical Centre, Todmorden
4,467 sq.m

The One Life Building is located in the heart of Middlesbrough offering
conveniently located services to the local community, including a GP
practice, opticians and pharmacy.

This visually striking building was completed in 2008 and offers multiple
services, including a GP practice, pharmacy, district nurses, physio,
podiatry, and clinical and office space for two local Foundation Trusts.

www.assuraplc.com

Portfolio analysis
by capital value

Portfolio analysis
by region

Portfolio analysis
by tenant covenant

Number
of
properties

Total
value
£m

Total
value
%

Number
of
properties

Total
value
£m

Total
value
%

<£1m

£1–5m

£5–10m

>£10m

53.5

245

618.5

322.2

321.1

North

South

Midlands

Scotland

Wales

147

538.7

127

391.6

274.2

44.8

66.0

GPs

NHS body

Pharmacy

Other

Total
rent roll
£m

Total
rent roll
%

50.3

13.7

5.6

4.8

398 1,315.3

100

398 1,315.3

100

74.4

100

Town

Build date

Sandbach

Gloucester

Nantwich

Bonnyrigg

South Kirkby

Bolton

Winsford

Basingstoke

Crewe

Fleetwood

Grimsby

Frome

Market Drayton

Blackpool

North Ormesby

Middlesbrough

Shrewsbury

Banbury

Sudbury

Todmorden

Worcester

Macclesfield

2004

2014

2008

2005

2013

2007

2012

2009

2012

2005

2011

2005

2012

2009

2014

2008

2006

Sq.m

2,681

3,481

3,322

4,074

2,812

2,964

2,988

2,318

6,261

5,857

6,796

4,087

3,667

5,217

7,652

3,327

6,086

3,691

2,937

4,467

4,257

6,007

Properties valued over £10 million

Building official name

Ashfields Primary Care Centre

Aspen Centre

Beam Street Medical Centre

Bonnyrigg Medical Centre

Church View Medical Centre

Crompton Health Centre

Dene Drive Primary Care Centre

Dickson House

Eaglebridge Health and Wellbeing Centre

Fleetwood Health and Wellbeing Centre

Freshney Green Primary Care Centre

Frome Medical Centre

Market Drayton Primary Care Centre

Moor Park Health and Leisure Centre

North Ormesby Health Village

One Life Building

Severn Fields Health Village

South Bar House

Sudbury Community Health Centre

Todmorden Medical Centre

Turnpike House Medical Centre

Waters Green Medical Centre

EPRA 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) (%)

See a detailed rationale for each performance measure on pages 38 and 39.

List size NHS rent %

23,381

21,067

24,235

21,906

13,779

11,425

23,328

37,056

42,723

11,733

29,402

29,112

17,482

28,482

22,384

9,586

16,883

33,937

9,367

13,452

27,170

61,397

2017

2.4p

49.4p

44.7p

5.05%

2.1%

13.7%

12.4%

88%

91%

88%

97%

91%

88%

87%

67%

90%

91%

87%

83%

91%

95%

66%

94%

89%

100%

92%

91%

93%

2016

2.0p

46.1p

42.4p

5.23%

3.0%

16.5%

16.0%

Strategic reportGovernanceFinancial statementsAdditional information4

Assura plc Annual Report and Accounts 2017

Chairman’s statement

Assura’s purpose is to provide
GPs and patients with the
buildings they need today
for the NHS of tomorrow.

EPRA EPS

2.4p

up by 20%

Simon Laffin
Non-Executive Chairman

Dividends paid per share

2.25p

up by 9.8%

Dear Shareholder
Assura has continued
to grow over the last
12 months.

Our property portfolio expanded
significantly, through both acquisitions
and new developments. In the past year
we have added £170 million of property
and this, together with the £141 million
of property additions in the previous
year, has increased our net rental
income by 16% to £67.9 million. We
are now the UK’s largest developer and
owner-manager of primary healthcare
property with a property portfolio
valued at over £1.3 billion.

The increased scale of our operations
and our strong financial position have
assisted us in obtaining better terms
on our debt. We have signed new
unsecured debt facilities of £350 million,
lowering the overall cost of borrowings
by 78 basis points to 4.06%.

Last year we set a lower medium-term
loan to value (“LTV”) target range of
between 40% and 50%. At the year
end our LTV was 37%, well positioned
relative to this range. We are continuing
to source attractive investment
opportunities and we currently have a
pipeline of further property acquisitions
and developments of £153 million
in solicitors’ hands. This will in time
increase the LTV. We shall continue
to monitor what the right LTV range
is for the Company.

A key part of our strategy is our
unique proposition of offering all of
the elements of the property service
for GPs. This provides GPs with a
long-term partner approach throughout
the lifecycle of a medical centre, from
first idea of a new surgery through:
the NHS business case; development
and build of the new surgery; moving
in; disposal of the old property; and
maintenance of the premises over
the next 25 plus years. Our ability to
“develop, invest and manage” gives us
a crucial advantage when securing new
development opportunities and other
asset management initiatives with GPs.
Moreover, it provides a highly scalable
model that means that, as we grow,
the benefits of scale accrue to
shareholders and drive our progressive
dividend policy and shareholder returns.
The benefit of this model has been
illustrated again this year as rent roll
rose by 17% to £74.4 million and EPRA
earnings rose by 58% to £40.3 million.

www.assuraplc.com

Dividends
We aim to deliver superior risk adjusted
returns to our shareholders. A key
component of this return is a growing,
covered dividend. In January 2017 the
Board increased our quarterly dividend
payment by 9% to 0.60 pence per
share or 2.4 pence per share on an
annualised basis. This represents an
increase of over 33% from the level of 0.45
pence per share paid three years ago.

Shareholder engagement
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 public company.
We have held 95 meetings with
investors during the year and I am
delighted to welcome a number of
new shareholders onto our register.

Our people and the Board
The past year was marked by the tragic
death of our previous CEO, Graham
Roberts. Graham stepped down in
March 2016 and passed away in July,
having been suffering from cancer.
Graham was a great leader and CEO
for Assura over his four years in charge,
delivering a period of remarkable
success which saw the Group grow from
a market capitalisation of £152 million to
become a FTSE 250 company valued at
over £900 million. He had a clear vision,
inspired investor confidence and built a
strong team, all of which transformed
Assura into a leading player in the sector.

I became Executive Chairman in March
last year to cover for Graham’s absence.
In October 2016, the Board appointed
Jonathan Murphy as Interim CEO and
confirmed him as permanent CEO in
February 2017. Jonathan had been
Finance Director since January 2013.
He brings extensive knowledge and
experience to the role, as well as the
commitment and ability to continue to
deliver on our strategy. We are currently
recruiting for a new Finance Director.

I am delighted to welcome Andrew
Darke onto the Board as Property
Director. Andrew has been with Assura
since its flotation in 2003 and brings to
the Board an unparalleled knowledge
and understanding of the specialist
primary care property market.

We have 43 people employed in
Assura and, on behalf of the Board,
I would like to thank them all for their
hard work, dedication and contribution
to the success of the business through
such a busy year.

Our investment case

By following our strategies we can deliver long-term
shareholder value through:

Low volatility of property returns

Low default risk

Linkage to cost inflation

Scalable, internally managed model

Covered, progressive dividends

Excellent risk adjusted returns.

Read about our business model and strategy on page 10

Looking ahead
With the support of our shareholders,
Assura has the strongest balance sheet
in the sector and we are well placed
to continue investing in what remains a
very fragmented market. In addition, we
remain focused on carefully managing
our existing portfolio with our in-house
management team continuing to deliver
the highest standard of customer
service and operational excellence for
the nation’s GPs, while also maximising
the value of our portfolio through asset
management initiatives.

Although the NHS and primary care
policy consensus across all mainstream
parties is now more positive than ever
before, we remain frustrated by the
slow progress in transforming policy
into meaningful investment in primary
care premises. It looks as if the general
election will result in a continuity
in basic primary care strategy by
whichever party wins it. Everyone
seems to agree that better healthcare
hinges on more care being provided
in the primary care sector. Having more
doctors and better leveraging of their
skills through ancillary healthcare
professionals will require more and
better premises. We are ready to
support this essential investment in the
infrastructure of the NHS by offering the
right skills, relationships and capital to
make the plans a reality on the ground.

Simon Laffin
Non-Executive Chairman
22 May 2017

Culture, values and ethics
The NHS is Assura’s prime customer,
accounting for 86% of our total rent roll.
We strongly support the NHS and believe
in its vital role in the country’s health. We
aim to provide the NHS, GPs and patients
with the buildings needed for the NHS
of today and tomorrow. These buildings
provide the essential social infrastructure
required to improve the health of the
communities in which we operate. We
direct private sector capital to provide,
develop and enhance primary care
premises. Some 6% of the UK’s NHS
patients now use our premises.

This important social dimension to
our work is reflected in our alignment
with the values of the NHS and our
commitment to the highest standards
of ethics and integrity. We have robust
ethical policies and control procedures
which help us ensure that good
business ethics are embedded across
the Group. The Government and NHS
control both new asset investment and
rental increases, based on a transparent
market mechanism. This reflects the
mutually beneficial partnership that
we have with the public sector.

For a number of years, we have been
working on designing and developing
an energy neutral building, which brings
together the latest thinking in sustainable
design practice and construction
techniques. Our first project under this
initiative is now nearing completion and
we hope to apply these innovative
approaches to future schemes in our
development pipeline. This is in addition
to our commitment to meeting the highest
possible BREEAM accreditation for our
schemes as evidenced by us achieving
a “Very Good” accreditation for both
properties completed in the year.

Strategic reportGovernanceFinancial statementsAdditional information6

Assura plc Annual Report and Accounts 2017

CEO review

Investment in primary care
premises is an essential
enabler for the necessary
NHS transformations.

Investment property value

£1,344.9m

up by 21.2%

Rent roll

£74.4m

up by 16.6%

Jonathan Murphy
CEO

Overview
A year of political disruption has
contributed towards uncertainty in
the financial and commercial property
markets. Despite this backdrop Assura
has continued to deliver superior risk
adjusted returns built on a secure and
long-term income stream funded by
the NHS. In the past year, our property
return was 9.7%, driven by an income
return of 5.3% and an increase in
property values adding a further 4.4%.

At the end of the financial year, in
March, Sir Robert Naylor released
his landmark review of the NHS
estate highlighting the crucial role
for primary care premises in enabling
the policy imperatives of dramatically
increasing evening and weekend GP
appointments, encouraging practices
to work together in networks or hubs
and increasing significantly the primary
care workforce. It is now clear that
mainstream thinking recognises that
investment in primary care premises is
an essential enabler to the necessary
NHS transformation. Assura’s bespoke
approach, one that works for the NHS,
for GPs, for wider community health
teams and for patients, is well suited
to deliver what is required.

Delivering long-term
outperformance in
property returns
Assura is a constituent of the IPD All
Healthcare Index and over the last five
years we have delivered an annualised
ungeared return of 8.9% This level of
consistent performance 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 strong returns achieved in this
five-year period are even more
creditable given the development
activity of this time has been at
historically low levels, as development
activity is a key driver of Assura’s
returns in two ways. Firstly, we are
typically able to source developments
at an effective yield on cost that is
100 basis points higher than through
acquisitions. Secondly, developments
provide evidence of construction cost
inflation that drives rental growth.

Our 398 medical centres have a rent roll
of £74.4 million with the geographically
diverse nature of the portfolio allowing
us to serve more than 6% of the UK’s
population. Our investment approach is
to identify those assets we believe are
best in class in their local catchment
areas. By acquiring those assets that
provide a broad range of services to
their local communities, we believe
these will provide greater prospects
for lease renewal on expiry and so
drive greater property returns over
the long term.

A good example of this approach can
be seen in our acquisition of Donnington
Medical Practice in Shropshire. This
centre serves over 12,500 patients and
provides 17 additional services on site
including blood pressure and coronary
heart disease prevention, dermatology,
minor surgery, and smoking cessation
programmes.

For key properties, we are not afraid
to acquire shorter leases, and use our
property skills to redevelop or enhance
the premises, whilst seeking to re-gear
the lease to a longer period.

www.assuraplc.com

Net initial yield movement

The attractiveness of the sector has resulted in a stable yield profile with modest
yield compression in recent years.

%
8

Jun
06

Jun
07

Mar
08

Mar
09

Mar
10

Mar
11

Mar
12

Mar
13

Mar
14

Mar
15

Mar
16

Mar
17

IPD monthly UK index initial yield Assura Net Initial Yield 15-year Gilt

points in the past year. The portfolio
net initial yield as at 31 March 2017
was 5.10%.

We completed two developments
during the year at a total development
cost of £13.8 million. This has added
£0.7 million to our annual rent roll.

We also add value through active asset
management of our properties, working
with our GP tenants on proposals for
physical extensions or agreeing new or
extended lease terms. During the year
we agreed four extensions, 15 new
leases and 10 lease extensions.
Together this asset management
activity added a further £0.4 million
to our rent roll.

The combined impact of our investment
and asset management activity has
been to achieve a 7% growth in EPRA
NAV to 49.4 pence per share.

Rental income
The key driver of our property return is the
income from our long-term leases. In the
year rental growth was 1.6% from settled
rent reviews. Most of our rent reviews are
on an open market basis, set by reference
to rental awards agreed with the District
Valuer on new schemes. This means
that they are influenced by land and
construction cost inflation over the
medium term. Over recent years there
has been significant inflation in these
costs, but this increased cost is not yet
fully reflected in our passing rents as the
slowdown in new schemes has reduced
the evidence of that inflation. 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.

Capital growth
The balance of our ungeared annualised
return is generated from capital growth,
which has seen a like-for-like valuation
growth of 5.6% in the past year. This
increase has primarily come from
a movement in yields with our net
equivalent yield moving by 23 basis

Strategic reportGovernanceFinancial statementsAdditional information
8

Assura plc Annual Report and Accounts 2017

CEO review continued

Maximising operational
efficiency
The property additions have been
integrated by our in-house property
management team, which is delivering
sector-leading tenant satisfaction
across our portfolio. In our annual tenant
satisfaction survey over 95% of our
tenants said they would recommend us
as potential landlords to other GPs, and
our GPs remain our greatest source of
referrals for new business. We remain
focused on understanding their evolving
needs and demands, so we can be at
the forefront of the significant investment
required in improving premises in
the future.

Our team of portfolio and investment
managers has 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 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
a 58% growth in EPRA earnings to
£40.3 million. This has been achieved

from 21% growth in our investment
property value and a reduction in our
EPRA Cost Ratio from 17% to 14%.

The overall impact of all of these factors
has enabled us to increase our quarterly
dividend from January 2017 by 9% to
0.60 pence per share.

Continued focus on our
specialist sector
Assura represents a unique proposition
in our sector as we act as investor,
developer and manager of our
properties. This gives us an unrivalled
knowledge and understanding of the
requirements of GPs for their premises.
We also maintain a database of every
primary care property in the UK that
enables us to identify and analyse
potential acquisition opportunities.
This exceptional market knowledge has
been a key contributor to our continued
success in expanding our portfolio
during the year and we closed the year
with a portfolio of 398 properties and
a valuation in excess of £1.3 billion.

The ongoing growth in the portfolio
has largely been achieved through
continued acquisitions. In the year
we completed £156 million of property
additions, which was the largest

Ten-year Total Return vs standard
deviation 2007-2016
(since the inception of the IPD All Healthcare Index)

Total Return
(per annum)

Residential index

Primary Healthcare

Bonds

Healthcare

Ofﬁce

Industrial

Equities

All property

Retail

15
increased risk

10
Risk (standard deviation)

5
reduced risk

Source: MSCI

10%

contributor to the £236 million increase
in investment property in the year.
This has enabled our rent roll to grow
by 17% to £74.4 million.

Our in-house development team is
currently busier than it has been for a
number of years. Although completed
schemes in the year numbered only two
sites, for a gross development cost of
£13.8 million, the number of potential
opportunities has increased markedly.
We are currently on site at a further six
schemes with a gross development cost
of £31 million, which is a significant uplift
from this time last year. The pipeline
remains strong, with a further eight
schemes with a gross development
cost of £36 million where we expect
to be on site within the next 12 months.

This increased level of activity is
encouraging. The schemes we are
working on are being driven by pressing
local requirements; however, we are yet
to see the full effect of national policy
imperatives or programmes. The
potential for the Sustainability and
Transformation Plans (“STPs”) and the
Estates and Technology Transformation
Fund is real, though we are not yet
seeing that potential converted into
significant investment.

We remain optimistic that these
central initiatives will result in increased
investment in the future. We have the
skills, resources and capital to support
and benefit from these plans when they
convert into action.

Funding further growth
At the year end we had an immediate
acquisition pipeline of £86 million
and we continue to identify new
opportunities that meet our
acquisition criteria.

To support this continued expansion
of the portfolio, we have been active
in sourcing new funding over the past
year. In May 2016, we agreed a £200
million unsecured revolving credit facility
with a club of four banks at an initial
margin of 150 basis points. At the year
end we had utilised £100 million of
these facilities and so to provide further
scope for expansion we have now, in
May 2017, increased this facility to
£250 million on the same terms.

www.assuraplc.com

There is no doubt that the policy
backdrop is more positive than it has
been for a number of years. However,
there is a risk that this fails to convert
into significant investment on the
ground. In recent years investment
has dropped to historically low levels
despite a number of seemingly positive
central initiatives.

Outlook
With a general election just a few weeks
away, all eyes will be on the next steps
for NHS policy after 8 June. Whatever
the make-up of Parliament, however,
the fundamentals for primary care estate
will remain steadfast: to reduce pressure
on hospitals, improve access to general
practice and help the people who rely
on health services the most to reach them
closer to home, GP surgery buildings and
primary care premises must be fit for the
future. Assura is uniquely placed both to
deliver and support in this time
of unprecedented change.

Jonathan Murphy
CEO
22 May 2017

In October 2016, Assura issued £100
million of unsecured 10-year notes at a
fixed rate of 2.65%. This was Assura’s
first issue in the US private placement
market and demonstrates our ability
to attract a new source of long-term
funding at an attractive rate. This
unsecured funding increases operational
flexibility and reduces transaction costs
associated with financing the expanding
property portfolio.

These new facilities highlight that the
increased financial strength of Assura is
enabling us to source new unsecured
funding at attractive rates. We have
sustained a strong, long-term and
diversified debt profile, with 81% of our
borrowings now at fixed rate with an
average maturity of 8.7 years, while
delivering a reduction in our weighted
average cost of debt from 4.84%
to 4.06%.

The loan to value ratio at the year
end was 37%, which provides further
capacity for growth as we maintain
a medium-term target range of 40%
to 50%.

Market developments
Our purpose is simple: to provide GPs
and patients with the buildings they
need now, for the NHS of today and
tomorrow. Providing a wider range
of health services closer to home,
from a broader range of primary care
professionals, is both more convenient
for patients and significantly less
expensive for the NHS. Without the right
buildings, however, the plans cannot
be delivered. The outdated and unfit
converted residential stock of surgery
premises must evolve into purpose built
medical centres, with the capacity and
the capability to meet the challenges
the NHS will face in the future.

Given the complex pressures on our
National Health Service, it is perhaps
no surprise that the prosaic matter of
bricks and mortar rarely makes it to the
top of the policy agenda. However, in the
past year the importance of improving
the quality of physical infrastructure has
been explicitly recognised as being part
of the solution.

Local STPs delivered this year set
out the optimal design for services
in 44 geographical areas. As ever,
there is a huge variety in the detail of the
documents. There is a common thread
across all the plans that the primary
care estate will be a crucial enabler
of what they are trying to deliver.

The plans highlight the need for a
significant increase in the primary
care workforce – with the potential
scope going significantly beyond
the recruitment of new GPs. More
community pharmacists, nurse
practitioners, physician associates and
mental health therapists will operate
from the primary care setting; however,
if primary care premises do not have
the capacity to host them, these
desperately needed boosts to staffing
levels simply cannot be achieved.

A larger workforce represents a shift
into a greater provision of primary care
at scale. This reflects that larger scale
practices can more easily manage extra
services and extended hours, as well as
potentially delivering greater efficiencies
in operations and back office functions.
To this end, there are a number of different
ways that GPs can work together:
through formal alliances, federations and
clusters of merged practices. All models
of working at scale rely upon larger and
more modern buildings.

Yet the level of government investment
in primary care premises remains at
historically low levels. The Estates and
Technology Transformation Fund,
offering £900 million of much-needed
investment for both GP premises and
surgery technology, has not resulted in
significant progress for buildings.
Demand for funding far outstrips supply,
and the pace of projects cannot hope
to match this demand. We must wait
to see how much of the pledged
£325 million of additional capital for
the most advanced STPs filters through
to improve primary care estate, and we
await more detail on NHS England’s
vision to create 150 urgent treatment
centres to take the pressure off
A&E units.

Of course, health policy and health
economics are extremely complex, so
we engage regularly with the NHS and
government to make the case for further
investment in primary care infrastructure,
both through our expanding in-house
capability and through our chairing of the
British Property Federation’s Healthcare
Committee. We believe that our model
offers the best solution to the NHS’s
capital problem for primary care estate,
so we work hard to ensure policymakers
have a clear understanding of the benefits
it can bring.

Strategic reportGovernanceFinancial statementsAdditional information10

Assura plc Annual Report and Accounts 2017

Our business model and strategy

A business model designed to
deliver superior risk adjusted returns.

What we need

Customer relationships
Knowledge of GPs’ evolving requirements through
our involvement in the design and management of
medical centres gives us a unique insight into their
property needs.

Assets
Our bespoke medical centres are constructed in
locations that are crucial to the local health economy
and to the highest sustainability standards.

People
Our team of 43 people covers the key skills of
real estate ownership and includes asset and property
management, development, investment, marketing
and financing.

Partners
We maintain strategic partnerships with the leading
architectural practice in the sector and a number of
specialist healthcare developers to complement our
in-house expertise.

Capital
The support of our shareholders, banking partners and
bondholders is crucial to sustaining our investment in
the UK’s health infrastructure.

Develop

Invest

Manage

How our strategy and business
model work together
Our strategic priorities drive the
behaviours of our team to support our
business model, ensuring everything we
do is tailored toward creating value for
our shareholders and stakeholders.

Read more on page 28-33

21.2% growth in investment property to £1,344.9 million.

1.57% rental growth from rent reviews settled in the period.

Total Property Return of 9.7%.

Drive development 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.

The market is becoming increasingly competitive

but our strong brand and reputation as a long-term
investor in the sector mean we are well placed to
secure further attractive opportunities.

Delivered two newly constructed, bespoke GP-led

medical centres.

Engaged with senior NHS leaders and politicians

to support transforming primary care.

Complete developments currently on site.
Promote benefits of investment in primary

care infrastructure for the NHS.

Work with emerging STPs to identify

development opportunities.

Further changes to the organisational structures or
policies of the NHS could lead to delays in further
investment in primary care infrastructure. However,
recent publications recommend an increasing
role for primary care service provision.

First zero carbon and energy neutral building on site.

Both of the two newly constructed medical centres

achieved “Very Good” BREEAM rating.

Develop more zero carbon medical centres of
the future for the NHS and continue investment
into the highest sustainability standards for
new developments.

Further investment in our team’s development.

Sustainable development and building design is an
area of constant change and we seek to be fully up
to date with the latest technologies and innovations.

Failure to recruit, develop and retain our team with
the right skills and experience may weaken our
ability to deliver against our strategic priorities.

EPRA Cost Ratio reduced to 13.7% and weighted

average cost of debt reduced to 4.06%.

EPRA EPS increased to 2.4 pence.

Total Accounting Return of 12.0%.

Seek further opportunities to expand the portfolio.
Continue to promote the Company to a wide
shareholder base and a diverse group of
debt funders.

Achieve further scale benefits.

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.

Strategic reportGovernanceFinancial statementsAdditional information20

Assura plc Annual Report and Accounts 2017

Summary of our
strategy in action

Claire Rick, Head of Public Affairs

Focus

Expertise

Maintaining a strategic focus on a highly
attractive market
Our success is built upon our in-depth knowledge
and understanding of local health economies, which
allow us to focus on those surgeries which best fit
our investment criteria and which will complement
our portfolio.

Keeping primary care at the core of our activities is
a strategy underpinned by the ever-growing policy
spotlight on the role of general practice, wider access
to clinical pharmacy and a range of other diagnostic and
treatment services in the community. By focusing on this
most pressing need – for the right buildings in the right
places for primary care – our business can make the
biggest difference for patients, GPs and the NHS.

Responding to the NHS agenda
The unique skills mix of our team works in tandem with
our UK database of primary care estate, so that we can
hold the most effective discussions with both current
and prospective tenants.

We are actively engaged with policymakers and
influencers at national and regional level to ensure that
the buildings and developments we design support
primary care policy for the long term, and that the
estate needed to support the transformation of the
NHS is getting the attention it requires in national capital
and estate planning. As chair of the British Property
Federation’s Healthcare Committee, we are putting our
expertise into action with colleagues across the sector.
This year we have met with ministers responsible for
NHS estate as well as MPs from all parties and leaders
in primary care.

UK population served by Assura buildings

86%

NHS/GP tenant covenant

www.assuraplc.com

Sustainability

Effectiveness

Investing in our people and
social infrastructure
It is not just our partnerships with GPs which are
designed for the long term. Sustainability is also a
hallmark of the way we design our buildings, how
we invest in our people and how we support better
health in our communities.

Our developments in progress are all on track to
achieve a BREEAM rating of at least “Very Good”,
thanks to our focus on designs which reduce impact
on the environment.

We continue to support charities in making a difference
to health in our local communities. In the past year this
included funding to help Life After Loss provide a new
fetal heart monitor for Warrington General Hospital,
allowing potential problems to be detected and tracked
earlier in pregnancy.

Leveraging our team’s skills
to maximum advantage
Projects to improve our buildings – such as our
refurbishment at Long Lane Surgery in Coalville,
Leicestershire – simply would not happen without
our teams working together to make effective use
of their specialist skill sets.

Our portfolio team is in regular contact with our
tenants to identify opportunities to improve and develop
buildings as the demands for space evolve and change,
while our development team works alongside to ensure
designs hit the mark, planning processes are smooth
and construction works managed.

100%

developments on track for BREEAM rating of
“Very Good” or better

400+

meetings with tenants during the year

Strategic reportGovernanceFinancial statementsAdditional information22

Assura plc Annual Report and Accounts 2017

Key performance
indicators

Assura is the UK’s leading healthcare REIT
In order to sustain the leadership position, 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 (“KPIs”). 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

Strategic priority

KPI and benchmark

Focus

Maintaining a strategic focus
on a highly attractive market

Expertise

Responding to the NHS agenda

IPD annualised five-year
Total Return
8.9%
IPD: 7.0%

Rental growth from
rent reviews
1.6%
2016: 1.2%

Total Property Return
9.7%
2016: 8.9%

% of tenant covenant
NHS/GP
86%
2016: 87%

WAULT
13.2 years
2016: 14 years

Complete developments
£13.8m 2 sites
2016: £16.4m 4 sites

Developments on site
£31.0m 6 sites
2016: £13.5m 2 sites

Sustainability

Investing in our people
and social infrastructure

BREEAM rating achieved on
developments – “Very Good” or better
100%
2016: 100%

Effectiveness

Leveraging our team’s skills
to maximum advantage

Average EPC rating
A
2016: B

EPRA Cost Ratio
13.7%
2016: 16.5%

Total Accounting
Return
12.0%
2016: 7.2%

EPRA EPS
2.4p
2016: 2.0p

Total Shareholder
Return
13.2%
2016: (11.4%)

Rental growth, being the weighted average annualised uplift

on reviews settled during the year, provides an indicator of

how cost inflation is translated into increased rent.

Total Property Return shows the return generated by our

portfolio on a debt free basis, with the IPD figure providing

an equivalent five-year annualised figure. This shows the

quality of our investments to deliver a combination of rental

income and capital growth.

NHS percentage is the proportion of our rent roll that is paid

directly by GPs or NHS bodies. Weighted Average Unexpired

Lease Term (“WAULT”) is the average period until the next

available break clause in our leases weighted by rent. These

measures show who we provide our buildings to and how

long our existing leases last for, demonstrating our position

as a long-term partner to the NHS.

Developments, both completed during the year and currently

on site, illustrate how our buildings are chosen by the NHS to

provide a modern facility to suit the primary care needs of that

particular location.

We have delivered rental growth of 1.6% from rent reviews

completed during the year. This slight increase against 2016

has been driven mainly by reviews linked to inflation but we

believe, with construction cost inflation returning, medium-term

prospects for rental growth are improving.

The Total Property Return for the year of 9.7% reflects the

capital growth achieved on the portfolio in addition to the

annual rental yield. The IPD five-year Total Return of 8.9% per

annum is in excess of the All Healthcare Benchmark of 7.0%,

demonstrating how our portfolio has delivered strong returns

over a sustained period.

In a year of growth, the WAULT of 13.2 years and effective NHS

backing of rent of 86% have remained strong, showing how

investments during the year fit with our existing portfolio.

Development activity has improved during the year with two

schemes completed during the year and six on site at the year

end. Although development activity in the sector has not yet

returned to the levels we would hope for, we have a pipeline of

eight schemes (development cost £36 million) that we would

hope to be on site in next 12–18 months.

BREEAM is the world’s foremost environmental assessment

method and rating for buildings, and sets the standard for

best practice in sustainable building design, construction

and operation. An Energy Performance Certificate (“EPC”)

gives a building a rating for energy efficiency. Strong

performance against these measures demonstrates

our commitment to building sustainable buildings that

improve the local infrastructure.

Both of the developments completed during the year achieved

our target of a BREEAM rating of “Very Good”, and exceeded

our target for EPC ratings by achieving an average of A.

In addition, we are on site with our first zero carbon and energy

neutral building, and we expect all buildings on site to meet our

BREEAM and EPC ratings targets.

A reducing EPRA Cost Ratio shows the efficiency and scale

benefits of our operating model, being costs as a percentage

of rental income.

EPRA EPS is a measure of recurring profit calculated in

accordance with EPRA guidelines.

Total Accounting Return is the amount generated for

shareholders in the form of dividends and movement in

EPRA NAV. TSR is the amount generated in the form of

dividends and movement in share price. These two measures

are key measures in assessing our performance in the form

of returns for shareholders and are the measures to which

Directors’ long-term incentive plans are linked.

The efficient integration of the 77 properties acquired during the

year has contributed to a reduction in our EPRA Cost Ratio to

13.7%. This cost efficiency, along with the growth achieved and

reduction in weighted average cost of debt, has been reflected

in our EPRA EPS increasing to 2.4 pence per share.

Our Total Accounting Return of 12.0% reflects capital growth

achieved during the year along with the consistent dividend

returned to shareholders. The TSR of 13.2% illustrates

how the ratio of share price to EPRA has increased. As

at 31 March 2017, the share price premium to EPRA NAV

was 17% (2016: 15%).

www.assuraplc.com

and our growth in net asset value (“NAV”). Lastly, we consider
Total Shareholder Return (“TSR”) as measured by the stock
market, which reflects the value of dividends paid and the
relative movement in our share price over the period.

This overriding objective is reflected in the long-term management
incentive schemes implemented, with rewards linked to both
TSR and NAV growth over a three-year period. Further detail
is provided in the Remuneration Report on pages 52 to 65.

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 TSR to our investors.

In order to achieve these objectives, we have four strategic
priorities and how we monitor ourselves against them is
outlined below:

Explanation

Performance

Rental growth, being the weighted average annualised uplift
on reviews settled during the year, provides an indicator of
how cost inflation is translated into increased rent.
Total Property Return shows the return generated by our
portfolio on a debt free basis, with the IPD figure providing
an equivalent five-year annualised figure. This shows the
quality of our investments to deliver a combination of rental
income and capital growth.

NHS percentage is the proportion of our rent roll that is paid
directly by GPs or NHS bodies. Weighted Average Unexpired
Lease Term (“WAULT”) is the average period until the next
available break clause in our leases weighted by rent. These
measures show who we provide our buildings to and how
long our existing leases last for, demonstrating our position
as a long-term partner to the NHS.

Developments, both completed during the year and currently
on site, illustrate how our buildings are chosen by the NHS to
provide a modern facility to suit the primary care needs of that
particular location.

We have delivered rental growth of 1.6% from rent reviews
completed during the year. This slight increase against 2016
has been driven mainly by reviews linked to inflation but we
believe, with construction cost inflation returning, medium-term
prospects for rental growth are improving.

The Total Property Return for the year of 9.7% reflects the
capital growth achieved on the portfolio in addition to the
annual rental yield. The IPD five-year Total Return of 8.9% per
annum is in excess of the All Healthcare Benchmark of 7.0%,
demonstrating how our portfolio has delivered strong returns
over a sustained period.

In a year of growth, the WAULT of 13.2 years and effective NHS
backing of rent of 86% have remained strong, showing how
investments during the year fit with our existing portfolio.
Development activity has improved during the year with two

schemes completed during the year and six on site at the year
end. Although development activity in the sector has not yet
returned to the levels we would hope for, we have a pipeline of
eight schemes (development cost £36 million) that we would
hope to be on site in next 12–18 months.

BREEAM is the world’s foremost environmental assessment
method and rating for buildings, and sets the standard for
best practice in sustainable building design, construction
and operation. An Energy Performance Certificate (“EPC”)
gives a building a rating for energy efficiency. Strong
performance against these measures demonstrates
our commitment to building sustainable buildings that
improve the local infrastructure.

Both of the developments completed during the year achieved
our target of a BREEAM rating of “Very Good”, and exceeded
our target for EPC ratings by achieving an average of A.

In addition, we are on site with our first zero carbon and energy
neutral building, and we expect all buildings on site to meet our
BREEAM and EPC ratings targets.

A reducing EPRA Cost Ratio shows the efficiency and scale
benefits of our operating model, being costs as a percentage
of rental income.

EPRA EPS is a measure of recurring profit calculated in

accordance with EPRA guidelines.

Total Accounting Return is the amount generated for

shareholders in the form of dividends and movement in
EPRA NAV. TSR is the amount generated in the form of
dividends and movement in share price. These two measures
are key measures in assessing our performance in the form
of returns for shareholders and are the measures to which
Directors’ long-term incentive plans are linked.

The efficient integration of the 77 properties acquired during the
year has contributed to a reduction in our EPRA Cost Ratio to
13.7%. This cost efficiency, along with the growth achieved and
reduction in weighted average cost of debt, has been reflected
in our EPRA EPS increasing to 2.4 pence per share.

Our Total Accounting Return of 12.0% reflects capital growth
achieved during the year along with the consistent dividend
returned to shareholders. The TSR of 13.2% illustrates
how the ratio of share price to EPRA has increased. As
at 31 March 2017, the share price premium to EPRA NAV
was 17% (2016: 15%).

Focus

Maintaining a strategic focus

on a highly attractive market

Expertise

Responding to the NHS agenda

Sustainability

Investing in our people

and social infrastructure

Effectiveness

Leveraging our team’s skills

to maximum advantage

Rental growth from

IPD annualised five-year

Total Return

8.9%

IPD: 7.0%

rent reviews

1.6%

2016: 1.2%

9.7%

2016: 8.9%

Total Property Return

% of tenant covenant

NHS/GP

86%

2016: 87%

WAULT

13.2 years

2016: 14 years

Complete developments

Developments on site

£13.8m 2 sites

£31.0m 6 sites

2016: £16.4m 4 sites

2016: £13.5m 2 sites

BREEAM rating achieved on

developments – “Very Good” or better

100%

2016: 100%

2016: B

Average EPC rating

EPRA Cost Ratio

EPRA EPS

Total Accounting

Total Shareholder

13.7%

2016: 16.5%

Return

12.0%

2016: 7.2%

2.4p

2016: 2.0p

Return

13.2%

2016: (11.4%)

Strategic reportGovernanceFinancial statementsAdditional information

Assura plc Annual Report and Accounts 2017

Resources and relationships

Managing our resources to
maximise value in the long-term.

What makes us unique is
our emphasis on long term
relationships to support
our “develop, invest and
manage” business model,
aiming to create value for
all stakeholders.

Brand
We place great value on our reputation
as a long-term partner to our GP
tenants, supporting them through the
lifecycle of their medical centre. This
reputation and our excellent relationships
within the GP community lead to off
market acquisition opportunities with
GPs as our greatest source of referrals.

Our established track record in
providing state of the art primary
care premises helps secure our
appointment on developments.

People
We have a small but very
knowledgeable, skilled and focused
team. Our internally managed model is
highly scalable and our development
capability enables us to grow the
business without significant increase
in overheads.

We recognise that our success
depends on the quality of our people
and we encourage all of our employees
to reach their full potential. Staff who
wish to undertake relevant training are
supported through study support and
paid study leave, and we currently have
nine members training for professional
qualifications, including accountancy,
chartered secretarial, chartered
surveyor and marketing. We also seek
to promote from within and there have
been several internal promotions during
the past few years.

We strive to provide a great place to
work and focus on employee wellbeing,
providing private medical insurance,
a cycle to work scheme and other
incentives to promote a healthy lifestyle.
We understand the value of gender
diversity and the structure and
gender makeup of the Board, senior
management team and employee
workforce is shown on page 27.

Our whistleblowing hotline allows staff
and suppliers to raise any issues of
concern in complete confidence. No
issues have been raised this year.

All of the above help us to attract,
engage and develop our people to
enable the effective delivery of the
Group’s strategy over the long-term.

95.9%

of tenants would recommend us

shareholder meetings held
in the year

“ As far as the sale and leaseback process
is concerned, I found that Assura and NHS
England have both been very supportive. As a
result, we are now in a good position to recruit
an additional doctor to work at the medical
centre. Thank you for your very kind support.”

Dr Eddie F Lee
Featherstone Family Health Centre

www.assuraplc.com

Customer relationships
Our dedicated team of asset managers
looks after our tenants’ property needs
through regular communication and
a supportive approach to property
management.

Customer satisfaction is vital for the
business and we monitor this through
regular surveys. In our most recent
survey, over 95% of tenants who
responded said they would recommend
us as potential landlords to other GPs.

We seek to develop a long-lasting
relationship with GPs, working
to meet their current and future
premises aspirations.

Capital and funding
Over the past few years we have
significantly increased our shareholder
base, strengthening our financial
soundness. Shareholder engagement
is a key priority for the business and 95
investor meetings have been held in the
year. We engage with our shareholders
in an open and transparent way.

We have continued to strengthen
our financial position through reducing
our financing costs and improving
the financial structure to make it more
appropriate to support our business.
We have diversified our debt funding
and obtained unsecured lending
through a revolving credit facility
and a US private placement. Having
these unsecured facilities increases
operational flexibility and reduces
transaction costs associated with
financing properties. We are grateful
to our shareholders and debt providers
for their support.

“ Assura were absolutely fantastic to work with;
so straightforward and very good at working
with the purchaser to achieve tight timescales.”

Kevin Whitfield
Wellspring Properties

Strategic reportGovernanceFinancial statementsAdditional information26

Assura plc Annual Report and Accounts 2017

Resources and relationships continued

Supplier partnerships
We work closely with our specialist
healthcare developer partners, including
the leading architectural practice in the
sector, West Hart Partnership, to secure
development appointments and create
state of the art healthcare premises.

We encourage the use of local suppliers
to support local economies and our
suppliers must confirm adherence to
our “zero tolerance” modern slavery
and anti-bribery policies.

We have worked hard with our external
lawyers to streamline the acquisition
and development process, increase
efficiencies and reduce costs.

Environmental impact
We are committed to sustainable
development and the creation of
bespoke leading edge premises with
minimal running costs and a flexible
design capable of adapting to
evolving needs.

We realise that our healthcare
premises are crucial to the local health
economy and aim to enhance the
patient experience wherever possible.

To reduce the environmental impact of
new developments, we aim to achieve
BREEAM rating of “Excellent” where
possible. The two new build properties
completed during the year achieved
ratings of “Very Good”, and our first
zero carbon and energy neutral building
is currently on site.

The greenhouse gas emissions from
operating activities and property
occupied by the Group represented
91.3 mt CO2e (2016: 74.5mt CO2e).

Jim Hart and Steve West – West Hart Partnership

“ I have worked in conjunction with Assura within
my role as a Practice Manager for the past
four years. I have developed a good working
relationship with my portfolio manager Andy
ensuring we provide a safe, comfortable,
modern premises for our patients and
staff. Assura are committed to developing
GP premises and aim to provide continuous
support to practices to accommodate the
changes within primary care.”

Michelle Frankish, Practice Manager
Eastfield Medical Centre

www.assuraplc.com

Employee gender diversity

Male

Female

Board of Directors

Senior management

Employees

Total no. of employees*

Including Non-Executive Directors.

As a percentage breakdown
Board of Directors

80%

Senior management

57%

Employees

54%

20%

43%

46%

Photovoltaic cells at Ardudwy Health Centre, Harlech

Database and technology
We have created a bespoke database
of GP premises throughout the UK and
this assists with targeted marketing and
evaluation of acquisition opportunities
with regard to their strategic importance
to the local health economy.

Our investment in IT allows staff to
access all relevant information when
attending clients’ premises and to
work remotely if necessary.

The threat of cyber-attack evolves
in sophistication and scope and we
continue to monitor the security of
our systems to mitigate this risk.

The NHS
This is a particularly challenging time for
the NHS, as the headlines remind us
every day. And behind those headlines,
primary care estate sits as a relatively
unheard story – yet recognised this year
as second only to workforce in the list
of factors that will ensure a sustainable
future for primary care.

We believe the primary care estate
is a fundamental part of the NHS
conversation: without the right
buildings, in the right places for
patients, many GPs simply will not have

the infrastructure they need to offer
extended appointment hours, digital
consultations and more services, tests
and treatment in the community. We
have welcomed the Government’s focus
on this issue this year, with the ongoing
Estates and Technology Transformation
Fund, the Naylor Review highlighting the
important role of private investment for
primary care premises and additional
capital announced for the most
advanced STPs. However, it is clear
that despite these initiatives, investment
in the primary care estate still is not
moving far enough or fast enough to
meet the changing needs of GPs and
to support the shift of services out
of hospital and closer to home.

We are investing in specialist, in-house
expertise to help us engage with and
inform NHS organisations, national
and local government, sector bodies,
patient groups and academics on ways
in which we can help ensure the right
primary care estate is in place today for
the NHS of tomorrow. We are proud to
chair the British Property Federation’s
Healthcare Committee, working with
our colleagues and partners across
health and social care property to
provide data, expert analysis and
policy solutions to government.

Strategic reportGovernanceFinancial statementsAdditional information
28

Assura plc Annual Report and Accounts 2017

Risk management

Effective risk management is crucial
in delivering our strategic objectives.

Risk management is the
responsibility of the Board,
which sets the risk appetite
and tolerances for the
business, determines the
nature and extent of the
principal risks the Company
is willing to take in achieving
its strategic objectives
and ensures that risk
management and internal
controls are embedded in
the business’s operations.

c
g
e
t
a
r
t

Changes to government policy

Competitor threat

Reduction in investor demand

Failure to communicate

We target above market, risk adjusted
returns in our chosen healthcare real
estate assets, by developing assets
ourselves (as opposed to purchasing
only completed developments) and using
debt to gear returns up to 50% loan to
value (“LTV”). However, we seek to avoid,
trap or heavily mitigate risks in all other
areas of the business, including:

Property event risk – by full insurance

cover, full due diligence and
committed funds for acquisitions

Development risk – by only undertaking
developments where there is already
an agreement for lease in place

Control risk – by clear management

controls and Board reporting
Gearing risk – we maintain an

appropriate range of lenders and debt
maturities with variable rate debt being
restricted to one third of our loan book,
on gearing up to 50% LTV

Political risk – which could limit future

growth but does not affect the
current business assets.

The Risk Committee met six times in
the year, to review the risk register,
identify emerging risks and conduct
“deep dives” into individual risks to
ensure that sound assurance is in

place. The Risk Committee reports to
the Audit Committee, which regularly
monitors risk management and
internal control systems and reports
to the Board.

The Board has carried out a robust
assessment of the principal risks facing
the business. These are the risks which
would threaten its business model, future
performance, solvency or liquidity and
are summarised on pages 30 to 33.

The Board has also considered which
of the Group’s strategic objectives may
be affected by these risks and its
findings are set out in the table below.

During the year the Risk Committee,
Audit Committee and the Board
considered the impact of Brexit (on
the basis that the Group is a wholly
UK based operation with no reliance
on exports) and concluded that it did
not, in itself, constitute a significant risk
to the business. Cyber security was
investigated and, following an upgrade
to the IT systems, security and
processes during the year, it was
considered that an appropriate level
of risk mitigation was in place.

Strategic objective

Focus

Expertise

Sustainability

Effectiveness

l Reduction in availability and/or increase in cost of finance

Failure to maintain capital structure and gearing

a
c
n
a
n
F

a
n
o
i
t
a
r
e
p
O

k
s

i
r

a
p
c
n

i
r
P

l Development overspend

Key staff dependency

Underperformance of assets

www.assuraplc.com

Based on this consideration of
principal risks and the forecasting
exercise completed, the Board has
a reasonable expectation that the
Company will be able to continue
in operation and meet its liabilities as
they fall due over the five-year period
assessed. The Board considers that
the long-term nature of the leases and
financing arrangements in place means
that the business model would remain
viable in the event that further growth
of the business was not achieved.

Having made reference to the principal
risks facing the Company, as laid out on
pages 30 to 33, sensitivities which are
considered severe but within the realms
of possibility have been applied to the
assumptions to review the potential
impact on the Company’s results and
financial position. Specific sensitivities
applied include increases in interest
rates, a prolonged downturn in property
investment valuations, an increased
risk of tenant default and a sustained
absence of rent review growth. This
assessment has not assumed any
significant changes to government
policy with respect to NHS estates
strategies or the GP reimbursement
model, or any specific implications
as a result of Brexit.

Viability statement
In accordance with provision C.2.2 of the
UK Corporate Governance Code 2014
(“the Code”), the Board has conducted a
review of the Company’s current position
and principal risks to assess the
Company’s longer-term viability.

A five-year period is considered
appropriate for this review as this
corresponds with the Company’s
strategic planning timeframe. In
addition, the long-term nature of
leases and debt facilities supports
an assessment over this period.

Company forecasts are prepared using
a comprehensive financial model which
projects the income statement, balance
sheet, cash flows and key performance
indicators over the relevant timeframe.
The model allows various assumptions
to be applied and altered in respect
of factors such as level of investment,
investment yield, availability and cost
of finance, rental growth and potential
movements in interest rates and
property valuations.

Strategic reportGovernanceFinancial statementsAdditional information30

Assura plc Annual Report and Accounts 2017

Principal risks and uncertainties

Strategic risks

Changes to government policy

Risk

Avoid

Trap

Mitigate

The Group proactively
engages with the Government
over policy that could impact
the business, both directly
and through the Healthcare
Committee of the British
Property Federation.

The Board monitors
changes in government
policy and management
reports to the Board at
every meeting.

Reduced funding for
primary care premises’
expenditure 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.

Comment

Movement
in year

Net risk rating

Estates strategies and STPs have recommended increasing investment in the primary care estate.

The reimbursement mechanism is not currently under review.

The Group has recently recruited a head of public affairs with NHS experience to make the case to the Government and the NHS of the benefit of
investment in primary care infrastructure.

Competitor threat

Risk

Avoid

Trap

Mitigate

Increased competition from
new purchasers could lead
to a reduction in our ability
to acquire new properties
and a general increase in
prices across the sector.

We maintain our
specialist knowledge, team
structure, and strong brand
recognition with GPs, and
focus heavily on customer
care.

Continuing use of our
specialist expertise.

The Board receives
regular property reports,
highlighting where we have
lost to competitors and
when new entrants are
identified. The market is
increasingly competitive and
every proposed transaction
is reviewed by our
Investment Committee to
ensure that the prospective
returns are adequate.

Movement
in year

Net risk rating

Comment

A further significant increase in asset prices increases the risk of these returns not achieving our required level and our rate of acquisitions slowing significantly.

We have made substantial additions to our portfolio during the year.

Reduction in investor demand

Risk

Avoid

Trap

Mitigate

We are open in
communicating our strategy
to investors and maintain
an LTV range which is
acceptable to the market.

The dividend yield and the
underlying strength of the
cash flows supporting it
remain attractive relative
to other asset classes.

The overall economy and
its impact on the Group’s
operations are regularly
assessed and considered
in reviewing the Group’s
strategy.

The Board receives regular
reports on investor relations
and the development of our
share register.

Reduced investor
demand for UK primary care
property could lead to a
reduction in asset valuations
and a fall in future profits.

This could arise from:
Changes in NHS policy
Health of the UK economy
Availability of finance
Relative attractiveness
of other asset classes.

Comment

Movement
in year

Net risk rating

The fundamentals for our sector remain very strong and the longevity and security of our cash flows have continued to generate strong investor demand

for our shares in the past year.

www.assuraplc.com

Key:

New

No change

Low

Medium

High

Movement
in year

Failure to communicate

Risk

Avoid

Trap

Mitigate

Failure to adequately
communicate the
Company’s strategy
and explain performance
may result in an increased
disconnect between
investors’ perceptions
of value and actual
performance.

Strategic priorities are clearly
articulated in corporate
communications and the
Group’s performance is
transparently reported.

We communicate
regularly with investors
and analysts.

The Board receives regular
reports on investor attitudes
and the market.

The Group maintains close
links with its two brokers,
which communicate
investor thoughts and
concerns.

Investor communication,
particularly through
face-to-face meetings,
remains a key priority.

Net risk rating

Comment

95 meetings have been held during the year.

Financial risks

Reduction in availability and/or increase in cost of finance

Risk

Avoid

Trap

Mitigate

The Group has
predominantly long-term
facilities which reduce
these refinancing risks.

The Group regularly
monitors and manages
its refinancing profile and
cash requirements.

The Group actively engages
with a range of funders to
ensure a breadth of funder
and maturity profiles.

We continue to explore
financing options with
other lenders as well
as maintaining strong
relationships with
existing lenders.

A reduction in available
financing could adversely
affect the Group’s ability to
source new funding and
refinance existing facilities.

This 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.

Comment

Movement
in year

Net risk rating

The current appetite for lending into the sector is very strong, given the quality of the underlying cash flows and, during the year, the Group obtained £300 million
of unsecured debt at attractive rates.

Failure to maintain capital structure and gearing

Risk

Avoid

Trap

Mitigate

It is possible to dispose
of properties to preserve
covenants as certain
facilities are unsecured.

Property valuations are
inherently uncertain and
subject to significant
judgement.

A fall in property values or
income could adversely
affect bank covenants.

Breach of covenants could
lead to forced asset
disposals which could
reduce the Group’s net
assets and profitability.

Valuations and yields are
regularly benchmarked
against comparable
portfolios.

The Board has established
a target range for a net LTV
ratio over the medium term
of 40% to 50%. All financial
forecasting, including
for new acquisitions,
considers gearing and
covenant headroom.

The Group engages two
external valuers to review
property valuations.

The valuations are formally
reviewed by the Board twice
a year.

Covenant headroom
and gearing are regularly
monitored with reference
to possible valuation
movements and future
expenditure.

The Board regularly reviews
the capital structure of
the Group.

Comment

The level of gearing is currently at 37% and this provides generous covenant headroom.

Movement
in year

Net risk rating

Strategic reportGovernanceFinancial statementsAdditional information32

Assura plc Annual Report and Accounts 2017

Principal risks and uncertainties continued

Operational risks

Development overspend

Risk

Avoid

Trap

Mitigate

Development risk could
adversely impact the
performance of the Group as
a result of cost overruns and
delays on new projects.

The Group has a dedicated
and experienced
development team.

The Group’s policy is to
engage in developments
that are substantially pre-let
with fixed price or capped
price build contracts.

A high level of due diligence
is undertaken before works
commence and detailed
designs are negotiated to
prevent variations.

Regular reviews are
conducted of latest cost
estimates as each project
progresses.

We remain confident of our
ability to manage this risk
through our experienced
team of development
surveyors and reduce
the potential risk through
the use of fixed price
contracts and the use
of performance bonds.

A performance bond
insures against the risk
of the main contractor
becoming insolvent.

Comment

The potential impact of this has not changed during the year as the number of developments remains at a historically low level.

Key staff dependency

Risk

Avoid

Trap

Mitigate

Failure to recruit,
develop and retain staff and
Directors with the right skills
and experience may result
in underperformance.

Succession planning, team
structure and skill sets are
regularly evaluated and
planned.

The appraisal process acts
as a two way discussion
forum to identify employee
aspirations and any
dissatisfaction.

Any employee resignations
are reported at each
Board meeting.

Competitive salary and
benefit packages are
aligned with appropriate
peer groups and periodically
benchmarked.

Professional development
and training are encouraged
and costs are met by
the Group.

Succession plans are
in place for each
department.

Long-term incentive plans
span five-year periods to
encourage retention of
key staff.

Movement
in year

Net risk rating

Movement
in year

Net risk rating

Comment

Nine members of staff are currently working towards a professional qualification.

We successfully recruited six qualified surveyors, a qualified accountant and a head of public affairs in the year and staff turnover remains low.

www.assuraplc.com

Key:

New

No change

Low

Medium

High

Movement
in year

Net risk rating

Underperformance of assets

Risk

Avoid

Trap

Mitigate

Not all rent reviews
are upwards only and
challenges to reviews and
appeals could lead to lack
of rental growth.

The Group engages
experienced third parties
to conduct rent reviews.

Leases are carefully
reviewed on acquisition and
the Group does not acquire
leases with a tenant right
to trigger a downward
rent review.

The strategic importance of
a practice to its location is a
key investment decision.

We are in regular contact
with GPs to ensure there are
no financial issues.

Loss of income could
arise from failing practices
handing back GP contracts,
losing the right to rent
reimbursement, and
becoming unable to meet
their financial obligations
under the lease.

The Group targets Retail
Price Index (“RPI”) reviews
for new leases but if this is
unachievable then open
market upwards only
reviews or open market
landlord trigger only
reviews are accepted.

We liaise with GPs and NHS
commissioning bodies to
ensure continuing provision
of services from that practice.
GPs remain personally liable
as named individuals under
the lease. We review financial
information provided by the
NHS on our tenants and
as part of the acquisition
due diligence.

Comment

Approximately 28% of leases have fixed uplifts or are linked to RPI.

There are very limited cases of GPs threatening to hand back medical contracts and we are in active discussion with the tenants and NHS commissioning
bodies in these cases.

Strategic reportGovernanceFinancial statementsAdditional information34

Assura plc Annual Report and Accounts 2017

Business review

A year of growth delivering
further scale benefits.

Portfolio as at 31 March 2017
£1,315.3 million (2016:
£1,088.0 million)
Our business is built on our investment
portfolio of 398 properties, with a
passing rent roll of £74.4 million
(2016: £63.8 million), 86% of which is
underpinned by the NHS. The WAULT
is 13.2 years and 75% of the rent roll
will still be contracted in 2027.

At 31 March 2017, our portfolio of
completed investment properties was
valued at a total of £1,315.3 million (see
Note 10 to the accounts, 2016: £1,088.0
million), which produced a net initial
yield (“NIY”) of 5.10% (2016: 5.29%).
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 5.29% (2016: 5.52%). Adjusting
this Royal Institution of Chartered
Surveyors standard measure to reflect
the advanced payment of rents, the true
equivalent yield is 5.47% (2016: 5.72%).

Our EPRA NIY, based on our passing
rent roll and latest annual direct property
costs, was 5.05% (2016: 5.23%).

Net rental income

Valuation movement

2017
£m

67.9

56.5

Total Property Return 124.4

2016
£m

58.4

36.4

94.8

Expressed as a percentage of opening
investment property plus additions,
Total Property Return was 9.7%
compared with 8.9% in 2016.

Our annualised Total Return over the
five years to 31 December 2016 as
calculated by IPD was 8.9% compared
with the IPD All Healthcare benchmark
of 7.0% over the same period.

The valuation gain in the year of £56.5
million represents a 5.6% uplift on a
like-for-like basis net of actual purchase
costs associated with properties acquired
during the year. The uplift has arisen due
to the downward pressure on yields with
increased demand for 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 1.49%
at 31 March 2017.

Total Property Return

9.7%

2016: 8.9%

Capital invested

£178.9m

2016: £144.9m

EPRA Cost Ratio

13.7%

2016: 16.5%

Investment and
development activity
We have invested substantially during
the period, with this expenditure split
between investments in completed
properties, developments, forward
funding projects, extensions and
fit-out costs enabling vacant space
to be let as follows:

Acquisition of completed
medical centres

Developments/forward
funding arrangements

Like-for-like portfolio
(improvements)

Total capital expenditure

2017
£m

155.6

20.9

2.4

178.9

The bulk of the growth in our investment
portfolio has come from the acquisition
of 76 properties, seeing us invest £155.6
million during the period. Details of our
properties valued over £10 million are
on page 3.

Despite the continued delay in NHS
approval of new developments, we have
completed two developments during
the period (both under forward funding
agreements) with a total development
cost of £13.8 million. This has added
£0.7 million to our annual rent roll and
generated a 5.0% yield on cost.

During the year we recorded a
revaluation gain of £1.5 million in
respect of investment property under
construction and a deficit of £0.7 million
in respect of land held for sale. This
resulted in a net gain of £0.8 million
(2016: £0.7 million).

As at 31 March 2017, we had six
developments on site under a forward
funding agreement, with a total
committed investment value of £31.0
million, and a further eight which we
would hope to be on site shortly
(estimated cost of £36.0 million).

Live developments and forward funding arrangements

West Gorton

Swansea

Kibworth

Woodville

Middlesbrough

Wivenhoe

Estimated
completion
date

July-17

Dec-17

Jun-17

Oct-17

Jan-18

Development
costs

Costs
to date

Size

£3.5m

£2.0m

£2.8m

£2.9m

£18.3m

£1.5m

£2.3m 1,280 sq.m

£1.2m

£1.5m

£1.6m

979 sq.m

975 sq.m

993 sq.m

£4.7m 4,389 sq.m

£0.5m

628 sq.m

Portfolio management
We have continued to deliver rental
growth and have successfully
concluded on 156 rent reviews during
the year to generate a weighted average
annual rent increase of 1.57% (2016:
1.20%) on those properties. Our
portfolio benefits from a 28% weighting
in fixed, RPI and other uplifts which
generated an average uplift of 2.49%
during the period. The majority of our
portfolio is subject to open market
reviews and these have generated
an average uplift of 0.88% during
the period.

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.

During the period we have secured
15 new tenancies with an annual rent
roll of £0.4 million covering 4,377 square
metres. Our EPRA Vacancy Rate was
2.1% (2016: 3.0%).

Administrative expenses
The Group analyses cost performance
by reference to EPRA Cost Ratios
(including and excluding direct vacancy
costs) which were 13.7% and 12.4%
respectively (2016: 16.5% and 16.0%).

We also measure operating efficiency
as the proportion of administrative
costs to the average gross investment
property value. This ratio during the
year was 0.57% (2016: 0.60%) and
administrative costs stood at £7.0
million (2016: £6.1 million).

www.assuraplc.com

Portfolio analysis
by capital value

Number of
properties

Total
value
£m

Total
value
%

<£1m

53.5

£1–5m

245

618.5

£5–10m

>£10m

322.2

321.1

398 1,315.3

100

Portfolio analysis
by region

Number of
properties

Total
value
£m

Total
value
%

North

South

Midlands

Scotland

Wales

147

127

538.7

391.6

274.2

44.8

66.0

398 1,315.3

100

Portfolio analysis
by tenant covenant

GPs

NHS body

Pharmacy

Other

Total
rent roll
£m

Total
rent roll
%

50.3

13.7

5.6

4.8

74.4

100

Strategic reportGovernanceFinancial statementsAdditional information

Assura plc Annual Report and Accounts 2017

Business review continued

Financing
In May 2016, we replaced our existing
£120 million revolving credit facility with
a new five-year £200 million facility on
an unsecured basis. The initial interest
rate is 150 basis points above LIBOR,
subject to leverage. Subsequent to the
year end, we have further extended this
facility to £250 million.

In October 2016, we announced that
the Group had signed agreements in
the US private placement market for
new unsecured, 10-year notes totalling
£100 million. These have a fixed interest
rate of 2.65% and were drawn in full.

At 31 March 2017, we had undrawn
facilities and cash of £123.3 million.

2017

2016

£499.6m £327.9m

8.7 years 10.2 years

Details of the facilities and their
covenants are set out in Note 17
to the accounts.

Net finance costs presented through
EPRA earnings in the year amounted
to £20.6 million (2016: £24.0 million). In
addition, £1.4 million of loan issue costs
were written off following the change in
the revolving credit facility.

EPRA earnings

Net rental
income

Administrative
expenses

Net finance
costs

Share-based
payments and
taxation

EPRA
earnings

2017
£m

2016
£m

67.9

58.4

(7.0)

(6.1)

(20.6)

(24.0)

–

(2.8)

40.3

25.5

4.06%

4.84%

The movement in EPRA earnings can
be summarised as follows:

81%

296%

37%

88%

218%

30%

Interest cover is the number of times
net interest payable is covered by
EPRA earnings before net interest.

Our LTV ratio currently stands at 37%,
which is below our target range of
40–50% but will increase as we invest
in our pipeline in the short term. 81%
of the debt facilities are fixed with a
weighted average debt maturity of 8.7
years compared with a WAULT of 13.2
years, which highlights the security of
the cash flows of the business.

Year ended 31 March 2016

Net rental income

Administrative expenses

Net finance costs

Share-based payments
and taxation

Year ended 31 March 2017

£m

25.5

9.5

(0.9)

3.4

2.8

40.3

EPRA earnings has grown 58% to
£40.3 million in the year to 31 March
2017 reflecting the property acquisitions
completed and the reduced finance
costs from reducing our LTV and the
average cost of borrowings.

Financing
statistics

Net debt

Weighted
average debt
maturity

Weighted
average
interest rate

% of debt at
fixed/capped
rates

Interest cover1

Loan to value

Alternative Performance
Measures ("APMs")
The financial performance for the year
is reported including a number of APMs
(financial measures not defined under
IFRS). We believe that including these
alongside IFRS measures provides
additional information to help
understand the financial performance
for the year and calculations with
reconciliations back to reported IFRS
measures are included where possible.

Underlying profit is no longer reported,
to avoid confusion, being similar to the
industry standard EPRA measure.

Earnings per share
The basic earnings per share (“EPS”)
on profit for the period was 5.8 pence
(2016: 2.2 pence).

EPRA EPS, which excludes the
net impact of valuation movements,
non-recurring finance costs and
gains on disposal, was 2.4 pence
(2016: 2.0 pence).

Based on calculations completed in
accordance with IAS 33, share-based
payment schemes are currently
expected to be dilutive to EPS, with
3.3 million new shares expected to be
issued. The dilution is not material as
illustrated by the table below:

EPS measure

Profit for year

EPRA

Basic

5.8p

2.4p

Diluted

5.8p

2.4p

Dividends
Total dividends paid in the year to
31 March 2017 were £37.0 million
(2016: £27.2 million) or 2.25 pence
per share (2016: 2.05 pence per share).
£5.1 million of this was satisfied through
the issuance of shares via scrip.

www.assuraplc.com

Net assets
EPRA NAV movement

EPRA NAV at
31 March 2016

EPRA
earnings

Capital
(revaluations
and capital
gains)

Dividends

Shares issued

Other

EPRA NAV at
31 March 2017

Pence

£m

per share

754.5

46.1

40.3

2.4

56.4

(37.0)

1.7

1.6

3.3

(2.3)

–

(0.1)

817.5

49.4

Our Total Accounting Return per share
for the year ended 31 March 2017
is 12.0% of which 2.25 pence per
share (4.9%) has been distributed to
shareholders and 3.3 pence per share
(7.1%) is the movement on EPRA NAV.

As a REIT with the requirement to
distribute 90% of taxable profits, the
Group expects to pay out as dividends
at least 90% of recurring cash profits.
All dividends paid during the year were
normal dividends (non-PID) with an
associated tax credit, as a result of
brought forward tax losses and
available capital allowances. It is
expected that some proportion of
dividends paid out in the 2017/18
financial year will need to include
a PID element.

The table below illustrates our cash
flows over the period:

Opening cash

Net cash
flow from
operations

Dividends paid

Investment:

Property
acquisitions

Development
expenditure

Sale of
properties

Other

Financing:

Net proceeds
from equity
issuance

Net
borrowings
movement

Closing cash

2017
£m

44.3

2016
£m

66.5

39.0

(31.9)

22.9

(26.3)

(157.9)

(122.5)

(19.9)

(17.7)

1.4

(0.3)

1.5

(0.2)

–

299.1

148.8

23.5

(179.0)

44.3

Net cash flow from operations differs
from EPRA earnings due to movements
in working capital balances, and
non-cash items such as share-based
payment charges and movements
in deferred tax.

Strategic reportGovernanceFinancial statementsAdditional information
38

Assura plc Annual Report and Accounts 2017

Business review continued

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 within the real estate
sector across Europe. This section details the rationale for
each performance measure as well as our performance
against each measure.

Summary table

EPRA EPS (p)

EPRA NAV (p)

EPRA NNNAV (p)

2017

2.4p

49.4p

44.7p

2016

2.0p

46.1p

42.4p

EPRA NIY (%)

5.05% 5.23%

EPRA “topped-up”
NIY (%)

5.05% 5.23%

EPRA Vacancy Rate

2.1%

3.0%

EPRA Cost Ratio
(including direct
vacancy costs) (%)

EPRA Cost Ratio
(excluding direct
vacancy costs) (%)

13.7% 16.5%

12.4% 16.0%

EPRA EPS

2.4p

2016: 2.0p

Diluted EPRA EPS

2.4p

2016: 2.0p

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 7
to the accounts.

EPRA NAV

49.4p

2016: 46.1p

EPRA NNNAV

44.7p

2016: 42.4p

Definition
NAV adjusted to include properties
and other investment interests at fair
value and to exclude certain items not
expected to crystallise in a long-term
investment property business.

Purpose
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 8 to the accounts.

Definition
EPRA NAV adjusted to include the
fair values of (i) financial instruments,
(ii) debt and (iii) deferred taxes.

Purpose
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 8 to the accounts.

www.assuraplc.com

2017
£m

2016
£m

EPRA Cost Ratio
(including direct vacancy costs)

1,410.1 1,169.6

2016: 16.0%

Investment property 1,344.9 1,109.4

Less developments

(20.2)

(11.5)

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

1,324.7 1,097.9

85.4

71.7

74.4

(3.2)

63.8

(2.6)

71.2

61.2

–

71.2

61.2

EPRA NIY – A/B (%)

5.05

5.23

EPRA “topped up”
NIY – C/B (%)

5.05

5.23

2017

2016

ERV of vacant space (£m) 1.6

2.0

ERV of completed
property portfolio (£m) 76.7

EPRA Vacancy Rate (%) 2.1

66.5

3.0

13.7%

2016: 16.5%

EPRA Cost Ratio
(excluding direct vacancy costs)

12.4%

Definition
Administrative and operating costs
(including and excluding direct vacancy
costs) divided by gross rental income.

Purpose
A key measure to enable meaningful
measurement of the changes in a
company’s operating costs.

2017
£m

2016
£m

3.2

7.0

2.6

6.1

0.1

1.9

(0.2)

Direct property costs

Administrative expenses

Share-based payment
costs

Net service charge
costs/fees

Exclude:

Ground rent costs

(0.4)

EPRA costs (inc direct
vacancy costs) – A

9.7 10.0

Direct vacancy costs

(0.9)

(0.3)

EPRA costs (exc direct
vacancy costs) – B

Gross rental income
less ground rent costs
(per IFRS)

8.8

9.7

70.7 60.6

Gross rental income – C 70.7 60.6

EPRA Cost Ratio
(inc direct vacancy
costs) – A/C

EPRA Cost Ratio
(exc direct vacancy
costs) – B/C

13.7% 16.5%

12.4% 16.0%

EPRA NIY

5.05%

2016: 5.23%

EPRA “topped-up” NIY

5.05%

2016: 5.23%

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.

EPRA Vacancy Rate

2.1%

2016: 3.0%

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.

Strategic reportGovernanceFinancial statementsAdditional information

Assura plc Annual Report and Accounts 2017

Chairman’s introduction to governance

Good governance is essential
to support the delivery of
our strategy.

Simon Laffin
Non-Executive Chairman

Dear Shareholder
I am pleased to present the Corporate
Governance Report, which sets out
how the Board and its Committees
operate and how we are committed
to maintaining the highest level
of Corporate Governance.

People and culture
As members of the Board we have an
important role in setting the Group’s
culture. We strive to lead by example
and the Board culture is one of
openness, mutual respect and
constructive debate.

Leadership
The Board is collectively responsible
for the long-term success of the Group.
We announced the sad death of
Graham Roberts in July 2016. Graham
had been on sick leave since March
2016 and during this period I had been
acting as Executive Chairman. Jonathan
Murphy was appointed Interim CEO in
October 2016 and my role reverted to
Non-Executive Chairman.

www.assuraplc.com

We were delighted to confirm
Jonathan’s permanent appointment
as CEO in February 2017. We also
welcomed Andrew Darke, Property
Director, to the Board in October 2016,
retaining responsibility for the property
operations and developments.

Remuneration
We were pleased to have received
over 99% of votes in favour of both our
Remuneration Policy and Remuneration
Report at the 2016 AGM and I am
grateful to shareholders for the level of
engagement and support during the year.

Relations with shareholders
Effective communication with shareholders
is a key priority and 95 investor meetings
have been held during the year.
Shareholders are encouraged to attend
the Annual General Meeting (“AGM”) in
July where all Board members will be on
hand to answer questions.

Performance evaluation
As in previous years we carried out
an internal evaluation of the Board and
its Committees. Further details on the
process and results are set out on
page 47.

The Board was content, given its small
size and its strong spirit, that this year’s
review was conducted internally and
at no cost. This was overseen on a
confidential basis by Orla Ball, our
Company Secretary. We will keep under
review the need for an independent
external agency to assist the process.

Effectiveness
I believe that the Board has an effective,
well-balanced structure. Board
members have a wealth of skills and
experience, as shown on pages 44 and
45, which enable them to challenge,
motivate and support the business.

Compliance with the Code
As a Board we believe that good
governance will support the delivery
of the Group’s strategy.

In accordance with the Listing Rules,
I confirm that throughout the year
ended 31 March 2017, the Company
was compliant with all the relevant
provisions as set out in the Code save
for during the period when I acted as
Executive Chairman. The Company
ceased to be a “smaller” company as
defined by the Code from 1 April 2017,
and as such my membership of the
Audit Committee and Remuneration
Committee does not comply with Code
Provisions C.3.1 and D.2.1. We believe
that, given the quality of the Board, this
has in no way adversely affected our
performance and controls. We have
commenced the search for a new
independent Non-Executive Director
who will join these Committees and
ensure that we comply with Code
Provision B.1.2, which requires at least
half the Board to be independent, when
a new Finance Director is appointed.
I am pleased to confirm that the
Company is compliant with all other
provisions of the Code at the date of
this Annual Report.

I consider that all the Directors continue
to devote sufficient time to discharging
their duties to a high standard and
remain committed to their roles.

Simon Laffin
Non-Executive Chairman
22 May 2017

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Assura plc Annual Report and Accounts 2017

Leadership

July 2016 AGM –
key highlights

All resolutions passed.
Full Director attendance.
1,249 to 1,332 million votes
cast for each resolution.
All Directors retired and were

re-elected to the Board.

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 its activities.

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 relevant Board committees are
shown below.

Relations with shareholders
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 the Executive
Directors, institutional investors, 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 ad hoc requests
for information from shareholders and
all shareholders have access to the
Board, with an opportunity to raise
questions at the AGM and other
shareholder meetings.

The Board, together with its
professional advisors, actively
analyses the shareholder register.

Accountability
The Board understands its
responsibility to present a fair, balanced
and understandable assessment of
the Group’s position and prospects,
to assess the principal risks facing the
Group, to ensure that there are effective
systems of risk management and internal
control and to provide a statement as
to the Group’s long-term viability. The
steps it has taken to comply with these
requirements are set out in this section
of the Annual Report.

Governance framework

BOARD

Audit Committee

Nominations Committee
(“Nomco”)

Remuneration Committee
(“Remco”)

Executive Board
(“Exbo”)

Risk Committee

Investment Committee

IT Committee

www.assuraplc.com

Division of responsibilities

Role

Chairman

CEO

Non-Executive Directors

Senior Independent Director

Company Secretary

Responsibilities
The effective running of the Board
Ensuring the Directors receive accurate and timely information
Promoting high standards of Corporate Governance
Ensuring Board agendas take full account of relevant issues and Board members’ concerns
As Chair of the Nominations Committee, ensuring effective Board succession plans are in place
Running the Company’s business
Implementing the business strategy and culture
Regularly updating the Board on progress against approved plans
Providing effective leadership of the Executive Board to achieve agreed strategies and objectives
Constructively challenging and helping to develop proposals on strategy
Satisfying themselves as to the integrity of the financial information and that there are effective systems of risk

management and financial control
Serving on relevant Committees
Acting as Chair of the Board if the Chairman is conflicted
If necessary, acting as a conduit to the Board for communicating shareholder concerns
Ensuring the Chairman is provided with effective feedback on performance
Serving as an intermediary for other Directors when necessary
Ensuring good information flow within the Board and Committees
Facilitating induction and training of Board members
Advising the Board on all governance matters

Board and Committee meeting attendance

Director

Simon Laffin

Jonathan Murphy

David Richardson

Jenefer Greenwood

Andrew Darke

Board

7/7

Nominations
Committee

6/6

Remuneration
Committee

7/8

1/1
On appointment as CEO

6/6

n/a

8/8

n/a

Audit Committee

4/4

Board and Committee meeting timeline

Remco
6 June

Remco
8 August

Remco
23 August

Board
27 September

Board/Nomco
30 September

Board/Audit/Remco/
Nomco
24 January

Board
25 February
(written resolutions)

Board/Audit/Nomco
17 November

MAY 16

JUN 16

JUL 16

AUG 16

SEP 16

OCT 16

NOV 16

DEC 16

JAN 17

FEB 17

MAR 17

Board/
Audit/
Remco
13 May

Board
5 July

Remco/
Nomco
20 September

Remco/
Nomco
20 February

Board/Audit/Remco/Nomco
23 March

Strategic reportGovernanceFinancial statementsAdditional information
44

Assura plc Annual Report and Accounts 2017

Board of Directors

Simon Laffin
Non-Executive Chairman

Jonathan Murphy
CEO

Andrew Darke
Property Director

Skills and experience
Simon has served as Chairman
of Assura since 2011 and is
Chairman of Flybe Group plc, a
Non-Executive Director at Watkin
Jones plc and Chairman of the
Audit Committee of Dentsu Aegis
Network. Previously he served
as Chairman of Hozelock Group
and a Non-Executive Director of
Quintain Estates and Development
plc, 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.

Skills and experience
Jonathan is the CEO of Assura
and was previously the Finance
Director, having joined the Group
in January 2013. He has significant
experience in real estate, capital
markets and investment gained
during his time as Finance Director
and Interim CEO of the Group
and in his previous position as
Managing Director for the property
management business of Brooks
Macdonald Group plc. Jonathan
was previously Finance Director
for the fund management
business of Brooks Macdonald
and Braemar Group plc.

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. He holds an MBA from
IESE, the European Business
School in Barcelona.

Skills and experience
Andrew is a Chartered Surveyor
and has been with Assura since
flotation having acquired the seed
portfolio in 2003. He has led the
property team through its growth
since 2003 and been instrumental
in all aspects of the property
development, investment and
portfolio management.

Prior to joining Assura, Andrew
held investment and development
roles at Barlows plc, Rowlinson
Securities plc and Royal & Sun
Alliance. He started his career
at the District Valuers Office
following graduation from
Liverpool University.

Appointed
August 2011

Appointed
February 2017

Appointed
October 2016

Other current appointments
Simon is also Non-Executive
Chairman of Flybe Group plc, a
Non-Executive Director of Watkin
Jones plc and Chairman of the
Audit Committee at Dentsu
Aegis Network.

Other current appointments
None

www.assuraplc.com

David Richardson
Senior Independent Director

Jenefer Greenwood OBE
Non-Executive Director

Orla Ball
Company Secretary

Skills and experience
Jenefer is a Chartered Surveyor
who started her career at Hillier
Parker in 1978, becoming
Executive Director and Head of
Retail on merger with CBRE. She
worked for Grosvenor Estate from
2003 until 2012. Jenefer’s skills
include real estate, customer
focus and marketing.

Jenefer 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.

Skills and experience
Orla qualified as a solicitor with
Eversheds Manchester and gained
significant corporate governance
and mergers and acquisitions
experience working as a corporate
lawyer for over 14 years.

Her move in-house to Braemar
Group plc, subsequently acquired
by Brooks Macdonald plc, provided
her with further property skills as
she looked after the legal matters
for its property management and
property funds business.

Orla is Head of Legal for the Group
and Chair of the Risk Committee.

Skills and experience
David is a Non-Executive Director of
Assura whose skills and experience
include finance and accounting,
mergers and acquisitions and
corporate governance. 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.

Appointed
January 2012

Appointed
May 2012

Appointed
April 2015

Other current appointments
David is currently Chairman of BBGI
SICAV S.A. and a Board member
of The Edrington Group.

Other current appointments
Jenefer sits on the Supervisory Board
of INTERNOS Global Investors and
was appointed to the Board of DCH
Group in August 2014.

Independent

Other current appointments
None

Strategic reportGovernanceFinancial statementsAdditional information

Assura plc Annual Report and Accounts 2017

Effectiveness

Board activities in the year

The table below shows a selection of Board activities in the financial year.

Strategy, property and funding
Regular updates on portfolio and portfolio valuations
Approval of unsecured revolving credit facility and private
placement, and consideration of future funding requirements
Regular public affairs updates and presentations by internal
Consideration and debate on future strategy

and external speakers

Internal control and risk management
Setting the Group’s risk appetite
Reviewing the risk register and internal controls following Audit
Review of IT systems and capital expenditure requirements
Consideration of Brexit implications
Market Abuse Regulation training, and implementation

Committee recommendations

of share dealing and inside information policies

Financial performance
Regular financial updates and reviews of KPIs
Approval of dividends and dividend policy
Competitor analysis
Review of direct property costs, vacant space and asset
Approval of final and interim results and trading statements
Updates on REIT requirements

enhancements initiatives

Leadership, culture and people
Staff recruitment and leaver updates
Staff succession updates from Nominations Committee
Appointment of CEO and Property Director following
Setting the Group’s culture and leading by example
Approval of whistleblowing hotline

Nominations Committee recommendation

anti-bribery policies

Governance, stakeholders and shareholders
Setting the environmental, modern slavery and
Approval of electronic shareholder communications
Consideration of shareholder activism
Regular review of shareholder register
Investor roadshow feedback
Governance updates

Board Committees
To assist in its Corporate Governance
responsibilities, the Board has
established standing Committees.
All Non-Executive Directors and the
Chairman served on all Committees.
This was appropriate given the
relatively small size of the Board. Each
Committee follows Terms of Reference
which are reviewed annually and are
available on the Company’s website.
However, Simon Laffin stepped down
from the Audit Committee during his
period as Executive Chairman.

Information flow
The Board manages the Group’s
growth closely and secures its
understanding of the business through
comprehensive Board papers, which
include minutes of all Executive Board
meetings, and also through staff
presentations.

At least one Board meeting a year is held
at the Group’s head office in Warrington
and Board members meet staff in an
informal setting before the meeting to
encourage feedback and foster a closer
relationship between staff and the Board.

Time commitments
Other directorships of the Board
members are set out on pages 44 and
45. Executive Directors are permitted
to serve on other boards if they can
demonstrate this will not interfere with
their time commitment to the Company.
At present, neither of the Executive
Directors holds any Non-Executive
Director positions.

The Nominations Committee remains
satisfied that all Directors devote
sufficient time to discharging their
duties to a high standard and are
committed to their roles.

Induction and
professional development
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, and have access to
the advice and services of the Company
Secretary, who advises the Board on
Corporate Governance matters.

www.assuraplc.com

The Nominations Committee will be
focusing on succession planning and
recruitment of a new Non-Executive
Director this year and the Board will
continue to devote more time to strategic
discussions. The 2015 evaluation had
noted the opportunity for enhanced
non-financial performance measures and
at least three non-financial performance
measures were included in the Executive
Board objectives for the year.

Board composition

Chairman

Executive Directors

Non-Executive
Directors

Board tenure (in current role)

0–2 years

4–6 years

Board gender balance

Female

Male

Re-election of Directors
In accordance with Corporate
Governance best practice, it is the
Company’s policy that all Directors will
submit themselves for re-election at the
2017 AGM. All Directors resigned and
were re-elected at the 2016 AGM.

Board and Committee
performance evaluation
An internal evaluation of the Board and
its Committees was carried out during
the year. Board members completed a
comprehensive questionnaire, returning
it confidentially to the Company
Secretary, who prepared an anonymous
summary of the results.

The feedback was extremely positive.
The only significant points to arise were:

The continued need for succession

planning for all roles at the
appropriate time

The benefit of a greater diversity

of skills at Board level

The requirement for a further

Non-Executive Director to ensure
compliance with the Code
A need for further strategic

discussion and consideration
of emerging issues.

Board strengths

Simon Laffin
Non-Executive Chairman
Experienced Chairman
Strategy
Finance

Andrew Darke
Property Director
Real Estate
Customer Focus
Marketing

Jenefer Greenwood
Non-Executive Director
Real Estate
Customer Focus
Marketing

Composition
of the Board

Jonathan Murphy
CEO
Corporate Finance
Capital Markets
Risk Management

David Richardson
Senior Independent Director
Finance & Accounting
Mergers & Acquisitions
Corporate Governance

Key:

Non-Executive Chairman

Executive Director

Non-Executive Director

Strategic reportGovernanceFinancial statementsAdditional information48

Assura plc Annual Report and Accounts 2017

Nominations Committee Report

Nominations Committee members

Simon Laffin (Committee Chair)
Jenefer Greenwood
Jonathan Murphy (since February 2017)
David Richardson

Number of meetings in the year
Six

Attendees
Orla Ball – Company Secretary

Responsibilities

Key activities of the Committee

The Terms of Reference, which are
reviewed annually (and are available
to view on the Company's website),
require the Nominations Committee
(“the Committee”) to meet at least
once per year.

Key issues
Re-election of all Directors at the

July 2016 AGM.

Responding to the illness of our

CEO and temporary arrangements
to cover his absence.

Appointment of interim and

permanent CEO and the Property
Director.

Review of succession planning.
Review of Board composition,
Committee composition and
Committee Chairmanship.

Consideration of training needs

and skills updating.

Board performance evaluation.
Considered and confirmed that
the Non-Executive Directors
were independent.

Board and Committee changes
The Committee met six times through
the year, tackling a number of significant
issues. In particular, it debated how to
respond to the absence from work and
then sad death of our CEO, Graham
Roberts, both in the short term and
for longer-term succession. In the first
instance, the Committee decided to
appoint me as Executive Chairman
in March 2016 when Graham Roberts
took three months’ sick leave during
his treatment for cancer. Following
Graham’s sad death in the summer,
the Committee began an extensive
search for a new CEO, first by selecting
executive recruitment firm Odgers
Berndtson (which has no other
connection with Assura), from a shortlist
of three such firms, to assist with the
process. The firm's brief was to provide
a long and then a short list of external
candidates, together with consideration
of any internal candidates. A long list
of potential candidates was reviewed
by the Committee and from this,
a short list selected. The Committee
then interviewed a number
of candidates.

In October 2016, the Board appointed,
on the recommendation of the
Nominations Committee, Jonathan
Murphy as Interim CEO, enabling
me to revert to my former role as
Non-Executive Chairman.

In February 2017, the Committee
recommended to the Board that
Jonathan Murphy was the best
candidate for the role, and so the Board
approved his appointment. Jonathan
had proved himself a capable leader
whilst Interim CEO and with his
knowledge and experience gained
as Finance Director, the Committee
considered him to be the right person
for the role.

The Committee also recommended
that Andrew Darke be appointed to
the Board as Property Director. The
Board approved this appointment
in October 2016.

www.assuraplc.com

Following Jonathan Murphy’s
appointment as CEO, the position of
Finance Director must now be filled
and Warren Partners has been selected
to assist with the recruitment process.
Jonathan will continue to fulfil the
Finance Director role until a suitable
candidate is found.

Board performance evaluation
The Board has reviewed its
performance, and the performance
of its Committees and individual
Directors based on an internal
evaluation overseen by the Company
Secretary on a confidential basis in
January 2017. The Board concluded
that its access to relevant information
is good, the strategy and goals of the
Company are clear and discussions
around the boardroom table are
constructive and challenging. The
Board continues to have an appropriate
mix of skills and experience as shown
in the strengths table on page 47
which will be supplemented by the
skills of the new Finance Director and
Non-Executive Director once appointed.

The Nominations Committee also
met in the absence of the Chairman to
appraise the Chairman’s performance.
There were no major changes adopted
in the way the Board operates.

Simon Laffin
Chair of the Nominations Committee
22 May 2017

Commitments of the Chairman
I am also Non-Executive Chairman of
Flybe Group plc and Non-Executive
Director at Watkin Jones plc. The
Committee considered that I manage
my time effectively in order to allocate
sufficient time to each of my roles.

Diversity
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. Odgers Berndtson was
particularly tasked with searching for
possible CEO candidates who could
increase the diversity of the Board.

The Board targeted having at least
20% female representation, which
was achieved in 2012.

The Committee will continue to
consider gender and wider aspects of
diversity such as experience, nationality,
disability and age when recommending
any future Board appointments and
recruitment firms are instructed to
include a diverse list of candidates for
the Committee’s consideration. Final
appointments will always be made
on merit.

Succession planning
Succession planning was a focus of the
Committee during 2016.

The Committee considered the
immediate cover required for the
CEO position as well as considering
development of talent within the
business to fill more senior roles
over the medium and long term.

The Committee acknowledges that
given the size of the workforce there will
not be successors for every senior role.
However, the culture of the business
is to develop our people and promote
from within where possible.

The Committee has identified the need
for a further Non-Executive Director to
ensure compliance with the Code and
has appointed recruitment firm The
Zygos Partnership to assist with the
search process.

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Assura plc Annual Report and Accounts 2017

Audit Committee Report

Audit Committee members

David Richardson (Committee Chair)
Jenefer Greenwood
Simon Laffin1

1. Re-appointed following return to Non-Executive Chairman position

Number of meetings in the year
Four

Additional attendees – as appropriate
Deloitte LLP
Savills Commercial Limited and Jones Lang LaSalle
Jonathan Murphy – CEO
Andrew Darke – Property Director
Orla Ball – Company Secretary
Paul Carroll – Financial Controller
David Purcell – Group Finance Manager

Responsibilities

Key activities of the Committee

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.

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.

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.

Review of external audit
Reviewed, considered and agreed
the scope and fees for 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
external valuers and raised queries
on these.

Reviewed the effectiveness,
performance and fees of the
external valuers.

Review of Committee
The Committee reviewed its

performance and was found to be
performing to a high standard.

Review of risk management
and internal controls
Reviewed the effectiveness of the
Company’s internal controls and
risk management processes
and the disclosures made in
the Annual Report.

Received the minutes from the Risk

Committee and reviewed the principal
risks derived from the risk register
along with any movement in those
risks in the year.

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 requirement for
an internal audit function.

Reviewed the viability statement

and supporting evidence.

Reviewed the approved treasury

counterparties.

www.assuraplc.com

needs. The Committee considers that
the additional cost of an internal audit
department is not currently justified.
However, specific pieces of work are
commissioned by the Audit Committee
to examine particular processes and
controls as deemed necessary.

Audit/non-audit fees payable
to external auditor
The external auditor did not carry out
any services beyond the audit of this
Annual Report and review of the interim
accounts. The fees paid to the external
auditor are disclosed in Note 4(a) to the
accounts, and the policy for non-audit
services is in the Audit Committee
Terms of Reference available on
our website.

Effectiveness of external
audit process
The Committee assessed the
effectiveness of the external audit
process, initially reviewing and
challenging the audit planning
memorandum prepared by Deloitte
and then monitoring fulfilment of this
plan. The Committee received regular
feedback from management on the
service and support provided by Deloitte,
had a meeting at the end of the audit
to discuss judgements and concluded
that the external audit was carried out
efficiently and effectively with objective,
independent challenge. Accordingly, the
Committee recommends Deloitte’s
re-appointment at the 2017 AGM.

Deloitte was appointed following a
competitive tender in March 2012 and
the latest date by which the Company
is required to tender and appoint an
external auditor is for the financial year
beginning 1 April 2022. The current lead
auditor, Rachel Argyle, was appointed
in March 2015. There are no current
intentions to conduct an audit tender
in the next 12 months.

David Richardson
Chair of the Audit Committee
22 May 2017

Dear Shareholder
As Chairman of the Audit Committee
(“the Committee”), I have pleasure
in setting out below the formal report
on its activities for the year ended
31 March 2017.

The Committee is aware of the
Code’s requirements in relation to risk
and the monitoring of internal control
systems. During the year the Committee
received minutes from the meetings
of the Risk Committee, reviewed the
risk register, monitored the Group’s
risk management and internal control
systems and was kept appraised of the
upgrades being made to the IT systems,
security and processes. The Committee
has not identified any significant failings
or weakness in these control systems
during the year.

The Committee performs a detailed
review of the content and tone of the
Annual Report and half year results
and has satisfied itself that there are
robust controls over the accuracy
and consistency of the information
presented. Accordingly, the Committee
has advised the Board that the Annual
Report taken as a whole is “fair,
balanced and understandable” and
provides the information necessary
for the shareholders to assess the
Company’s position and performance,
business model and strategy.

The Company ceased to be a “smaller”
company as defined by the Code on
1 April 2017 and as such membership
of the Audit Committee does not
comply with Code Provisions C.3.1. We
have commenced the search for a new
independent Non-Executive Director
to join the Committee.

Significant financial reporting
matters
Valuation of investment properties,

including those under construction –
valuations and yields are discussed
with management and benchmarked
against comparable portfolios. The
two external valuers present to and
are challenged by the Committee on
their valuations.

Validity of the going concern basis
and the availability of finance going
forward – the Committee considers
the financing requirements of the
Group in the context of committed

facilities and evaluates management’s
assessment of going concern and
the assumptions made. The external
auditor also reports to the Committee
following its review.

Viability statement – the Committee
considered the viability statement
proposed for inclusion in the Annual
Report and the supporting analysis
produced by management. The
statement was approved for inclusion
in the 2017 report and appears on
page 29.

Other financial reporting
matters
In addition to the significant financial
reporting matters discussed above,
the Committee considers other financial
reporting matters as and when they
arise to ensure appropriate treatment
in the accounts.

During the year this included the
following:

Share-based payment charges for
the Value Creation Plan (“VCP”) and
Performance Share Plan (“PSP”).
Distributable reserves within the Group.
Presentation of non-recurring

expenses such as loan issue costs
written off.

Internal restructuring plan for

banking purposes.

We are satisfied that there were no
matters arising from each of the above
that we wish to draw to the attention
of the shareholders.

Internal controls
The Group’s internal control systems
include a detailed authorisation process,
formal documentation of all transactions,
a robust system of financial planning
(including cash flow forecasting and
scenario testing) and a robust appraisal
process for all property investments.
Changes to internal controls, or controls
to respond to changing risks identified,
are addressed by the Risk Committee
with appropriate escalation to the Audit
Committee as required.

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

Strategic reportGovernanceFinancial statementsAdditional information52

Assura plc Annual Report and Accounts 2017

Remuneration Report

Remuneration Committee members

Jenefer Greenwood (Committee Chair)
Simon Laffin
David Richardson

Number of meetings in the year
Eight

Additional attendees – as appropriate
Jonathan Murphy – CEO
Orla Ball – Company Secretary
FIT Remuneration Consultants LLP

Responsibilities

The Terms of Reference, which are reviewed annually (and are available to view
on the Company’s website), require the Committee to meet at least once per year.

The Committee’s activities during the year included:

Consideration of objectives and targets for annual bonuses
Consideration of annual pay awards and bonuses
Overseeing the continued vesting of awards under the VCP
Commencing operation of the new PSP
Addressing remuneration-related issues arising from the changes

to the Executive Board.

www.assuraplc.com

Dear Shareholder
On behalf of the Board, I am pleased to
introduce the Directors’ Remuneration
Report for the year ended 31 March
2017. This report has been prepared
by the Remuneration Committee (“the
Committee”) and approved by the
Board. The report is split into two parts:

The Directors’ Remuneration
Policy – which provides an
“at a glance” summary of the
Remuneration Policy for which
shareholder approval was obtained
at the 2016 AGM and which will
continue to apply without amendment
for the forthcoming year.
The Annual Report on

Remuneration – which sets out
payments and awards made to the
Directors and details the link between
Company performance and
remuneration for the 2016/17
financial year.

We were very pleased to secure
such strong levels of support from
shareholders at the 2016 AGM for our
new Remuneration Policy, with over
99% of votes in favour of this resolution
and the accompanying resolution to
establish the new PSP. As no changes
are proposed to the existing policy,
only one remuneration resolution will
be tabled at the 2017 AGM, i.e. the
advisory shareholder vote on the
Annual Report on Remuneration.

Context to the Committee’s
decisions
The last financial year marked a further
period of success for Assura, with
continued strong growth. See our
Business Review on pages 34 to 39.

2016/17 also saw various changes in
the structure of our Executive Board to
reflect Graham Roberts’ very sad death.

It was in this context that the
Committee made its key decisions,
which included:

Agreeing to pay Jonathan Murphy
a non-pensionable and non-bonus
attracting salary supplement of
£5,417 per month to reflect his
assuming the role of Interim CEO
between 3 October 2016 and
27 February 2017 (when he was
appointed to the role of CEO and
became entitled to a base salary
of £335,000)

Agreeing the package of Andrew
Darke upon his appointment to
the Board as Property Director
Determining the approach to

Graham’s remuneration following
his death

Reflecting another year of strong
performance, determining that the
Executive Directors earned bonuses
equal to 72.8% and 65.5% of salary
for Jonathan Murphy and Andrew
Darke respectively. Further details of
how this bonus outturn was
calculated can be found on page 58.

Making the first awards under

Assura’s new PSP which will vest
based upon performance against a
blend of absolute NAV per share and
TSR growth targets

Confirming that the next outstanding
tranche of the VCP awards could
vest, the minimum TSR threshold
having been met for that tranche (as
described more fully on page 60).

Remuneration in 2017/18
We do not intend to alter our approach
to executive remuneration in the
forthcoming year, the main features
of which will be:

Base salaries: Jonathan Murphy’s
and Andrew Darke’s base salaries
will be £335,000 (unchanged) and
£225,000 (increased by £5,000)
respectively.

Annual bonus: We will retain the
current approach to bonus target
setting and assessment. Therefore,
the performance objectives set under
the annual bonus will continue to
relate to matters such as value-added
opportunities (within the portfolio and
from market activity), financial targets,
customer satisfaction, etc. Jonathan
Murphy’s maximum bonus
opportunity will be 100% (reflecting
our policy for the CEO role), with
Andrew Darke’s maximum bonus
being 75% of salary. A deferred share
element was introduced into the
annual bonus plan as part of last
year’s policy review, under which up
to 50% of any bonus earned by an
Executive Director is deferred into
shares for two years to the extent
that the Executive Director does not
already hold shares worth at least
300%. Clawback/malus provisions
will continue to apply.

Long-term incentives: A further

round of awards will be made under
the PSP over shares worth 150%
of salary, which will vest based on
performance against a blend of
absolute NAV per share and TSR
growth targets. A two-year post
vesting holding period will also apply
(unless shares worth 300% of salary
are already held), with clawback/
malus provisions also applying.

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
Chair of the Remuneration Committee
22 May 2017

Strategic reportGovernanceFinancial statementsAdditional information54

Assura plc Annual Report and Accounts 2017

Remuneration Report continued

PART A: REMUNERATION
POLICY AND PRACTICE
“AT A GLANCE”
Shareholder approval was obtained at
the 2016 AGM for a new Directors’
Remuneration Policy. This policy has
been developed with regard to the UK
Corporate Governance Code and is felt
to be appropriate to support the
long-term success of the Company
while ensuring that it does not promote
inappropriate risk taking. More
particularly, the policy is framed to
support the Company’s strategic
drivers, which are set out on pages 18
and 19. The Committee aims for the
policy and its use of performance
metrics to support shareholder value
creation by incentivising sustainable
performance consistent with the
strategic drivers and appropriate risk
management and that:

The interests of shareholders and
management should be aligned
Excessive risk taking should be
discouraged and effective risk
management given due consideration
It should retain and motivate, based
on selection and interpretation
of appropriate benchmarks
Poor performance should not

be rewarded

The long-term interests of the
Company should be promoted.

Our goal is to maximise returns for
shareholders over the long term. Our
success is measured by three KPIs:

Total Property Return – measuring
income and capital appreciation
generated from the portfolio.

Total Accounting Return – measuring

total reported returns for the
Company after all overheads and
including the effect of leverage.
Total Shareholder Return – the

dividend and capital appreciation
experienced by shareholders.

Our remuneration arrangements either
directly or indirectly encourage delivery
of outstanding performance against
these KPIs. The table below shows
progress on the three KPIs over the last
three years:

Total Property Return

Total Accounting Return

Total Shareholder Return

24.1%

28.0%

49.7%

Our full policy can be found in last
year’s Report and on our website
(www.assuraplc.com). However, for
convenience we have set out opposite
a summary of the policy’s key terms:

www.assuraplc.com

Element

Operation

Maximum opportunity

Fixed remuneration

Base salary

Pension/benefits

An Executive Director’s base salary is considered by the
Committee on appointment and then reviewed
periodically or when an individual changes position or
responsibility. When making a determination as to the
appropriate salary level, the Committee first considers
remuneration practices within the Group as a whole and,
where considered relevant, conducts objective research
on companies within the Company’s peer group. The
results of any benchmarking will only be one of many
factors taken into account by the Committee. Other
factors include:
Individual performance and experience
Pay and conditions for employees across the Group
The general performance of the Company
The economic environment.
A market competitive suite of benefits is provided, which
are reviewed periodically to ensure that they remain
appropriate.

Executive Directors can receive pension contributions to
personal pension arrangements or, if a Director is
impacted by annual or lifetime limits on contribution levels
to qualifying pension plans, the balance (or all) can be
paid as a cash supplement.

Performance-based variable remuneration

Bonus

Long-term incentives

Shareholding requirement

Pay-outs may be made in a mix of cash and deferred
shares determined by the Committee following the
financial year end, based on achievement against
a range of financial and strategic targets which
may include (but are not limited to):
Delivering specific added-value activities
Delivering financial goals
Improving operational performance
Developing the performance capability of the team.
Bonus payments are not pensionable, but are subject
to clawback provisions.

Awards under the PSP may be granted as nil/nominal
cost options or conditional awards which vest to the
extent performance conditions are satisfied over a period
of at least three years, with a post vesting holding period
also potentially applying. Vested awards may also be
settled in cash. Clawback and malus provisions apply
to PSP awards.

Executive Directors may not sell any shares acquired via
any share-based incentive plan if the sale would take their
shareholding below the shareholding requirement.

In the normal course of events, increases in the Executive
Directors’ salaries will not exceed the average increase for
employees, save where there is a clear misalignment with
market levels. However, 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.

Benefit values vary year on year depending on premiums
and the maximum value is the cost of the provision of
these benefits.

The maximum employer’s contribution is 20% of base
salary. Actual contributions are currently 13.5% for the
CEO and the Property Director.

The maximum annual bonus for Executive Directors is
100% of salary. At threshold performance 0% of
maximum can be earned.

At target up to 75% of maximum can be earned.

150% of base salary in normal circumstances (up
to 300%, if the Committee considers that it is in
shareholders’ interests to do so, e.g. if exceptional
circumstances exist relating to a recruitment).

The Executive Directors are expected to acquire shares
equal to at least 300% of their salary. At the Committee’s
discretion this may be acquired over a timeframe
determined by the Committee.

The full policy also provides full details of our approach to:

Setting performance targets for the annual bonus and PSP
Committee discretions
Differences between our approach to remuneration for Executive Directors and the wider workforce
Travel and hospitality
Considering the views of our shareholders
Recruitments, terminations and service contracts
Chairman and Non-Executive Directors’ fees
External appointments.

Strategic reportGovernanceFinancial statementsAdditional information56

Assura plc Annual Report and Accounts 2017

Remuneration Report continued

Illustrations of application of Remuneration Policy
The policy of the Committee is to align Executive Directors’ interests with those of shareholders and to give the Executive
Directors incentives to perform at the highest levels. To achieve this, the Committee seeks to ensure that a significant proportion
of the remuneration package varies with the performance of the Company and that targets are aligned with the Company’s
stated business objectives.

The composition and total value of the Executive Directors’ remuneration package for the financial year 2017/18 at minimum,
on-target and maximum performance scenarios are set out in the charts below:

£1,400

£1,200

£1,000

£800

£600

£400

£200

£900k

28%

44%

£397k

100%

£1,235k

41%

27%

32%

£567k

30%

22%

48%

£271k

100%

£778k

43%

22%

35%

MIninum

On-target
CEO – Jonathan Murphy

Maximum

MIninum

On-target
Property Director – Andrew Darke

Maximum

Fixed elements

Annual variable

Multiple reporting periods

Assumptions used in determining the level of pay-out under given scenarios are as follows:

Minimum
Consists of base salary, benefits and pension.
Base salary is the salary to be paid in 2017/18.
Benefits measured as benefits paid in the year ended 31 March 2017.
Pension measured as the defined contribution or cash allowance in lieu of Company contributions of 13.5% of salary.

2017/18

Jonathan Murphy

Andrew Darke

Base
salary
£’000

335

225

Benefits
£’000

Pension
£’000

Total fixed
£’000

397

271

On-target
Based on what the Director would receive if performance were on-target (excluding share price appreciation and dividends):

Annual bonus: consists of the on-target bonus (75% of maximum opportunity used for illustrative purposes).
Long-term incentive: consists of the midpoint level of vesting (50% vesting) under the PSP.

Maximum
Based on the maximum remuneration receivable (excluding share price appreciation and dividends):

Annual bonus: consists of maximum bonus of 100% of salary for Jonathan Murphy and 75% of salary for Andrew Darke.
Long-term incentive: consists of the face value of awards (at 150% of salary).

Total equity exposure of Executives at 31 March 2017
Jonathan Murphy and Andrew Darke owned 1,640,346 and 1,159,115 shares respectively as at 31 March 2017. A table
summarising their interests is included in the Annual Report on Remuneration (Part B below) on page 62).

www.assuraplc.com

PART B: 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 2017. 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.

Consideration by the
Committee of matters relating
to Directors’ remuneration
The members of the Committee during
2016/17 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,
and no potential conflicts of interest
arising from cross-directorships. Other
than Mr Laffin, the Non-Executives have
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 sets the fees of the
Chairman and the fees for the Non-
Executive Directors are set by the
Chairman in conjunction with the CEO.
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 eight meetings
during the year. Its activities during
and relating to the financial year
2016/17 included:

Consideration of objectives and
targets for annual bonuses

Consideration of annual pay awards

and bonuses

Overseeing the continued vesting

of awards under the VCP
Commencing operation of the

new PSP

Addressing remuneration-related
issues arising from the changes
to the Executive Board
Preparing this report.

Advisors to the Committee
During 2016/17 the Committee received
advice from FIT Remuneration
Consultants LLP (“FIT”), its independent
advisor. FIT is a member of the
Remuneration Consultants Group and,
as such, voluntarily operates under the
code of conduct in relation to executive
remuneration consulting in the UK. The
Committee reviewed the nature of the
services provided by FIT and was
satisﬁed that no conﬂict of interest
exists or existed in the provision of
these services. The total fees paid
to FIT in respect of services to the
Committee during the year were
£42,500. Fees were determined based
on the scope and nature of the projects
undertaken for the Committee.

The Committee also sought the views
of Jonathan Murphy during the year.
The CEO is given notice of all meetings
and, at the request of the Chairman
of the Committee, attends part of the
meetings. The CEO may request that
he attends and speaks at Committee
meetings. In normal circumstances, the
CEO will be consulted on general policy
matters and matters concerning the
other Executive Director and
employees.

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)

Graham Roberts1

Jonathan Murphy2

Andrew Darke3

Year

Salary

Taxable
benefits

Bonus4

Pensions

Long-term
incentives5

2016/17

2015/16

2016/17

2015/16

2016/17

101

322

270

215

110

–

228

178

108

144

3,366

3,114

736

1,445

–

Total

3,489

3,747

1,232

1,812

277

1. Further details of Graham Roberts’ remuneration can be found on page 64.
2. Jonathan Murphy’s 2015/16 long-term incentive figure includes the value of vested Executive Recruitment Plan awards.
3. Andrew Darke joined the Board on 3 October 2016 and figures above relate to amounts after appointment only.
4. A portion of Jonathan Murphy’s bonus for 2016/17 is deferred as explained on page 58.
5. The long-term incentives column includes the value of the VCP awards that vested during the year as described more fully below.

Strategic reportGovernanceFinancial statementsAdditional information58

Assura plc Annual Report and Accounts 2017

Remuneration Report continued

Benefits
Taxable benefits comprised health insurance, death in service benefits, critical illness, group income protection and company
car allowance.

2016/17 annual bonus plan outcome
In determining the award for 2016/17, the Committee took into account the Company’s financial performance and achievements
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. 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 key success factors for the year were identified as continuing to increase the
investment portfolio and to reduce the overall cost of borrowing. For 2016/17 the maximum potential bonus awards were 100%
of salary for Graham Roberts as CEO and 75% of salary for Jonathan Murphy and Andrew Darke.

Following Graham Roberts’ resignation due to ill-health in June 2016 no bonus was paid to him relating to 2016/17.

Performance measures

Actual targets set at the beginning of the year

Actual performance outcome

Grow the scale of the portfolio

Good £105 million additions, Strong £140 million,
Outstanding £190 million

Strong £173 million

Grow income through extensions
(annualised)

Good £140,000 additional rent, Strong £175,000,
Outstanding £215,000

Nil

Let vacant space

Good £360,000, Strong £510,000, Outstanding
£660,000

Strong £556,000

Deliver underlying budget

Good 100%, Strong 105%, Outstanding 110%

Strong 105%

Reduce average cost of debt

Increase the percentage of tenants asserting
they would recommend Assura to others

Good 30 basis points reduction, Strong 40 basis
points, Outstanding 50 basis points

Outstanding 78 basis points

Good 90%, Strong 92.5%, Outstanding 95%

Outstanding 96%

The Committee reviewed the performance of Jonathan Murphy. His financial targets were as above, overall being rated Strong.
His individual targets were to: develop a data analytic tool to financially appraise current and prospective tenants; deepen his
understanding of the wider healthcare property market; sustain excellent communication with the Board; and deliver an
operational efficiency and savings plan. The Committee concluded that Jonathan had performed strongly on all these
objectives. It also noted that Jonathan assumed additional responsibility during the year following the resignation of Graham
Roberts and was appointed Interim CEO on 1 October 2016, and confirmed as CEO on 27 February 2017.

As a result, the Committee decided to award Jonathan a bonus of £177,652 equating to 72.8% (93.2% of maximum bonus) of
his total salary (excluding the salary supplement paid to him while acting as Interim CEO).

The Committee also considered the performance of Andrew Darke. His financial targets were as above, overall being
rated Strong.

His individual targets were to: strengthen and develop the property team; deepen his understanding of the wider healthcare
property market; sustain excellent business performance communication with the Board; and continue to enhance the GP
property market database.

The Committee concluded that Andrew had performed strongly on these objectives. As a result the Committee decided
to award Andrew a bonus of £144,100, equivalent to 65.5% (87.3% of maximum bonus) of annual base salary.

Up to 50% of any bonus earned by an Executive Director must be deferred into shares for two years to the extent that the
Executive Director does not already hold shares worth at least 300% of salary. While Andrew Darke holds the requisite number
of shares, Jonathan Murphy does not, resulting in a portion of his bonus being deferred.

www.assuraplc.com

Total pension entitlements
No Executive Director or any member of staff is entitled to a defined benefit pension arrangement. Graham Roberts, Jonathan
Murphy and Andrew Darke received payments in lieu of pension contributions equivalent to 20.0%, 13.5% and 13.5% of salary
respectively for 2016/17.

Vesting of long-term incentive awards (audited)
Value Creation Plan
As reported previously, to take account of three significant capital raising events, certain adjustments were made to the VCP
pay-out algorithm to ensure the potential VCP benefit created at each Measurement Date was:

Attributable to management’s performance/achievement of the VCP performance conditions (i.e. an 8% p.a. return to

shareholders must be achieved before any value is created for participants); and

Aligned with the value created for shareholders during the relevant measurement period.

More particularly, the Committee amended the Threshold Price applicable to the first Measurement Date (i.e. 20 August 2015)
whereby, for each capital raising event (to be known as “Tranches”), a Threshold Price was set which must be exceeded before
any value could be earned by participants. The paragraphs below summarise the alterations.

The Threshold Price applicable to each Tranche of shares at the first Measurement Date was set as follows:

Share capital at the start of the VCP

Capital issued for MP Realty Holdings Ltd acquisition

Capital issued following placing/offer to shareholders

Capital issued for Metro MRI Ltd acquisition

Original
Threshold
Price
(pence)

New
Threshold
Price
(pence)

39.37

44.95

45.06

51.29

Shares
(m)

529.5

44.3

414.3

18.8

Tranche

Each Tranche under the VCP was tested on the first Measurement Date and on 20 August 2015 was subject to the original
terms and conditions of the VCP, except that, as shown above, each Tranche had its own Threshold Price.

At subsequent Measurement Dates (i.e. one and two years after the first Measurement Date), it was determined that 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); and
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).

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.

The maximum aggregate number of shares that can be issued to satisfy awards under the VCP to all participants remained
limited to 25 million. Therefore, no adjustments were made to the cap on the number of shares that could be earned under the
VCP as a result of the changes to the share capital.

Strategic reportGovernanceFinancial statementsAdditional information60

Assura plc Annual Report and Accounts 2017

Remuneration Report continued

As previously reported, the first Measurement Date occurred on 20 August 2015. The table below sets out the actual value
creation under the VCP as calculated at the first Measurement Date, using (as prescribed in the plan rules) 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:

Average share price at first Measurement Date

Dividends paid per share in issue

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)

56.27

5.0625

C=A+B

61.3325

39.37

C-T

21.9625

56.27

2.40

58.67

44.95

13.72

56.27

1.95

58.22

45.06

13.16

56.27

1.50

57.77

51.29

6.48

As per the VCP performance condition, the total participant benefit available was 10% of the above value created for each
Tranche multiplied by the number of shares in each Tranche, which amounts in total to £17.8 million. As a consequence of the
Company’s strong performance up to the first Measurement Date, the VCP units converted virtually in full into nil-cost options
over 24,999,950 shares (out of the total 25 million pool). This resulted in Graham Roberts’ units converting into 11,779,255
nil-cost options, Jonathan Murphy’s into 5,153,423 options and Andrew Darke’s into 5,889,627 options.

Under the rules, 50% of any shares that accrued at the first Measurement Date (in the form of nil-cost options) became
exercisable at the first Measurement Date, 50% of the remainder become exercisable at the second and 100% at the third,
provided the minimum return thresholds for each Tranche are achieved at each Measurement Date.

On 25 September 2015 Messrs Roberts and Murphy exercised the first 50% of their nil-cost options resulting in them receiving
(after the payment of income tax and NICs) 3,121,503 and 1,365,657 shares respectively. The share price on 25 September 2015
was 54.25 pence.

On 30 August 2016 Messrs Murphy and Darke exercised the next 25% of their nil-cost options resulting in them receiving
(after the payment of income tax and NICs) 682,829 and 780,376 shares respectively. The share price on 30 August 2016
was 58.5 pence.

Graham Roberts held outstanding awards under the VCP on his death. The Committee exercised its discretion to allow these
outstanding awards (including the Tranche that was due to vest in 2017) to vest at the same time as the 2016 award using the
minimum return threshold used in 2016 (this award already having provisionally vested in full in 2015).

The impact of the conversion of the Executive Directors’ units into nil-cost options and the above exercises is set out in the table below:

Name

Graham Roberts

Jonathan Murphy

Andrew Darke

Year of
grant

2015

Awards
outstanding
at 01/04/16

2,944,814

2,944,813

1,288,356

1,288,355

1,472,407

1,472,406

Granted
during the
year

Lapsed
during the
year

Exercised
during the
year

Awards
outstanding
at 31/3/17

2,944,814

2,944,813

1,288,356

–

Exercise
price

Exercisable
between

Nil-cost Aug ’16–23

Nil-cost Aug ’17–23

Nil-cost Aug ’16–23

–

1,288,355

Nil-cost Aug ’17–23

1,472,407

–

Nil-cost Aug ’16–23

–

1,472,406

Nil-cost Aug ’17–23

–

www.assuraplc.com

Performance Share Plan
Shareholder approval was obtained at the 2016 AGM for the establishment of a new PSP. The following awards were made
under the PSP to Messrs Murphy and Darke over shares worth 150% of salary:

Executive

Jonathan Murphy

Andrew Darke

Date of grant

8 August 2016

Awards
outstanding
at 01/04/16

–

Awards
granted
during the
year

607,759

530,172

Awards
vested
during the
year

Awards
lapsed
during the
year

Interests
outstanding
at 31/03/17

Normal vesting/
exercise date1

–

607,759

From 8 August 2019

530,172

From 8 August 2019

Note
1. A two-year post vesting holding period will apply to the extent that, on vesting, a participant does not comply with the shareholding guideline in place

at that time (currently 300% of salary).

The above PSP awards were granted at the closing share price on the day before the grant. The exercise price is nil. The
minimum share price in 2016/17 was 49.4 pence and the maximum share price was 60.6 pence. The closing share price
on 31 March 2017 was 57.85 pence.

These awards vest based on performance against the following targets which encourage the generation of sustainable long-
term returns to shareholders over a three year performance period commencing on the year of grant:

Absolute TSR growth: 50% of award

Absolute average annual compound TSR growth over performance period

Percentage of this portion of award that vests

Below 5%

15%

100%

NAV per share growth (including the value of dividends paid): 50% of award

Absolute average annual compound NAV per share growth over performance period

Percentage of this portion of award that vests

Below 5%

15%

100%

Straight line vesting will occur between each target.

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 Laffin

David Richardson

Jenefer Greenwood

Basic fees

Additional
fees1

Total fees

2016/17

2015/16

2016/17

2015/16

2016/17

2015/16

130.5

128.5

36.9

36.1

36.9

36.1

–

16.5

16.4

8.3

8.2

130.5

128.5

53.4

52.5

45.2

44.3

Note
1. Additional fees represent Senior Independent Director and Chairman of Board Committee fees.

Simon Laffin received no additional fees for acting as Executive Chairman between March and October 2016.

Strategic reportGovernanceFinancial statementsAdditional information
62

Assura plc Annual Report and Accounts 2017

Remuneration Report continued

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 300% of their basic salary in the Company.

Shareholding and other interests at 31 March 2017

Director

Executive

Graham Roberts3

Jonathan Murphy

Andrew Darke

Non-Executive

Simon Laffin

David Richardson

Jenefer Greenwood

Shares
required to be
held
(percentage
of salary)

Number of
shares
required to
hold1

Number of
beneficially
owned
shares2

Total interests
held at
31 March
2017

Shareholding
requirement
met?

n/a

300

–

n/a

4,000,000

1,737,251

1,640,346

1,140,881

1,159,115

–

3,357,664

414,835

117,256

414,835

117,256

n/a

No4

Yes

n/a

Notes
1. Shareholding requirement calculation is based on the share price at the end of the year (57.85 pence at 31 March 2017).
2. Beneficial interests include shares held directly or indirectly by connected persons.
3. Figures relate to the share interests of Graham Roberts on his death.
4. Portion of current year bonus deferred as explained on page 58.

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, with an inner 5% limit applying to discretionary plans.

There has been no movement in Directors’ shareholdings since the year end.

Performance graph and table
The Committee believes that the Executive Directors’ Remuneration Policy and the supporting reward structure provide clear
alignment with the Company’s performance. The Committee believes it is appropriate to monitor the Company’s performance
against the FTSE All Share Real Estate Investment Trusts index for these purposes.

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 an eight-year period as required by the Regulations:

350

300

250

200

150

100

Mar
09

Mar
10

Mar
11

Mar
12

Mar
13

Mar
14

Mar
15

Mar
16

Mar
17

Assura FTSE Real Estate Investment Trusts FTSE All Share

www.assuraplc.com

Single figure
of total
remuneration
£’0002

Bonus
pay-out (as
percentage
maximum
opportunity)

Long-term
incentive
vesting
rates (as
percentage
maximum
opportunity)

1,232

3,489

3,747

677

680

674

395

314

487

–

100

–

100

–

The table below shows the CEOs’ remuneration packages over the past eight years:

Year

2016/171

2015/16

2014/15

2013/14

2012/13

2011/12

2010/11

2009/10

Name

Jonathan Murphy

Graham Roberts

Nigel Rawlings3

Nigel Rawlings

Nigel Rawlings (from 16/03/10)

Richard Burrell4, 5 (until 15/03/10)

Notes
1. Both Graham Roberts’ and Jonathan Murphy’s remuneration details have been included as they both served as CEO during the year.
2. 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.

3. Nigel Rawlings ceased to be a Director with effect from 30 April 2012. The bonus of £100,000 was a one-off award reflecting his contribution to selling

the Pharmacy business.

4. Richard Burrell ceased to be a Director on 15 March 2010.
5. During the financial year 2009/10 Richard Burrell was CEO 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.

Percentage change in the CEO’s remuneration
The table below compares the percentage increase in the CEO’s pay (including salary and fees, taxable benefits and annual
bonus) with the wider employee population. The Company considers the 43 full-time employee population, excluding the
Executive Board, to be an appropriate comparator group:

CEO

Total employee pay

Average employee pay

Salary
% increase

Taxable
benefits
% increase

Bonus
% increase/
(decrease)

4.0

3.6

3.0

–

1.9

6.0

n/a1

39.7

102.0

Note
1. No comparison has been made as Jonathan Murphy’s bonus for the year related to his performance as Finance Director.

Graham Roberts’ remuneration details have been used as the basis for the above table (subject to a pro-rata increase as
appropriate to reflect his part year service).

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

2016/17
£m

3.3

37.0

2015/16
£m

3.3

27.2

% change

–

36.0

Strategic reportGovernanceFinancial statementsAdditional information64

Assura plc Annual Report and Accounts 2017

Remuneration Report continued

Payments to past Directors or for loss of office
The remuneration of Graham Roberts on his death was approached as follows:

Graham received his usual pay, pension and car allowance plus contractual benefits up to his death.
Graham did not receive any bonus relating to the year.
Graham held outstanding awards under the VCP on his death. The Committee exercised its discretion to allow these

outstanding awards (including the Tranche that was due to vest in 2017) to vest at the same time as the 2016 award using the
minimum return threshold used in 2016 (these awards already having provisionally vested in full in 2015).

Statement of shareholder voting
The table below shows the advisory vote on the 2015/16 Directors’ Remuneration Report and the binding vote on the new
Remuneration Policy at the AGM held on 14 June 2016:

2016 AGM resolution

Annual Report on Remuneration

Remuneration Policy

Votes for

% Votes against

1,320,733,144

1,322,798,958

99.09 12,097,233

99.25 10,029,694

0.91

0.75

Votes
withheld

6,634

8,359

Statement of implementation of Remuneration Policy for 2017/18
Executive Directors
Salary
In setting salary levels for 2017/18 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 2017/18 and the relative
increases are set out below:

Executive Director

Jonathan Murphy

Andrew Darke

Notes
1. Jonathan Murphy’s salary at the 2016/17 year end.
2. Salary on appointment as Director.

2016/17
salary
£’000

3351

2202

2017/18
salary
£’000

335

225

% change

–

2.3

Pension and benefits
As was the case last year, Jonathan Murphy and Andrew Darke will receive payments in lieu of pension contributions equivalent
to 13.5% of salary respectively. Benefits will be provided in line with the Remuneration Policy.

Annual bonus
The maximum bonus opportunity for 2017/18 will be 100% of salary for Jonathan Murphy and 75% of salary for Andrew Darke.

The performance objectives under the annual bonus plan for 2017/18 will continue to relate to value-added opportunities,
within the portfolio and from market activity and financial targets. 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. Appropriate levels of disclosure of the 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 practice of previous years and view the weightings for bonus purposes at the end of the
year, having regard to all known factors.

As was the case with the 2016/17 bonus, a deferred share element will apply, under which up to 50% of any bonus earned by
an Executive Director will be deferred into shares for two years to the extent that the Executive Director does not already hold
shares worth at least 300% of salary.

Long-term incentives
A further grant of awards will be made under the PSP to Jonathan Murphy and Andrew Darke over shares worth 150% of salary
which will vest subject to the extent to which the following performance conditions are satisfied. A post vesting holding period
will also apply to the extent that, on vesting, a participant does not comply with the shareholding guideline in place at that time
(currently 300% of salary).

www.assuraplc.com

Absolute TSR growth: 50% of award

Absolute average annual compound TSR growth over performance period

Percentage of this portion of award that vests

Below 5%

15%

100%

NAV per share growth (including the value of dividends paid): 50% of award

Absolute average annual compound NAV per share growth over performance period

Percentage of this portion of award that vests

Below 5%

15%

100%

Straight line vesting would occur between each target.

Non-Executive Directors
The following table sets out the fee rates for the Non-Executive Directors from 1 April 2017:

Chairman fee

Non-Executive Director base fee

Additional fee for Chairmanship of Audit and Remuneration Committee

Additional fee for Senior Independent Director

By order of the Board

Jenefer Greenwood
Chair of the Remuneration Committee
22 May 2017

2017/18
£’000

133.4

37.7

8.5

2016/17
£’000

130.5

36.9

8.3

% change

2.2

2.4

Strategic reportGovernanceFinancial statementsAdditional information66

Assura plc Annual Report and Accounts 2017

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 2017. The
Corporate Governance Statement set
out on page 41 forms part of this report.

The Group has facilities from a number
of financial institutions, none of which
are repayable before May 2021 other
than modest annual amortisation. In
addition to surplus available cash of
£23.3 million at 31 March 2017 (2016:
£43.7 million), the Group has undrawn
facilities of £100 million at the balance
sheet date.

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
risk management and internal control
systems, including financial, operational
and compliance control systems.

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 105.

Principal activities
Assura plc is a leading primary care
property investor and developer. It owns
and procures good quality primary care
properties across the UK.

The subsidiary and associated
undertakings are listed in Note 9
to the accounts.

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 34 to 39, which are incorporated
in this report by reference.

Going concern
Assura’s business activities together
with factors likely to affect its future
performance are set out in the business
review on pages 34 to 39. In addition,
Note 23 to the accounts 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’s primary care property
developments in progress are all
substantially pre-let.

The Board monitors these systems on
an ongoing basis and this year’s review
found them to be operating effectively.

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 13.2 years. They
are diverse both geographically and
by lot size and therefore represent
excellent security.

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 Board considers it
appropriate that the financial statements
have been prepared on a going concern
basis of accounting and there are no
material uncertainties to the Company’s
ability to continue to prepare them on
this basis over a period of at least 12
months.

Long-term viability statement
The Company’s viability statement is on
page 29.

Dividends
Details of the dividend can be found
in Note 19 to the accounts. 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.

Details of the Group’s dividend policy
can be found in the business review on
page 37.

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 2017, the average number of
days taken by the Group to pay its
suppliers was 10 days (2016: 22 days).

Post balance sheet events
Subsequent to the year end, the
revolving credit facility has been
extended to £250 million.

Directors’ liability insurance
The Company has arranged insurance
cover in respect of legal action against
its Directors.

www.assuraplc.com

Company share scheme
The Assura plc Employee Benefit Trust
holds 61,898 (0.004%) of the issued
share capital of the Company in 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 2017, Assura
donated £24,850 to charities (2016:
£26,520), all of which were UK registered
charities, and no contributions were
made for political purposes (2016: nil).
More details of our chosen charities can
be found on our website.

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 award
proportionate to the individual’s
contribution. 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.
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 Directors 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
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
As at 31 March 2017, the issued
share capital of the Company is
1,655,040,993 Ordinary Shares of
10 pence each. Authority was obtained
at the 2016 AGM for the purchase of
up to 10% of share capital, if deemed
appropriate by the Directors. This
expires at the conclusion of the
2017 AGM.

Interests in voting rights
As at 19 May 2017, the Company had been notified of the following interests
in accordance with DTR 5:

Name of shareholder

Invesco Limited

Artemis Investment Management

BlackRock (BGI)

Aberdeen Asset Management

Legal & General

31 March 2017

19 May 2017

Percentage
of Ordinary
Shares

18.97

9.99

6.50

5.06

3.01

Percentage
of Ordinary
Shares

16.66

no change

Strategic reportGovernanceFinancial statementsAdditional information68

Assura plc Annual Report and Accounts 2017

Directors’ Report continued

Price risk, credit risk, liquidity
risk and cash flow risk
Full details of how these risks are
mitigated can be found in Note 23
to the accounts.

Future developments
Details of future developments are
discussed on pages 34 to 37 in the
business review.

Competition and Markets
Authority (“CMA”) Order
The Company confirms that it has
complied with the Statutory Audit
Services for Large Companies Market
Investigation (Mandatory Use of
Competitive Tender Processes and
Audit Committee Responsibilities) Order
2014 published by the CMA on
26 September 2014.

Greenhouse gas emissions
The greenhouse gas emissions from the
head office activities is provided on
page 26. This has been calculated by
reference to kilowatt hours used and
miles driven, with appropriate
conversion factors applied.

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.

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 2018.

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 DWF, 20 Fenchurch
Street, London EC3M 3AG on 18 July
2017 at 11am.

Both the Directors’ Report and the
Strategic Report were approved by
the Board and signed on its behalf.

Orla Ball
Company Secretary
22 May 2017

www.assuraplc.com

Directors’ Responsibility Statement

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, is fair,
balanced and understandable and
provide the information necessary
for shareholders to assess
the Company’s position and
performance, business model
and strategy.

By order of the Board

Orla Ball
Company Secretary
22 May 2017

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 EU. 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 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.

Strategic reportGovernanceFinancial statementsAdditional information70

Assura plc Annual Report and Accounts 2017

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 2017

and of the Group’s and Parent Company’s profit for the year then ended;

the Group and Parent Company financial statements have been properly prepared in accordance with International Financial

Reporting Standards (“IFRSs”) as adopted by the European Union; and

the financial statements 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 that we have audited 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 26 and A to F.

The financial reporting framework that has been applied in the preparation of the Group and Parent Company financial statements
is applicable law and IFRSs as adopted by the European Union.

Summary of our audit approach

Key risk
The key risk that we identified in the current year was the valuation of the property portfolio excluding properties under development.

Materiality
The materiality applied in the current year was £16.0 million, which was determined on the basis of 2% of net assets, and specific
materiality applied was £1.9 million, which was determined on the basis of 5% of EPRA earnings (as defined on page 38).

Significant changes in our approach
The following significant changes in our approach from the prior year comprise:

Materiality
In the prior year materiality was determined with reference to profit before tax, of which it represented 5%, whereas for the current
year we have determined materiality for the Group based upon net assets with a lower specific materiality based upon the EPRA
profit measure.

Risk identification
In the prior year we identified a key risk in relation to acquisitions. Although the Group has made corporate acquisitions in the year
ended 31 March 2017, this was not an area that had a significant effect on our audit strategy nor the allocation of resources in the
audit, hence it is not considered to be a key risk in the current year.

We have also refined our key risk regarding valuation of the property portfolio to exclude the valuation of properties under

development as a significant risk of material misstatement.

www.assuraplc.com

Going concern and the Directors’ assessment of the principal risks that would threaten the solvency or liquidity of the Group

As required by the Listing Rules we have reviewed the Directors’
statement regarding the appropriateness of the going concern
basis of accounting contained on page 66 of the Directors’ Report
and the Directors’ statement on the longer-term viability of the
Group contained within the Strategic Report on page 29.

We are required to state whether we have anything material
to add or draw attention to in relation to:

We confirm that we have nothing material to add or draw attention
to in respect of these matters.

We agreed with the Directors’ adoption of the going concern basis
of accounting and we did not identify any material uncertainties.
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.

the Directors’ confirmation on page 28 that they have carried
out a robust assessment of the principal risks facing the
Group, including those that would threaten its business model,
future performance, solvency or liquidity;

the disclosures on pages 30 to 33 that describe those risks
and explain how they are being managed or mitigated;

the Directors’ statement on page 66 of the Directors’ Report
about whether they considered it appropriate to adopt the
going concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s ability
to continue to do so over a period of at least twelve months
from the date of approval of the financial statements; and
the Directors’ explanation on page 29 as to how they have

assessed the prospects of the Group, over what period they
have done so and why they consider that period to be
appropriate, and their statement as to whether they have
a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.

Independence

We are required to comply with the Financial Reporting Council’s
Ethical Standards for Auditors and confirm that we are
independent of the Group and we have fulfilled our other ethical
responsibilities in accordance with those standards.

We confirm that we are independent of the Group and we have
fulfilled our other ethical responsibilities in accordance with those
standards. We also confirm we have not provided any of the
prohibited non-audit services referred to in those standards.

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Assura plc Annual Report and Accounts 2017

Independent Auditor’s Report continued

Our assessment of risks of material misstatement
The assessed risk of material misstatement described below is that which had the greatest effect on our audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team.

Valuation of property portfolio excluding properties under development

Risk description
The Group owns and manages a portfolio of 398 modern primary healthcare properties that are carried at fair value in the financial
statements. The portfolio is valued at £1,315.3 million as at 31 March 2017 and comprises the majority of the assets in the Group
balance sheet.

The Group uses professionally qualified external valuers, Savills and Jones Lang LaSalle (“the Valuers”), to fair value the Group’s
portfolio twice annually. The Valuers are engaged by the Directors and perform their work in accordance with the Royal Institution of
Chartered Surveyors (“RICS”) Valuation – Professional Standards. The Valuers used by the Group are well-known firms and have
considerable experience in the markets in which the Group operates.

The valuation of the portfolio is inherently subjective and is underpinned by a number of assumptions. The existence of significant
estimation uncertainty, coupled with the fact that only a small percentage difference in individual property valuations, when
aggregated, could result in a material misstatement on the income statement and balance sheet, warrants specific audit focus in this
area.

In determining a property’s valuation, the Valuers take into account property-specific information such as current tenancy agreements
and rental income attached to the asset. The portfolio (excluding development properties) is valued by the investment method of
valuation. Key inputs into the valuation exercise are yields and Estimated Rental Value (“ERV”), which are influenced by prevailing
market yields, comparable market transactions and the specific characteristics of each property in the portfolio.

Valuation of property represents a key source of estimation uncertainty for the Group, as described in the Group’s accounting policies
on page 80, and a significant financial reporting matter considered by the Audit Committee, as described on page 51.

How the scope of our audit responded to the risk
Given the inherent subjectivity involved in the valuation of investment properties, the need for deep market knowledge when
determining the most appropriate assumptions, and the technicalities of a valuation methodology, we engaged our internal valuation
specialists (qualified chartered surveyors) to assist us in our audit of this key risk area.

We read the valuation reports for all properties and attended meetings with each of the Valuers. We confirmed that the valuation approach
for each was in accordance with RICS guidance and suitable for use in determining the carrying value in the Group balance sheet.

We assessed the Valuers’ qualifications and expertise and read their terms of engagement with the Group to determine whether there
were any matters that might have affected their objectivity or may have imposed scope limitations upon their work. We also considered
other engagements which exist between the Group and the Valuers.

We carried out procedures, on a sample basis, to test whether property-specific data supplied to the Valuers by management reflected
the underlying property records held by the Group and which had been tested during our audit.

We assessed management’s process for reviewing and challenging the work of the external Valuers, including management’s experience
and knowledge to undertake this activity. We observed discussions between management and the Valuers which evidenced that
alternative assumptions and recent market transactions were considered and evaluated before the final valuation was determined.

We compared the yields used by the Valuers to an estimated range of expected yields, determined via reference to published
benchmarks, and to recent transactions. We also considered the reasonableness of other assumptions that are not so readily
comparable to published benchmarks, such as Estimated Rental Value and void rates. Additionally, we evaluated year-on-year
movements in capital value with reference to published benchmarks. Where assumptions were outside the expected range or
otherwise deemed unusual, and/or valuations appeared to experience unexpected movements, we undertook further investigations
and, when necessary, held further discussions with the Valuers in order to challenge the assumptions.

We also considered the adequacy of the Group’s disclosures about the degree of the estimation and sensitivity to key assumptions
made when valuing these properties disclosed in Note 10.

Key observations
We found that the assumptions used in the valuations were supportable in light of available and comparable market evidence.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these 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.

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Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Materiality

Overall Group materiality
£16.0 million.

Basis for determining materiality

2% of net assets.

Rationale for the benchmark applied In arriving at this judgement we had regard
to the carrying value of the Group’s assets,
acknowledging that the primary
performance measure of the Group is the
carrying value of investment property.

Specific Group materiality
£1.9 million. Applied to EPRA
impacting balances.

<5% of EPRA earnings.

In addition to net assets, we consider
EPRA earnings to be a critical financial
performance measure for the Group and we
applied a lower threshold of £1.9 million based
on less than 5% of that measure for testing
of all impacted balances, classes
of transactions and disclosures.

The materiality for the Group financial statements as a whole was set at £1.5 million for 2015/16. This was determined with reference to
profit before tax, of which it represented 5%. For 2016/17 we have determined materiality for the Group based upon net assets with a
lower specific materiality based upon the EPRA profit measure. Given the growth in the business through acquisitions, we consider that
these two measures better align with the principal considerations of the shareholders of the Group, and are more aligned to practices
observed with industry peers. This is a change to the approach adopted last year.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £800,000 (2016: £30,000),
or £95,000 for differences impacting EPRA, 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 internal and external environment. This included
assessing Group-wide controls, assessing the risks of material misstatement at the Group level, and in particular looking at where the
Directors make subjective judgements, for example in respect of significant accounting estimates or adoption of accounting policies that
are underpinned by a number of assumptions. As in all our audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

The Group is audited in its entirety by the Group audit team. 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. This results in full scope audit procedures performed
on 99% of the Group’s net assets. At the parent entity level we also tested the consolidation process and carried out analytical procedures to
conclude that there were no significant risks of material misstatement of the aggregated financial information of the remaining components not
subject to audit or audit of specified account balances.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:

the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are

prepared is consistent with the financial statements; and

the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not
identified any material misstatements in the Strategic Report and the Directors’ Report.

Matters on which we are required to report by exception

Adequacy of explanations received and
accounting records
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

We have nothing to report in respect of these matters.

require for our audit; or

adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit 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.

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Assura plc Annual Report and Accounts 2017

Independent Auditor’s Report continued

We have nothing to report arising from these matters.

We have nothing to report arising from our review.

We confirm that we have not identified any such inconsistencies or
misleading statements.

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.

Corporate Governance Statement
Under the Listing Rules we are also required to review part of the
Corporate Governance Statement relating to the Company’s
compliance with certain provisions of the UK Corporate
Governance Code.

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:

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.

Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ Responsibilities 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). 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.

Scope of the audit of the financial statements
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 (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Manchester, UK
22 May 2017

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75

Consolidated income statement
Consolidated income statement
For the year ended 31 March 2017
For the year ended 31 March 2017

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
Finance revenue
Finance costs
Early repayment costs
Profit before taxation
Taxation
Profit for the year attributable to
equity holders of the parent

Note

4
10

20
3
5
17

EPRA
£m

71.1
(3.2)
67.9

(7.0)
–

–
(0.1)
0.1
(20.7)
–
40.2
0.1

2017
Capital
and other
£m

Total
£m

EPRA
£m

2016
Capital
and other
£m

–
–
–

–
56.5

(0.1)
–
–
(1.4)
–
55.0
–

71.1
(3.2)
67.9

(7.0)
56.5

(0.1)
(0.1)
0.1
(22.1)
–
95.2
0.1

61.0
(2.6)
58.4

(6.1)
–

–
(1.9)
0.2
(24.2)
–
26.4
(0.9)

–
–
–

–
36.4

0.1
–
–
–
(34.1)
2.4
–

Total
£m

61.0
(2.6)
58.4

(6.1)
36.4

0.1
(1.9)
0.2
(24.2)
(34.1)
28.8
(0.9)

40.3

55.0

95.3

25.5

2.4

27.9

EPRA EPS
EPS
EPS

– basic & diluted
– basic
– diluted

7
7
7

2.4p

2.0p

5.8p
5.8p

2.2p
2.1p

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.

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Assura plc Annual Report and Accounts 2017
Assura plc Annual Report and Accounts 2017

Consolidated balance sheet
Consolidated balance sheet
As at 31 March 2017
As at 31 March 2017

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
Deferred revenue

Total liabilities
Net assets

Capital and reserves

Share capital
Own shares held
Share premium
Merger reserve
Reserves
Total equity

NAV per Ordinary Share

EPRA NAV per Ordinary Share

– basic
– diluted
– basic
– diluted

Note

2017
£m

2016
£m

10
9
11
22

12
13
10

14
17
15
16

17
14
15

18
18

8
8
8
8

1,344.9
–
0.4
0.5
1,345.8

23.5
9.4
0.9
33.8
1,379.6

16.4
4.3
16.3
–
37.0

515.8
3.0
5.8
524.6
561.6
818.0

165.5
–
246.1
231.2
175.2
818.0

49.4p
49.3p
49.4p
49.3p

1,109.4
0.4
0.2
0.4
1,110.4

44.3
7.5
1.7
53.5
1,163.9

16.5
4.0
14.2
0.3
35.0

365.2
3.0
6.4
374.6
409.6
754.3

163.8
(0.6)
241.9
231.2
118.0
754.3

46.1p
45.7p
46.1p
45.8p

The financial statements were approved at a meeting of the Board of Directors held on 22 May 2017 and signed on its behalf by:

Simon Laffin
Non-Executive Chairman

Jonathan Murphy
CEO

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77

Consolidated statement of changes in equity
Consolidated statement of changes in equity
For the year ended 31 March 2017
For the year ended 31 March 2017

1 April 2015
Profit attributable to equity holders
Total comprehensive income
Issue of Ordinary Shares
Issue costs
Dividends
Employee share-based incentives
31 March 2016

Profit attributable to equity holders
Total comprehensive income
Dividends
Employee share-based incentives
31 March 2017

Note

Share
capital
£m

100.7
–
–
62.5
–
0.2
0.4
163.8

–
–
0.9
0.8
165.5

Own
shares
held
£m

Share
premium
£m

Merger
reserve
£m

Reserves
£m

(1.8)
–
–
(0.3)
–
–
1.5
(0.6)

–
–
–
0.6
–

–
–
–
250.7
(9.5)
0.7
–
241.9

–
–
4.2
–
246.1

231.2
–
–
–
–
–
–
231.2

–
–
–
–
231.2

121.8
27.9
27.9
–
–
(27.2)
(4.5)
118.0

95.3
95.3
(37.0)
(1.1)
175.2

Total
equity
£m

451.9
27.9
27.9
312.9
(9.5)
(26.3)
(2.6)
754.3

95.3
95.3
(31.9)
0.3
818.0

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Assura plc Annual Report and Accounts 2017
Assura plc Annual Report and Accounts 2017

Consolidated cash flow statement
Consolidated cash flow statement
For the year ended 31 March 2017
For the year ended 31 March 2017

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 expenditure
Proceeds from sale of property and investments
Expenditure on property, plant and equipment
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
Early repayment costs
Loan issue costs
Net cash inflow from financing activities

Decrease in cash and cash equivalents

Opening cash and cash equivalents
Closing cash and cash equivalents

Note

19
17
17
17
17

2017
£m

71.1
(19.2)
0.8
0.1
(13.8)
39.0

(157.9)
(19.9)
1.4
(0.3)
(176.7)

–
–
(31.9)
(59.0)
210.0
–
(2.2)
116.9

2016
£m

62.7
(25.9)
0.8
0.2
(14.9)
22.9

(122.5)
(17.7)
1.5
(0.2)
(138.9)

308.6
(9.5)
(26.3)
(188.5)
45.0
(34.1)
(1.4)
93.8

(20.8)

(22.2)

44.3
23.5

66.5
44.3

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79

Notes to the accounts
Notes to the accounts
For the year ended 31 March 2017
For the year ended 31 March 2017

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 6 for further details.

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 2017. The
pronouncements either had no material impact on the financial statements or resulted in changes in presentation and
disclosure only:

n Annual improvements 2010–2012 cycle
n Annual improvements 2011–2013 cycle

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). In particular, lease income is outside the scope of IFRS 15 and as the Group is
a lessor, IFRS 16 is not expected to materially impact the treatment of leases to tenants.

n IFRS 9 Financial Instruments (1 January 2018)
n IFRS 15 Revenue from Contracts with Customers (1 January 2018)
n IFRS 16 Leases (not yet endorsed in the EU)
n Amendments to IFRS 2 Classification and Measurement of share-based payment transactions (1 January 2018)
n Amendments to IAS 7 Disclosure initiative (1 January 2017)
n Amendments to IAS 12 Recognition of deferred tax assets for unrealised losses (1 January 2017)
n Annual Improvements to IFRS Standards 2014–2016 Cycle

The financial statements are prepared on a going concern basis as explained in the Directors’ Report on page 66 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.

Key sources of estimation and uncertainty
The key assumptions concerning the future, and other key sources of estimation and uncertainty at the balance sheet date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year, are discussed below.

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. Details of the
accounting policies applied in respect of valuation are set out on page 80 and they key unobservable inputs relating to the
valuations are set out in Note 10.

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Assura plc Annual Report and Accounts 2017
Assura plc Annual Report and Accounts 2017

Notes to the accounts continued
For the year ended 31 March 2017

2. Significant accounting policies continued
Critical judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, which are described below, the Directors do not consider there to be
significant judgements applied with regards to the policies adopted.

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. In addition, the
Company recognises dividend income when the rights to receive payment have been established (normally when declared and
paid).

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, which represents fair value, 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.

Property operating expenses are expensed as incurred and property operating expenditure not recovered from tenants through
service charges is charged to the income statement.

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Notes to the accounts continued
For the year ended 31 March 2017

2. Significant accounting policies continued
Gains on sale of properties
Gains on sale of properties are recognised on the completion of the 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 expected tax payable on any non-REIT taxable income for the period and is calculated using tax rates that have
been enacted or substantively enacted at the balance sheet date. 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.

Income statement definitions
EPRA earnings represents profit calculated in accordance with the guide published by the European Public Real Estate
Association. See Note 7 for details of the adjustments. Underlying profit is no longer reported to avoid confusion, being very similar
to the industry standard EPRA EPS measure which is now reported.

Capital and other represents all other statutory income statement items that are excluded from EPRA earnings.

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
The Group is run as one business and as such no segmental analysis is presented for the current or prior year results.

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Notes to the accounts continued
For the year ended 31 March 2017

3. Revenue

Rental revenue
Other related income
Gross rental and related income

Finance revenue
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

Fees payable to auditor for audit of Company’s annual accounts
Fees payable to auditor for audit of Company’s subsidiaries
Total audit fees

2017
£m

70.4
0.7
71.1

0.1
0.1

2016
£m

60.2
0.8
61.0

0.2
0.2

71.2

61.2

2017
£m

2.0
0.3
2.3
0.2
1.1
3.4
7.0

2017
£m

0.1
0.1
0.2

2016
£m

1.9
0.4
2.3
0.2
1.2
2.4
6.1

2016
£m

0.1
0.1
0.2

Note

4(a)

The Audit Committee considers the level of non-audit fees prior to work commencing to ensure independence is maintained. The
only non-audit fees incurred during the year were £15,000 in respect of the interim review (2016: £15,000). Detail of
considerations during the year is provided on page 51.

The average monthly number of employees during the year was 39 (2016: 33).

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 (including related social security costs)
Social security costs

2017
£m

1.4
0.1
0.3
1.8

2016
£m

1.8
1.8
0.3
3.9

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Notes to the accounts continued
For the year ended 31 March 2017

5. Finance costs

Interest payable
Interest capitalised on developments
Amortisation of loan issue costs
Finance costs presented through EPRA profit
Write off of loan issue costs
Early repayment costs (Note 17)
Total finance costs

Interest was capitalised on property developments at 5% (2016: 5%).

6. 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 before taxation
UK income tax at rate of 20% (2016: 20%)

Effects of:
Non-taxable income (including REIT exempt income)
Expenses not deductible for tax purposes
Movement in unrecognised deferred tax

2017
£m

20.4
(0.4)
0.7
20.7
1.4
–
22.1

2017
£m

(0.1)
(0.1)

2017
£m

95.2
19.0

(18.6)
–
(0.5)
(0.1)

2016
£m

24.1
(0.5)
0.6
24.2
–
34.1
58.3

2016
£m

0.9
0.9

2016
£m

28.8
5.8

(6.0)
0.6
0.5
0.9

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 19%
in 2018 (2017: 20%).

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. The movement in part relates to brought forward losses
that have been utilised during the year, with the remainder representing a change in the estimated losses that will be utilised
in the future.

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 2016, the taxable rental profit of
the Group was £nil as a result of capital allowances available, and consequently no PID was required. A small PID is expected to
be required for the year to 31 March 2017 which will be distributed in due course within the usual quarterly dividends and in
advance of the payment deadline of 31 March 2018.

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 2017.

Further reductions in the main rate of corporation tax have been substantively enacted; the rate reduced to 19% from 1 April 2017
and will reduce to 17% from 1 April 2020. These changes have been reflected in the calculation of deferred tax.

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Notes to the accounts continued
For the year ended 31 March 2017

7. Earnings per Ordinary Share

Profit for the year

Early repayment costs
Revaluation gains
Loss/(gain) on sale of property
Write off of loan issue costs
EPRA earnings

Weighted average number of shares in issue – basic
Potential dilutive impact of share options
Weighted average number of shares in issue – diluted

Earnings
2017
£m

95.3

Earnings
2016
£m

27.9

EPRA
earnings
2017
£m

95.3

–
(56.5)
0.1
1.4
40.3

EPRA
earnings
2016
£m

27.9

34.1
(36.4)
(0.1)
–
25.5

1,647,388,495 1,647,388,495 1,300,338,908 1,300,338,908
11,243,261
1,650,631,786 1,650,631,786 1,311,582,169 1,311,582,169

11,243,261

3,243,291

Earnings per Ordinary Share – basic
Earnings per Ordinary Share – diluted

5.8p
5.8p

2.4p
2.4p

2.2p
2.1p

2.0p
2.0p

As set out on pages 59 and 60, the current estimated number of shares over which nil-cost options may be issued to participants
of the VCP is 3.2 million (2016: 12.5 million). After allowing for shares held by the Employee Benefit Trust, this would amount to a
potential issuance of a further 3.2 million (2016: 11.2 million) shares in September 2017. Options issued under the PSP are not
currently considered dilutive.

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Notes to the accounts continued
For the year ended 31 March 2017

8. NAV per Ordinary Share

Net assets

Own shares held
Deferred tax
EPRA NAV

Number of shares in issue
Potential dilutive impact of VCP (Note 7)
Diluted number of shares in issue

NAV
2017
£m

818.0

NAV
2016
£m

754.3

EPRA
NAV
2017
£m

818.0

–
(0.5)
817.5

EPRA
NAV
2016
£m

754.3

0.6
(0.4)
754.5

1,655,040,993 1,655,040,993 1,637,706,738 1,637,706,738
11,243,261
1,658,284,284 1,658,284,284 1,648,949,999 1,648,949,999

11,243,261

3,243,291

NAV per Ordinary Share – basic
NAV per Ordinary Share – diluted

49.4
49.3

EPRA NAV
Mark to market of fixed rate debt
EPRA NNNAV

EPRA NNNAV per Ordinary Share – basic

46.1p
45.7p

49.4
49.3

EPRA
NNNAV
2017
£m

817.5
(77.7)
739.8

44.7p

46.1p
45.8p

EPRA
NNNAV
2016
£m

754.5
(60.2)
694.3

42.4p

The EPRA measures set out above are in accordance with the Best Practices Recommendations of the European Public Real
Estate Association dated November 2016.

Mark to market adjustments have been provided by the counterparty or by reference to the quoted fair value of financial instruments.

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Notes to the accounts continued
For the year ended 31 March 2017

9. Investments
Below is listing of all subsidiaries of Assura plc:

Property investment companies

Holding or dormant companies

Abbey Healthcare Group Ltd*
Abbey Healthcare Property Investments Ltd*
Ashdeane Investments Ltd*
Assura Aspire Ltd*
Assura Aspire UK Ltd*
Assura Beeston Ltd*
Assura CVSK Ltd*
Assura HC Ltd*
Assura HC UK Ltd*
Assura Health Investments Ltd*
Assura Medical Centres Ltd*
Assura PCP UK Ltd*
Assura Primary Care Properties Ltd*
Assura Properties plc*
Assura Properties UK Ltd*
Assura Trellech Ltd*
BHE (Heartlands) Ltd*
BHE (St James) Ltd*
Birchdale Investments Ltd*
Broadfield Surgery Ltd*
Cae Court Developments Ltd*
Cloverleaf Investments Ltd*
Donnington Healthcare Ltd*
F.P. Projects Ltd*
Malmesbury Medical Enterprise Ltd*
Medical Properties Ltd*
Metro MRH Ltd*
Metro MRI Ltd*
Metro MRM Ltd*
Newton Healthcare Ltd*
Park Medical Services Ltd*
Pentagon HS Ltd*
PVR Investments Ltd*
SPCD (Silsden) Ltd*
The Third Party Development Corporation*
Trinity Medical Properties Ltd*

AH Medical Properties Ltd*
Assura (AHI) Ltd*
Assura Aylesham Ltd*
Assura Banbury Ltd*
Assura CS Ltd*
Assura Financing Ltd*
Assura Grimsby Ltd*
Assura Group Ltd (Guernsey)
Assura HC Holdings Ltd*
Assura IH Ltd
Assura Investments Ltd*
Assura Kensington Ltd*
Assura Management Services Ltd*
Assura Pharmacy Holdings Ltd* (Guernsey)
Assura Pharminvest Ltd*
Assura Property Ltd* (Guernsey)
Assura Property Management Ltd*
Assura Retail York Ltd*
Assura Services Ltd*
Assura Southampton Ltd*
Assura Stanwell Ltd*
Assura Todmorden Ltd*
Assura Tunbridge Wells Ltd*
MP Realty Holdings Ltd*
PCI Management Ltd*
PH Investment (No. 1) Ltd*
Primary Care Initiatives (Macclesfield) Ltd*
Riddings Pharmco Ltd*
South Kirkby Property Ltd*
SPCD (Balsall Common) Ltd*
SPCD (Crawcrook) Ltd*
SPCD (Davyhulme) Ltd*
SPCD (Didcot) Ltd*
SPCD (Kincaidston) Ltd*
SPCD (Rugeley) Ltd*
SPCD (Sutton in Ashfield) Ltd*
The 3P Development Ltd*
Trinity Medical Developments Ltd*

* Indicates subsidiary owned by intermediate subsidiary of Assura plc.

All companies are wholly owned by the Group and registered in England unless otherwise indicated. All companies registered in
England have a registered address of The Brew House, Greenalls Avenue, Warrington, WA4 6HL. The companies registered in
Guernsey have a registered address of Old Bank Chambers, La Grande Rue, St Martin’s, Guernsey. Taking into consideration
the facts of each transaction, acquisitions of companies owning property completed during the years ended 31 March 2017
and 31 March 2016 have been accounted for as asset purchases as opposed to business combinations.

The Group also holds an investment in Virgin Healthcare Holdings Limited, made up of a 2% equity holding (book value £nil) and a
£4 million loan note receivable (book value £nil, 2016: £nil).

During the year the Group agreed to dispose of the 15% investment in GB Partnerships Investments Limited at book value (£0.4
million).

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Notes to the accounts continued
For the year ended 31 March 2017

10. 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 2017. 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”). Valuers are paid on the basis of a fixed fee arrangement,
subject to the number of properties valued.

Initial yields mainly range from 4.40% to 5.00% (2016: 4.65% to 5.25%) for prime units, increasing up to 8.00% (March 2016:
6.15%) for older units with shorter unexpired lease terms. For properties with weaker tenants and poorer units, the yields
range from 6.00% to 12.00% (March 2016: 6.15% and over 8.0%) and higher for those very close to lease expiry or those
approaching obsolescence.

A 0.25% shift of valuation yield would have approximately a £68.1 million (2016: £54.2 million) impact on the investment
property valuation.

Opening fair value
Additions:
– acquisitions
– improvements

Development costs
Transfers
Transfer from assets held for sale
Capitalised interest
Disposals
Unrealised surplus on revaluation
Closing market value
Add finance lease obligations
recognised separately
Closing fair value of
investment property

Investment
2017
£m

1,094.9

155.6
2.4
158.0
–
14.0
–
–
(0.9)
55.7
1,321.7

IPUC
2017
£m

11.5

–
–
–
20.9
(14.0)
0.8
0.4
(0.2)
0.8
20.2

Total
2017
£m

Investment
2016
£m

1,106.4

915.6

155.6
2.4
158.0
20.9
–
0.8
0.4
(1.1)
56.5
1,341.9

124.5
2.7
127.2
–
16.4
0.6
–
(0.6)
35.7
1,094.9

IPUC
2016
£m

6.7

–
–
–
17.7
(16.4)
3.1
0.5
(0.8)
0.7
11.5

Total
2016
£m

922.3

124.5
2.7
127.2
17.7
–
3.7
0.5
(1.4)
36.4
1,106.4

3.0

–

3.0

–

3.0

1,324.7

20.2

1,344.9

1,097.9

11.5

1,109.4

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
Land held for sale
Total property assets

Three land sites are held as available for sale (2016: three land sites).

2017
£m

1,315.3
20.2
6.4
3.0
1,344.9
0.9
1,345.8

2016
£m

1,088.0
11.5
6.9
3.0
1,109.4
1.7
1,111.1

Fair value hierarchy
The fair value measurement hierarchy for all investment property and IPUC as at 31 March 2017 was Level 3 – Significant
unobservable inputs (2016: Level 3). There were no transfers between Levels 1, 2 or 3 during the year.

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Notes to the accounts continued
For the year ended 31 March 2017

10. Property assets continued
Descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are
as follows:

Valuation techniques used to derive Level 3 fair values
The valuations have been prepared on the basis of fair market value which is defined in the RICS Valuation Standards as “the
estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an
arm’s-length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion.”

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. A decrease in the ERV would decrease market value. A decrease in the equivalent yield would increase the
market value. An increase in the remaining lease term would increase the fair value.

11. Property, plant and equipment
The Group holds computer and other equipment assets with cost of £1.0 million (2016: £0.7 million) and accumulated
depreciation of £0.6 million (2016: £0.5 million), giving a net book value of £0.4 million (2016: £0.2 million).

Additions during the year were £0.3 million (2016: £0.2 million) and depreciation charged to the income statement was £0.1 million
(2016: £0.1 million).

12. Cash, cash equivalents and restricted cash

Cash held in current account

Restricted cash

2017
£m

23.3

0.2

23.5

2016
£m

43.7

0.6

44.3

Restricted cash arises where there are rent deposits, 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.

13. Trade and other receivables

Trade receivables

Prepayments and accrued income

Other debtors

2017
£m

5.1

1.2

3.1

9.4

2016
£m

4.2

1.2

2.1

7.5

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 (2016: £nil).

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Notes to the accounts continued
For the year ended 31 March 2017

13. Trade and other receivables continued
As at 31 March 2017 and 31 March 2016, the analysis of trade debtors that were past due but not impaired is as follows:

Past due but not impaired

2017
2016

Neither past
due nor
impaired
£m

4.4
3.8

Total
£m

5.1
4.2

>30 days
£m

>60 days
£m

>90 days
£m

>120 days
£m

0.2
0.2

0.3
0.1

0.2
0.1

–
–

The bulk of the Group’s income derives from the NHS or is reimbursed by the NHS, hence the risk of default is minimal.

14. Trade and other payables

Trade creditors

Other creditors and accruals

VAT creditor

2017
£m

1.4

12.8

2.2

16.4

2016
£m

2.8

11.8

1.9

16.5

Finance lease arrangements are amounts payable in respect of leasehold investment property held by the Group. The amounts
due after more than one year, which total £3.0 million (2016: £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 23. The fair value of the Group’s lease obligations is approximately equal to their carrying value.

15. Deferred revenue

Arising from rental received in advance

Arising from pharmacy lease premiums received in advance

Current

Non-current

16. Provisions

At 1 April

Utilisation of provision
At 31 March

2017
£m

15.7

6.4
22.1

16.3

5.8
22.1

2017
£m

0.3

(0.3)
–

2016
£m

13.7

6.9
20.6

14.2

6.4
20.6

2016
£m

0.4

(0.1)
0.3

Provisions related to the onerous property lease on the former Pall Mall office. The lease expired in July 2016.

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Notes to the accounts continued
For the year ended 31 March 2017

17. Borrowings

At 1 April
Amount drawn down in year
Amount repaid in year
Loan issue costs
Amortisation of loan issue costs
Write off 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:

2017
£m

369.2
210.0
(59.0)
(2.2)
0.7
1.4
520.1

4.3
515.8
520.1

2016
£m

513.5
45.0
(188.5)
(1.4)
0.6
–
369.2

4.0
365.2
369.2

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 (“LTV”) 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). In addition, the bond is subject to a WAULT
covenant of 10 years which, if breached, gives the bondholder the option to change the facility to an amortising basis.

2. Loans from Aviva Commercial Finance with an aggregate balance of £213.8 million at 31 March 2017 (2016: £217.8 million).
The Aviva loans are partially amortised by way of quarterly instalments and partially repaid by way of bullet repayments falling
due between 2024 and 2044 with a weighted average term of 13.8 years to maturity; £4.3 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%. The loans carry a debt service cover covenant of 1.05 times and an LTV covenant of 70%, calculated
across all loans and secured properties.

In November 2015, in line with the debt reduction plan announced in the Prospectus for the October 2015 equity raise,
£182.0 million of loans were repaid along with associated early repayment costs of £34.1 million.

3. Five-year club revolving credit facility with RBS, HSBC, Santander and Barclays for £200 million on an unsecured basis at an
initial margin of 1.50% above LIBOR, expiring in May 2021. The margin increases based on the LTV of the subsidiaries to
which the facility relates, up to 2.0% where the LTV is in excess of 50%. The facility is subject to a historical interest cover
requirement of at least 175%, maximum LTV of 60% and a weighted average lease length of seven years. As at 31 March
2017, £100 million of this facility was drawn. This facility replaced the previous £120 million secured revolving credit facility.
Subsequent to the year end, the available facility has been increased to £250 million.

4. 10-year notes in the US private placement market for a total of £100 million. The notes are unsecured, have a fixed interest

rate of 2.65% and were drawn on 13 October 2016. The facility is subject to a historical interest cover requirement of at least
175%, maximum LTV of 60% and a weighted average lease length of seven years.

The Group has been in compliance with all financial covenants on all of the above loans as applicable throughout the year.

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Notes to the accounts continued
For the year ended 31 March 2017

18. Share capital

Ordinary Shares issued and fully paid

At 1 April

Issued 20 July 2015

Issued 25 September 2015

Issued 14 October 2015

Issued 4 November 2015

Issued 20 January 2016 – scrip

Issued 27 January 2016

Issued 20 April 2016 – scrip

Issued 27 July 2016 – scrip

Issued 26 August 2016

Issued 19 October 2016 – scrip

Issued 18 January 2017 – scrip

At 31 March
Own shares held

Total share capital

Number of
shares
2017

Share
capital
2017
£m

Number of
shares
2016

Share
capital
2016
£m

1,637,706,738

163.8 1,006,900,141

100.7

–

2,291,541

1,880,037

8,000,000

2,130,150

3,032,527

–

0.2

0.8

0.2

0.3

4,545,455

3,543,975

618,000,000

2,229,072

1,611,873

876,222

–

0.4

61.8

0.2

0.1

–

1,655,040,993
(61,898)

165.5 1,637,706,738
(1,256,714)

–

1,654,979,095

165.5 1,636,450,024

163.8
(0.6)

163.2

Ordinary Shares issued on 20 July 2015, 4 November 2015 and 27 January 2016 represent shares issued as part consideration
to discharge the monetary liability for the acquisition of investment properties held in corporate vehicles. The shares were valued
based on the closing share price the day before issuance with this amount appropriately allocated between share capital and
share premium.

On 25 September 2015 and 26 August 2016, 3,543,975 and 8,000,000 Ordinary Shares were issued following employees
exercising nil-cost options awarded under the VCP. Further information can be found in respect of the VCP in Note 20 and on
pages 59 and 60 of the Remuneration Report.

On 14 October 2015, 618,000,000 Ordinary Shares were issued by way of a Firm Placing, Placing and Open Offer and Offer for
Subscription at a price of 50 pence per Ordinary Share. Gross proceeds to the Company were £309.0 million, which has been
allocated appropriately between share capital (£61.8 million) and share premium (£247.2 million). Issue costs totalling £9.5 million
were incurred and have been allocated against share premium.

On 20 January 2016, 1,611,873 Ordinary Shares were issued to shareholders who elected to receive Ordinary Shares in lieu
of a cash dividend under the Company scrip dividend alternative.

In the year ended 31 March 2017, 9,334,255 Ordinary Shares were issued to shareholders who elected to receive Ordinary
Shares in lieu of a cash dividend under the Company scrip dividend alternative.

Post year end, on 19 April 2017, 1,514,247 Ordinary Shares were issued to shareholders who elected to receive Ordinary Shares
in lieu of a cash dividend under the Company scrip dividend alternative.

Own shares held comprise shares held by the Employee Benefit Trust.

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Notes to the accounts continued
For the year ended 31 March 2017

19. Dividends paid on Ordinary Shares

Payment date

30 April 2015
22 July 2015
4 November 2015
20 January 2016
20 April 2016
27 July 2016
19 October 2016
18 January 2017

Pence per
share

Number of
Ordinary Shares

0.5 1,006,900,141
0.5 1,006,900,141
0.5 1,632,989,571
0.55 1,635,218,643
0.55 1,637,706,738
0.55 1,639,998,279
0.55 1,649,878,316
0.60 1,655,040,993

2017
£m

–
–
–
–
9.0
9.0
9.1
9.9
37.0

2016
£m

5.0
5.0
8.2
9.0
–
–
–
–
27.2

A quarterly dividend for 2017/18 of 0.60 pence per share is currently planned to be paid on 19 July 2017 to shareholders on the
share register at 16 June 2017.

A scrip dividend alternative was introduced with effect from the January 2016 quarterly dividend. Details of shares issued in lieu
of dividend payments can be found in Note 18.

The dividends paid do not include any PIDs as defined under the REIT regime.

20. Share-based payments
As at 31 March 2017, the Group had two long-term incentive schemes in place – the Value Creation Plan (“VCP”) and the
Performance Share Plan (“PSP”).

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 2017, the Employee Benefit Trust held a total of 61,898 (2016: 1,256,714) 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 2017, a total of 3,305,149 nil-cost options were outstanding to employees (including 2,760,761 outstanding to
Executive Directors as detailed in the Remuneration Committee Report).

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 from March 2012 to March 2017. 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.

At the first Measurement Date in August 2015, nil-cost options over 24,999,450 Ordinary Shares were awarded to scheme
participants. 50% of these were exercisable in September 2015 with the remainder exercisable in 2016 or 2017 subject to
achievement of certain performance hurdles. Further details in respect of the VCP are provided in the Remuneration Committee
Report on pages 59 and 60.

Performance Share Plan
During the year, 1,137,931 nil-cost options were awarded to Executive Directors under the newly created PSP. Participants’
awards will vest if certain targets relating to TSR and growth in NAV are met, as detailed in the Remuneration Committee Report.

www.assuraplc.com
www.assuraplc.com

93
93

Notes to the accounts continued
For the year ended 31 March 2017

20. Share-based payments continued
The fair value of the newly issued PSP equity settled units granted during the year was estimated as at the date of grant using the
Stochastic 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 2017:

Expected share price volatility (%)

Risk free interest rate (%)

Expected life of units (years)

2017

0.03

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 2017 was £454,600 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 £318,000 (2016:
£468,500) and a credit has been recorded during the year in respect of the lower than expected employer national insurance
contributions payable on the awards that vested during the period so that the total income statement charge was £0.1 million
(2016: £1.9 million).

As at 31 March 2017, 1,137,931 share options were outstanding (2016: nil).

21. Note to the consolidated cash flow statement

Reconciliation of net profit before taxation to net cash inflow from operating activities:

Net profit before taxation

Adjustments for:

(Increase)/decrease in debtors

Increase/(decrease) in creditors

Decrease in provisions

Revaluation gain

Interest capitalised on developments

Loss/(gain) on disposal of properties

Depreciation

Early repayment costs

Employee share-based incentive costs

Amortisation of loan issue costs

Write off of loan issue costs

Net cash inflow from operating activities

2017
£m

2016
£m

95.2

28.8

(2.8)

1.2

(0.3)

(56.5)

(0.4)

0.1

–

0.3

0.7

1.4

39.0

0.5

(1.5)

(0.1)

(36.4)

(0.5)

(0.1)

0.1

34.1

(2.6)

0.6

–

22.9

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Notes to the accounts continued
For the year ended 31 March 2017

22. Deferred tax
Deferred tax consists of the following:

At 1 April
Income statement movement
At 31 March

2017
£m

0.4
0.1
0.5

The amounts of deductible temporary differences and unused tax losses (which have not been recognised) are as follows:

Tax losses
Other timing differences

2017
£m

225.6
1.9
227.5

2016
£m

1.3
(0.9)
0.4

2016
£m

213.4
6.0
219.4

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

2017
£m

38.4

0.3
38.7

2016
£m

38.4

1.1
39.5

23. 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
£18 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 800 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.

www.assuraplc.com
www.assuraplc.com

95
95

Notes to the accounts continued
For the year ended 31 March 2017

23. 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 13.2 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 2017

Non-cancellable leases
Trade and other receivables

Receivables as at 31 March 2016

Non-cancellable leases
Trade and other receivables

On
demand
£m

Less than
3 months
£m

–
–
–

18.8
9.5
28.3

On
demand
£m

Less than
3 months
£m

–
–
–

15.9
7.5
23.4

3 to 12
months
£m

56.5
–
56.5

3 to 12
months
£m

47.8
–
47.8

1 to 5
years
£m

289.0
–
289.0

1 to 5
years
£m

252.7
–
252.7

>5 years
£m

648.5
–
648.5

>5 years
£m

629.0
–
629.0

Total
£m

1,012.8
9.5
1,022.3

Total
£m

945.4
7.5
952.9

The table below summarises the maturity profile of the Group’s financial liabilities, including interest, at 31 March 2017 and
31 March 2016 based on contractual undiscounted payments at the earliest date on 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 2017

Non-derivative financial liabilities:
Interest bearing loans and borrowings
Trade and other payables
Total financial liabilities

Payables as at 31 March 2016

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

–
–
–

6.4
12.7
19.1

On
demand
£m

Less than
3 months
£m

–
–
–

6.5
13.3
19.8

19.2
3.7
22.9

3 to 12
months
£m

14.4
3.2
17.6

1 to 5
years
£m

327.5
0.2
327.7

1 to 5
years
£m

99.8
0.2
100.0

>5 years
£m

388.2
2.7
390.9

>5 years
£m

406.8
2.8
409.6

Total
£m

741.3
19.3
760.6

Total
£m

527.5
19.5
547.0

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Notes to the accounts continued
For the year ended 31 March 2017

23. Derivatives and other financial instruments continued
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 and restricted to one third of the loan book. 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 2017
was as follows:

Floating rate asset
Cash

Liabilities (fixed rate unless stated)
Long-term loans:

Revolving credit facility (variable rate)
Private placement
Bond
Aviva

Payments due under finance leases

Within
1 year
£m

1 to 5
years
£m

>5 years
£m

Total
£m

23.5

–

23.5

–
–
–
(4.3)
–

(100.0)
–
–
(19.7)
(0.2)

–
(100.0)
(110.0)
(189.8)
(2.8)

(100.0)
(100.0)
(110.0)
(213.8)
(3.0)

In November 2011 the Group issued a £110.0 million 10-year senior secured bond at 4.75%.

Aviva loans decreased during the period to £213.8 million (2016: £217.8 million). The Aviva loans are partially amortised by way
of quarterly instalments and partially repaid by way of bullet repayments falling due between 2024 and 2044. £4.3 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%.

The Group has a revolving credit facility of £200 million which expires in 2021. Interest is charged at an initial rate of LIBOR
plus 1.5%, subject to LTV.

On 3 October 2016, the Group agreed new 10-year notes in the US private placement market for a total of £100 million. The
notes are unsecured and have a fixed interest rate of 2.65%.

The ageing analysis of the financial assets and liabilities excluding trade receivables and payables of the Group at 31 March 2016
was as follows:

Floating rate asset
Cash

Liabilities (fixed rate unless stated)
Long-term loans:

Revolving credit facility (variable rate)
Bond
Aviva

Payments due under finance leases

Within
1 year
£m

1 to 5
years
£m

>5 years
£m

Total
£m

44.3

–

44.3

–
–
(4.0)
–

(45.0)
–
(18.6)
(0.2)

–
(110.0)
(195.2)
(2.8)

(45.0)
(110.0)
(217.8)
(3.0)

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www.assuraplc.com

97
97

Notes to the accounts continued
For the year ended 31 March 2017

23. Derivatives and other financial instruments continued
Sensitivity analysis
As at 31 March 2017, 81% of debt drawn by the Group is subject to fixed interest rates. A 0.25% movement in interest rates
would change profit by £0.2 million based on the amount of variable rate debt drawn.

Cash
Long-term loans
Payments due under finance leases

Book value

Fair value

2017
£m

23.5
520.1
3.0

2016
£m

44.3
(369.2)
(3.0)

2017
£m

23.5
597.8
3.0

2016
£m

44.3
(429.4)
(3.0)

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 LTV, which is calculated as net debt divided by total property. The LTV
percentage on this basis is 37% at 31 March 2017 (30% at 31 March 2016).

Investment property
Investment property under construction
Held for sale – land
Total property

Loans
Finance lease
Cash

Net debt

LTV

2017
£m

1,324.7
20.2
0.9
1,345.8

2017
£m

520.1
3.0
(23.5)
499.6

2016
£m

1,097.9
11.5
1.7
1,111.1

2016
£m

369.2
3.0
(44.3)
327.9

37%

30%

24. Commitments
At the year end the Group had seven (2016: two) committed developments of which six were on site with a contracted total
expenditure of £39.7 million (2016: £13.5 million) of which £15.9 million (2016: £8.5 million) had been expended.

25. Related party transactions
Details of transactions during the year and outstanding balances at 31 March 2017 in respect of associates are detailed in Note 9.

Details of payments to key management personnel are provided in Note 4.

26. Post balance sheet events
Subsequent to the year end, the revolving credit facility has been extended to £250 million.

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Assura plc Annual Report and Accounts 2017

Company income statement
Company income statement
For the year ended 31 March 2017
For the year ended 31 March 2017

Revenue
Dividends received from subsidiary companies
Group management charge
Total revenue
Administrative expenses
Share-based payment charge
Impairment of investment in subsidiary
Operating profit

Profit before taxation
Taxation
Profit attributable to equity holders

2017
£m

150.0
2.1
152.1
(2.6)
(0.1)
(111.7)
37.7

37.7
–
37.7

2016
£m

50.0
1.2
51.2
(2.1)
(1.9)
–
47.2

47.2
–
47.2

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.

Company balance sheet
Company balance sheet
As at 31 March 2017
As at 31 March 2017

Non-current assets

Investments in subsidiary companies

Current assets

Cash and cash equivalents
Other receivables
Amounts owed by subsidiary companies

Current liabilities

Trade and other payables

Net assets

Capital and reserves

Share capital
Share premium
Own shares held
Merger reserve
Reserves
Total equity

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www.assuraplc.com

99
99

Note

2017
£m

372.5
372.5

–
0.1
380.7
380.8

2016
£m

396.7
396.7

5.2
0.1
345.8
351.1

(1.0)
(1.0)

(1.5)
(1.5)

752.3

746.3

165.5
246.1
–
183.7
157.0
752.3

163.8
241.9
(0.6)
295.4
45.8
746.3

The financial statements were approved at a meeting of the Board of Directors held on 22 May 2017 and signed on its behalf by:

Simon Laffin
Non-Executive Chairman

Jonathan Murphy
CEO

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 2017
For the year ended 31 March 2017

1 April 2015
Profit attributable to equity holders
Total comprehensive income
Issue of Ordinary Shares
Share issue costs
Dividends
Employee share-based incentives
31 March 2016

Profit attributable to equity holders
Total comprehensive income
Merger reserve release
Dividends
Employee share-based incentives
31 March 2017

Note

Share
capital
£m

100.7
–
–
62.5
–
0.2
0.4
163.8

–
–
–
0.9
0.8
165.5

Share
premium
£m

Own
shares
held
£m

–
–
–
250.7
(9.5)
0.7
–
241.9

–
–
–
4.2
–
246.1

(1.8)
–
–
(0.3)
–
–
1.5
(0.6)

–
–
–
–
0.6
–

Merger
reserve
£m

295.4
–
–
–
–
–
–
295.4

–
–
(111.7)
–
–
183.7

Reserves
£m

30.0
47.2
47.2
–
–
(27.2)
(4.2)
45.8

37.7
37.7
111.7
(37.0)
(1.2)
157.0

Total
equity
£m

424.3
47.2
47.2
312.9
(9.5)
(26.3)
(2.3)
746.3

37.7
37.7
–
(31.9)
0.2
752.3

Company cash flow statement
Company cash flow statement
For the year ended 31 March 2017
For the period ended 31 March 2017

Operating activities

Dividends received from subsidiaries

Charges received from subsidiaries

Amounts paid to suppliers and employees

Net cash (outflow)/inflow from operating activities

Investing activities
Net loans advanced to subsidiaries
Net cash inflow/(outflow) from investing activities

Financing activities
Issue of Ordinary Shares
Issue costs paid on issuance of Ordinary Shares
Dividends paid
Net cash (outflow)/inflow from financing activities

(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of period
Cash and cash equivalents at end of period

www.assuraplc.com

101

Note

2017
£m

2016
£m

–

2.1

(2.5)

(0.4)

50.0

1.2

(5.2)

46.0

27.1
27.1

(314.6)
(314.6)

–
–
(31.9)
(31.9)

(5.2)
5.2
–

308.6
(9.5)
(26.3)
272.8

4.2
1.0
5.2

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Assura plc Annual Report and Accounts 2017

Notes to the Company accounts
Notes to the Company accounts
For the year ended 31 March 2017
For the period ended 31 March 2017

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.

The auditor’s remuneration for audit and other services is disclosed in Note 4. a) to the Group accounts. Disclosure of individual
Director’s remuneration, share interests, share options, long-term incentive schemes, pension contributions and pension
entitlements required by the Companies Act 2006 and those specified for audit by the Listing Rules of the Financial Conduct
Authority are shown in the Remuneration Report on pages 57 to 63 and form part of these accounts.

B. Investments in subsidiary companies

Cost
Provision for diminution in value

2017
£m

484.2
(111.7)
372.5

2016
£m

396.7
–
396.7

Details of all subsidiaries as at 31 March 2017 are shown in Note 9 to the Group accounts.

The Company directly holds investments in Assura Group Limited and Assura IH Limited, which are both intermediate holding
companies for the property owning subsidiaries in the Assura plc group.

During the period the Company received a dividend of £150 million from its wholly owned subsidiary company, Assura Group
Limited, which was settled by clearing an intercompany balance owed by Assura plc to Assura Group Limited. The resulting
reduction in net assets of Assura Group Limited led to management completing an impairment assessment of the investment held
in Assura Group Limited. Following this assessment, an impairment charge of £111.7 million was recorded. A corresponding
amount has been transferred from the merger reserve to retained earnings which is considered distributable.

C. Cash and cash equivalents

Cash held in current account

D. Loans to subsidiary companies – current

Amounts owed by Group undertakings

The above loans are unsecured, non-interest bearing and repayable upon demand.

2017
£m

–

2017
£m

380.7

2016
£m

5.2

2016
£m

345.8

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.

E. Related party transactions

Group undertakings
31 March 2017
31 March 2016

The above transactions are with subsidiaries.

Charges
received
£m

Dividends
received
£m

Amounts
owed by
£m

Amounts
owed to
£m

2.1
1.2

150.0
50.0

380.7
345.8

–
–

www.assuraplc.com
www.assuraplc.com

103
103

Notes to the Company accounts continued
For the year ended 31 March 2017

F. 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 had trade and other payables of £1.0 million at 31 March 2017 (31 March 2016: £1.5 million).

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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Assura plc Annual Report and Accounts 2017

Glossary

AGM is Annual General Meeting.

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.

BPF is the British Property Federation
which is the membership organisation,
and the voice, of the UK real estate
industry.

Building Research Establishment
Environmental Assessment Method
(“BREEAM”) assesses the
sustainability of buildings against
a range of criteria.

Code is the UK Corporate Governance
Code 2014, a full copy of which is
available on the website of the Financial
Reporting Council.

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.

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.

Company is Assura plc.

Consumer Price Index (“CPI”) is
an official measure of the general level
of inflation as reflected in the weighted
average of prices of a basket of
consumer goods and services such
as transportation, food, clothing, etc.
CPI is commonly calculated on a
monthly and annual basis.

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.

European Public Real Estate
Association (“EPRA”) is the industry
body for European REITs. EPRA is a
registered trade mark of the European
Public Real Estate Association.

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.

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105

IFRS is International Financial
Reporting Standards as adopted
by the European Union.

Mark to Market is the difference
between the book value of an asset
or liability and its market value.

NAV is Net Asset Value.

Net Initial Yield (NIY) 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.

Interest Cover is the number of times
net interest payable is covered by EPRA
earnings 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 Investment Property Databank
Limited which provides performance
analysis for most types of real estate
and produces an independent
benchmark of property returns.

IPD Healthcare Index is 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.

KPI is Key Performance Indicators.

Loan to Value (“LTV”) is the ratio
of net debt to the total value of
property assets.

London Interbank Offered Rate
(“LIBOR”) is the interest rate charged
by one bank to another for lending
money.

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.

PSP is Performance Share Plan.

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.

Retail Price Index (“RPI”) is an 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.

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.

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Assura plc Annual Report and Accounts 2017

Glossary continued

RPI Linked Leases are those leases
which have rent reviews which are
linked to changes in the RPI.

Sustainability and Transformation
Plans (“STPs”) are 44 regional
proposals to improve health and care in
that area.

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.

VCP is Value Creation Plan.

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 basis points) 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.

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107

Corporate information

Registered Office:

The Brew House
Greenalls Avenue
Warrington
WA4 6HL

Company Secretary:

Orla Ball

Auditor:

Legal Advisors:

Stockbrokers:

Deloitte LLP
2 Hardman Street
Manchester
M3 3HF

Ernst & Young LLP
100 Barbirolli Square
Manchester
M2 3EY

Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET

Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY

Bankers:

Aviva plc

Barclays Bank plc

HSBC plc

Santander UK plc

The Royal Bank of Scotland plc

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108

Assura plc Annual Report and Accounts 2017

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.

This report is printed on Galerie Satin which
is made from pulp sourced from well managed
forests and other controlled sources. Both
the paper and the print factory are FSC®
(Forest Stewardship Council®) certified.

Assura plc
The Brew House
Greenalls Avenue
Warrington
WA4 6HL

T: 01925 420660
F: 01925 234503
E: info@assura.co.uk