Assura Annual Report 2018

← All annual reports

FY2018 Annual Report · Assura

Loading PDF…

Meeting the needs
of a changing NHS

Annual Report and Accounts 2018

Financial highlights

Investment property (£m)

Diluted EPRA NAV (p)*

Net rental income (£m)

£1,732.7m

up by 28.8%

52.4p

up by 6.3%

£80.2m

up by 18.1%

2018

2017

2016

1,732.7

2018

1,344.9

1,109.4

2017

2016

52.4

2018

49.3

2017

45.8

2016

80.2

67.9

58.4

Profit before tax (£m)

£71.8m

down by 24.6%

* See Note 8

EPRA EPS (p)**

2.5p

up by 4.2%

Total dividends paid (p)

2.46p

up by 9.3%

2018

2017

71.8

2018

95.2

2017

2.5

2018

2.4

2017

2016

28.8

2016

2.0

2016

2.46

2.25

2.05

** See Note 7

Available online at:
www.assuraplc.com

Contents

Strategic report
2 Our business at a glance
4 Chairman’s statement
6 CEO review
10 Market overview
12 Our business model and strategy
14 Our business model in action
20 Strategy at a glance
22 Key performance indicators
24 Policy matters
26 Stakeholder engagement
32 Risk management
34 Principal risks and uncertainties
38 Business review

Governance
44

Chairman’s introduction
to governance

46 Leadership
48 Board of Directors
50 Effectiveness
52 Nominations Committee Report
54 Audit Committee Report
56 Remuneration Report
70 Directors’ Report
73

Directors’ Responsibility
Statement
Independent Auditor’s Report

Financial statements
80
81
82

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

83
84 Notes to the accounts
102 Company financial statements

Additional information
108 Glossary
110 Corporate information

www.assuraplc.com

Premises fit
for the future

In the NHS’s 70th year, the buildings
in which patients receive their care are
under unprecedented strain. Our growing,
ageing population needs more from the
NHS than ever before, and its estate is
feeling the pressure.

Primary care buildings – the places
where more than 90% of patient contact
in the NHS takes place – are being asked
to accommodate more staff, and provide
seven-day access to general practice and
a bigger range of services closer to home.
By improving its physical infrastructure,
the NHS is equipping itself for the task.

The third party development model is
playing a vital role. Since we began our
work, we have now invested more than
£350 million (in addition to acquistions
of more than £1.2 billion) in improving
existing GP buildings and in developing
new, modern premises, meaning that
patients are getting their care in fit-for-
purpose surroundings – helping to create
a primary care estate today that is in
shape for the NHS of tomorrow.

C A S T L E M E D I C A L G R O U P

14
20

76 56

Strategic reportFinancial statementsAdditional informationGovernance2

Assura plc Annual Report and Accounts 2018

Our business at a glance

Investing to
support the
primary healthcare
infrastructure.

76 56

Medical centres valued over £10 million

Building official name

Ashfields Health Centre

Aspen Centre

Bonnyrigg Medical Centre

Church View Medical Centre

Church View Primary Care Centre

Crompton Health Centre

Dene Drive Primary Care Centre

Dickson House

Eagle Bridge Health & Wellbeing Centre

Fleetwood Health & Wellbeing Centre

Freshney Green Primary Care Centre

Frome Medical Centre

Hall Green Health Centre

Malmesbury Primary Care Centre

Market Drayton Primary Care Centre

Moor Park Medical Centre

North Ormesby Health Village

Northgate Health Centre

One Life Building

Parkshot Medical Centre

Severn Fields Health Village

South Bar House

Sudbury Community Health Centre

Tees Valley Treatment Centre

The Surgery @ Wheatbridge

Todmorden Medical Centre

Turnpike House Medical Centre

Waters Green Medical Centre

Town

Build date

Sandbach

Gloucester

Bonnyrigg

South Kirkby

Nantwich

Bolton

Winsford

Basingstoke

Crewe

Fleetwood

Grimsby

Frome

Birmingham

Malmesbury

Market Drayton

Blackpool

North Ormesby

Bridgnorth

Middlesbrough

Richmond

Shrewsbury

Banbury

Sudbury

Middlesbrough

Chesterfield

Todmorden

Worcester

Macclesfield

2004

2014

2005

2013

2008

2007

2012

2009

2012

2003

2008

2005

2011

2005

2007

2005

2014

2012

2009

2014

2018

2008

2006

Sq.m

2,681

3,481

4,074

2,812

3,322

2,964

2,988

2,318

6,261

5,857

6,796

4,087

2,406

3,205

3,667

5,217

7,652

3,589

3,327

974

6,086

3,691

2,937

4,389

2,943

4,467

4,257

6,007

List size NHS rent %

24,388

21,354

22,168

14,020

24,440

11,043

24,083

37,435

43,712

11,839

28,439

29,036

25,674

15,697

17,645

28,966

18,068

16,475

9,882

12,377

17,279

32,941

9,760

–

15,292

13,466

28,908

61,405

88%

91%

97%

91%

88%

87%

67%

90%

91%

87%

83%

86%

90%

95%

66%

91%

94%

100%

94%

89%

100%

n/a

83%

92%

91%

93%

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
%

>£10m

£5–10m

£1–5m

<£1m

437.5

440.3

315

764.3

107

67.5

North

South

Midlands

Scotland

Wales

172

664.0

182

557.2

313.3

50.3

124.8

GPs

NHS body

Pharmacy

Other

Total
rent roll
£m

Total
rent roll
%

61.8

14.6

7.4

7.2

518 1,709.6

100

518 1,709.6

100

91.0

100

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 42 and 43.

2018

2.5p

52.4p

51.8p

4.77%

4.81%

1.8%

13.0%

12.0%

2017

2.4p

49.4p

44.7p

5.05%

2.1%

13.7%

12.4%

Development pipeline

2017/18

2018/19

2019/20

Completed 2017/18

On site 2018/19

Pipeline

10 schemes, £47 million
approximate value

Brixworth Surgery, Northampton

Canolfan Feddygol Porthcawl
Medical Centre, Porthcawl

Darley Dale Medical Centre,
Derbyshire

Durham Diagnostic Treatment
Centre, Durham

Stow Surgery, Stow-on-the-Wold

Blaenavon Primary Care Resource Centre

Kibworth Medical Centre,
Leicester
975 sq.m

Mountview Surgery & Children’s
Centre, Swansea
979 sq.m

Tees Valley Treatment Centre,
Middlesbrough
4,389 sq.m

West Gorton Medical Centre,
Greater Manchester
1,280 sq.m

Wivenhoe Surgery, Colchester
628 sq.m

Woodville Surgery, Derbyshire
993 sq.m

Read more
page 30

Lender relationships
We have worked with our lenders,
both existing and new, to improve
our financial structure in support
of our business model.

We have extended our RCF and taken
a second unsecured private placement,
having repaid the secured loans with
Aviva, to increase our operational
flexibility and benefit from reduced
interest rates in the current environment.

Read more
Note 16 to the accounts on page 94

Strategic reportFinancial statementsAdditional informationGovernance28

Assura plc Annual Report and Accounts 2018

Stakeholder engagement continued

Greater Manchester Mayor, Andy Burnham,
opening our West Gorton site

GPs/NHS

Conversations matter: a year
of stakeholder engagement
From GPs guest-blogging for us about
their perspectives on working in unfit
premises to surveying our tenants for their
views of the role a building plays in the
care they deliver, this year has been about
listening to, and sharing the bricks and
mortar issues which matter to, staff using
primary care buildings. We are reflecting
this across our communications work,
including distributing our Property
Matters newsletter to every practice in
the country. We were delighted to join the
Nuffield Trust as an expert advisor to its
Restate programme, helping five STP
teams to work on challenges for primary
care estate in their respective footprints.

With NHS estates issues rising up
government’s agenda in the last year,
engagement with ministers, officials and
MPs has also been a focus, along with
our role as chair of the British Property
Federation’s Healthcare Committee. We
teamed up with our sector colleagues
to highlight the potential of third party
development to help government
reach its commitment of £10 billion of
investment to improve the NHS estate.
Our Primary Care Buildings Pledge set
out the capacity for the model to inject
more than £3 billion into new primary care
centres over five years – the equivalent
of 750 new buildings across the country.
We have been hugely encouraged by
the response to our joint pledge and
conversations on its potential continue.

L I L L I P U T S U R G E R Y

Lilliput Surgery, Poole

We have discussed primary care estates
challenges and solutions with MPs at
a range of events in Westminster, while
in constituencies across the country,
parliamentarians have been visiting to see
how better buildings are improving the
patient experience. Welsh Government
Minister for Housing and Regeneration,
Rebecca Evans AM, opened our new
building for Mountain View Health Centre,
Children’s Centre and Pharmacy in
Swansea; Siobhain McDonagh MP cut the
ribbon on our landmark extension for Wide
Way Medical Centre in Mitcham; Tracey
Brabin MP opened our refurbishment of a
derelict former surgery building for Cook
Lane Surgery in West Yorkshire; Richard
Graham MP welcomed new tenants
NewMedica to the Aspen Centre in
Gloucester; and Greater Manchester
Mayor, Andy Burnham, marked the
official opening of our West Gorton site.

On the Conservative Party Conference
fringe, we brought together British
Property Federation Chief Executive,
Melanie Leech, Greater Manchester
Health and Social Care Partnership
advisor, Dr George Ogden, and Place
North West Deputy Editor, Jessica
Middleton-Pugh, to discuss the primary
care buildings of the future. Our white
paper, “Designing the future: how can
architecture change the way patients
experience primary care?” explored those
themes in more detail, combining expert
views from architects and academics
with international research by our team to
explore the changing nature of healthcare
building design around the world, and its
potential to support changes in care here.

The absence of robust, national data
on primary care estate was a problem
flagged by Sir Robert Naylor’s review
of NHS land and buildings, and we have
welcomed NHS Improvement’s steps to
begin addressing this gap. This year, we
supported the Reform think-tank in it’s
work in this area; it’s paper “A design
diagnosis: reinvigorating the primary care
estate”, analyses interviews with GPs,
practice managers and estates experts
to consider the range of options to fund
improvements to primary care buildings,
and to recommend measures which
could accelerate delivery. A roundtable
to discuss the paper, opened by the
BMA’s General Practice Committee lead
on premises, Dr Krishna Kasaraneni,
stressed the importance of this broad
mix of approaches.

www.assuraplc.com

Warrington Youth Club
Used our grant to run free health and
fitness sessions for young girls and
young people with disabilities.

Active Cheshire
Used our funding to pilot a model for
free community walks with older people,
in partnership with GP surgeries.

Beat eating disorders
Used our funding to recruit and deploy
five Warrington-based volunteers to
support sufferers via its helpline and
online chat services.

Warrington Wolves Foundation
Used our grant to fund food for 160
children from low income families attending
summer holiday activity programmes.

Active Cheshire, community walk participants

development to ensure the score is
maximised. All BREEAM schemes
completed during the year achieved
a rating of “Very Good” or better.

We also think about the impact of our
employees and office; details of our
directly controlled greenhouse gas
emissions are provided in the Directors’
Report, and we have re-emphasised
our recycling efforts in the office.

The ultra low energy building at West
Gorton, completed during the year, is
a great example of this and our on-site
developments incorporate features such
as photovoltaic cells, low energy light
fittings and air source heat pumps.

In terms of how this is tracked and
measured, we have achieved and
maintain ISO 14001 Environmental
Management System certification and
we aim to achieve BREEAM ratings of
“Excellent” on all developments
completed. The BREEAM rating is
considered at the start of the design
process and tracked throughout

Communities

Walking the walk
Our relationships with GPs fed directly
into our community work for 2017/18.
In addition to the second year of our
partnership with Life After Loss – during
which we funded a new fetal heart
monitor for Warrington General Hospital
so that problems can be identified earlier
in pregnancy, and memory box kits for
hundreds of local families experiencing
stillbirth or miscarriage – we also
funded four Warrington projects
designed to improve health in our
community (see right).

Our partnership with Active Cheshire,
which worked with one of our
Warrington medical centre sites to
establish community walks for older
people, has been particularly inspiring
as it links directly with our national work
to promote surgery buildings as focal
points for physical activity. Our “Mile Maps”
programme – which offers any GP practice
a free wall map detailing a one-mile route
for stepping out from the surgery door,
which can be recommended to staff and
patients – has now been rolled out to more
than 90 practice buildings around the
country, and we look forward to growing
this network even further during 2018/19.

Environment

We are conscious of the environmental
impact of our business; particularly
in respect of our developments. Our
development team, led by Simon
Gould, is constantly looking at ways
to innovate on building design and
incorporate features that are better from
an environmental perspective and also
minimise running costs for the tenants.

Strategic reportFinancial statementsAdditional informationGovernance30

Assura plc Annual Report and Accounts 2018

Stakeholder engagement continued

Assura employees Adam Waheed, Kirsty Grice and Debbie Barry

We have created the Assura Development
Programme offering employees the
chance to receive one to one coaching
to advance their career. We also seek to
promote from within and there have been
several internal promotions during the
past few years.

We listened to the results of an employee
survey completed during the year to
implement a consistent and transparent
appraisal process, giving each member
of staff development objectives.

Employee wellbeing
We are constantly looking at ways to
make the employee experience at Assura
as enjoyable as possible. Employee
benefits introduced include a holiday
buy-back scheme, private medical
insurance a cycle to work scheme and
on-site gym facilities, amongst others.

We have also renewed our policies in
respect of health and safety, employee
rights and diversity (including in respect
of gender, race, disability and ethnicity,
amongst others), and data protection
to ensure staff are suitably protected.

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

Employees

We have a small but very knowledgeable,
skilled and focused team. As such we
understand that staff retention is key
to maintaining our relationships with
other stakeholders and, therefore,
our reputation.

We strive to provide a great place to work
whilst encouraging employees to reach
their full potential through training
and development.

Quality of service is also important
to us and we have achieved and
maintained ISO 9001 Quality
Management System certification.

Training and development
Staff who wish to undertake relevant
training are supported through study
support and paid study leave. We
currently have nine members training
or professional qualifications, including
accountancy and chartered surveyor,
and are delighted by the success of three
individuals completing their studies for
qualifications in chartered secretarial,
marketing and chartered surveyor.

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
67%

Senior management
67%

Employees
50%

33%

50%

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.

Women in property
According to the Association of Women
in Property, women represent only 15% of
the property and construction workforce.
We’re proud to have such strong female
representation in our team, and this year
our new Chief Financial Officer, three
new surveyors and new appointments in
finance and portfolio management have
further strengthened our expertise.

www.assuraplc.com

Our key resources

New directions

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.

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.

Natalie McRoy is one of our assistant
portfolio administrators and this year,
she decided to begin her journey
to becoming one of our specialist
portfolio managers.

the role in more detail. Given that two
administrators have already taken this
training route from administration to
surveying roles with Assura, I knew
it was a fantastic opportunity.

“The senior portfolio manager was
a huge influence in my thinking – I
knew I wanted to stay with Assura,
but I was looking for more challenge.
Adam began giving me some more
complex assignments and taking me
out on property visits to understand

“It’s very intense and a lot of work
around my existing role, but it’s exciting
to be able to see the path I’m on. I’m
really looking forward to the day I take
on my first properties as a graduate
trainee surveyor.”

Assura employee Natalie McRoy

What makes a good
Assura portfolio manager?

“It’s the expertise they have not just in the buildings themselves, but also in
what GPs and the NHS need from physical infrastructure to achieve their
vision of more care closer to home. The ultimate ‘user’ of these buildings is
the patients they serve, so at any one time the team will be finding solutions
to everything from creating extra consulting rooms for a practice to advising
on steps to make buildings more energy efficient.”

W O O D V I L L E

Spencer Kenyon
Head of Portfolio Management

Woodville Surgery, Derbyshire

Strategic reportFinancial statementsAdditional informationGovernance32

Assura plc Annual Report and Accounts 2018

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.

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%
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 with fixed
price or capped price build contracts
– 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 an appropriate level

– Political risk – which could limit future
growth but does not affect the current
business assets.

The Risk Committee met five 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. Staff were reminded
of the whistleblowing hotline where
concerns overs risk management could
be raised in confidence but none were
received. Risk Committee projects in
the year included reviews of payment
processes, the General Data Protection
Regulation (“GDPR”), cyber security and
penetration testing, health and safety of
staff, prevention of tax evasion, fire risks
at properties following the Grenfell Tower
disaster, and supplier/staff conflicts.
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 34 to 37.

Strategic objective

Focus

Expertise

Sustainability

Effectiveness

Changes to government policy

c
g
e
t
a
r
t
S

Competitor threat

Reduction in investor demand

Failure to communicate

l Reduction in availability and/or increase in cost of finance
a
c
n
a
n
F

Failure to maintain capital structure and gearing

k
s

i
r

a
p
c
n
i
r
P

l Development overspend
a
n
o
i
t
a
r
e
p
O

Key staff dependency

Underperformance of assets

www.assuraplc.com

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 on page 32.

As during the previous financial year,
the Risk Committee, Audit Committee
and the Board considered the impact
of Brexit on the business and again
concluded, on the basis that the Group
is a wholly UK-based operation with no
reliance on exports, that Brexit did not,
in itself, constitute a significant risk to the
business. Cyber security was also kept
under review and, given the upgrade to
the IT systems the previous year and
with continuing improvements to security
and processes during the year, it was
considered that an appropriate level of
risk mitigation was in place.

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 the 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 of interest rates and
property valuations.

Having made reference to the principal
risks facing the Company, as laid out
on pages 34 to 37, 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 (0.5% per
annum), a prolonged downturn in
property investment valuations (initially
25 basis points, followed by further
negative movements), an increased
risk of tenant default and a sustained
absence of rent review growth. We
assume that debt facilities can be
refinanced as required, although on a
variable rate and with a margin above
LIBOR in excess of what we currently
pay. All models showed compliance
with covenants throughout the
forecast period.

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.

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.

Strategic reportFinancial statementsAdditional informationGovernance34

Assura plc Annual Report and Accounts 2018

Principal risks and uncertainties

Key

No change

Low

Medium

High

Strategic risks
Changes to government policy

Risk

Avoid

Trap

Mitigate

Movement in year

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.

Net risk rating

Comment
STPs highlight the need for investment in the primary care estate, and all note that buildings will be an enabler of NHS transformation. Government has committed
to invest £10 billion in improving NHS buildings, which will include good value private sector funding. Ministers have also launched a national strategic estates
planning service for the NHS, designed to support STPs and to signpost options for funding and delivery of their local capital programme of projects.

The reimbursement mechanism is not currently under review.

The Group’s Head of Public Affairs continues to make the case to the Government and the NHS for the benefit of investment in primary care infrastructure.

Competitor threat

Risk

Avoid

Trap

Mitigate

Movement in year

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.

Net risk rating

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.

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.
However, we have made substantial additions to our portfolio during the year.

While sector specialists and other low risk income focused funds continue to drive competition and pricing in the sector, our Investment Team maintains a pipeline
of suitable investment opportunities.

Reduction in investor demand

Risk

Avoid

Trap

Mitigate

Movement in year

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

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

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

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

This could arise from:
– Changes in NHS policy
– Health of the UK

economy

– Availability of finance
– Relative attractiveness

of other asset classes.

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

Net risk rating

Comment
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. The Group raised gross proceeds of £98.4 million through a placing in June 2017 and £310.7 million from a share issue in December 2017.
On both occasions we received strong support from both existing and new investors, reflecting the high level of support for the business and its current strategy.

www.assuraplc.com

Key

No change

Low

Medium

High

Failure to communicate

Risk

Avoid

Trap

Mitigate

Movement in year

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
141 meetings have been held during the year.

The equity issues completed during the year were supported by both existing and new shareholders and regular communication with both existing and potential
shareholders will remain a key priority for the year ahead.

Financial risks
Reduction in availability and/or increase in cost of finance

Risk

Avoid

Trap

Mitigate

Movement in year

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.

The Group has a number of
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.

Net risk rating

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

Comment
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 increased its unsecured
revolving credit facility from £200 million to £300 million and privately placed £150 million unsecured notes at attractive rates.

Failure to maintain capital structure and gearing

Risk

Avoid

Trap

Mitigate

Movement in year

Property valuations are
inherently uncertain and
subject to significant
judgement.

Valuations and yields are
regularly benchmarked against
comparable portfolios.

The Group engages two
external valuers to review
property valuations.

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

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

All financial forecasting,
including for new acquisitions,
considers gearing and
covenant headroom.

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

Net risk rating

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

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
LTV is currently at 26% and this provides generous covenant headroom.

Strategic reportFinancial statementsAdditional informationGovernance

Assura plc Annual Report and Accounts 2018

Principal risks and uncertainties continued

Key

No change

Low

Medium

High

Operational risks
Development overspend

Risk

Avoid

Trap

Mitigate

Movement in year

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.

Net risk rating

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 increased slightly during the year as the number of developments gathers momentum.

Our future development programme is more geared towards in-house development (as opposed to forward funding commitments) so increased scrutiny on JCT
contract conditions and pre-contract due diligence is required in conjunction with our legal advisors.

Key staff dependency

Risk

Avoid

Trap

Mitigate

Movement in year

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

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 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.

Succession plans are in place
for each department.

Any employee resignations
are reported at each
Board meeting.

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

Net risk rating

Comment
Nine members of staff are currently working towards a professional qualification with three members of staff achieving ICSA, MRICS and ACIM qualifications
in the year.

We successfully recruited several qualified members of staff in the year. Please see further details of our employee engagement on page 30.

www.assuraplc.com

Key

No change

Low

Medium

High

Underperformance of assets

Risk

Avoid

Trap

Mitigate

Movement in year

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 any new
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.

Net risk rating

Movement in year

Net risk rating

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

Less than 6% of leases have tenant ability to trigger a downward rent review.

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

Strategic reportFinancial statementsAdditional informationGovernance

Assura plc Annual Report and Accounts 2018

Business review
For the year ended 31 March 2018

Portfolio as at 31 March 2018
£1,732.7 million (31 March 2017:
£1,344.9 million)
Our business is based on our investment
portfolio of 518 properties. This has a
passing rent roll of £91.0 million (March
2017: £74.4 million), 84% of which is
underpinned by the NHS. The WAULT
is 12.6 years and 74% of the rent roll
will still be contracted in 2028.

At 31 March 2018 our portfolio of
completed investment properties was
valued at a total of £1,709.6 million,
including investment properties held for
sale of £7.4 million (March 2017: £1,315.3
million and £nil), which produced a net
initial yield (“NIY”) of 4.80% (March 2017:
5.10%). 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 4.98% (March 2017: 5.29%).
Adjusting this Royal Institution of
Chartered Surveyors (“RICS”) standard
measure to reflect the advanced payment
of rents, the true equivalent yield is 5.15%
(March 2017: 5.47%).

Our EPRA NIY, based on our passing rent
roll and latest annual direct property
costs, was 4.77% (March 2017: 5.05%).

Net rental income

Valuation movement

Total Property
Return

2018
£m

80.2

79.4

2017
£m

67.9

56.5

159.6

124.4

Expressed as a percentage of opening
investment property plus additions, Total
Property Return for the year was 9.7%,
which is the same return as in 2017.

Our annualised Total Return over the five
years to 31 December 2017 as calculated
by IPD was 9.9% compared with the IPD
All Healthcare Benchmark of 9.4% over
the same period.

The net valuation gain in the year of
£79.4 million comprises a 6.86% uplift
on a like-for-like basis net of movements
relating to properties acquired in the
period. 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 UK gilt which traded at
1.588% at 31 March 2018.

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:

Total Property Return

9.7%

2017: 9.7%

Capital invested

£316.6m

2017: £178.9m

EPRA Cost Ratio

13.0%

2017: 13.7%

Acquisition of completed
medical centres

Developments/forward
funding arrangements

Like-for-like portfolio
(improvements)

Total capital expenditure

2018
£m

278.9

31.7

6.0

316.6

The bulk of the growth in our investment
portfolio has come from the acquisition
of 115 properties for £278.9 million during
the period.

Despite the continued delay in NHS
approval of new developments, we have
completed six developments during the
period (all under forward funding
agreements) with a total development
cost of £31.3 million. This has added
£1.6 million to our annual rent roll and
generated a 5.2% yield on cost. The
£31.7 million in the table above is
development spend during the year,
whereas the £31.3 million relates to
projects completed.

www.assuraplc.com

Portfolio analysis
by capital value

Number of
properties

Total
value
£m

Total
value
%

315

107

437.5

440.3

764.3

67.5

518 1,709.6

100

>£10m

£5–10m

£1–5m

<£1m

Size

Portfolio analysis by region

During the year we recorded a
revaluation gain of £6.2 million in
respect of investment property under
construction (2017: £0.8 million).

Development gains are recorded based
on the stage of completion whilst there
has also been uplift reflecting an element
of yield shift, as with the existing portfolio.

As at 31 March 2018, we had five
developments on site (four under
forward funding agreements), with a
total committed investment value of
£23.6 million, and a further 10 which
we would hope to be on site shortly
(estimated cost of £47 million).

Live developments and forward funding arrangements
Estimated
completion
date

Development
costs

Costs
to date

Brixworth

Darley Dale

Durham

Porthcawl

Stow-on-the-Wold

May-18

Sep-18

Apr-18

Feb-19

Dec-18

£1.2m

£2.3m

£10.2m

£7.2m

£2.7m

£0.1m

£1.0m

600 sq.m

773 sq.m

£9.7m

2,069 sq.m

£2.0m

2,212 sq.m

£1.0m

742 sq.m

Portfolio management
We have continued to deliver rental
growth and have successfully concluded
182 rent reviews during the year to
generate a weighted average annual rent
increase of 1.70% (2017: 1.57%) on those
properties. Our portfolio benefits from a
28% weighting in fixed, RPI and other
uplifts which generated an average uplift
of 3.14% during the period. The majority
of our portfolio is subject to open market
reviews and these have generated an
average uplift of 0.68% during the period.

Administrative expenses
The Group analyses cost performance
by reference to our EPRA Cost Ratios
(including and excluding direct vacancy
costs) which were 13.0% and 12.0%
respectively (2017: 13.7% and 12.4%).

We also measure our operating efficiency
as the proportion of administrative costs
to the average gross investment property
value. This ratio during the period was
0.51% (2017: 0.57%) and administrative
costs stood at £7.9 million (2017:
£7.0 million).

We have secured 13 new tenancies with
an annual rent roll of £0.4 million, in
addition to 15 lease re-gears (rent of
£0.9 million) and three extensions to
existing buildings (rent of £0.1 million).
Our EPRA Vacancy Rate was 1.8%
(March 2017: 2.1%).

E A G L E B R I D G E H E A L T H A N D W E L L B E I N G C E N T R E

Number of
properties

Total
value
£m

Total
value
%

North

South

Midlands

Scotland

Wales

172

182

664.0

557.2

313.3

50.3

124.8

518 1,709.6

100

Portfolio analysis
by tenant covenant

GPs

NHS body

Pharmacy

Other

Total
rent roll
£m

61.8

14.6

7.4

7.2

Total
rent roll

91.0

100

Eagle Bridge Health and Wellbeing Centre

Strategic reportFinancial statementsAdditional informationGovernance40

Assura plc Annual Report and Accounts 2018

Business review continued

Financing
In line with our financing strategy, we
have continued the move from secured
to unsecured facilities and increased
our share capital base through two
equity issuances.

In May 2017, we extended the revolving
credit facility to £250 million. The terms
were unchanged, being unsecured and at
an initial margin of 150 basis points above
LIBOR, subject to leverage. In October
2017, this was further extended to
£300 million.

Our LTV ratio currently stands at 26%
following the equity raises in the year. LTV
will increase in the short term as we invest
in additional properties and our policy
allows us to reach the range of 40% to
50% should the need arise. 73% of the
debt facilities are fixed with a weighted
average debt maturity of 6.0 years.

As at 31 March 2018, we had undrawn
facilities and cash totalling £199 million.
Details of the outstanding facilities and
their covenants are set out in Note 16
to the accounts.

In June 2017, we completed a £98.4 million,
gross of expenses, equity raise via a
placing of approximately 164 million shares.

Net finance costs presented through
EPRA earnings in the year amounted
to £22.0 million (2017: £20.6 million).

Finance costs presented outside of EPRA
earnings totalled £57.3 million (2017: £1.4
million). These costs represent one-off
costs associated with early repayment of
facilities or accounting adjustments to write
off loan fees where the revolving credit
facility was amended. The 2018 charge
included £56.4 million of early redemption
fees associated with the Aviva loans being
repaid in January 2018, in line with the
plan announced in the prospectus for the
December 2017 equity raise.

Alternative Performance
Measures (“APMs”)
The financial performance for the period
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 period,
in particular in respect of EPRA measures
which are designed to aid comparability
across real estate companies.
Calculations of the measures, with
reconciliations back to reported IFRS
measures, are included where possible.

In October 2017, we issued £150 million
of privately placed loan notes in two
tranches with maturities of eight and
10 years. The weighted average coupon
is 3.04% and the notes are unsecured.

In December 2017, we completed a
£310.7 million, gross of expenses, equity
raise via Firm Placing, Placing and Open
Offer and Offer for Subscription.

In January 2018, the proceeds from the
December equity raise were used, in part,
to repay the remaining £211 million of
long-term loans held by Aviva Commercial
Finance, with associated repayment costs
of £56 million.

Financing statistics

2018

2017

Net debt1

£460.4m £499.6m

Weighted average
debt maturity

Weighted average
interest rate

% of debt at fixed/
capped rates

6.0 yrs

8.7 yrs

3.12% 4.06%

73%

81%

Interest cover2

327%

296%

LTV1

26%

37%

1. See Note 22
2. Interest cover is the number of times net interest
payable is covered by EPRA earnings before
net interest.

Profit before tax
Profit before tax for the period was
£71.8 million (2017: £95.2 million). The
decrease reflects the net impact of the
early repayment costs incurred relating to
the repayment of the Aviva facilities, offset
by increased valuation gain on investment
property and the higher net rental income
following additions to the portfolio.

EPRA earnings

Net rental income

Administrative
expenses

2018
£m

80.2

2017
£m

67.9

(7.9)

(7.0)

Net finance costs

(22.0)

(20.6)

Share-based
payments and
taxation

EPRA earnings

(0.3)

50.0

–

40.3

The movement in EPRA earnings can be
summarised as follows:

Year ended 31 March 2017

Net rental income

Administrative expenses

Net finance costs

Share-based payments
and taxation

Year ended 31 March 2018

£m

40.3

12.3

(0.9)

(1.4)

(0.3)

50.0

EPRA earnings has grown 24% to
£50.0 million in the year to 31 March 2018
reflecting the property acquisitions and
developments completed as well as
the impact of our asset management
activity with rent reviews and new lettings.
This has been offset by increases
in administrative expenses and
financing costs.

www.assuraplc.com

The table below illustrates our cash flows
over the period:

Earnings per share
The basic earnings per share (“EPS”)
on profit for the period was 3.7 pence
(2017: 5.8 pence).

EPRA EPS, which excludes the net impact
of valuation movements and gains on
disposal, was 2.5 pence (2017: 2.4 pence).

Opening cash

Net cash flow from
operations

Based on calculations completed in
accordance with IAS 33, share-based
payment schemes are currently expected
to be dilutive to EPS, with 0.2 million new
shares expected to be issued. The
dilution is not material as illustrated in
the table below:

EPS measure

Profit for year

EPRA

Basic

Diluted

Other

3.7p

2.5p

3.7p

2.5p

Dividends
Total dividends settled in the year to
31 March 2018 were £46.4 million or 2.455
pence per share (2017: 2.25 pence per
share). £9.7 million of this was satisfied
through the issuance of shares via scrip.

As a REIT with requirement to distribute
90% of taxable profits (Property Income
Distribution, “PID”), the Group expects
to pay out as dividends at least 90% of
recurring cash profits. Three of the four
dividends paid during the year were normal
dividends (non-PID), as a result of brought
forward tax losses and available capital
allowances. The October 2017 dividend
was paid as a PID and future dividends
will be a mix of PID and normal dividends
as required.

2018
£m

23.5

2017
£m

44.3

49.9

39.0

Dividends paid

(36.7)

(31.9)

Investment:

Property acquisitions (282.3)

(157.9)

Development
expenditure

Sale of properties

Financing:

Net proceeds from
equity issuance

Net borrowings
movement

Closing cash

(31.7)

(19.9)

0.9

–

1.4

(0.3)

397.1

–

(92.0)

148.8

28.7

23.5

Net cash flow from operations differs from
EPRA earnings due to movements in
working capital balances.

Diluted EPRA NAV movement

Diluted EPRA NAV
at 31 March 2017

EPRA earnings

Capital (revaluations
and capital losses)

Dividends

Shares issued

Refinancing costs

Other

£m

817.5

50.0

79.1

(46.4)

411.0

(57.3)

(4.0)

Pence
per

49.3

2.5

4.0

(2.5)

1.4

(2.4)

0.1

Diluted EPRA NAV
at 31 March 2018

1,249.9

52.4

Our Total Accounting Return per share
for the year ended 31 March 2018
is 11.0% of which 2.455 pence per
share (5.0%) has been distributed to
shareholders and 3.1 pence per share
(6.0%) is the movement on EPRA NAV.

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

F
n
a
n
c

s
t
a
t
e
m
e
n
t
s

A
d
d
i
t
i

o
n
a

n
f
o
r
m
a
t
i

o
n

Assura plc Annual Report and Accounts 2018

Business review continued

EPRA performance measures
The European Public Real Estate Association (“EPRA”)
has published Best Practices Recommendations with
the aim of improving the transparency, comparability and
relevance of financial reporting with the real estate sector
across Europe. This section details the rationale for each
performance measure as well as our performance
against each measure.

EPRA EPS

2.5p

2017: 2.4p

EPRA NAV

52.4p

2017: 49.3p

Diluted EPRA EPS (p)

2.5p

2017: 2.4p

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.

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.
Presented on a diluted basis.

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.

2018

2.5

2017

2.4

13.0

13.7

12.0

12.4

2018

52.4

51.8

4.77

2017

49.4

44.7

5.05

4.81

5.05

1.8

2.1

Summary table

EPRA EPS (p)

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

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

EPRA NAV (p)

EPRA NNNAV (p)

EPRA NIY (%)

EPRA “topped-up”
NIY (%)

EPRA Vacancy
Rate (%)

EPRA NNNAV

51.8p

2017: 44.7p

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

2018
£m

2017
£m

EPRA Cost Ratio (including
direct vacancy costs)

Investment
property

1,732.7 1,344.9

Less developments

(22.2)

(20.2)

13.0%

2017: 13.7%

Completed
investment
property portfolio

Allowance for
estimated
purchasers’ costs

Gross up
completed
investment
property – B

Annualised cash
passing rental
income

Annualised
property outgoings

Annualised
net rents – A

Notional rent
expiration of
rent-free periods
or other incentives

Topped-up
annualised rent – C

EPRA NIY – A/B
(%)

EPRA “topped-up”
NIY – C/B (%)

1,710.5 1,324.7

EPRA Cost Ratio (excluding
direct vacancy costs)

111.0

85.4

1,821.5 1,410.1

90.1

74.4

(3.3)

(3.2)

86.8

71.2

12.0%

2017: 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.

2018
£m

2017
£m

0.9

–

Direct property costs

3.3

3.2

87.7

71.2

4.77

5.05

4.81

5.05

Administrative
expenses

Share-based
payment costs

Net service charge
costs/fees

Exclude:

7.9

7.0

0.3

0.1

(0.3)

(0.2)

Ground rent costs

(0.4)

EPRA Costs
(including direct
vacancy costs) – A

10.8

9.7

Direct vacancy costs

(0.8)

(0.9)

EPRA Costs
(excluding direct
vacancy costs) – B

Gross rental income
less ground rent
costs (per IFRS)

Gross rental income
– C

10.0

8.8

83.1

70.7

83.1

70.7

EPRA Cost Ratio
(including direct
vacancy costs) – A/C 13.0

EPRA Cost Ratio
(excluding direct
vacancy costs) – B/C 12.0

13.7

12.4

ERV of vacant
space (£m)

ERV of completed
property portfolio
(£m)

EPRA Vacancy
Rate (%)

2018

2017

1.7

1.6

93.8

76.7

1.8

2.1

EPRA NIY

4.77%

2017: 5.05%

EPRA “topped-up” NIY

4.81%

2017: 5.05%

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

1.8%

2017: 2.1%

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 reportFinancial statementsAdditional informationGovernance44

Assura plc Annual Report and Accounts 2018

Chairman’s introduction to governance

Good governance is
key to the way we run
our business.

Simon Laffin
Non-Executive Chairman

Dear Shareholder

This is 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
The Board is responsible for setting the
Group’s overall culture and promoting its
core values. We strive to lead by example
through a team culture of transparency,
mutual respect and constructive debate.

Effective communication between the
Board and wider business is facilitated
by regular staff presentations and site
visits as well as the fact that we only have
50 employees, all of whom work in our
head office in Warrington. An informal
dinner with the Board and all staff once
a year provides an opportunity to hear
employees’ views on a range of matters
and new Directors gain valuable insight
to the business divisions through one
on ones with staff members as part of
their induction.

Performance evaluation
Given the recent Board member changes,
the Board decided that it would make
sense to defer the Board evaluation
until later this year. The Board will
consider whether it is appropriate
for an independent external agency
to assist with 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 48 and 49, which
enable them to challenge, motivate and
support the business. In our new members,
Jayne Cottam brings financial and debt
strategy skills gained from her previous

roles and Ed Smith’s health service, public
sector and business experience will stand
us in good stead as Assura continues
to fund the transformation of NHS
primary care premises.

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

Remuneration
We received over 98% of votes in favour
of our Remuneration Report at the 2017
AGM and I am grateful to shareholders
for the level of engagement and support
during the year.

Compliance with the Code
As a Board we believe that good
governance is key to the way we
run our business.

In accordance with the Listing Rules,
I confirm that throughout the year
ended 31 March 2018, the Company
was compliant with all the relevant
provisions as set out in the Code, save
as follows: (i) During the period up to
October 2017 I was a member of the
Audit Committee and this did not comply
with Code Provision C.3.1. We were able
to address this when Ed Smith joined
and replaced me on the Committee. (ii)
Following Jayne Cottam joining as CFO
we did not comply, with Code Provision
B.1.2, which requires at least half the
Board to be independent. This was
rectified on Ed Smith’s appointment.

www.assuraplc.com

(iii) The Board has not carried out a
performance evaluation in this financial
year in accordance with Code Provision
B.6 for the reasons stated before. I am
pleased to confirm that the Company
is compliant with all other provisions
of the Code at the date of this
Annual Report.

Executive Board
Following Andrew Darke’s decision
to step down as Property Director,
the Group strengthened the Executive
Board with the appointment of the three
property division heads, Patrick Lowther,
Simon Gould and Spencer Kenyon, to
the Executive Board.

The Executive Board meets fortnightly to
consider operational matters as well as
strategic direction for the business divisions.

Simon Laffin
Non-Executive Chairman
22 May 2018

New appointees to the Executive Board

Leadership
The Board is collectively responsible for
the effective leadership and long-term
success of the Group.

We were delighted to welcome Jayne
Cottam as CFO in September 2017
following Jonathan Murphy’s appointment
as CEO in February 2017.

On 22 March 2018, I announced my
intention to retire as Chairman at the
conclusion of the AGM. I had indicated to
the Board last year that I was considering
retiring as Chairman and, accordingly,
the Board commenced a search for a
new Non-Executive Director who could
provide possible Chairman succession.
Ed Smith joined the Board in October
2017 and the Board now intends to
appoint him as Non-Executive Chairman
at the conclusion of the AGM. I wish him
all the best in this role.

Andrew Darke stepped down from
the Board on 31 March 2018 to pursue
his own personal business interests but
continues to support the business on
a consultancy basis.

We have commenced the search for
a new independent Non-Executive
Director to further strengthen the Board
and provide possible succession for
the Audit Committee Chair, given that
David Richardson has indicated that
he may retire next year.

Left to right: Patrick Lowther, Spencer Kenyon, Simon Gould

Strategic reportFinancial statementsAdditional informationGovernance46

Assura plc Annual Report and Accounts 2018

Relations with shareholders
The Board welcomes open
communication with its shareholders
and works with its stockbrokers Stifel
and JP Morgan Cazenove to ensure that
an appropriate level of communication
is maintained. The dialogue with
shareholders is facilitated by a series
of investor relations activities, including
regular meetings between the Executive
Directors, institutional investors, sales
teams and industry/sector analysts,
as well as regular advice from KPMG
Makinson Cowell.

141 investor meetings have been held
in the year.

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, together with its professional
advisors, actively analyses the shareholder
register and the Senior Independent
Director is available to act as a conduit
for investor concerns if required.

The equity issues completed in June 2017
and December 2017 were supported by
both existing and new shareholders and
effective communication with current
and potential shareholders remains a
key priority for the year ahead.

Shareholders are encouraged to attend
the AGM in July where all Board members
will be on hand to answer any questions.

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.

Leadership

July 2017 AGM –
key highlights

– All resolutions passed.
– 1,457 to 1,468 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 such as the equity raises.

The relevant Board Committees are
shown below.

Governance framework

BOARD

Audit Committee

Nominations Committee

Remuneration Committee

Executive Board

Risk Committee

Investment Committee

IT Committee

www.assuraplc.com

Division of responsibilities

Role

Chairman

CEO

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 day to day operations
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

Non-Executive Directors

– 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

– Chairing and/or serving on relevant Committees

Senior Independent Director

If necessary, acting as a conduit to the Board for communicating shareholder concerns

– Acting as Chair of the Board if the Chairman is conflicted
–
– Ensuring the Chairman is provided with effective feedback on performance
– Serving as an intermediary for other Directors when necessary

Company Secretary

– Ensuring good information flow within the Board and Committees
–
– Advising the Board on all governance matters

Facilitating induction and training of Board members

Board and Committee meeting attendance

Director

Simon Laffin

Jonathan Murphy

David Richardson

Jenefer Greenwood

Andrew Darke

Jayne Cottam*

Ed Smith*

Board

8/8

7/8

5/5

4/4

Nominations
Committee

Remuneration
Committee

Audit

Committee

4/4

n/a

2/2

4/4

n/a

2/2

5/5

4/5

4/4

* Full Board and relevant Committee attendance after appointment.

F L E E T W O O D H E A L T H A N D W E L L B E I N G C E N T R E

Fleetwood Health And Wellbeing Centre

Strategic reportFinancial statementsAdditional informationGovernance48

Assura plc Annual Report and Accounts 2018

Board of Directors

Name
Position

Simon Laffin
Non-Executive Chairman

Jonathan Murphy
CEO

Jayne Cottam
CFO

Skills and experience

Simon is an experienced
Chairman having served as
Chairman of Assura since
2011. Previously he served
as an advisor to CVC Capital
Partners, 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.

Simon also chairs the
Nominations Committee.

Simon has announced his
attention to stand down at
the conclusion of the AGM.

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.

Jayne is a CIMA qualified
accountant, with skills
including finance, debt
strategy and risk management.
She joined Assura from
Morris Homes, one of the
UK’s largest private national
housing developers where
she was the Finance Director
for Operations, heading
up the operational finance
team across the Group
and providing financial and
strategic support as a member
of the Board for each of the
three operating regions.

Jayne was previously Director
of Finance for the Continental
Europe Division of European
Metal Recycling Limited, one
of the world’s largest metal
recyclers, and before that
held a number of other
senior finance positions.

Appointed

August 2011

February 2017

September 2017

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.

None

www.assuraplc.com

David Richardson
Senior Independent Director

Jenefer Greenwood
OBE
Non-Executive Director

Ed Smith CBE
Non-Executive Director

Orla Ball
Company Secretary

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.

David chairs the
Audit Committee.

Jenefer is a Chartered
Surveyor with extensive
knowledge of the real
estate industry (in particular
development and maximising
value) and significant board
level experience. Jenefer
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 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.

Jenefer chairs the
Remuneration Committee.

Ed is an experienced
Chairman with significant
health service, public sector
and business experience.
He was Chairman of NHS
Improvement for two years
and Deputy Chairman of NHS
England for the previous three
years. He was also Lead
Non-Executive Director for the
Department for Transport until
the end of December 2017.

Ed was the former Global
Assurance Chief Operating
Officer and Strategy Chairman
of PricewaterhouseCoopers
(“PwC”). Before retiring from
PwC, he had a 30-year career
as a Senior Partner, holding
many leading Board and
top client roles in the UK
and globally.

Ed is a Chartered Accountant.

The Board intends to appoint
Ed as Chairman at the AGM.

Orla’s skills include corporate
governance, and managing
legal risk. She 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.

Orla’s 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.

She recently qualified as a
Chartered Secretary and has
been admitted as an Associate
of ICSA.

Orla is Head of Legal for
the Group, Chair of the Risk
Committee and a member
of the Executive Board.

January 2012

May 2012

October 2017

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

Independent

Jenefer is a Non-Executive
Director of St Modwen
Properties plc, sits on
the Supervisory Board of
INTERNOS Global Investors,
is on the Board of Liverty and
is a Director of the Ernest
Cook Trust.

Ed is the Pro-Chancellor
and Chairman of Council at
the University of Birmingham.
He also has advisory
roles at Pushdoctor and
HCA Healthcare.

Independent

April 2015

None

Independent

Strategic reportFinancial statementsAdditional informationGovernance50

Assura plc Annual Report and Accounts 2018

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 equity issues of £98.4 million through a

placing in June 2017 and £310.7 million from a share
issue in December 2017

– Approval of increase in unsecured revolving credit
facility to £300 million and UK private placement of
£150 million unsecured notes

– Consideration of future funding requirements
– Consideration and debate on future strategy

Internal control and risk management
– Setting the Group’s risk appetite
– Adopting the risk register and regular reviews of internal
controls following Audit Committee recommendations

– Review of IT systems and capital expenditure

requirements

– Approval of prevention of tax evasion policy

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 enhancements initiatives

– Approval of final and interim results and

trading statements

– Updates on REIT requirements

Leadership, culture and people
– Staff recruitment and leaver updates
– Staff succession updates from Nominations Committee
– Appointment of CFO and Non-Executive Director

following Nominations Committee recommendation
– Setting the Group’s culture and leading by example

Governance, stakeholders and shareholders
– Regular review of NHS developments
– Regular review of shareholder register
– Investor roadshow feedback
– Governance updates

Board Committees
All Non-Executive Directors apart from the
Chairman served on all Committees. Each
Committee follows Terms of Reference
which are reviewed annually and are
available on the Company’s website.

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

Board members meet staff in an informal
setting before the July 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 48 and 49.
Executive Directors would be permitted to
serve on one other Board if this would not
interfere with their time commitment to
the Company. At present, neither of
the Executive Directors holds any
Non-Executive Director positions.

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
2018 AGM. Jayne Cottam and Ed Smith,
having been appointed during the year,
will submit themselves for election.

Induction and professional
development
On appointment, new Directors
undertake a full, formal and tailored
induction programme.

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, preparing
a regular governance update for each
Board meeting.

www.assuraplc.com

Board composition

Chairman

Executive Directors

Non-Executive Directors

Board tenure (in current role)

0–2 years

4–6 years

Board gender balance

Female

Male

Executive Board

Female

Male

3 (50%)

2 (33%)

4 (67%)

2 (33%)

4 (67%)

NED induction process

Following Ed Smith’s appointment as NED,
the following induction was carried out:

Meetings with the Chairman and
other Board members

Meetings with the CEO, CFO and
Property Director

Directors’ duties and governance
training from the Company’s legal
advisors and briefings from the
Company Secretary

A full support pack of relevant
reading materials

Briefings from the Company’s advisors
including auditors, corporate brokers
and PR firm

Meetings with members of senior
management and other staff members
at the Company’s head office
in Warrington

Visits to premises

Board strengths

Composition of the Board

Simon Laffin
Non-Executive
Chairman
– Experienced
Chairman
– Strategy
– Finance

Jonathan
Murphy
CEO
– Corporate
Finance
– Capital
Markets
– Strategy

Jayne Cottam
CFO
–

Finance &
Accounting
– Corporate
Finance

– Risk

Management

Ed Smith
Non-Executive
Director
– Public Sector
– NHS
–

Finance &
Accounting

David
Richardson
Senior
Independent
Director
–

Finance &
Accounting
– Mergers &

Acquisitions

– Corporate

Governance

Jenefer
Greenwood
Non-Executive
Director
– Real Estate
including
development
and
maximising
value
– Customer
Focus
– Marketing

Key:

Non-Executive Chairman

Executive Director

Non-Executive Director

Strategic reportFinancial statementsAdditional informationGovernance52

Assura plc Annual Report and Accounts 2018

Nominations Committee Report

Nominations Committee members

– Simon Laffin (Committee Chair)
– Jenefer Greenwood
– Jonathan Murphy
– David Richardson
– Ed Smith (from October 2017)

Number of meetings in the year
– Four

Additional attendees – as appropriate
– Orla Ball – Company Secretary

Responsibilities

Key activities of the Committee

The Terms of Reference are reviewed
annually (and are available to view on
the Company’s website).

Key issues
– Submitting for re-election all Directors

at the AGM.

– Appointment of CFO and Non-

Executive Director.

– Review of succession planning

particularly for Chairman and Audit
Committee Chair.

– Review of Board composition,
Committee composition and
Committee Chair.

– Consideration of training needs and

skills updating.

– Confirmation that the Non-Executive

Directors were independent.

Board and Committee changes
The Nominations Committee (“the
Committee”) met four times through
the year.

Following Jonathan Murphy’s
appointment as CEO, the position
of CFO had to be filled and Warren
Partners (which has no other connection
with Assura) was selected to assist with
the recruitment process. A short list of
potential candidates was interviewed by
the Committee and, on the Committee’s
recommendation, Jayne Cottam was
appointed by the Board to the position
of CFO in September 2017.

Another key process for the Committee
was to select a Non-Executive Director,
preferably with relevant NHS expertise,
to further strengthen the Board and
who could provide possible Chairman
succession. The Committee selected

recruitment firm The Zygos Partnership
(which has no other connection with
Assura) to assist with the search process.
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 2017, the Board appointed
Ed Smith on the Committee’s
recommendation. The Committee has
recommended to the Board that Ed is
appointed as Chairman following my
planned retirement at the AGM.

The Board is planning to recruit
another Non-Executive Director with
complementary skills and expertise
to further the Board’s strength and to
provide succession options as Chair
of the Audit Committee. The Committee
has selected Russell Reynolds Associates
(who acquired Zygos Partnership) to
assist with the process.

www.assuraplc.com

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 2017.

The Committee considered the
external Board appointments as well
as the development of talent within the
business to fill more senior roles over
the medium and long term.

Simon Laffin
Chair of the Nominations Committee
22 May 2018

Commitments of the Chairman
I am also Non-Executive Chairman of
Flybe Group plc and Non-Executive
Director at Watkin Jones plc. The
Committee considers 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. The Zygos Partnership and Warren
Partners were particularly tasked with
searching for possible CFO and Non-
Executive Director candidates who could
increase the diversity of the Board.

The Board targeted having at least
20% female representation, which
was achieved in 2012. Following Jayne
Cottam’s appointment and Andrew
Darke’s resignation, female representation
on the Board is now 33% and we are
pleased that the Group ranked 33rd
in the Hampton-Alexander Review
FTSE 250 Rankings Women on Boards
and in Leadership.

Strategic reportFinancial statementsAdditional informationGovernance54

Assura plc Annual Report and Accounts 2018

Audit Committee Report

Audit Committee members

– David Richardson (Committee Chair)
– Jenefer Greenwood
– Ed Smith (from October 2017)
– Simon Laffin (until October 2017)

Number of meetings in the year
– Five

Additional attendees – as appropriate
– Deloitte LLP
– Savills Commercial Limited and Jones Lang LaSalle
– Jonathan Murphy – CEO
– Jayne Cottam – CFO
– Andrew Darke – Property Director
– Orla Ball – Company Secretary
– Paul Carroll – Financial Controller
– David Purcell – Head of Financial Reporting

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.

Other matters
– 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.

– Reviewed documentation relating
to the December 2017 equity raise.

www.assuraplc.com

Audit/non-audit fees
payable to external auditor
The only non-audit services provided by
Deloitte were as reporting accountant to
the equity raise, as required by SAS 72
regulations. 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 2018 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 a new
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 2018

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 2018.

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 performed 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 did not comply with
Code Provision C.3.1. Compliance was
achieved following the appointment of
Ed Smith in October 2017.

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 and
discuss their findings with the
Committee.

– 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 2018 report and appears on
page 33.

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”).
– Prospectus, working capital and
SAS 72 sign offs required for the
equity raise in December 2017.
– Presentation of non-recurring

expenses such as early repayment
fees and loan issue costs written off.

We are satisfied that there were no
matters arising from any 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 Committee is satisfied that
the current level of control and risk
management within the business
adequately meets the Group’s current
needs. Specific pieces of internal work
are commissioned by the Committee
to examine particular processes and
controls as deemed necessary. The
Committee considers that the additional
cost of an internal audit department is
not currently justified.

Strategic reportFinancial statementsAdditional informationGovernance56

Assura plc Annual Report and Accounts 2018

Remuneration Report

Remuneration Committee members

– Jenefer Greenwood (Committee Chair)
– Simon Laffin
– David Richardson
– Ed Smith (from 10 October 2017)

Number of meetings in the year
– Four

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 twice
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.

– Consideration of targets and awards

under the PSP.

– Oversight of the Executive Board’s
remuneration structures and levels.

– Addressing remuneration-related

issues arising from the changes to
the Executive Board.

Dear Shareholder

On behalf of the Board, I am pleased
to introduce the Directors’ Remuneration
Report for the year ended 31 March 2018.
This report has been prepared by
the Remuneration Committee (“the
Committee”) and approved by the
Board. The remainder of this report
is split into two parts:

We were very pleased to continue to
receive such strong levels of support from
shareholders at the 2017 AGM for our
advisory shareholder vote on the Annual
Report on Remuneration, with over 98%
of votes in favour of this resolution. As
no changes are proposed to the existing
policy, a similar resolution will be the only
remuneration resolution tabled at the
2018 AGM.

– 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 full Remuneration Policy is
available on the Company’s website.
– 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 2017/18 financial
year and how the Remuneration Policy
will be implemented for the 2018/19
financial year.

www.assuraplc.com

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 2018

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 38 to 43.

2017/18 also saw us welcome Jayne
Cottam to the Board as Chief Financial
Officer (“CFO”) and Ed Smith as a
Non-Executive Director. As announced
in October 2017, Andrew Darke, Property
Director, stepped down from the Board
at the end of the financial year.

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

– Agreeing Jayne Cottam’s remuneration
arrangements upon her appointment
to the Board.

– Reflecting another year of strong

performance, determining that the
Executive Directors earned bonuses
equal to 84%, 57% and 60% of salary
for Jonathan Murphy, Andrew Darke
and Jayne Cottam respectively. Further
details of how this bonus outturn was
calculated can be found on page 62.

Remuneration in 2018/19
The main features will be:

– Base salaries: Jonathan Murphy’s
and Jayne Cottam’s base salaries
will be £365,000 and £184,500
respectively. Jayne Cottam’s base
salary will be reviewed in October 2018
when she has completed one year’s
service as CFO.

– 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) and financial
targets. Jonathan Murphy’s maximum
bonus opportunity will continue to be
100%, with Jayne Cottam’s maximum
bonus being 75% of salary. 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% of salary.
Clawback/malus provisions will
continue to apply.

– Making the second awards under

– Long-term incentives: A further

Assura’s PSP in 2017 which will vest in
2020 based upon performance against
a blend of absolute NAV per share and
TSR growth targets.

– Confirming that the final outstanding

tranche of the VCP awards could vest,
the minimum TSR threshold having
been met for that tranche (as
described more fully on page 63).

– Confirming Andrew Darke’s

arrangements upon leaving the Board.

grant of awards will be made under the
PSP to Jonathan Murphy and Jayne
Cottam over shares worth 150% of
salary which will vest subject to
the extent to which three-year
performance targets are satisfied.
However, reflecting the Company’s
focus on earnings growth and a
progressive dividend policy, the
Remuneration Committee is proposing
to switch the NAV target to an earnings
per share (“EPS”) target for the 2018
PSP awards onwards. EPRA EPS will
be used as the metric best suited to
demonstrating operational earnings
growth as it excludes the impact of
revaluations. No changes will be made
to the TSR metric, the threshold
vesting percentage or the growth
ranges. Major investors have been
consulted on this proposal.

– A two-year post vesting holding period
will also apply to PSP awards (unless
shares worth 300% of salary are
already held), with clawback/malus
provisions also applying.

Strategic reportFinancial statementsAdditional informationGovernance58

Assura plc Annual Report and Accounts 2018

Remuneration Report continued

PART A: REMUNERATION
POLICY AND PRACTICE
“AT A GLANCE”
The current Directors’ Remuneration
Policy was approved by shareholders at
the 2016 AGM. This policy was developed
with regard to the prevailing 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 20 and 21. 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

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

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

– Earnings Per Share – measuring the
profitability of the Company and its
ability to pay dividends.

– 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 KPIs over the last three years:

Earnings Per Share

Total Property Return

Total Accounting Return

Total Shareholder Return

6.9p

24.5%

31.7%

6.1%

www.assuraplc.com

Our full policy can be found on the Company’s website (www.assuraplc.com). However, for convenience we have set out below
a summary of the policy’s key terms:

Element

Operation

Maximum opportunity

Fixed remuneration

Base salary

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:

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.

Individual performance and experience

–
– Pay and conditions for employees across the Group
–
–

The general performance of the Company
The economic environment.

Pension/benefits

A market competitive suite of benefits is provided, which are
reviewed periodically to ensure that they remain appropriate.

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

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.

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

Performance-based variable remuneration

Bonus

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):

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.

– Delivering specific added-value activities
– Delivering financial goals
–
– Developing the performance capability of the team.

Improving operational performance

Bonus payments are not pensionable, but are subject to
clawback provisions.

Awards under the PSP may be granted as nil-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.

Long-term incentives

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).

Shareholding
requirement

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.

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 reportFinancial statementsAdditional informationGovernance
60

Assura plc Annual Report and Accounts 2018

Remuneration Report continued

Clawback
The Committee retains the power to reduce the annual bonus or potential vesting of unvested deferred bonus/PSP awards (including
to zero) (often referred to as malus) or to recoup the value of previously paid or vested awards from an individual within two years of
vesting if it considers appropriate to do so (often referred to as clawback). The Committee may choose to exercise this power where
there has been:

– a material misstatement of financial results for any period;
– an error or the use of inaccurate information in assessing the extent to which any performance condition was satisified; or
– circumstances warranting the summary dismissal of an individual.

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 2018/19 at minimum,
on-target and maximum performance scenarios are set out in the charts below:

£976k

28%

44%

£428k

100%

£1,341k

41%

27%

32%

£1,400k

£1,200k

£1,000k

£800k

£600k

£400k

£200k

Minimum

On-target
CEO – Jonathan Murphy

Maximum

Fixed elements

Annual variable

Multiple reporting periods

£466k

30%

22%
48%

£638k

43%

22%

35%

On-target
CFO – Jayne Cottam

Maximum

£223k

100%

Minimum

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 2018/19.
– Benefits have been estimated for 2018/19.
– Pension is measured as the defined contribution or cash allowance in lieu of Company contributions of 13.5% of salary.

2018/19

Jonathan Murphy

Jayne Cottam

Base salary
£’000

Benefits
£’000

Pension
£’000

Total fixed
£’000

365

184.5

428

222.5

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 Jayne Cottam.
– Long-term incentive: consists of the face value of awards (at 150% of salary).

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 2018. 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
2017/18 were Jenefer Greenwood
(Committee Chairman), Simon Laffin,
David Richardson and Ed Smith (from
10 October 2017). 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. 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 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 four meetings and
one subcommittee meeting during the
year. Its activities during and relating to
the financial year 2017/18 included:

– Consideration of objectives and

targets for annual bonuses

– Consideration of annual pay awards

and bonuses

– Overseeing the final vesting of awards

under the VCP

– Consideration of targets and awards

under the PSP

– Oversight of the Executive Board’s
remuneration structures and levels
– Addressing remuneration-related

issues arising from the changes to
the Executive Board

– Confirming Andrew Darke’s

arrangements upon leaving the Board

– Preparing this report.

Advisors to the Committee
During 2017/18 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
£30,000. 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 Chair 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)

Jonathan Murphy1

Andrew Darke2

Jayne Cottam3

Graham Roberts4

Year

Salary

Taxable
benefits

Bonus5

Pensions

Long-term
incentives6

2017/18

2016/17

2017/18

2016/17

2017/18

2016/17

335

270

229

110

101

281

178

128

144

–

838

736

958

–

3,366

Total

1,513

1,232

1,359

277

169

3,489

Notes
1. Jonathan Murphy’s remuneration for 2016/17 reflects his role as Finance Director, Interim CEO (3 October 2016 to 27 February 2017) and then

permanent CEO.

2. Andrew Darke joined the Board on 3 October 2016. The 2016/17 figures above relate to the part year from appointment.
3. Jayne Cottam joined the Company on 25 September 2017. The 2017/18 figures above relate to the part year from appointment.
4. Graham Roberts’ remuneration reflects the period up to his death in June 2016.
5. A portion of bonus is deferred as explained on page 62.
6. The long-term incentives column includes the value of the VCP awards that vested during the year as described more fully below. Andrew Darke’s

VCP award vested before he was appointed to the Board.

Strategic reportFinancial statementsAdditional informationGovernance
62

Assura plc Annual Report and Accounts 2018

Remuneration Report continued

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

2017/18 annual bonus plan outcome
In determining the award for 2017/18, 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.
These accounted for 80% of the bonus potential. The remaining 20% was based on an assessment of personal performance against
individual objectives set at the beginning of the year.

It is the Committee’s approach to also 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 raise capital to support further growth. For 2017/18 the maximum potential bonus awards were 100%
of salary for Jonathan Murphy as CEO and 75% of salary for Andrew Darke and Jayne Cottam.

Actual targets set at the beginning
of the year

Actual performance outcome

Potential
(% of max)

Payout
(% of max)

Outstanding £278.9 million acquisition spend

Performance measures

Grow the scale of the portfolio

Increase the number of developments to
generate rental evidence to support ERV
growth

Good £160 million, Strong £180
million, Outstanding £200 million

Good £30 million, Strong £35
million, Outstanding £40 million

Good £31.7 million spend during year

Achieve unconditional sign off of new
developments in year

Good 4 schemes, Strong 5
schemes, Oustanding 6 schemes

Strong five schemes

Grow rent through physical extensions

Good 5, Strong 6, Outstanding 7

Not achieved three schemes

Let vacant space

Good £400,000, Strong £500,000,
Outstanding £600,000

Good £409,000

Add value through lease re-gears and
increase WAULT

Good 11, Strong 13,
Outstanding 15

Outstanding 15

Deliver EPRA earnings budget

Good £46 million, Strong £47
million, Outstanding £48 million

Outstanding £50.0 million

Obtain new debt at a cost below 3.5% Good 30bps, Strong 40bps,

Outstanding 67bps below

Outstanding 50bps

Total

–

The Committee reviewed the performance of Jonathan Murphy. His financial targets were as above, overall being rated Strong.
His individual targets were to develop an effective Public Affairs strategy, recruit a strong CFO, deepen his knowledge of the wider
community healthcare property market, develop and implement a capital funding strategy and deliver innovation into the design
and construction of Assura’s new buildings. The Committee concluded that Jonathan had performed strongly on all of these
objectives resulting in an assessment of 18 out of 20 for this part of the bonus.

As a result, the Committee decided to award Jonathan a bonus of £281,400 equating to 84% (84% of maximum bonus) of his
total salary.

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

His individual targets were to successfully recruit and integrate new surveyors into the development team, develop the wider property
team including effective succession planning, deepen his knowledge of the wider community healthcare property market, deliver
rental growth ahead of budget and deliver innovation into the design and construction of Assura’s new buildings resulting in an
assessment of 10 out of 20 for this part of the bonus.

The Committee concluded that Andrew had performed strongly on these objectives. As a result the Committee decided to award
Andrew a bonus of £128,250, equivalent to 57% (76% of maximum bonus) of annual base salary.

The Committee also considered the performance of Jayne Cottam. Her financial targets were as above, overall being rated Strong.

Her individual targets were to effectively manage the advisors during the equity raise, negotiate the redemption of the Aviva long-term
debt, deepen her knowledge of the primary care property market and Assura’s interaction with it, evaluate and design an effective
debt capital funding strategy and develop her investor relations expertise resulting in an assessment of 14 out of 20 for this part of
the bonus.

The Committee concluded that Jayne had performed strongly on these objectives. As a result the Committee decided to award Jayne
a bonus of £55,800 after adjusting for the part year worked, equivalent to 60% (80% of maximum bonus) of annual base salary.

www.assuraplc.com

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 Jonathan Murphy and Andrew Darke hold the requisite
number of shares, Jayne Cottam does not, resulting in 50% of her bonus being deferred in shares.

Total pension entitlements
No Executive Director or any member of staff is entitled to a defined benefit pension arrangement. All the Executive Directors
received payments in lieu of pension contributions equivalent to 13.5% of salary respectively for 2017/18.

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

Shares
(m)

529.5

44.3

414.3

18.8

Original
Threshold

New
Threshold

Price (pence)

39.37

44.95

45.06

51.29

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.

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)

C=A+B

C-T

56.27

5.0625

61.3325

39.37

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

Strategic reportFinancial statementsAdditional informationGovernance64

Assura plc Annual Report and Accounts 2018

Remuneration Report continued

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 Jonathan Murphy’s units converting 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 Jonathan Murphy exercised the first 50% of his nil-cost options resulting in him receiving (after the payment
of income tax and NICs) 1,365,657 shares. 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.

On 31 August 2017 Messrs Murphy and Darke exercised the final 25% of their nil-cost options resulting in them receiving (after the
payment of income tax and NICs) 682,828 and 780,375 shares respectively. The share price on 31 August 2017 was 65.25 pence.

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

Year of grant

Awards
outstanding
at 01/04/17

Granted
during the
year

Lapsed
during the
year

Exercised
during the
year

Awards
outstanding
at 31/03/18

Exercise
price

Exercisable
between

Jonathan Murphy

2015

1,288,355

Andrew Darke

2015

1,472,406

–

1,288,355

1,472,406

–

Nil-cost Aug ’17–23

The aggregate gain by Directors on the exercise of share options during the year was £1,796,000.

Performance Share Plan
Shareholder approval was obtained at the 2016 AGM for the establishment of a PSP. The following awards were made under the
PSP to the Executive Directors during the year:

Executive

Jonathan Murphy

Andrew Darke

Jayne Cottam

Date of grant

Basis of award

18 July 20171

150% of salary

18 July 20171

150% of salary

9 February 20182

150% of salary3

Face value
of award
£000

502,500

337,500

135,000

End of
performance
period

31 March 2020

Notes
1. The awards made on 18 July 2017 were granted using the average mid-market share price on the three dealing days prior to the date of grant

(62.517 pence). The exercise price is nil.

2. The awards made on 9 February 2018 were granted using the average mid-market share price on the three dealing days prior to the date of grant

(58.45 pence). The exercise price is nil.

3. A pro-rata award was made to Jayne Cottam as she was appointed part way through the financial year.

Details of the outstanding PSP awards are:

Executive

Date of grant

Awards
outstanding
at 01/04/17

Awards
granted
during the
year

Awards
vested during
the year

Awards
lapsed during
the year

Interests
outstanding
at 31/03/18

Normal vesting/
exercise date1

Jonathan Murphy

8 August 2016

607,759

–

18 July 2017

–

803,781

Andrew Darke

8 August 2016

530,172

–

Jayne Cottam

9 February 2018

18 July 2017

–

539,853

230,967

–

607,759

From 8 August 2019

803,781

From 18 July 2020

239,183

290,989

From 8 August 2019

413,264

126,589

From 18 July 2020

–

230,967 From 9 February 2021

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).

www.assuraplc.com

The above PSP awards were granted at the average mid-market share price on the three dealing days before the grant. The exercise
price is nil. The minimum share price in 2017/18 was 57.00 pence and the maximum share price was 66.67 pence. The closing share
price on 31 March 2018 was 59.30 pence.

In addition, Mr Darke has outstanding awards under the PSP which are due to vest in 2019 and 2020 subject to satisfaction of the
relevant vesting criteria. The Board has exercised its discretion under the plan rules to classify Mr Darke as a good leaver and allow
the awards to continue to vest on the respective normal vesting dates subject to the relevant performance conditions and time
pro-rating. In respect of his 2016 PSP awards (530,172 shares originally granted), 239,183 shares have lapsed as a result of early
cessation, leaving 290,989 shares which will vest in August 2019, subject to performance. In respect of his 2017 PSP awards
(539,853 shares originally granted), 413,264 shares have lapsed as a result of early cessation, leaving 126,589 shares which will
vest in July 2020, subject to performance.

All outstanding PSP 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 at the start of the financial 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

Ed Smith1

Basic fees

Additional
fees2

2017/18

2016/17

2017/18

2016/17

2017/18

2016/17

2017/18

133.4

130.5

37.7

36.9

37.7

36.9

17.4

–

17.0

16.5

8.5

8.3

–

Total fees

133.4

130.5

54.7

53.4

46.2

45.2

17.4

Notes
1. Ed Smith was appointed to the Board on 10 October 2017.
2. Additional fees represent Senior Independent Director and Chairman of Board Committee fees.

Strategic reportFinancial statementsAdditional informationGovernance66

Assura plc Annual Report and Accounts 2018

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 2018

Director

Executive

Jonathan Murphy

Jayne Cottam

Non-Executive

Simon Laffin

David Richardson

Jenefer Greenwood

Ed Smith

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
2018

Change from
1 April
2017

Shareholding
requirement
met?

300

–

1,846,543

2,393,349

753,003

933,390

17,543

–

3,620,821

263,157

485,010

117,256

87,719

485,010

117,256

87,719

70,175

–

87,719

Yes

n/a

Notes
1. Shareholding requirement calculation is based on the share price at the end of the year (59.3 pence at 31 March 2018).
2. Beneficial interests include shares held directly or indirectly by connected persons.

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 a nine-year period as required by the Regulations:

R
S
T
d
e
s
a
b
e
R

400

350

300

250

200

150

100

Mar
09

Mar
10

Mar
11

Mar
12

Mar
13

Mar
14

Mar
15

Mar
16

Mar
17

Mar
18

Assura
FTSE Real Estate Investment Trusts
FTSE All Share

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

Year

2017/18

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)

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)

1,513

1,232

3,489

3,747

677

680

674

395

314

487

–

100

–

100

–

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 50 full-time employee population, excluding the Executive
Directors, to be an appropriate comparator group:

CEO

Total employee pay

Average employee pay

Taxable
benefits

Salary

% increase

% increase/
(decrease)

–1

6.1

(0.7)

2.8

7.6

Bonus
% increase/
(decrease)

n/a2

7.0

12.6

Notes
1. No change during year ended 31 March 2018 from date of appointment.
2. No comparison has been made as Jonathan Murphy’s prior year bonus did not relate to a full year as CEO.

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

2017/18
£m

4.4

46.4

2016/17
£m

3.3

37.0

% change

33.3

25.4

Strategic reportFinancial statementsAdditional informationGovernance68

Assura plc Annual Report and Accounts 2018

Remuneration Report continued

Payments to past Directors or for loss of office
The remuneration arrangements in respect of Andrew Darke, who stepped down from the Board on 31 March 2018, are as follows:

– Salary, benefits and pension were paid up to 31 March 2018.
– Annual bonus for the year ended 31 March 2018 was paid following the year end in cash (i.e. no deferral was operated given the

300% share ownership guideline being met).

– The 2016 and 2017 PSP awards will continue to vest at the normal vesting date subject to the relevant performance targets and

time pro-rating.

– No payment was made or will be made in respect of loss of office. However, Mr Darke will be retained by the Company as a

consultant after stepping down from the Board to retain access to his skills, knowledge and contacts. The consultancy agreement
will run until 31 March 2019 for a fee of £2,000 per calendar month and is terminable by either party on one month’s notice.

Statement of shareholder voting
The table below shows the advisory vote on the 2016/17 Directors’ Remuneration Report at the AGM held on 15 June 2017 and the
binding vote on the Remuneration Policy at the AGM held on 14 June 2016:

AGM resolution

Votes for

Votes against

% Votes withheld

Annual Report on Remuneration (2017 AGM)

1,444,072,651

98.38

23,722,945

Remuneration Policy (2016 AGM)

1,322,798,958

99.25

10,029,694

1.62

0.75

8,648

8,359

Statement of implementation of Remuneration Policy for 2018/19
Executive Directors
Salary
In setting salary levels for 2018/19 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 2018/19 and the relative increases are set
out below:

Executive Director

Jonathan Murphy

Jayne Cottam

2017/18
salary
£’000

335

180

2018/19
salary
£’000

365

184.5

% change

2.5

The CEO received a salary increase of 9% (from £335,000 to £365,000) in recognition of his growing experience and performance in
the role (noting that he has now served a compete financial year as CEO, in addition to his time as interim CEO). While this increase is
above that awarded to the general workforce, the Committee has adopted this approach given the size and responsibility of the role and
noting that it still remains very conservatively positioned against companies of a comparable size in the FTSE 250 Real Estate sector.

Pension and benefits
As was the case last year, Jonathan Murphy and Jayne Cottam 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 2018/19 will continue to be 100% of salary for Jonathan Murphy and 75% of salary for
Jayne Cottam.

The performance objectives under the annual bonus plan for 2018/19 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 2017/18 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.

www.assuraplc.com

Long-term incentives
A further grant of awards will be made under the PSP to Jonathan Murphy and Jayne Cottam over shares worth 150% of salary
which will vest subject to the extent to which three-year performance targets are satisfied. However, reflecting the Company’s focus on
earnings growth and a progressive dividend policy, the Remuneration Committee is proposing to switch the NAV target to an EPS target
for the 2018 PSP awards onwards. EPRA EPS will be used as the metric best suited to demonstrating operational earnings growth
as it excludes the impact of revaluations. No changes will be made to the TSR metric, the threshold vesting percentage or the growth
ranges. As such, the performance targets for the 2018 PSP awards, which are expected to be granted in July 2018, will be as follows:

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%

EPRA EPS: 50% of award

100%

EPRA EPS Growth over performance period

Percentage of this portion of award that vests

Below 5%

15%

100%

Straight line vesting would occur between each target.

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).

Non-Executive Directors
The following table sets out the fee rates for the Non-Executive Directors from 1 April 2018:

Chairman fee

Non-Executive Director base fee

Additional fee for Chairing of Audit and Remuneration Committee

Additional fee for Senior Independent Director

2018/19
£’000

150.0

38.6

8.7

2017/18
£’000

133.4

37.7

8.5

% change

12.4

2.4

Following consultation with our remuneration consultants and reviewing the current market position for comparable roles and the
commitment required to fulfil the role the Board decided to increase the Chairman fee by 12% to £150,000. This level is
conservatively positioned with market comparables and represents the first increase above inflation since 2011.

By order of the Board

Jenefer Greenwood
Chair of the Remuneration Committee
22 May 2018

Strategic reportFinancial statementsAdditional informationGovernance70

Assura plc Annual Report and Accounts 2018

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 2018. The Corporate
Governance Statement set out on
page 44 forms part of this report.

The Directors’ Report and the other
sections of this Annual Report contain
forward-looking statements. The extent
to which the Company’s shareholders or
anyone may rely on these forward-looking
statements is set out on page 111.

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 38 to 43, 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 38 to 43. In addition,
Note 22 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 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 £26.7 million
at 31 March 2018 (2017: £23.3 million),
the Group has undrawn facilities of
£170 million at the balance sheet date.

The Group’s primary care property
developments in progress are all
substantially pre-let.

The Group has adequate headroom in its
banking covenants. The Group has been
in compliance with all financial covenants
on its loans throughout the year.

The Group’s properties are substantially
let with rent paid or reimbursed by the
NHS and they benefit from a weighted
average lease length of 12.6 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 33.

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

Dividends
Details of the dividend can be found
in Note 18 to the accounts. The Group
benefits from brought forward tax losses,
which resulted in three of the four
dividends paid during the year being paid
as ordinary dividends. The October 2017
dividend was paid as a PID.

Details of the Group’s dividend policy
can be found in the business review
on page 41.

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 2018, the average number
of days taken by the Group to pay its
suppliers was 12 days (2017: 10 days).

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

www.assuraplc.com

Donations
In the year to 31 March 2018, Assura
donated £23,000 to charities (2017:
£24,850), all of which were UK registered
charities, and no contributions were made
for political purposes (2017: 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 2018, the issued share
capital of the Company is 2,383,122,112
Ordinary Shares of 10 pence each.
Authority was obtained at the 2017 AGM
for the purchase of up to 10% of share
capital, if deemed appropriate by the
Directors. This expires at the conclusion
of the 2018 AGM.

Interests in voting rights
As at 18 May 2018, the Company had been notified of the following interests
in accordance with DTR 5:

Name of shareholder

Invesco Limited

BlackRock Inc.

Artemis Investment Management

Standard Life Aberdeen

Schroders plc

Resolution Capital Limited

Legal & General Group plc

31 March 2018

18 May 2018

Percentage of
Ordinary
Shares

11.97

10.99

9.45

8.71

6.27

6.12

5.29

3.01

no change

<5%

6.29

no change

Strategic reportFinancial statementsAdditional informationGovernance72

Assura plc Annual Report and Accounts 2018

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 22
to the accounts.

Future developments
Details of future developments are
discussed on pages 38 to 41 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 represented 94.1mt
CO2e (2017: 91.3mt CO2e) 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.

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 CMS, Cannon Place,
78 Cannon Street, London EC4N 6AF
on 10 July 2018 at 11am.

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

This confirmation is given and should
be interpreted in accordance with the
provisions of section 418 of the
Companies Act 2006.

Orla Ball
Company Secretary
22 May 2018

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 2019.

www.assuraplc.com

Directors’ Responsibility Statement

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

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

– Present information, including

– The Annual Report and financial

statements, taken as a whole, is fair,
balanced and understandable and
provides 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 2018

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 reportFinancial statementsAdditional informationGovernance74

Assura plc Annual Report and Accounts 2018

Independent Auditor’s Report to the members of Assura plc
Report on the audit of the financial statements

Opinion

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 2018 and of the Group’s

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

– have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the

European Union; and

– have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial

statements, Article 4 of the IAS Regulation.

We have audited the financial statements of Assura plc (the “Parent Company”) and its subsidiaries (the “Group”) which 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 24 and A to F.

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the
European Union.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.

We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited
by the FRC’s Ethical Standard were not provided to the Group or the Parent Company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Summary of our audit approach

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

Materiality
The materiality applied for the Group financial statements was £25 million which was determined on the basis of 2% of net assets
and specific materiality applied was £2.5 million which was determined on the basis of 5% of EPRA earnings (as defined on page 42).

Scoping
The Group audit team performed full scope audit procedures giving coverage of 100% of the Group’s net assets. The Group is
audited in its entirety by the Group audit team.

Significant changes in our approach
Our approach is consistent with the previous year.

Conclusions relating to going concern, principal risks and viability statement

Going concern
We have reviewed the Directors’ statement in Note 2 to the financial statements 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
and Company’s ability to continue to do so over a period of at least twelve months from
the date of approval of the financial statements.

We are required to state whether we have anything material to add or draw attention
to in relation to that statement required by Listing Rule 9.8.6R(3) and report if the
statement is materially inconsistent with our knowledge obtained in the audit.

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

www.assuraplc.com

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

Principal risks and viability statement
Based solely on reading the Directors’ statements and considering whether they were
consistent with the knowledge we obtained in the course of the audit, including the
knowledge obtained in the evaluation of the Directors’ assessment of the Group’s and
the Company’s ability to continue as a going concern, we are required to state whether
we have anything material to add or draw attention to in relation to:

– the disclosures on pages 34 to 37 that describe the principal risks and explain how

they are being managed or mitigated;

– the Directors’ confirmation on page 32 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; or

– the Directors’ explanation on page 33 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.

We are also required to report whether the Directors’ statement relating to the prospects of the Group required by Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team.

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.

Valuation of property portfolio excluding properties under development

Key audit matter description
The Group owns and manages a portfolio of 518 modern primary healthcare properties that are carried at fair value in the financial
statements. The portfolio is valued at £1,709.6 million as at 31 March 2018 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 at half-yearly intervals. 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, therefore we have identified a
potential fraud risk in this area. 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 in Note 2, and a significant financial reporting matter considered by the Audit Committee, as described on page 55.
Further details are disclosed in Note 10 to the financial statements.

Strategic reportFinancial statementsAdditional informationGovernance76

Assura plc Annual Report and Accounts 2018

Independent Auditor’s Report continued

How the scope of our audit responded to the key audit matter
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 audit matter.

We read the valuation reports for all properties and attended meetings with each of the Valuers. We assessed whether 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 ERV 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, where 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 valuations and their underlying assumptions were supportable in light of available and comparable market evidence,
and the disclosures were appropriate.

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.

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

Materiality

Group financial statements

Overall Group materiality
£25 million (2017: £16 million)

Specific Group materiality
£2.5 million (2017: £1.9 million)
Applied to EPRA earnings
impacting balances

Basis for determining
materiality

2% (2017: 2%) of net assets

5% (2017: 5%) of
EPRA earnings

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.

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
£2.5 million based on 5% of
that measure for testing of all
impacted balances, classes of
transactions and disclosures.

Parent Company
financial statements

£2.3 million
(2017: £1.7 million)

The Parent Company
materiality represents 2%
(2017: 2%) of equity which is
capped at 90% (2017: 90%)
of Specific Group materiality.

As a non-trading Parent
Company, equity is the key
driver of the Company. The
cap is applied against the
specific Group materiality
due to the EPRA earnings
impacting transactions within
the Company.

www.assuraplc.com

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1,250,000 (2017:
£800,000), or £124,000 (2017: £95,000) for differences impacting EPRA earnings, 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.

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 100% (2017: 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.

We have nothing to report in respect
of these matters.

Other information

The Directors are responsible for the other information. The other information
comprises the information included in the Annual Report, other than the financial
statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.

In this context, matters that we are specifically required to report to you as uncorrected
material misstatements of the other information include where we conclude that:

– Fair, balanced and understandable – the statement given by the Directors that they

consider the Annual Report and financial statements taken as a whole is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Group’s position and performance, business model and
strategy, is materially inconsistent with our knowledge obtained in the audit; or

– Audit Committee reporting – the section describing the work of the Audit Committee

does not appropriately address matters communicated by us to the Audit Committee;
or

– Directors’ statement of compliance with the UK Corporate Governance Code – the
parts of the Directors’ statement required under the Listing Rules relating to the
Company’s compliance with the UK Corporate Governance Code containing
provisions specified for review by the auditor in accordance with Listing Rule
9.8.10R(2) do not properly disclose a departure from a relevant provision of the
UK Corporate Governance Code.

Strategic reportFinancial statementsAdditional informationGovernance78

Assura plc Annual Report and Accounts 2018

Independent Auditor’s Report continued

Responsibilities of Directors

As explained more fully in the Directors’ Responsibility Statement, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

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.

Report on other legal and regulatory requirements

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

– 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 Group and the Parent Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the Strategic Report or 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 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.

Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain
disclosures of Directors’ remuneration have not been made or the part of the Directors’
Remuneration Report to be audited is not in agreement with the accounting records
and returns.

We have nothing to report in respect
of these matters.

www.assuraplc.com

Other matters

Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the Board of Directors to audit the financial statements
for the year ended 31 March 2012 and subsequent financial periods. The period of total uninterrupted engagement including previous
renewals and re-appointments of the firm is seven years, covering the years ended 31 March 2012 to 31 March 2018.

Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with
ISAs (UK).

Rachel Argyle (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Manchester, United Kingdom
22 May 2018

Strategic reportFinancial statementsAdditional informationGovernance80
80

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Consolidated income statement
Consolidated income statement
For the year ended 31 March 2018
For the year ended 31 March 2018

Gross rental and related income
Property operating expenses
Net rental income

Administrative expenses
Revaluation gains
Loss 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

EPRA
EPS
EPS

– basic & diluted
– basic & diluted

Note

4
10

19
3
5
16

2018
Capital
and other
£m

–
–
–

–
79.4
(0.3)
–
–
(0.9)
(56.4)
21.8
–

EPRA
£m

83.5
(3.3)
80.2

(7.9)
–
–
(0.3)
0.1
(22.1)
–
50.0
–

2017
Capital
and other
£m

–
–
–

–
56.5
(0.1)
–
–
(1.4)
–
55.0
–

EPRA
£m

71.1
(3.2)
67.9

(7.0)
–
–
(0.1)
0.1
(20.7)
–
40.2
0.1

Total
£m

83.5
(3.3)
80.2

(7.9)
79.4
(0.3)
(0.3)
0.1
(23.0)
(56.4)
71.8
–

Total
£m

71.1
(3.2)
67.9

(7.0)
56.5
(0.1)
(0.1)
0.1
(22.1)
–
95.2
0.1

50.0

21.8

71.8

40.3

55.0

95.3

2.5p

7
7

2.4p

3.7p

5.8p

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. All income derives from continuing operations.

Consolidated balance sheet
Consolidated balance sheet
As at 31 March 2018
As at 31 March 2018

Non-current assets
Investment property
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

Non-current liabilities
Borrowings
Obligations due under finance leases
Deferred revenue

Total liabilities
Net assets

Capital and reserves
Share capital
Share premium
Merger reserve
Reserves
Total equity

NAV per Ordinary Share

– basic
– diluted

EPRA NAV per Ordinary Share – basic

– diluted

www.assuraplc.com
www.assuraplc.com

81
81

Note

2018
£m

2017
£m

10
11
21

12
13
10

14
16
15

16
14
15

8
8
8
8

1,732.7
0.4
0.5
1,733.6

28.7
13.7
8.4
50.8
1,784.4

20.2
–
19.0
39.2

486.3
2.8
5.7
494.8
534.0
1,250.4

238.3
580.4
231.2
200.5
1,250.4

52.5p
52.5p
52.4p
52.4p

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

The financial statements were approved at a meeting of the Board of Directors held on 22 May 2018 and signed on its behalf by:

Jonathan Murphy
CEO

Jayne Cottam
CFO

Strategic reportFinancial statementsAdditional informationGovernance

82
82

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Consolidated statement of changes in equity
Consolidated statement of changes in equity
For the year ended 31 March 2018
For the year ended 31 March 2018

1 April 2016
Profit attributable to equity holders
Total comprehensive income
Dividends
Employee share-based incentives
31 March 2017

Profit attributable to equity holders
Total comprehensive income
Issue of Ordinary Shares
Issue costs
Dividends
Employee share-based incentives
31 March 2018

Note

Share
capital
£m

163.8
–
–
0.9
0.8
165.5

–
–
70.9
–
1.6
0.3
238.3

Own
shares
held
£m

Share
premium
£m

(0.6)
–
–
–
0.6
–

–
–
–
–
–
–
–

241.9
–
–
4.2
–
246.1

–
–
338.2
(12.0)
8.1
–
580.4

Merger
reserve
£m

231.2
–
–
–
–
231.2

–
–
–
–
–
–
231.2

Reserves
£m

118.0
95.3
95.3
(37.0)
(1.1)
175.2

71.8
71.8
–
–
(46.4)
(0.1)
200.5

Total
equity
£m

754.3
95.3
95.3
(31.9)
0.3
818.0

71.8
71.8
409.1
(12.0)
(36.7)
0.2
1,250.4

Consolidated cash flow statement
Consolidated cash flow statement
For the year ended 31 March 2018
For the year ended 31 March 2018

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

Increase/(decrease) in cash and cash equivalents

Opening cash and cash equivalents
Closing cash and cash equivalents

www.assuraplc.com
www.assuraplc.com

83
83

Note

18
16
16
16
16

2018
£m

81.0
(22.8)
0.8
0.1
(9.2)
49.9

(282.3)
(31.7)
0.9
–
(313.1)

409.1
(12.0)
(36.7)
(213.8)
180.0
(56.4)
(1.8)
268.4

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

5.2

(20.8)

23.5
28.7

44.3
23.5

Strategic reportFinancial statementsAdditional informationGovernance

84
84

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the accounts
Notes to the accounts
For the year ended 31 March 2018
For the year ended 31 March 2018

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.

The financial statements are prepared on a going concern basis as explained in the Directors’ Report on page 70 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.

Standards affecting the financial statements
The following standards and amendments became effective for the Company in the year ended 31 March 2018. The pronouncements
either had no material impact on the financial statements or resulted in changes in presentation and disclosure only (effective for
periods beginning on or after the date in brackets):

− Amendments to IAS 7 Disclosure initiative (1 January 2017)
− Amendments to IAS 12 Recognition of deferred tax assets for unrealised losses (1 January 2017)

Standards in issue not yet effective
The following standards and amendments are in issue as at the date of the approval of these financial statements, but are not yet
effective for the Company. The Directors do not expect that the adoption of the standards listed below will have a material impact
on the financial statements of the Company in future periods but are continuing to assess the potential impact (effective for periods
beginning on or after the date in brackets).

− IFRS 9 Financial Instruments (1 January 2018)
− Amendments to IAS 40 Transfers of Investment Property (1 January 2018)
− Amendments to IFRS 2 Classification and measurement of share-based payment transactions (1 January 2018)
− Annual Improvements to IFRS Standards 2014–2016 Cycle (1 January 2018)
− Annual Improvements to IFRS Standards 2015–2017 Cycle (1 January 2019)

IFRS 15 Revenue from Contracts with Customers (1 January 2018)
This standard is based on the principle that revenue is recognised when control passes to a customer. The majority of the Group’s
income is from tenant leases and is outside the scope of the new standard. The remaining, non-material, income streams have been
assessed under the new standard and no material changes have been identified.

IFRS 16 Leases (1 January 2019)
The standard does not impact the Group’s financial position as a lessor or the Group’s rental income from its investment properties.
The standard requires lessees to recognise a right-of-use asset and related lease liability representing the obligation to make lease
payments. Interest expense on the lease liability and depreciation on the right-of-use asset will be recognised in the income statement.
Having reviewed the Group’s current operating leases and head leases, it is estimated that the Group will recognise a right-of-use
asset and corresponding lease liability which would not be material. The net impact on the income statement will also not be material.

There are no other standards or interpretations yet to be effective that would be expected to have a material impact on the financial
statements of the Group.

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.

www.assuraplc.com
www.assuraplc.com

85
85

Notes to the accounts continued
For the year ended 31 March 2018

2. Significant accounting policies continued
Property valuations
The key source of estimation and uncertainty relates to the valuation of the property portfolio, where a valuation is obtained twice
a year from professionally qualified external valuers. The evidence to support these valuations is based primarily on recent, comparable
market transactions on an arm’s-length basis. However, the assumptions applied are inherently subjective and so are subject to a
degree of uncertainty. Property valuations are one of the principal uncertainties of the Group. Details of the accounting policies applied
in respect of valuation are set out below and the key unobservable inputs relating to the valuations are set out in Note 10.

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 regard 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.

Strategic reportFinancial statementsAdditional informationGovernance

86
86

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the accounts continued
For the year ended 31 March 2018

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 transaction 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.

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 an appropriate valuation 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.

Notes to the accounts continued
For the year ended 31 March 2018

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
Reporting accountant services

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

www.assuraplc.com
www.assuraplc.com

87
87

2018
£m

82.7
0.8
83.5

0.1
0.1

2017
£m

70.4
0.7
71.1

0.1
0.1

83.6

71.2

2018
£m

2.6
0.5
3.1
0.3
1.5
3.0
7.9

2018
£m

0.1
0.1
0.2
0.1
0.3

2018
£m

1.8
0.3
0.3
2.4

2017
£m

2.0
0.3
2.3
0.2
1.1
3.4
7.0

2017
£m

0.1
0.1
0.2
–
0.2

2017
£m

1.4
0.1
0.3
1.8

Note

Strategic reportFinancial statementsAdditional informationGovernance

88
88

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the accounts continued
For the year ended 31 March 2018

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 16)
Total finance costs

2018
£m

21.9
(0.7)
0.9
22.1
0.9
56.4
79.4

2017
£m

20.4
(0.4)
0.7
20.7
1.4
–
22.1

Interest was capitalised on property developments at the appropriate cost of finance at commencement. During the year this ranged
from 4% to 5% (2017: 5%).

Loan costs written off related to facilities terminated prior to their maturity.

6. Taxation

Consolidated income tax

Deferred tax
Relating to origination and reversal of temporary differences
Income tax charge/(credit) 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 19% (2017: 20%)
Effects of:
Non-taxable income (including REIT exempt income)
Expenses not deductible for tax purposes
Movement in unrecognised deferred tax

2018
£m

–
–

2018
£m

71.8

13.6

(13.5)
–
(0.1)
–

2017
£m

(0.1)
(0.1)

2017
£m

95.2

19.0

(18.6)
–
(0.5)
(0.1)

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 2018/19
(2017/18: 19%).

Any Group tax charge/(credit) relates to its non-property income. As the Group has sufficient brought forward tax losses, no tax is due.

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. During the year the Group paid its first PID as part of the
October 2017 dividend. Future dividends will be a mix of PID and normal dividends as required.

To remain as a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group’s
qualifying activities and the balance of business. The Group remains compliant at 31 March 2018.

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.

www.assuraplc.com
www.assuraplc.com

89
89

Notes to the accounts continued
For the year ended 31 March 2018

7. Earnings per Ordinary Share

Profit for the year

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

Earnings
2017
£m

95.3

Earnings
2018
£m

71.8

EPRA
earnings
2018
£m

71.8

56.4
(79.4)
0.3
0.9
50.0

EPRA
earnings
2017
£m

95.3

–
(56.5)
0.1
1.4
40.3

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

1,963,754,891
210,307
1,963,965,198

1,647,388,495
3,243,291
1,650,631,786

Earnings per Ordinary Share – basic & diluted

3.7p

2.5p

5.8p

2.4p

8. NAV per Ordinary Share

Net assets

Deferred tax
EPRA NAV

NAV
2018
£m

1,250.4

EPRA
NAV
2018
£m

1,250.4

(0.5)
1,249.9

NAV

2017
£m

818.0

EPRA
NAV
2017
£m

818.0

(0.5)
817.5

Number of shares in issue
Potential dilutive impact of PSP (Note 19)
Diluted number of shares in issue

2,383,122,112
210,307
2,383,332,419

1,655,040,993
3,243,291
1,658,284,284

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

52.5p
52.5p

EPRA NAV
Mark to market of fixed rate debt
EPRA NNNAV

EPRA NNNAV per Ordinary Share – basic

52.4p
52.4p

EPRA
NNNAV
2018
£m

1,249.9
(14.4)
1,235.5

51.8p

49.4p
49.3p

EPRA
NNNAV
2017
£m

817.5
(77.7)
739.8

44.7p

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.

Strategic reportFinancial statementsAdditional informationGovernance

90
90

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the accounts continued
Notes to the accounts continued
For the year ended 31 March 2018
For the year ended 31 March 2018

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

Property investment companies

Assura (SC1) Ltd*
Assura (SC2) Ltd*
Assura Aspire Ltd*
Assura Aspire UK Ltd*
Assura Beeston Ltd*
Assura GHC Ltd*
Assura HC Ltd*
Assura HC UK Ltd*
Assura Health Investments Ltd*
Assura Medical Centres Ltd*

Holding or dormant companies

Assura Primary Care Properties Ltd* Medical Properties Limited*
Assura Properties plc*
Assura Properties UK Ltd*
Assura Trellech Ltd*
BHE (Heartlands) Ltd*
BHE (St James) Ltd*
Broadfield Surgery Ltd*
Cae Court Developments Ltd*
Donnington Healthcare Ltd*
Malmesbury Medical Enterprise Ltd* Trinity Medical Properties Ltd*

Metro MRH Ltd*
Metro MRI Ltd*
Metro MRM Ltd*
Newton Healthcare Ltd*
Park Medical Services Ltd*
PCD Pembrokeshire Ltd*
Pentagon HS Ltd*
SJM Developments Ltd*

Assura PCP UK Ltd*

Abbey Healthcare Group Ltd*
Abbey Healthcare Property Investments Ltd* Assura Pharmacy Holdings Ltd*
Ashdeane Investments Ltd*
AH Medical Properties Ltd*
Assura (AHI) Ltd*
Assura Aylesham Ltd*
Assura Banbury Ltd*
Assura CS Ltd*
Assura CVSK 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 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*
Birchdale Investments Ltd*
Cloverleaf Investments Ltd*
F.P. Projects Ltd*
MP Realty Holdings Ltd*
PCI Management Ltd*
PH Investment (No. 1) Ltd*

Primary Care Initiatives (Macclesfield) Ltd*
PVR Investments 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 (Silsden) Ltd*
SPCD (Sutton in Ashfield) Ltd*
Stonebrites Ltd*
The 3P Development Ltd*
The Third Party Development Corporation*
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 2018 and
31 March 2017 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 0.7% equity holding (book value £nil) and
a £4 million loan note receivable (book value £nil, 2017: £nil).

www.assuraplc.com
www.assuraplc.com

91
91

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 2018. The properties have been valued individually and on the basis of open market value in accordance with RICS
Valuation – Professional Standards 2017 (“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 4.10% to 4.75% (2017: 4.40% to 5.00%) for prime units, increasing up to 8.00% (March 2017: 8.00%)
for older units with shorter unexpired lease terms. For properties with weaker tenants and poorer units, the yields range from 5.50%
to 8.00% (March 2017: 6.00% to over 8.00%) and higher for those very close to lease expiry or those approaching obsolescence.

A 0.25% shift of valuation yield would have approximately a £94.0 million (2017: £68.1 million) impact on the investment
property valuation.

Opening market value
Additions:
– acquisitions
– improvements

Development costs
Transfers
Transfer (to)/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
2018
£m

1,321.7

278.9
6.0
284.9
–
35.5
(7.4)
–
(0.2)
73.2
1,707.7

IPUC
2018
£m

20.2

–
–
–
31.7
(35.5)
(0.2)
0.7
(0.9)
6.2
22.2

Total
2018
£m

Investment
2017
£m

1,341.9

1,094.9

278.9
6.0
284.9
31.7
–
(7.6)
0.7
(1.1)
79.4
1,729.9

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

1,106.4

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

2.8

–

2.8

3.0

–

3.0

1,710.5

22.2

1,732.7

1,324.7

20.2

1,344.9

Market value of investment property as estimated by valuer
Add IPUC
Add pharmacy lease premiums/rent adjustments
Add finance lease obligations recognised separately
Fair value for financial reporting purposes
Completed investment property held for sale
Land held for sale
Total property assets

2018
£m

1,702.2
22.2
5.5
2.8
1,732.7
7.4
1.0
1,741.1

2017
£m

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

At March 2018, 15 assets are held as available for sale (2017: three assets).

The total value of investment property is £1,709.6 million, which is completed investment property of £1,702.2 million plus £7.4 million
of investment properties held for sale.

Strategic reportFinancial statementsAdditional informationGovernance

92
92

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the accounts continued
Notes to the accounts continued
For the year ended 31 March 2018
For the year ended 31 March 2018

10. Property assets continued
Fair value hierarchy
The fair value measurement hierarchy for all investment property and IPUC as at 31 March 2018 was Level 3 – Significant unobservable
inputs (2017: Level 3). There were no transfers between Levels 1, 2 or 3 during the year.

Descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are as follows:

Valuation techniques used to derive Level 3 fair values
The valuations have been prepared on the basis of fair market value which is defined in the Red Book 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 (target once
every three years). 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 £1.2 million (2017: £1.0 million) and accumulated depreciation
of £0.8 million (2017: £0.6 million), giving a net book value of £0.4 million (2017: £0.4 million).

Additions during the year were £0.2 million (2017: £0.3 million) and depreciation charged to the income statement was £0.2 million
(2017: £0.1 million).

12. Cash, cash equivalents and restricted cash

Cash held in current account
Restricted cash

2018
£m

26.7
2.0
28.7

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

2018
£m

9.1
2.0
2.6
13.7

2017
£m

23.3
0.2
23.5

2017
£m

5.1
1.2
3.1
9.4

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. The trade receivables
were slightly higher at March 2018 due to the timing of Easter around year end. Circa £3.4 million was receipted immediately post year
end. Other debtors are generally on 30–60 days’ terms. No bad debt provision was required during the year (2017: £nil).

www.assuraplc.com
www.assuraplc.com

93
93

13. Trade and other receivables continued
As at 31 March 2018 and 31 March 2017, the analysis of trade debtors that were past due but not impaired is as follows:

2018

2017

Past due but not impaired

Neither past due
nor impaired
£m

>30 days
£m

>60 days
£m

>90 days
£m

6.9

4.4

1.1

0.2

0.6

0.3

0.5

0.2

Total
£m

9.1

5.1

The bulk of the Group’s income derives from the NHS or is reimbursed by the NHS, hence the risk of default is not considered material.

14. Trade and other payables

Trade creditors
Other creditors and accruals
VAT creditor

2018
£m

2.3
15.1
2.8
20.2

2017
£m

1.4
12.8
2.2
16.4

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 £2.8 million (2017: £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
22. 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

2018
£m

18.5
6.2
24.7

19.0
5.7
24.7

2017
£m

15.7
6.4
22.1

16.3
5.8
22.1

Strategic reportFinancial statementsAdditional informationGovernance

94
94

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the accounts continued
Notes to the accounts continued
For the year ended 31 March 2018
For the year ended 31 March 2018

16. 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:

2018
£m

520.1
180.0
(213.8)
(1.8)
0.9
0.9
486.3

–
486.3
486.3

2017
£m

369.2
210.0
(59.0)
(2.2)
0.7
1.4
520.1

4.3
515.8
520.1

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 test of 10 years
which, if not met, gives the bondholder the option to change the facility to an amortising basis.

2. Five-year club revolving credit facility with RBS, HSBC, Santander and Barclays for £300 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 2018, £130 million of this
facility was drawn.

3. 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.

4. £150 million of privately placed notes in two tranches with maturities of eight and 10 years drawn on 20 October 2017. The

weighted average coupon is 3.04%. The facility is subject to a historical cost interest cover requirement of at least 175%, maximum
LTV of 60% and a weighted average lease length of seven years.

In January 2018, in line with the debt reduction plan announced in the Prospectus for the November 2017 equity raise, £211 million of
long-term debt held by Aviva Commercial Finance was repaid. The weighted average interest rate on the loans redeemed was 5.43%
with associated early repayment costs of £56 million.

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

www.assuraplc.com
www.assuraplc.com

95
95

17. Share capital

Ordinary Shares issued and fully paid
At 1 April
Issued 20 April 2016 – scrip
Issued 27 July 2016 – scrip
Issued 26 August 2016
Issued 19 October 2016 – scrip
Issued 18 January 2017 – scrip
Issued 19 April 2017 – scrip
Issued 23 June 2017
Issued 19 July 2017 – scrip
Issued 30 August 2017
Issued 18 October 2017 – scrip
Issued 6 December 2017
Issued 17 January 2018 – scrip
At 31 March
Own shares held
Total share capital

Number
of shares
2018

Share
capital
2018
£m

Number
of shares
2017

1,655,040,993
–
–
–
–
–
1,514,247
163,999,820
3,861,017
3,226,687
3,061,389
545,124,813
7,293,146
2,383,122,112
–
2,383,122,112

165.5
–
–
–
–
–
0.2
16.4
0.4
0.3
0.3
54.5
0.7
238.3
–
238.3

1,637,706,738
2,291,541
1,880,037
8,000,000
2,130,150
3,032,527
–
–
–
–
–
–
–
1,655,040,993
(61,898)
1,654,979,095

Share
capital
2017
£m

163.8
0.2
0.2
0.8
0.2
0.3
–
–
–
–
–
–
–
165.5
–
165.5

The Ordinary Shares issued in April 2016, July 2016, October 2016, January 2017, April 2017, July 2017, October 2017 and January
2018 were issued to shareholders who elected to receive Ordinary Shares in lieu of a cash dividend under the Company scrip
dividend alternative.

In June 2017, a total of 163,999,820 new Ordinary Shares of 10 pence each were placed at a price of 60 pence per share. The raising
resulted in gross proceeds of approximately £98.4 million which has been allocated appropriately between share capital (£16.4 million)
and share premium (£82.0 million). Issue costs totalling £2.3 million were incurred and have been allocated against share premium.

In August 2017 and August 2016, 3,226,687 and 8,000,000 Ordinary Shares respectively were issued following employees exercising
nil-cost options awarded under the VCP. Further information can be found in respect of the VCP in Note 19 and on pages 63 and 64 of
the Remuneration Report.

On 6 December 2017, 545,124,813 Ordinary Shares were issued by way of a Firm Placing, Placing and Open Offer and Offer for
Subscription at a price of 57 pence per Ordinary Share. Gross proceeds to the Company were £310.7 million, which has been
allocated appropriately between share capital (£54.5 million) and share premium (£256.2 million). Issue costs totalling £9.7 million
were incurred and have been allocated against share premium.

Strategic reportFinancial statementsAdditional informationGovernance

96
96

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the accounts continued
Notes to the accounts continued
For the year ended 31 March 2018
For the year ended 31 March 2018

18. Dividends paid on Ordinary Shares

Payment date

20 April 2016
27 July 2016
19 October 2016
18 January 2017
19 April 2017
19 July 2017
18 October 2017
17 January 2018

Pence per
share

Number of
Ordinary Shares

0.55
0.55
0.55
0.60
0.60
0.60
0.60
0.655

1,637,706,738
1,639,998,279
1,649,878,316
1,655,040,993
1,656,555,240
1,656,555,240
1,827,642,764
2,383,122,112

2018
£m

–
–
–
–
9.9
9.9
11.0
15.6
46.4

2017
£m

9.0
9.0
9.1
9.9
–
–
–
–
37.0

The April dividend for 2018/19 of 0.655 pence per share was paid on 18 April 2018 and the July dividend for 2018/19 of 0.655 pence
per share is currently planned to be paid on 18 July 2018 to shareholders on the share register at 15 June 2018.

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 17.

The October 2017 dividend was a PID as defined under the REIT regime. Future dividends will be a mix of PID and normal dividends
as required.

19. Share-based payments
As at 31 March 2018, the Group had one long-term incentive scheme in place – the Performance Share Plan (“PSP”). The Value
Creation Plan (“VCP”) is no longer in place following the final awards in August 2017. Further details in respect of the VCP can be found
in the Remuneration Committee Report on pages 63 and 64.

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 2018, the Employee Benefit Trust did not hold any (2017: 61,898) Ordinary Shares of 10 pence each in Assura plc.
The Trust remains in place to act as a vehicle for the issuance of new shares under the PSP.

Performance Share Plan
During the year, 1,574,601 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.

The following table illustrates the movement in options outstanding:

Options outstanding at 1 April 2017
Options issued during the year
Options lapsed in respect of leaver
Options outstanding at 31 March 2018

1,137,931
1,574,601
(652,447)
2,060,085

www.assuraplc.com
www.assuraplc.com

97
97

19. Share-based payments continued
The fair value of the newly issued PSP equity settled options 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 awards were granted. The following table lists the key
inputs to the models used:

Expected share price volatility (%)
Risk free interest rate (%)
Expected life units (years)

2018

22
0.26–0.88
3

2017

23
0.03
3

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 awards granted in 2018 was £691,320 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 £0.3 million
(2017: £0.1 million).

20. 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 in debtors
Increase in creditors
Decrease in provisions
Revaluation gain
Interest capitalised on developments
Loss 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

2018
£m

2017
£m

71.8

95.2

(4.3)
3.8
–
(79.4)
(0.7)
0.3
–
56.4
0.2
0.9
0.9
49.9

(2.8)
1.2
(0.3)
(56.5)
(0.4)
0.1
0.1
–
0.3
0.7
1.4
39.0

Strategic reportFinancial statementsAdditional informationGovernance

98
98

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the accounts continued
Notes to the accounts continued
For the year ended 31 March 2018
For the year ended 31 March 2018

21. Deferred tax
Deferred tax consists of the following:

At 1 April
Income statement movement
At 31 March

2018
£m

0.5
–
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

2018
£m

214.0
2.1
216.1

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

2018
£m

36.4
0.4
36.8

2017
£m

0.4
0.1
0.5

2017
£m

225.6
1.9
227.5

2017
£m

38.4
0.3
38.7

22. 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
£21 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 1,000 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

99
99

22. 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 12.6 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 2018

Non-cancellable leases
Trade and other receivables

Receivables as at 31 March 2017

Non-cancellable leases
Trade and other receivables

On
demand
£m

Less than
3 months
£m

–
–
–

22.5
13.7
36.2

On
demand
£m

Less than
3 months
£m

–
–
–

18.8
9.4
28.2

3 to 12
months
£m

67.5
–
67.5

3 to 12
months
£m

56.5
–
56.5

1 to 5
years
£m

357.3
–
357.3

1 to 5
years
£m

289.0
–
289.0

>5 years
£m

767.8
–
767.8

>5 years
£m

648.5
–
648.5

Total
£m

1,215.1
13.7
1,215.1

Total
£m

1,012.8
9.4
1,022.2

The table below summarises the maturity profile of the Group’s financial liabilities, including interest, at 31 March 2018 and
31 March 2017 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 2018

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

Payables as at 31 March 2017

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

–
–
–

3.8
16.5
20.3

11.3
3.7
15.0

On
demand
£m

Less than
3 months
£m

3 to 12
months
£m

–
–
–

6.4
12.7
19.1

19.2
3.7
22.9

1 to 5
years
£m

291.5
0.3
291.8

1 to 5
years
£m

327.5
0.2
327.7

>5 years
£m

266.5
2.5
269.0

>5 years
£m

388.2
2.7
390.9

Total
£m

573.1
23.0
596.1

Total
£m

741.3
19.3
760.6

Strategic reportFinancial statementsAdditional informationGovernance

100
100

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the accounts continued
Notes to the accounts continued
For the year ended 31 March 2018
For the year ended 31 March 2018

22. 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 2018
was as follows:

Floating rate asset
Cash

Liabilities (fixed rate unless stated)
Long-term loans:
Revolving credit facility (variable rate)
Private placements
Bond
Payments due under finance leases

Within
1 year
£m

1 to 5
years
£m

>5 years
£m

Total
£m

28.7

–

28.7

–
–
–
–

(130.0)
–
(110.0)
(0.3)

–
(250.0)
–
(2.5)

(130.0)
(250.0)
(110.0)
(2.8)

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

The Group has a revolving credit facility of £300 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%.

On 20 October 2017, the Group agreed £150 million of privately placed notes in two tranches with maturities of eight and 10 years.
The weighted average coupon is 3.04%.

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)
–
(110.0)
(19.7)
(0.2)

–
(100.0)
–
(189.8)
(2.8)

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

www.assuraplc.com
www.assuraplc.com

101
101

Notes to the accounts continued
For the year ended 31 March 2018

22. Derivatives and other financial instruments continued
Sensitivity analysis
As at 31 March 2018, 73% of debt drawn by the Group is subject to fixed interest rates. A 0.25% movement in interest rates would
change profit by £0.3 million based on the amount of variable rate debt drawn.

Cash
Long-term loans
Payments due under finance leases

Book value

Fair value

2018
£m

28.7
486.3
2.8

2017
£m

23.5
520.1
3.0

2018
£m

28.7
500.7
2.8

2017
£m

23.5
597.8
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 26% at 31 March 2018 (37% at 31 March 2017).

Investment property
Investment property under construction
Held for sale
Total property

Loans
Finance lease
Cash
Net debt

LTV

2018
£m

1,710.5
22.2
8.4
1,741.1

2018
£m

486.3
2.8
(28.7)
460.4

2017
£m

1,324.7
20.2
0.9
1,345.8

2017
£m

520.1
3.0
(23.5)
499.6

26%

37%

23. Commitments
At the year end the Group had five (2017: seven) committed developments which were all on site with a contracted total expenditure
of £23.6 million (2017: £39.7 million) of which £13.9 million (2017: £15.9 million) had been expended.

24. Related party transactions
Details of transactions during the year and outstanding balances at 31 March 2018 in respect of associates are detailed in Note 9.

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

Strategic reportFinancial statementsAdditional informationGovernance

102
102

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Company income statement
Company income statement
For the year ended 31 March 2018
For the year ended 31 March 2018

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

2018
£m

50.0
2.5
52.5
(3.1)
(0.3)
(36.5)
12.6

12.6
–
12.6

2017
£m

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

37.7
–
37.7

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 2018
As at 31 March 2018

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
Merger reserve
Reserves
Total equity

www.assuraplc.com
www.assuraplc.com

103
103

Note

2018
£m

336.0
336.0

0.3
0.1
790.3
790.7

2017
£m

372.5
372.5

–
0.1
380.7
380.8

(1.2)
(1.2)

(1.0)
(1.0)

1,125.5

752.3

238.3
580.4
147.2
159.6
1,125.5

165.5
246.1
183.7
157.0
752.3

The financial statements were approved at a meeting of the Board of Directors held on 22 May 2018 and signed on its behalf by:

Jonathan Murphy
CEO

Jayne Cottam
CFO

Company registered number: 9349441

Strategic reportFinancial statementsAdditional informationGovernance

104
104

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Company statement of changes in equity
Company statement of changes in equity
For the year ended 31 March 2018
For the year ended 31 March 2018

1 April 2016
Profit attributable to equity holders
Total comprehensive income
Merger reserve release
Dividends
Employee share-based incentives
31 March 2017

Profit attributable to equity holders
Total comprehensive income
Merger reserve release
Issue of Ordinary Shares
Issue costs
Dividends
Employee share-based incentives
31 March 2018

Share
capital
£m

Share
premium
£m

Note

163.8
–
–
–
0.9
0.8
165.5

–
–
–
70.9
–
1.6
0.3
238.3

241.9
–
–
–
4.2
–
246.1

–
–
–
338.2
(12.0)
8.1
–
580.4

Own
shares
held
£m

(0.6)
–
–
–
–
0.6
–

–
–
–
–
–
–
–
–

Merger
reserve
£m

295.4
–
–
(111.7)
–
–
183.7

–
–
(36.5)
–
–
–
–
147.2

Reserves
£m

45.8
37.7
37.7
111.7
(37.0)
(1.2)
157.0

12.6
12.6
36.5
–
–
(46.4)
(0.1)
159.6

Total
equity
£m

746.3
37.7
37.7
–
(31.9)
0.2
752.3

12.6
12.6
–
409.1
(12.0)
(36.7)
0.2
1,125.5

Company cash flow statement
Company cash flow statement
For the year ended 31 March 2018
For the year ended 31 March 2018

Operating activities
Charges received from subsidiaries
Amounts paid to suppliers and employees
Net cash inflow/(outflow) from operating activities

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

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

Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of period
Cash and cash equivalents at end of period

www.assuraplc.com
www.assuraplc.com

105
105

Note

2018
£m

2.5
(2.0)
0.5

(360.6)
(360.6)

409.1
(12.0)
(36.7)
360.4

0.3
–
0.3

2017
£m

2.1
(2.5)
(0.4)

27.1
27.1

–
–
(31.9)
(31.9)

(5.2)
5.2
–

Strategic reportFinancial statementsAdditional informationGovernance

106
106

Assura plc Annual Report and Accounts 2018
Assura plc Annual Report and Accounts 2018

Notes to the Company accounts
Notes to the Company accounts
For the year ended 31 March 2018
For the year ended 31 March 2018

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 to the Group accounts. Disclosure of each 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 61 to 67 and form part of these accounts.

B. Investments in subsidiary companies

Cost
Provision for diminution in value

2018
£m

484.2
(148.2)
336.0

2017
£m

484.2
(111.7)
372.5

Details of all subsidiaries as at 31 March 2018 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 £50 million (2017: £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 £36.5 million (2017: £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.

2018
£m

0.3

2018
£m

790.3

2017
£m

–

2017
£m

380.7

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 2018
31 March 2017

The above transactions are with subsidiaries.

Charges
received
£m

Dividends
received
£m

Amounts
owed by
£m

Amounts
owed to
£m

2.5
2.1

50.0
150.0

790.3
380.7

–
–

www.assuraplc.com
www.assuraplc.com

107
107

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 £1.2 million at 31 March 2018 (31 March 2017: £1.0 million).

There are no differences between the book value of cash and trade payables, nor is there any meaningful interest rate sensitivity.

Strategic reportFinancial statementsAdditional informationGovernance

108

Assura plc Annual Report and Accounts 2018

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.

BMA is the British Medical Association.

British Property Federation 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.

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.

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

Company is Assura plc.

Debt Service Cover is the number of
times net interest payable plus debt
amortisation is covered by underlying
profit before net interest.

Direct Property Costs comprise ground
rents payable under head leases, void
costs, other direct irrecoverable property
expenses, rent review fees and
valuation fees.

District Valuer (“DV”) is the District
Valuer Service being the commercial arm
of the Valuation Office Agency (“VOA”).
It provides professional property advice
across the public sector and in respect
of primary healthcare represents
NHS bodies on matters of valuation,
rent reviews and initial rents on
new developments.

Earnings per Ordinary Share from
Continuing Operations (“EPS”) is the
profit attributable to equity holders of the
parent divided by the weighted average
number of shares in issue during
the period.

European Public Real Estate
Association (“EPRA”) is the industry
body for European REITs. 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 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.

GMS is General Medical Services.

Gross Rental Income is the gross
accounting rent receivable.

Group is Assura plc and its subsidiaries.

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

Interest Cover is the number of times
net interest payable is covered by 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 All 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 a Key Performance Indicator.

Loan to Value (“LTV”) is the ratio of net
debt to the total value of property assets.
See calculation in Note 22.

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

www.assuraplc.com

109

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
purchasers’ 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 Primary Care Trusts.

Primary Care Property is the property
occupied by health services providers
who act as the principal point of
consultation for patients such as GP
practices, dental practices, community
pharmacies and high street optometrists.

Property Income Distribution (“PID”)
is the required distribution of income
as dividends under the REIT regime.
It is calculated as 90% of exempted
net income.

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.

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.

Strategic reportFinancial statementsAdditional informationGovernance
110

Assura plc Annual Report and Accounts 2018

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

JP Morgan Securities Limited
25 Bank Street
Canary Wharf
London
E14 5JP

Bankers:

Barclays Bank plc

HSBC plc

Santander UK plc

The Royal Bank of Scotland plc

www.assuraplc.com

111

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.

Strategic reportFinancial statementsAdditional informationGovernance112

Assura plc Annual Report and Accounts 2018

Notes

This report is printed on Galerie Satin and
Inspira 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