Assura Annual Report 2019

FY2019 Annual Report · Assura

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Annual Report and
Accounts 2019

Creating outstanding
spaces for health services
in our communities

Our business at a glance

Investing to support
primary healthcare
infrastructure

Our locations
We invest in and develop medical
centres throughout the UK.
The most important characteristic
of a building is its importance
to the community it serves.
Our buildings currently serve
approximately 5.6 million patients,
or 8.5% of the UK population.

Portfolio analysis

Capital value

Total value
£m

>£10m

£5–10m

£1–5m

<£1m

Total

Region

North

South

Midlands

Scotland

Wales

Total

Total value
£m

Number of
properties

348

109

563

Number of
properties

182

216

563

558.5

474.1

859.7

68.2

1,960.51

756.9

662.4

350.6

54.6

136.0

1,960.51

Total value

100

Total value

100

Tenant
covenant

Total rent roll
£m

Total rent
roll £m

Total rent roll
%

GPs

NHS body

Pharmacy

Other

Total

1. See Note 10 for reconciliation to balance sheet.

69.4

17.8

8.2

7.3

102.7

100

Financial highlights

I N V E S T M E N T P R O P E R T Y ( £ M )

D I L U T E D E P R A N A V ( P ) *

£1,978.8m

up by 14.2%

53.3p

up by 1.7%

2019

2018

2017

1,978.8

1,732.7

1,344.9

2019

2018

2017

53.3

52.4

49.3

N E T R E N T A L I N C O M E ( £ M )

P R O F I T B E F O R E T A X ( £ M )

£95.2m

up by 18.7%

£84.0m

up by 17.0%

2019

2018

2017

95.2

80.2

67.9

2019

2018

2017

84.0

71.8

95.2

T O T A L D I V I D E N D S P A I D ( P )

2.65p

up by 7.7%

2.7

2.5

2.4

2019

2018

2017

2.65

2.46

2.25

E P R A E P S ( P ) * *

2.7p

up by 8.0%

2019

2018

2017

* See Note 8
** See Note 7

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 48 and 49.

2019

2.7p

53.3p

52.5p

4.73%

4.78%

1.5%

2018

2.5p

52.4p

51.8p

4.77%

4.81%

1.8%

12.5%

13.0%

11.4%

12.0%

Who we are

We are a leading healthcare real estate investment
trust (REIT) with a portfolio of 563 medical centres
across the country.

Our purpose
Our purpose is to create outstanding spaces for health services
in our communities.

What we do
Fifteen years of working with GPs and the NHS means we have
a clear understanding of the needs of those using our buildings,
and of how their premises can support them. We combine that with
our capital strength to develop, invest in, manage and improve our
portfolio of essential social infrastructure.

The places where patients receive NHS care are fundamental to
their experience. And for the NHS’s 1.5 million staff, its buildings
are their work places.

We are here to support the right premises in the right places for
Britain’s most treasured public service.

What we value
Innovation

Expertise

Being genuine

Collaboration

Passion

How we work
We champion new ideas
and we’re open-minded

We do what we say we will

We don’t give up

We strive for excellence

We listen to, learn from and
encourage others

Available online at:
www.assuraplc.com

Strategic report
1 Highlights of the year
Primary care of the future
2
Chairman’s statement
4
6 Development pipeline
8
12
14
16
18
24
26
38
40
44 CFO review

CEO review
Market overview
Our business model and strategy
Strategy at a glance
Our business model in action
Key performance indicators
Stakeholder engagement
Risk management
Principal risks and uncertainties

Governance
50
52
54
56
58
60
62
79
81

Chairman’s introduction to governance
Leadership
Board of Directors
Effectiveness
Nominations Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Directors’ Responsibility Statement

Financial statements
82
88
89
90

Independent Auditor’s Report
Consolidated income statement
Consolidated balance sheet
Consolidated statement of changes
in equity
Consolidated cash flow statement
Notes to the accounts

91
92
110 Company financial statements

Additional information
116 Appendix
117 Glossary
118 Corporate information

Highlights
of the year

Investing £219m in
acquisitions including
Stratford Healthcare Centre
in Warwickshire — one of
the country’s largest
primary care buildings,
serving more than
18,000 patients

Marking Assura’s 15th
anniversary year

Our biggest year to date for
development, completing a new
primary care centre for patients in
South Wales, opening the Durham
Diagnostics and Treatment Centre,
starting on site for new buildings
in 11 locations including Essex,
Kent, Gloucestershire and Greater
Manchester and extending our
pipeline of opportunities

WEST GORTON MEDICAL CENTRE

Assigned an
investment
grade rating
of A- by Fitch
Ratings Limited
and issuing a £300m
unsecured listed bond

Creating the specialist
space for one of
the most modern
fertility clinics in the
NHS, within our Severn
Fields Health Village
in Shrewsbury

Assura plc Annual Report and Accounts 2019 1

Disposing of 12 assets
demonstrating our capital
recycling capabilities

Establishing our major
charity partnership
with Dementia UK and
progressing plans for the
country’s first accredited
dementia friendly primary
care centre design

Strategic reportPrimary care of the future

Thinking long term:
planning for the
NHS of the future

Creating outstanding
spaces for health services
in our communities.

H A R L E C H P R I M A R Y C A R E C E N T R E

W E S T G O R T O N M E D I C A L C E N T R E

D U R H A M

S T R A T F O R D

A R D U D W Y H E A LT H
C E N T R E , H A R L E C H

W E S T G O R T O N M E D I C A L C E N T R E

D U R H A M D I A G N O S T I C S A N D
T R E A T M E N T C E N T R E

Ardudwy Health Centre,
Harlech
625 sq.m

Small but innovative and crucial to delivery
of health services in this Welsh seaside town,
Ardudwy Health Centre in Harlech is one of
the most sustainable in our portfolio – with an
insulated timber frame, biomass boiler and
photovoltaic panels on the roof all helping to
generate heat and power for this community
branch surgery.

2 Assura plc Annual Report and Accounts 2019

West Gorton Medical Centre,
Greater Manchester
1,190 sq.m

In a city region tackling serious health challenges, West
Gorton Medical Centre’s building doesn’t just create space
for more services, it’s also a trailblazer for the Greater
Manchester’s ambition to become carbon neutral by 2038 –
dramatically reducing energy use and increasing efficiency
for the NHS compared with the average surgery building.

Durham Diagnostics and Treatment Centre,
Durham
2,069 sq.m

From urology and renal services to ENT, oral and maxillofacial
surgery and ophthalmology care, Durham Treatment Centre
bridges the gap between the GP surgery and hospital sites in
the North East of England – acting as a specialist treatment
hub for patients who previously had to travel long distances
for their care.

D U R H A M

S T R A T F O R D

S U D B U R Y P R I M A R Y C A R E C E N T R E

S T R A T F O R D H E A LT H C A R E C E N T R E

S U D B U R Y C O M M U N I T Y H E A LT H C E N T R E

Stratford Healthcare Centre,
Stratford-upon-Avon
5,988 sq.m

One of the largest primary care buildings in the
country, Stratford Healthcare Centre brings
together general practice, community mental
health, sexual health and treatment services as
well as a pharmacy and training space.

Sudbury Community Health Centre,
Sudbury
2,937 sq.m

A true super-centre for NHS services away from hospital,
Sudbury Community Health Centre houses paediatrics,
dermatology, audiology, musculoskeletal physiotherapy,
X-ray, dentistry, podiatry, mental health, midwifery,
diagnostics and pharmacy alongside GPs – in a community
which had campaigned for a new facility for decades.

Assura plc Annual Report and Accounts 2019 3

Strategic reportChairman’s statement

We continue to solidify
our position as a partner
of choice to the NHS

Ed Smith, CBE
Non-Executive Chairman

Our people, our capital strength, the quality of our service, our buildings
and our long-term relationships are the five unique hallmarks of our
partnerships with GPs and the NHS.

In these first months as Chairman, I have been struck by just how
deeply embedded these qualities are across this business. As our
nation’s health service seeks to deliver on the much-needed ambition
set out in the NHS Long Term Plan, significant capital investment
is required to support it, meaning the way we combine our unique
strengths to deliver GP and NHS infrastructure has never been
more important.

This year has given us particularly strong examples of all five elements
in action. The team has worked together to cement our strategy around
a clear vision and purpose, underpinned by a set of values and ways
of working which we agree are important to us, our customers and
the public.

The NHS is our prime customer, accounting for 85% of our total
rent roll. Approximately 8.5% of the UK’s NHS patients now use our
premises and we are proud to be providing the infrastructure that
serves so many people.

The last 12 months have seen us continue on our growth journey
and we now own and manage 563 properties. Our portfolio has
expanded through both new developments and acquisitions, with
£240 million of property additions in the year and £314 million from
the prior year. This has helped us to grow our net rental income by
18.7% to £95.2 million.

4 Assura plc Annual Report and Accounts 2019

Following the extensive support of our shareholders during 2017
we were able to fulfil our intentions to restructure some of our more
expensive debt facilities. The restructure provided the platform for
Assura to gain an A- investment grade rating from Fitch Ratings Limited
and successfully execute a £300 million public bond.

In a defining year for our development pipeline, we opened new
spaces around the country for GP practices and three NHS Trusts,
and acquired 57 high quality assets including one of the country’s
biggest primary care centres. This impressive progress would not
have been possible without our long-term relationships and market
understanding. The skills and knowledge of our team enable us to bring
together successfully the many stakeholders on each deal, navigating
the complex NHS procurement processes and managing our supply
chain to meet the individual needs of each community.

The quality of our service and depth of our relationship with our
tenants remain a key part of our strategy and this year we have evolved
our approach of listening, listening and listening even more to the
needs of everyone using our buildings. We have ensured there are
locally based teams serving some of our busiest geographical areas.
We have developed a new structure for our portfolio team to enhance
our customer service and introduced a new role of senior project
manager dedicated to overseeing our service to tenants during asset
enhancement schemes.

M A R K E T W E I G H T O N

Our investment case
Assura is one of the UK’s leading primary
care real estate investors and developers,
supporting the future requirements
of the NHS. As a trusted partner of
GPs, our scalable platform and robust
financial position enable us to deliver
sustainable returns.

Leader in the provision of primary
care real estate with a strong
brand nurtured through long-
term partnerships with GPs and
delivering value for money to
the NHS.

Strong balance sheet together
with a sustainable, covered and
progressive dividend policy.

Capitalising on acquisition and
development opportunities
supported by a scalable platform
to address growing demand.

Low risk, growing portfolio
providing a recurring
and predictable revenue stream.

M A R K E T W E I G H T O N
G R O U P P R A C T I C E

Results and dividends
Our effective business model and ability to acquire, develop and
manage and enhance properties has led to an increase in our
EPRA earnings to £63.8 million, growth of 27.6%. Our profit before
tax was £84.0 million.

Delivering superior and sustainable risk adjusted returns to our
shareholders, including a progressive and covered dividend, is a core
focus for us as a business. In January 2019, the Board increased the
dividend payment by 7.7% to 2.65 pence per share.

Strong shareholder engagement
We are committed to shareholder engagement through open and
transparent dialogue and communicate with our shareholders regularly.
Our management team invests significant time and effort in this process
and has conducted 108 meetings in the year. In addition, we have
commissioned an investor study in the year as well as a consultation
regarding changes to our Remuneration Policy, further details of which
can be found on page 63 of this report.

Our people and the Board
Having taken over as Chairman in July last year, it has been a pleasure
to join such a motivated team. We have 58 people within our business,
and their skills are at the very heart of Assura’s success. On behalf
of the Board I would like to thank each of them for their hard work,
commitment and dedication.

David Richardson has decided to retire after the AGM in July. He has
been Senior Independent Non-Executive Director and chair of the
Audit Committee for seven years now and was a key figure in the many
changes that Assura has undergone. I would like to thank David for his
service to the Company.

Jonathan Davies joined as Non-Executive Director in June 2018 and
will take over as Senior Independent Director and Audit Committee
chair following David’s retirement from the Board. Jonathan is Chief
Financial Officer of SSP Group plc and brings a wealth of experience to
the Company.

The future
Looking ahead, we have a health service with an energetic strategy for
the future, additional revenue funding, and real drive for integration of
services and adoption of new technologies. What it lacks, however, is
the capital investment strategy to match; in due course the Spending
Review will set out the Government’s contribution to the NHS’s long-
term capital needs, but other solutions will be needed to reach the
significant level of investment required. We’re ready to play our part;
demonstrated by our acquisition of primary care developer, GPI –
strengthening our development capability, growing our pipeline and
reinforcing our market position. Our goal of creating outstanding spaces
for health services in our communities is our vision for the future,
accommodating the transition towards more services in primary care,
more specialist treatments in communities, general practice at scale
and the growth of social prescribing.

As the Government continues to approve healthcare schemes, we
continue to solidify our position as a partner of choice to the NHS and
play a key role in providing high quality primary care facilities to reduce
the pressure on the NHS.

I would like to take this opportunity to thank our shareholders and
the whole Assura team – the beating heart of our business – for their
support and commitment over the year.

Ed Smith, CBE
Non-Executive Chairman
20 May 2019

Assura plc Annual Report and Accounts 2019 5

Strategic reportDevelopment pipeline

Planning for
the future

P O R T H C A W L

Our development team has had a strong year,
converting nine schemes from our pipeline to
on site, giving us 11 on site at year end, and
strengthening our pipeline of schemes in the
short and medium term.

S T O W

On site

Cinderford
1,491 sq.m
Estimated completion: spring 2020

Darley Dale
773 sq.m
Estimated completion: spring 2019

Great Barr
1,170 sq.m
Estimated completion: summer 2020

H A I L S H A M

Knebworth
859 sq.m
Estimate completion: winter 2019/20

S T O W - O N - T H E - W O L D D E V E L O P M E N T

How we develop
our pipeline

Our growing team of experienced
development surveyors source opportunities
through the strength of their relationships
with GPs and the NHS throughout the
country. We are the largest developer in our
sector and are well positioned to support the
needs of the NHS in the provision of primary
care in each community.

Our immediate pipeline are schemes that we
expect to be on site in the next 12 months.
Our extended pipeline includes those
schemes where we have been appointed as
preferred partners but the timing of approval
is less certain.

These pipeline figures do not include any
schemes relating to the acquisiton of GPI.

6 Assura plc Annual Report and Accounts 2019

P O R T H C A W L

Completed

Durham Diagnostics and Treatment
Centre, Durham
2,069 sq.m

Porthcawl Medical Centre, Porthcawl
2,212 sq.m

Saxon Spires Practice, Brixworth
600 sq.m

P O R T H C A W L M E D I C A L C E N T R E

Netherfield
1,247 sq.m
Estimate completion: winter 2019/20

Stafford
2,800 sq.m
Estimated completion: spring 2020

Newtown
1,317 sq.m
Estimated completion: summer 2020

Stow-on-the-Wold
742 sq.m
Estimated completion: summer 2019

South Woodham Ferrers
1,357 sq.m
Estimated completion: summer 2019

Timperley
424 sq.m
Estimated completion: spring 2020

Tonbridge
1,405 sq.m
Estimated completion: spring 2020

H A I L S H A M

Pipeline

On site

S C H E M E S , £ 4 9 m

Immediate pipeline

S C H E M E S , £ 5 2 m

Extended pipeline

S C H E M E S , £ 8 9 m

P I P E L I N E S C H E M E

Assura plc Annual Report and Accounts 2019 7

Strategic reportCEO review

Well positioned
sector leader in a
market which is
under-invested

Jonathan Murphy
CEO

Overview
Assura has just completed its 15th year and we have again
demonstrated our ability to deliver sustainable growth with an increase
in the value of our portfolio of £246 million to £2 billion. This growth was
driven by property additions as our investment and development teams
successfully secured 57 assets for inclusion in our portfolio at
an average yield on cost of 4.8% and a WAULT of 14.5 years.

As well as asset enhancement, we continue to accelerate our
investment in development opportunities. Development activity
enhances our returns in two ways: first, developments provide a higher
level of return for a low level of development risk; and, second, they
provide evidence of construction cost inflation that, in turn, drives rental
growth. We have significantly strengthened our extended development
pipeline this year to a total of £190 million.

The primary care property market remains highly attractive with its
secure, long-term income, linkage to construction cost inflation and
constrained supply leading to stable long-term returns.

Assura’s position in the market is distinct in that our all-round model
offers investment, development and management of premises to our
GP clients. This multi-faceted approach enables us to understand
better the requirements of the GPs and to anticipate their future
needs, thus giving us an advantage in securing future investment or
development opportunities.

It also enables us to own the relationship with our customers so that
we can protect and enhance the brand and reputation that have been
so carefully nurtured over Assura’s 15 years in operation. By retaining
the property management and enhancement skills in-house we are
also better able to understand the potential from our portfolio. We are
currently strengthening our asset enhancement team by creating a
dedicated project team to focus on delivering physical extensions
and asset enhancements within our portfolio. We believe this has the
potential to play a much bigger role in our value creation in the future.

This commitment to development as a key strategic driver of value is
reflected in today’s announcement of the acquisition of the primary
care developer, GPI. GPI has been a leading developer in primary care
for over 25 years and its experienced team and strong pipeline are a
valuable addition to the Assura proposition. Our development team will
now increase from five to nine surveyors and our extended pipeline will
increase from £190 million to £282 million. This makes it the strongest
pipeline in our history and reinforces our position as market leaders.

To support this growth, we have put in place a robust financial structure
with an emphasis on long-term sustainability through a lower level of
gearing and maximising our flexibility by using unsecured funding.
This approach was recognised earlier in the year by Fitch Ratings
Limited when they awarded us an investment grade rating of A-, which
marks us out as being amongst the most financially strong of the listed
property businesses.

8 Assura plc Annual Report and Accounts 2019

I N V E S T M E N T P R O P E R T Y V A L U E

£1,978.8m

up by 14.2%

R E N T R O L L

£102.7m

up by 12.9%

Distinct market
Assura holds a leading position in a distinct market with the majority of
its properties let to GPs on very long leases. These bespoke assets are
designed and built to the local health requirements of the communities
they serve and so are essential local social infrastructure. The GPs
receive 100% funding for their rental costs and so this NHS backing
provides excellent security for our income.

The bespoke nature of the assets means that they must be carefully
matched to local requirements and so all new buildings are approved
by the NHS in advance to exacting standards. This approval process
is rigorous and can be very time consuming with pre-qualification
standards for contractors. This effectively prevents any speculative
development and the net effect of this is a very stable market with
low volatility.

The sector is subject to strong growth in underlying demand. There are
three key elements for this growth in demand.

The first of these are the health and demographic changes we are
undergoing as a population. The UK population is forecast both to grow
and the relative proportion of older patients to increase significantly.
This has an outsize impact on healthcare demands as the elderly have
significantly higher health treatment requirements. The population of
the over 80s is forecast to increase by 70% over the next 20 years
according to the Office for National Statistics.

The second key element is the historically low levels of investment in
primary care property in the UK. This under-investment has left the UK
with an infrastructure that is struggling to keep pace with the increasing
demands of the NHS and its patients. The detailed study of the state of

the NHS property estate, the Naylor Review, was published in 2017 with
its recommendation of a £10 billion investment in NHS property across
both primary care and the hospital sector. The most recent study in
this area was a survey by the British Medical Association which was
published in February of this year. 50% of practices did not feel their
primary care buildings were currently fit for purpose and 80% judged
that their premises would be unsuitable for meeting the future needs
of their patients.

The final element is the policy direction to see more health treatments
occurring outside of the hospital environment. This policy has cross-
party support and recognises that it is both more convenient for the
patient and cheaper for the NHS for more routine outpatient, diagnostic
and minor urgent care to be dealt with by primary care centres and not
by hospitals.

These factors result in a market where there is a significant requirement
for investment in primary care and in the buildings that enable that care
to be delivered. In January 2019, the NHS published its Long Term
Plan. This was a response to an announcement by the Government
last summer that it was going to increase the overall NHS budget by
over £20.5 billion in real terms in the next five years. The Plan included
£4.5 billion of additional funding being allocated to primary care with
a specific emphasis on more healthcare staff working with and within
GP practices including more physiotherapists, pharmacists, physician
associates and social prescribing link workers. The Plan also called
for a significant expansion in the provision of outpatient clinics and
diagnostic services in a primary care setting. Our ability to provide the
innovative and flexible workspaces that this would require is second to
none and puts us in prime position to support the delivery of the Plan.

Financial highlights
I am pleased to be reporting on an excellent set of results for Assura
this year with profit before tax growing by 17% to £84.0 million and
growth in EPRA earnings per share of 8% to 2.7 pence. In addition,
we have achieved an increase in portfolio value supporting a further
2% gain in EPRA net asset value to 53.3 pence per share.

These strong results have been achieved through focusing on delivering
revenue growth, ensuring economies of scale are captured for the
benefits of shareholders and on optimising the value from our portfolio.

The overall impact of all of these factors has enabled us to increase
our quarterly dividend from January 2019 by 8% to 0.685 pence
per share which is the seventh successive dividend increase over
a period of six years.

Going forward, we plan to announce proposed dividends annually at
the time of our full year results rather than with the interim results as is

Assura’s position and strengths

Our market

Assura

Supported by
demographics

More GP-led
services in
communities

Significant
investment
required

Knowledge
and expertise

Best in
class team

Financial
strength

Secure
long-term
income streams

Significant
barriers to entry

No speculative
development

Internally
managed

Brand and
reputation

Strong
pipeline

Assura plc Annual Report and Accounts 2019 9

Strategic report
CEO review
continued

currently the case. In order to facilitate this change, at the interim results
in November 2019, we will announce the dividend for the following two
quarters before implementing this approach with the full year results in
May 2020. Dividends will continue to be paid on a quarterly basis.

Robust revenue growth
The skills of our development and investment teams were the key
element in securing the property additions of £240 million in the
year, which was the largest contributor to the £246 million increase
in investment property in the year. This has enabled our rent roll to
grow by 13% to £102.7 million.

In the year rental growth from settled rent reviews was 2.2%. Most of
our rent reviews are on an open market basis, which saw a growth
in the year of 1.1% up from 0.7% in the prior year. These rents are
set by reference to rental awards agreed with the District Valuer on
new schemes. This means that rents are influenced by land and
construction cost inflation over the medium term. While there has
been significant inflation in these costs in recent years, this is not yet
fully reflected in our passing rents as the slowdown in new schemes

has reduced the available evidence of that inflation. This inflation
is also partially affected by yield compression in recent years.
New development activity is starting to pick up as evidenced by the
strength of our development pipeline and this gives us confidence in
rental growth prospects over the medium term.

Improved operational efficiency
Assura adopts an internally managed model, so the Assura team
members are all employees of the business. This means that a lot of
our costs are fixed, and do not move in line with the gross asset value
as they typically do in funds managed by external fund managers.

This approach enables us to optimise the efficiency with which we
can translate increased rental income into underlying profit and hence
dividends. In the year we have delivered 28% growth in EPRA earnings
to £63.8 million which has been achieved by a combination of 19%
growth in our net rental income and a reduction from 13% to 12.5%
in our EPRA Cost Ratio.

Net initial yield movement

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

Jun
06

Jun
07

Mar
08

Mar
09

Mar
10

Mar
11

Mar
12

Mar
13

Mar
14

Mar
15

Mar
16

Mar
17

Mar
18

Mar
19

MSCI monthly UK initial yield

Assura net initial yield

15-year gilt

Twelve-year Total Return vs standard deviation (2007-2018)

Total Return (per annum) %

Residential index

Industrial

Primary healthcare

Healthcare

Equities

Ofﬁce

All property

Gilts

Retail

Increased risk

Source: MSCI

Risk (standard deviation)

Reduced risk

10 Assura plc Annual Report and Accounts 2019

Optimising portfolio value
Assura is a constituent of the MSCI All Healthcare Index and over
the last five years we have delivered an annualised ungeared return
of 9.9% which compares favourably to the Index at 9.1% pa over the
same period.

Our 563 medical centres, which are geographically diverse and
collectively serve approximately 8.5% of the UK’s population, currently
have a rent roll of £102.7 million. Our investment approach is to identify
and acquire those assets we believe are best in class in their local
catchment areas and facilitate provision of a broad range of services
to their local communities. We believe such properties provide better
prospects for lease renewal on expiry and so drive higher property
returns over the long term.

At the same time, we are prepared to acquire shorter leases or lower
value assets, and then use our property skills to redevelop or enhance
the premises, whilst seeking to re-gear the lease to a longer period or
to enhance and extend the premises.

It is not always asset value that determines the importance of an
asset within the portfolio. A good example of this is a property we
acquired this year in West Wales for under £1.5 million. It has a patient
list of 6,000, which is well below our average. However, it provides an
essential service to the local community and as a rural practice the
nearest alternative practice, which does not have any spare capacity,
is more than six miles away. We also identified the practice as under-
rented and so at first review we have been able to secure an uplift in the
passing rent of 9%.

We also work with our practices to identify opportunities for extensions
or improvements as this can often be a very cost effective way of
significantly improving the return on our assets.

A good example of this is Outwood Park Medical Centre in Wakefield
where, working with the GP practice and the NHS, we were able to
agree a new 25-year lease and complete some premises improvement
works including installation of some energy efficient LED lighting.
Overall, during the year we agreed 13 new leases and 6 lease
extensions, significantly improving surgery provision for some 222,000
patients, whilst adding a further £10.3 million to our total contracted
rent roll.

The Assura team’s property skills and wide expertise have enabled us
to end the year with a contracted rent roll of over £1.35 billion. We have
built up this rent roll through our portfolio management over these
last 15 years. During this time, we have developed deep relationships
with our GPs and the local NHS teams. This has given us a unique
opportunity to maximise the value from all our 563 properties.

To put this in context, over the last five years through acquisition,
development and asset enhancement, we have been able to protect
our average lease length so that the five years we should have lost
through the passing of time we have been able to mitigate to 2.4 years,
with the WAULT now standing at 12.0 years.

Each asset enhancement initiative may of itself be modest but this
perseverance in the improvement of our estate is crucial to the further
growth in our contracted rent roll.

The balance of our ungeared annualised return is generated from
capital growth, which has seen a like-for-like valuation growth of 1.5%
in the past year. This increase has primarily come from the movement
in yields with our net initial yield moving down by six basis points over
the past year to stand at 4.74%. The portfolio net equivalent yield as at
31 March 2019 was 4.77%.

We completed three developments during the year at a total
development cost of £18.7 million. This has added £1.0 million
to our annual rent roll.

The combined impact of our investment and asset management
activity has been to achieve a 2% growth in EPRA NAV to 53.3 pence
per share.

Positive social impact
Assura’s purpose is to create outstanding spaces for health services in
our communities. Part of that commitment is to continuously improve
our buildings and Assura has been at the forefront of innovation and
technical advances.

One of the crucial elements to the new generation of medical centres is
sustainability, and Assura has a commitment to the highest standards.
All of our in-house developments achieved a “Very Good” or “Excellent”
BREEAM rating, which is the industry benchmark for sustainability as
assessed by the Building Research Establishment (“BRE”). At two of
our developments this year, Brixworth and Stow-on-the-Wold, both
sites have had solar panels installed. All of the materials at Brixworth
were chosen from the BRE Green Guide to Specification and Stow
also includes an air source heat pump to minimise carbon emissions.

Providing the most sustainable buildings supports our climate change
efforts, though there is also a commercial imperative as sustainable
buildings have been shown to provide better returns for investors
and lower running costs for our customers.

A further crucial element is the positive impact that investment in
medical centres can have on the communities our GPs serve.

This year we have established a national partnership with the charity,
Dementia UK, given that the condition impacts upon millions of patients,
staff and carers using our buildings. We are helping to fund Dementia
UK’s national helpline for carers and are working on the development
of the country’s first medical centre to be accredited for dementia
friendly design.

A key aspect of the NHS Long Term Plan is a growing role for social
prescribing in primary care. For some practices, this will mean making
space for link workers and projects within their buildings, which
Assura is ideally placed to support. We are also supporting projects
themselves: we asked our GP practice tenants about the social
prescribing schemes which are making the biggest difference to health
for their patients, allowing us to fund 28 local initiatives from community
cafés and gardening clubs to dementia music groups.

Outlook
The fundamentals of our sector remain constant: long-term,
government backed income, with a linkage to cost inflation and with
constrained supply. These elements have supported the consistent
returns that our sector has delivered. Assura has established a
distinctive positioning in this market that has enabled us to enjoy strong
growth over the past five years and achieve a portfolio of 563 properties
with a contracted rent roll of £1.35 billion.

The requirements for investment in primary care continue to increase
and our ability to meet these needs has been strengthened through
our continued investment in our development and asset enhancement
teams. These investments reflect our belief in the future prospects
of Assura and enable us to look forward with confidence to the next
15 years.

Jonathan Murphy
CEO
20 May 2019

Assura plc Annual Report and Accounts 2019 11

Strategic reportMarket overview

Six drivers shaping
our market

Patients being cared for
in older, cramped and
unfit infrastructure

More of us living longer,
with more complex
conditions

A workforce struggling
with premises
challenges

“ It was clear that the buildings
that house general practice are
often old and in need of serious
investment and expansion.”

“ Being able to get into the
building easily or get to the
reception desk due to lack of
space to turn and manoeuvre.”

“ The areas that everyone has
to use are totally inadequate
for what they were originally
built for.”

“ It is impossible to speak
to the receptionist without
being overheard.”

“ No lift and the corridors
are narrow.”

Patients’ views on making the best use
of GP premises, Patients Association,
January 2019

Better primary care premises:

– Help to give patients a better
experience of primary care
– Allow patients to access more
NHS services closer to home

– Create more pleasant work places

for NHS staff, and space for a broader
range of professionals in primary care.

“ By 2021 it is predicted that
more than one million people
across the UK will be living
with dementia and by 2030,
three million people will be
living with or beyond cancer…
Doctors across the UK
consistently report that their
workload is increasing in
intensity and complexity.”

Working in a system that is under pressure:
The British Medical Association, March 2018

Better primary care premises:

– Support provision of a wider range
of health services close to home

– Provide accessible facilities so that all

patients with physical, mental and sensory
challenges can receive the care they need

– Create space for a broader range of

professionals in primary care.

50% of GP practices say their
premises aren’t suitable for
current needs, while 80% said
their premises would not be able
to handle expected future
demand. “The Government must
use [the] Spending Review to
urgently invest in practice
premises – as well as wider NHS
infrastructure – to bring facilities
up to 21st century standards
and ensure that GPs and their
colleagues throughout the
health service can guarantee the
best care now and in the future.”

Dr Richard Vautrey, British Medical
Association GP Committee chair on
its survey of premises, February 2019

We support GPs and the NHS by:

– Providing funding for new premises,
moving risk away from taxpayers
– Getting premises improvements and

new developments completed quickly,
with specialist healthcare development
expertise and skills

– Flexible lease and repairing options to
support GP recruitment, retention and
shared commitment to better premises.

12 Assura plc Annual Report and Accounts 2019

The need for health
infrastructure to
support new homes

When asked which advantages
would influence their support
for new homes, respondents
ranked ‘medical facilities built or
existing ones improved’ second
only to the creation of new jobs.

Public attitudes to house building,
Ministry of Housing, Communities
& Local Government, June 2018

We work with housing developers to:

– Support provision of new healthcare

infrastructure in areas of rapid housing
growth, ensuring GPs have the facilities
they need to cope with increasing
patient numbers

– Ensure Section 106 and Community
Infrastructure Levy commitments for
new primary care infrastructure are met.

Government strategy for
a broader mix of health
professionals in primary
care, and integration of
NHS services

“ Expanded neighbourhood
teams will comprise a
range of staff such as GPs,
pharmacists, district nurses,
community geriatricians,
dementia workers and allied
health professionals such as
physiotherapists
and podiatrists/chiropodists,
joined by social care and the
voluntary sector… By April
2021, [integrated care systems]
will cover the whole country.”

NHS Long Term Plan, January 2019

Better primary care premises:

– Support provision of a wider range
of health services close to home

– Provide accessible facilities to

support all patients with physical,
mental and sensory challenges
– Create space for a broader range
of professionals in primary care.

More revenue funding
pledged for primary
care – but capital
options remain limited

“ In this Long Term Plan,
we commit to increase
investment in primary medical
and community health services
as a share of the total national
NHS revenue spend across
the five years from 2019/20 to
2023/24.This means spending
on these services will be at
least £4.5 billion higher in five
year’s time.”

NHS Long Term Plan, January 2019

We support GPs and the NHS by:

– Providing funding for new premises,
moving risk away from taxpayers in
a capital-constrained NHS

– Providing options to unlock existing
loans or lease commitments held
by GPs so that premises improvement
projects can move forward

– Getting premises improvements and

new developments completed quickly,
with specialist healthcare development
expertise and skills

– Reducing energy use and cost for

the NHS with innovative designs and
technology in more modern buildings.

Our strategic priorities p16

Key performance indicators p24

Principal risks and uncertainties p40

Assura plc Annual Report and Accounts 2019 13

Strategic reportOur business model and strategy

Our business
model

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

We develop, invest in and manage a
portfolio of primary care, diagnostic and
treatment buildings across the UK.

We aim to generate attractive long-term financial returns
for our shareholders through our portfolio of crucial social
infrastructure for health services in our communities.

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

What
we do

Our competitive strengths
We are unique in offering our tenants a full property service, so
a partnership with Assura is a long-term approach. Our ability
to “develop, invest and manage” gives us a crucial advantage
when securing new development and investment opportunities
and other asset management initiatives. Moreover, our
internally managed structure provides a highly scalable model
which means that as we grow, the benefits of scale accrue to
shareholders and drive our progressive dividend policy.

Develop

Our team of development managers works with
our design and development partners to provide
bespoke, community-led property solutions for
each of our healthcare partners. We monitor and
manage the process from design through
to delivery of the completed building.

S E V E R N F I E L D S

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

Our strategic priorities p16

Leveraging our financial strength
To grow returns for investors, making
each £ invested work harder

Quality of buildings
To develop buildings fit for the future
of healthcare

Quality of service
To deliver on our promises

People
To attract, retain and
develop employees

Long-term relationships
To build long-term relationships that
benefit all of our stakeholders

S E V E R N F I E L D S H E A LT H V I L L A G E , S H R E W S B U R Y

14 Assura plc Annual Report and Accounts 2019

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

What
we
need

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

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

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

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

People
Our team of 58 people covers the key skills
of real estate ownership and includes asset
and property management, development,
investment, marketing and finance.

Stakeholder engagement p26

Invest

Manage

Our investment managers work to identify opportunities
and to build lasting relationships with GPs, NHS Trusts
and other health services, helping them to realise their
long-term ambitions for their premises and growing our
portfolio to provide scale benefits to our investors.

Our team of property surveyors supports the evolving
requirements of our tenants, liaising frequently to assist their
efficient operation. This integrated approach enables us to
benefit both the tenants and our shareholders through lease
renewals, property extensions or co-locating appropriate
partners such as pharmacies.

The
value
we
create

Key beneficiaries of our value creation

GP customers
Our purpose built medical centres provide the
essential infrastructure to allow GPs to provide
a broader range of healthcare services in
the community.

Communities
Our medical centres provide a crucial
community resource to aid improved health
outcomes in their locations. In the year we
donated £85,000 plus employee time to our
local charity partners.

Shareholders
Our EPRA EPS is 2.7 pence and capital
growth is 0.9 pence, supporting dividends
paid of 2.65 pence.

Employees
During the year we have invested significantly
in increasing our skilled employee base with
eight new recruits. £4.0 million has been paid
to our employees. We continue to promote
actively from within and provide training and
development opportunities to all staff.

Suppliers
£55.0 million has been paid to suppliers of
materials and services. Our construction and
management contracts are often with local
suppliers to promote sustainability.

Government
£2.1 million has been paid in employment
taxes to the UK Government.

Assura plc Annual Report and Accounts 2019 15

Strategic reportStrategy at a glance

Our strategy

Strategic priority

2019 priorities

2019 actions/progress

2020 priorities

KPIs

Risks

Leveraging our
financial strength
To grow returns for investors,
making each £ invested
work harder

– Drive development opportunities to support

rental growth evidence.

– Continue to promote the company to a wide
shareholder base and a diverse group of
debt funders.

– Achieve further scale benefits.

Quality of
buildings
To develop buildings fit for the
future of healthcare

– Bring our development pipeline through to

live schemes.

– Continue investment in new developments
that incorporate innovation in respect of
sustainable solutions and technology.

Quality of service
To deliver on our promises

–

Investment managers to focus on asset
enhancement opportunities.

– Complete developments currently

on site.

– Rental growth of 2.2% achieved

– Rental growth from rent reviews, to

– Growing, fully

grow recurring earnings.

– Maintain EPRA Cost Ratio.

– Maintain investment grade rating.

from rent reviews.

–

11 developments on site with

an immediate pipeline of 11

further schemes.

– A- investment grade rating achieved

from Fitch and £300 million

unsecured bond raised.

– EPRA Cost Ratio reduced to 12.5%.

–

Fully covered dividend increase for

sixth consecutive year.

covered dividend

– EPRA Cost Ratio

– EPRA EPS* and

EPRA NAV

–

Total Property

Return and Total

Shareholder Return*

–

Total Accounting Return*

– Rental growth from

rent reviews

on completed

developments

new developments

– Reduction in

investor demand

–

Failure to communicate

– Reduction in availability

and/or increase in cost

of finance

–

Failure to maintain

capital structure

and gearing

– Underperformance

of assets

– Changes to

government policy

– Development

overspend

– Underperformance

– Strongest development pipeline and

– Bespoke designs, incorporating

– BREEAM rating

most schemes on site in 10 years.

aspects of sustainability agenda (inc.

– Completed developments hit

BREEAM and EPC targets.

– Working with Dementia UK to

incorporate dementia friendly

features on our pipeline scheme

in Cinderford.

– BREEAM - aim for outstanding (KPI

– Average EPC rating on

dementia friendly).

- Very Good).

– Develop sustainable solutions.

– Developments on site

of assets

– EPC Ratings - achieve at least B on

– Quality of tenant and

completed developments and review

lease tenure

our existing portfolio.

–

Three developments completed

– Working with our tenants to advance

– Quality of tenant &

during the year.

asset enhancement opportunities

lease tenure

–

54 properties acquired and

successfully embedded by our

portfolio management team.

– Continued strong results from our

tenant satisfaction survey.

– Support for and sponsorship of

Patients Association report.

throughout portfolio.

– Complete developments on site

and convert immediate pipeline to

on site.

–

Tenant satisfaction

surveys

– Developments

completed

– Growth in contracted

rent roll*

– Changes to

government policy

– Competitor threat

– Key staff dependency

– Underperformance

of assets

People
To attract, retain and
develop employees

–

Further investment in team development.

– Conducted staff survey highlighting

– Continue with staff survey.

– Staff satisfaction survey

– Key staff dependency

– Establish staff groups to engage on

improvements or any areas identified

by the staff survey.

(to be reported on

from 2020)

Long-term
relationships
To build long-term relationships
that benefit all of our stakeholders

– Continue to seek growth opportunities
through acquisitions, and purchase
and leasebacks.

– Promote benefits of investment in primary

care infrastructure for the NHS.

– Work with emerging STPs and ICSs to
identify development opportunities.

– Working with our tenants to advance

–

Tenant satisfaction

– Changes to

– Growth in contracted

– Competitor threat

government policy

– Underperformance

surveys

rent roll*

– Developments on site

of assets

asset enhancement opportunities

throughout portfolio.

– Working with our suppliers to

innovate in technologies and ways

of building.

– Continue to focus on building

long-term relationships with all

stakeholders, including local

authorities, government, Patient

Association, GP collaboratives, NHS

Trusts, developers and social groups.

high levels of commitment and

employee satisfaction.

–

Training for all staff as needed,

including a high concentration

development programme for a small

number of staff each year.

–

Focus on staff wellbeing.

– Changing the way we work

- creating a more flexible

working environment.

– Establishment of All-Party

Parliamentary Group.

– Executive team positions on regional

business leader boards.

– Support for and sponsorship of

Patient Association report.

16 Assura plc Annual Report and Accounts 2019

Strategic priority

2019 priorities

2019 actions/progress

2020 priorities

KPIs

Risks

KPIs – read more p24
Risks – read more p38
*KPI linked to executive remuneration p73

– Rental growth of 2.2% achieved

– Rental growth from rent reviews, to

– Growing, fully

–

from rent reviews.
11 developments on site with
an immediate pipeline of 11
further schemes.

– A- investment grade rating achieved

from Fitch and £300 million
unsecured bond raised.

– EPRA Cost Ratio reduced to 12.5%.
Fully covered dividend increase for
–
sixth consecutive year.

– Strongest development pipeline and
most schemes on site in 10 years.

– Completed developments hit
BREEAM and EPC targets.
– Working with Dementia UK to
incorporate dementia friendly
features on our pipeline scheme
in Cinderford.

grow recurring earnings.
– Maintain EPRA Cost Ratio.
– Maintain investment grade rating.

covered dividend
– EPRA Cost Ratio
– EPRA EPS* and
EPRA NAV
Total Property
Return and Total
Shareholder Return*
Total Accounting Return*

–
– Rental growth from

–

rent reviews

– Bespoke designs, incorporating

– BREEAM rating

aspects of sustainability agenda (inc.
dementia friendly).

– BREEAM - aim for outstanding (KPI

- Very Good).

– Develop sustainable solutions.
– EPC Ratings - achieve at least B on

completed developments and review
our existing portfolio.

on completed
developments

– Average EPC rating on
new developments
– Developments on site
– Quality of tenant and

lease tenure

– Reduction in

investor demand
–
Failure to communicate
– Reduction in availability
and/or increase in cost
of finance
Failure to maintain
capital structure
and gearing

–

– Underperformance

of assets

– Changes to

government policy

– Development
overspend

– Underperformance

of assets

– Working with our tenants to advance
asset enhancement opportunities
throughout portfolio.

– Complete developments on site

and convert immediate pipeline to
on site.

– Quality of tenant &

–

lease tenure
Tenant satisfaction
surveys

– Developments
completed

– Growth in contracted

rent roll*

– Changes to

government policy
– Competitor threat
– Key staff dependency
– Underperformance

of assets

– Continue with staff survey.
– Establish staff groups to engage on

improvements or any areas identified
by the staff survey.

– Staff satisfaction survey
(to be reported on
from 2020)

– Key staff dependency

–

Three developments completed
during the year.
54 properties acquired and
successfully embedded by our
portfolio management team.
– Continued strong results from our

tenant satisfaction survey.
– Support for and sponsorship of
Patients Association report.

–

– Conducted staff survey highlighting
high levels of commitment and
employee satisfaction.
Training for all staff as needed,
including a high concentration
development programme for a small
number of staff each year.
–
Focus on staff wellbeing.
– Changing the way we work
- creating a more flexible
working environment.

– Establishment of All-Party
Parliamentary Group.

– Executive team positions on regional

– Working with our tenants to advance
asset enhancement opportunities
throughout portfolio.

–

Tenant satisfaction
surveys

– Growth in contracted

business leader boards.

– Working with our suppliers to

rent roll*

– Changes to

government policy
– Competitor threat
– Underperformance

– Support for and sponsorship of
Patient Association report.

innovate in technologies and ways
of building.

– Continue to focus on building
long-term relationships with all
stakeholders, including local
authorities, government, Patient
Association, GP collaboratives, NHS
Trusts, developers and social groups.

– Developments on site

of assets

Assura plc Annual Report and Accounts 2019 17

Leveraging our

financial strength

To grow returns for investors,

making each £ invested

work harder

– Drive development opportunities to support

rental growth evidence.

– Continue to promote the company to a wide

shareholder base and a diverse group of

debt funders.

– Achieve further scale benefits.

Quality of

buildings

To develop buildings fit for the

future of healthcare

– Bring our development pipeline through to

live schemes.

– Continue investment in new developments

that incorporate innovation in respect of

sustainable solutions and technology.

Quality of service

To deliver on our promises

–

Investment managers to focus on asset

enhancement opportunities.

– Complete developments currently

on site.

People

To attract, retain and

develop employees

–

Further investment in team development.

Long-term

relationships

To build long-term relationships

that benefit all of our stakeholders

– Continue to seek growth opportunities

through acquisitions, and purchase

and leasebacks.

– Promote benefits of investment in primary

care infrastructure for the NHS.

– Work with emerging STPs and ICSs to

identify development opportunities.

Strategic reportBusiness model in action

Our busiest year
on record
With 11 new buildings in progress around
the country and the opening of a landmark
diagnostics and treatment centre as the
NHS celebrated its 70th birthday, it’s been a
milestone year for our development team.

Porthcawl
This three-storey primary care centre
houses two GP surgeries with more than 20
consulting rooms, six treatment rooms, space
for minor operations and additional health
board services as well as a drop-off area,
ambulance bay and car park. Designed to
make visiting the surgery easier for those
with dementia, it has clear signage around
the building and a colour scheme to make
patients feel more at ease.

Unicorns, slime, school photos and coins
were all in a day’s work for our development
team as they gave a local primary school
one of the first tours of the new centre.
Pupils buried a time capsule in the grounds to
mark the occasion – filled with their statement
objects from 2019.

Durham
This 2,069 sq.m facility was commissioned
by City Hospitals Sunderland NHS
Foundation Trust to allow thousands of
patients across the North East to access
specialist hospital services closer to home.
Patients from Durham no longer have to
travel to Sunderland, Bishop Auckland,
Shotley Bridge or Sacriston for their care.
The building offers multiple outpatient clinic
and treatment rooms and a day-case theatre,
to bring a range of the Trust’s specialties
into the community including renal dialysis;
urology; ear, nose and throat and oral and
maxillofacial surgery.

Brixworth
Housing growth must be supported by the
social infrastructure that communities rely
on. The team at Brixworth’s Saxon Spires
Practice knew they wouldn’t be able to
continue serving a growing population from
their existing building, with new residents
moving to hundreds of new homes in the
area. Through a Section 106 agreement
with Barratt Homes, we completed this new
primary care centre building with space to
care for around 7,000 patients in modern
treatment and consulting rooms, with a
health education space for training.

.
.
.

p
o
e
v
e
d
e
W

18 Assura plc Annual Report and Accounts 2019

New Durham Treatment Centre opens in NHS’s 70th anniversary week

Our head of development giving a tour
at Porthcawl Medical Centre

Porthcawl
Medical Centre

Durham Diagnostics
and Treatment Centre

“ The children are so pleased
to have been involved and feel
a real part of the community.
Thank you for this amazing
opportunity.”

Jo Rowley, Headteacher

P O R T H C A W L

P A T I E N T S

17,000+

C O N S U LT I N G R O O M S

20+

P O R T H C A W L M E D I C A L C E N T R E

Assura plc Annual Report and Accounts 2019 19

Strategic reportBusiness model in action
continued

Supporting diverse
community needs
Our deep understanding of where and how
a health building fits in to the health system
for that community has been the key to our
strategic investments this year – as the team
brought some of the country’s most exciting
primary care, diagnostic and treatment centre
assets into our portfolio.

Stratford Health Care Centre,
Warwickshire
At 5,988 sq.m, this is one of the largest
primary healthcare facilities in operation
today, providing care for more than 18,000
patients next to Stratford-upon-Avon’s new
hospital development. Alongside the GP
surgery, it accommodates a pharmacy, dentist,
physiotherapy centre, rehabilitation centre,
mental and sexual health services, and a café.

Lifesaving treatment closer to home
in Oldham
Our acquisition of Oldham Kidney Care Centre
adds to our growing suite of buildings which
accommodate specialist services away from
hospital – reducing journey time for patients to
receive complex treatments in the community,
and easing pressure on hospital sites.

Right opposite Boundary Park Stadium and
the Royal Oldham Hospital, the centre is
a satellite of the renal unit of Salford Royal
Foundation Trust and has been hailed as
a state of the art facility for its provision of
haemodialysis across 22 stations in the main
treatment area, two bays, four side rooms and
a self-care room. The building means kidney
failure patients in Oldham can receive their
essential treatment without travelling so far,
improving their quality of life.

Upperthorpe Medical Centre, Sheffield
Serving a growing list of more than 11,000
patients, this large, purpose built health centre
has a short remaining lease term but comes
with exciting opportunities to improve and
refurbish the interior for staff and patients and
regear the lease with a new 25-year term.

Disposal in action
Our focus on long-term growth of the portfolio
saw us dispose of 12 assets during the year,
highlighting our capital discipline.

.
.
.
t
s
e
v
n

e
W

20 Assura plc Annual Report and Accounts 2019

Recent acquisition of Oldham Kidney Care Centre

“ It was quite a drag travelling to Salford and I
wasn’t getting home until midnight so it was
quite tiring. Now I can plan to do something with
the rest of my day. The new unit is great, it will
be a huge benefit for patients.”

Patient interviewed by Salford Royal NHS Trust on the opening
of the centre in 2014

Oldham Kidney Care Centre

Stratford Healthcare Centre

W E L L S T R E E T S U R G E R Y

Heysham Primary
Care Centre

P A T I E N T S

14,400+

G P O R N H S T E N A N T

100%

W E L L S T R E E T S U R G E R Y , H A C K N E Y

Assura plc Annual Report and Accounts 2019 21

Strategic reportBusiness model in action
continued

Relationships matter
From major asset enhancement projects
to bringing new health services into our
buildings and looking after the day to day
essentials for our sites all over the country,
our in-house team continues to show the
value of strong relationships with the people
and services within our premises.

Asset enhancement, Shrewsbury
Since 2003, the Shropshire and Mid Wales
Fertility Centre has been involved in the
creation of 1,500 families. So it was an
emotional occasion when the centre invited
families to help them mark the official opening
of their new, expanded space within our
Severn Fields Health Village. Creating the
highly specialist and technical new space the
centre needed within our existing building
– which already brings together general
practice with mental and sexual health
services – was a particularly exciting project
for our team this year.

The new facility is one of the most modern
in the NHS, delivering the latest assisted
conception methods and technology. The
centre has been designed to provide scope
for more advanced fertility treatments of
the future, such as pre-implantation genetic
diagnosis, and also to further improve the
centre’s high success rates.

Burton-on-Trent
This year saw other health services moving
into our buildings alongside general practice.
In Burton-on-Trent in Staffordshire, we
welcomed Midlands Partnership NHS
Foundation Trust into our Branston Primary
Care Centre’s premises. The Trust is now
offering sexual health services from part of
the ground and first floors, expanding the
primary care offer to local patients from
this site.

Listening and learning
We used our annual occupier satisfaction
survey this year to explore not just how our
tenants feel about our services, but also how
they feel their buildings can help improve their
impact for patients. Perhaps unsurprisingly
in view of the NHS Long Term Plan, the
most common requests were for even
more consulting rooms, and for space to
accommodate social prescribing initiatives
on site. 96% of those who responded told us
their building has a big or very big impact on
the experience of their patients, and a similar
proportion felt their building has a big or very
big impact on staff morale. Following the
pattern of recent years, 95% of respondents
told us they’d consider recommending
Assura to others.

.
.
.

e
g
a
n
a
m
e
W

22 Assura plc Annual Report and Accounts 2019

Making space for one of the country’s most advanced IVF facilities

Severn Fields Health Village,
Shrewsbury

“ I have to pinch myself every
morning walking into this
place because we finally
have, in Shrewsbury, a
department which is worthy
of the patients we treat – in
terms of giving them the
highest-quality care, in the
best facilities that we can
possibly supply.”

Jason Kasraie, Consultant Clinical
Embryologist and Andrologist, and
Head of Fertility Services at Shrewsbury
and Telford Hospital Trust

S E V E R N F I E L D S

Fertility clinic at
Severn Fields Health
Village, Shrewsbury

C O N S U LT I N G R O O M S

50+

T R E A T M E N T A N D
T H E R A P Y R O O M S

20+

S E V E R N F I E L D S H E A LT H V I L L A G E , S H R E W S B U R Y

Assura plc Annual Report and Accounts 2019 23

Strategic reportKey performance indicators

Measuring
our progress

Assura is one of the UK’s leading healthcare REITs. In order to sustain
this position, we need to demonstrate that we can consistently
outperform over time. To measure ourselves against this objective
we have a wide range of key performance indicators (“KPIs”).

for shareholders; secondly, the portfolio metrics which measure the
quality of the portfolio and our development activities; and lastly, our
non-financial metrics which measure our impact on stakeholders
of our business.

These can be distilled into three areas, all of which link back to
our strategic priorities and form the basis for how our executive
management team is judged and rewarded: firstly, the financial
performance of the business which measures the returns we generate

These KPIs are reflected in both the short term (annual bonus details
on page 73) and long-term management incentive schemes (linked to
TSR and growth in EPRA EPS over a three-year period, further details
on page 74). Certain of these measures are considered Alternative
Performance Measures, with further details provided in the CFO review.

Key

Leveraging our financial strength

Quality of buildings

Quality of service

People

Long-term relationships

Financial

KPI and benchmark

E P R A E P S

2.7p

2018: 2.5p

D I L U T E D E P R A N A V

53.3p

2018: 52.4p

E P R A C O S T R A T I O

12.5%

2018: 13.0%

T O T A L P R O P E R T Y R E T U R N

5.9%

2018: 9.7%

T O T A L A C C O U N T I N G R E T U R N

6.8%

2018: 11.0%

T O T A L S H A R E H O L D E R R E T U R N

1.3%

2018: 6.8%

24 Assura plc Annual Report and Accounts 2019

Explanation
The EPRA EPS, EPRA NAV and EPRA
Cost Ratio are key components of our
financial statements which drive the
three returns defined below, measuring
the recurring profit, efficiency and scale
benefits of our operating model and the
net accounting value of our assets and
liabilities respectively. Total Property
Return measures our success in choosing
the right investments and managing
these over time. Total Accounting Return
measures the returns we have delivered to
shareholders in the form of dividends paid
and the growth in NAV. Total Shareholder
Return reflects the value of dividends paid
and the relative movement of the share
price over the year.

Performance
Our EPRA EPS and diluted EPRA NAV
show increases compared with March
2018 and our economies of scale and
careful cost management show an
improvement in our EPRA cost ratio.

Our Total Property and Total Accounting
Returns reflect the rental yield of the
portfolio and dividend delivered to
shareholders respectively, in addition to
the valuation gains on the portfolio during
the year. Our Total Shareholder Return
reflects the movement in the share price
over the year. As at 31 March 2019, the
share price of 57.4 pence represents a
premium of 7.7% to diluted EPRA NAV.

Portfolio metrics

KPI and benchmark

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

£11.7m

2018: £16.6m

R E N T A L G R O W T H F R O M
R E N T R E V I E W S

2.2%

2018: 1.7%

W A U LT

12.0 years

2018: 12.6 years

% O F T E N A N T C O V E N A N T
N H S / G P S

85%

2018: 84%

D E V E L O P M E N T S C O M P L E T E D

3, £18.7m

2018: 6 sites, £31.3m

D E V E L O P M E N T S O N S I T E

11, £48.6m

2018: 5 sites, £23.6m

Non-financial

KPI and benchmark

B R E E A M R A T I N G O N
C O M P L E T E D D E V E L O P M E N T S

100%

“Very Good” or better

2018: 100%

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

2018: B

T E N A N T S A T I S F A C T I O N
S U R V E Y

95%

96%

Explanation
Growth in contracted rent roll and the
rental growth from rent reviews (being
the weighted average annualised uplift
on reviews settled during the year) are
measures of how we are growing our
income which in turn should support
our dividend policy.

Weighted Average Unexpired Lease
Term (“WAULT”) is the average period
until the next available break clause in our
leases weighted by rent. NHS percentage
is the proportion of our rent roll that is
paid directly by GPs or NHS bodies.
The figures quoted represent the total
cost of the schemes.

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

Performance
Our contracted rent roll has continued
to grow during the year, through both
portfolio additions and rental growth
of 2.2% from settled rent reviews.
This increase against the 1.7% achieved
in 2018 is a combination of open market
and reviews linked to inflation.

Our portfolio WAULT of 12.0 years and
effective NHS backing of rent of 85%
remain strong, reflecting the quality of
additions during the year.

Development activity has been strong,
with three completions and 11 schemes
on site at year end in addition to our
immediate pipeline of 11 schemes
(development cost of approximately
£52 million).

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

The satisfaction of the tenants in our
buildings is a crucial benchmark of the
quality of service that we provide. The KPI
measures the proportion of respondents
that would consider recommending us
to others.

Performance
All in-house developments completed
during the year achieved our target of
a BREEAM rating of “Very Good” and
an average EPC rating of A. Our on
site schemes incorporate a range of
environmentally friendly features and
are on track to hit our BREEAM and
EPC targets.

The results of our tenant satisfaction
survey are used to drive improvements in
our portfolio management team offering,
and indicate that the significant majority
of our tenants would recommend us as
a landlord.

Assura plc Annual Report and Accounts 2019 25

Strategic report

Stakeholder engagement

Working with all of
our stakeholders

W E S T G O R T O N M E D I C A L C E N T R E

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

W E S T G O R T O N M E D I C A L C E N T R E

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

GPs/NHS p28

EXTRA

W E S T G O R T O N M E D I C A L C E N T R E

EXTRA

Sustainability
We continue to innovate in the design
of our buildings, incorporating the latest
sustainability standards and measuring
ourselves against BREEAM standards.

Sustainability p35

EXTRA
EXTRA

T H E S U R G E R Y @ W H E A T B R I D G E

Suppliers
Our relationships with suppliers are crucial to
ensuring we provide the highest quality of buildings
and services.

We encourage the use of local suppliers to support
local economies. Our suppliers must confirm
adherence to our “zero tolerance” modern slavery
and anti-bribery policies, and we also require
compliance with the SafeContractor scheme.

Suppliers p29

26 Assura plc Annual Report and Accounts 2019

EXTRA

EXTRA
EXTRA

GPs/NHS
We aim to provide buildings that make it easier
for our GP and NHS tenants to deliver effective
services in their local community. It is therefore
crucial that we are continually updating our
understanding of what issues matter to GPs and
how the NHS is changing, seeking to develop
long-term relationships.

GPs/NHS p28

Shareholders
We aim to engage with shareholders in an
open and transparent way. The Executive
Directors participate in a year-round investor
relations programme and the Board
receives regular feedback to understand
shareholder views.

Investor relations activity p29

Board relations with shareholders p52

Communities
How buildings are used to serve their
local community is central to our purpose.
We have supported a number of projects
as part of our Healthy Communities
Programme and supported our main
charity Dementia UK.

Communities p32

C I N D E R F O R D

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 received an A- investment grade
rating from Fitch Ratings Limited and issued
our first unsecured listed bond.

Note 16 to the accounts on p102

EXTRA

Employees
Our team of employees is crucial to the ongoing
success of Assura. That is why we work so hard
to ensure appropriate training and development
opportunities are in place, and that Assura offers
a great place to work.

Employees p30

EXTRA

EXTRA
EXTRA

C I N D E R F O R D D E V E L O P M E N T

Assura plc Annual Report and Accounts 2019 27

Strategic reportStakeholder engagement
continued

GPs/NHS

This year, our work with MPs and other influencers has focused on the
patient experience – and the need to build the evidence of how primary
care infrastructure can contribute to the way we engage with and use
health services in the community. At the heart of this was a piece of
national research to explore how patients currently experience primary
care buildings, and what they would like to see in the future.

We supported the Patients Association charity to run a series of focus
groups and a national survey of members to better understand their
experiences of the buildings where they access general practice.
It flagged a wide variety of challenges for the primary care estate,
including confidentiality due to waiting area layout and design,
difficulties with access and navigation in some premises for people with
disabilities or limited mobility, and poor décor and lighting adding to
feelings of stress and anxiety.

Launched in Parliament and covered by national publications including
The Telegraph, Daily Mail and Pulse, the research also provided
inspiration on how future buildings can better serve patients, with
comments around the potential for space to support the integration
of health and social care, design to be more influenced by the patient
experience, energy-efficient buildings and the ability to incorporate
future technology.

Primary care estates challenges continue to be the focus of a range
of events for MPs, academics and other influencers and we have
been pleased to speak at a range of conferences this year. Away from
Westminster, Chris Heaton-Harris MP cut the ribbon on our new
development at Brixworth, and the Duchess of Cornwall paid a visit to
Frome Medical Centre’s site to see its enhanced primary care model in
action in a building which has enabled a huge mix of community groups
and health professionals to come together under one roof.

We have supported the creation of the new All-Party Parliamentary
Group for Healthcare Infrastructure (“APPG”) and provide secretariat
services to the group. Its work is currently focused on raising awareness
of the priorities for NHS estates, technology and facilities management
to support the Long Term Plan.

As chair of the British Property Federation’s (“BPF”) Healthcare
Committee, we have continued work to champion the role of the
property sector in supporting the NHS.

Jayne Cottam was elected to the North West Regional Council of
the Confederation of British Industry, whilst Jonathan Murphy joined
the North West Business Leadership Team tackling some of the core
challenges for the regional economy.

Grant Thornton’s report “REITs as a force for good” profiled our work
as an example of how our sector is helping to bridge the gap between
the NHS capital available, and the need for more modern premises for
primary care.

“ It’s essential, particularly as patient demand
grows, that these issues are rectified with better
investment in general practice; issues that can
have almost as much impact on patient care as
ensuring surgeries are equipped with the right
clinicians, medicines, and follow-up services.”

Professor Helen Stokes Lampard
Royal College of GPs

“ It’s clear that patients value the NHS and seek
high quality care as a first priority when they
visit their GP. Funding should primarily go into
improving standards of care – and patients
agree that this should be the case – but it
should not be ignored that many buildings
housing general practice are often old and
in need of serious investment.”

Rachel Power, Chief Executive
Patients Association

28 Assura plc Annual Report and Accounts 2019

Durham Diagnostics and Treatment Centre

Investor relations
and suppliers

Investor relations
As detailed in the Governance section on page 52, the Board is
committed to maintaining an appropriate level of communication with
shareholders. The Executive Directors and investor relations manager
are available throughout the year for investor meetings, and work with
advisors to give investors the opportunity to engage with management
at a range of forums.

The adjacent timeline shows the activity over the last 12 months,
and we expect to visit a greater number of cities and conferences
in the coming year. In addition, sector analysts are invited to results
presentations and offered meetings with management to ensure they
are well informed on the latest Company developments.

Key materials and contact information
Regular financial updates are provided to investors and the market
via regulatory news and the Company website. The key materials are
the Annual and Interim Reports, along with accompanying investor
presentations, and quarterly trading updates. All documents are
available on our corporate website (www.assuraplc.com) and are
supplemented by videos and webcasts giving further information.

N U M B E R O F M E E T I N G S
H E L D D U R I N G T H E Y E A R

O F T H E R E G I S T E R
S E E N

108

71%

Suppliers
Relationships with our suppliers are important to our business – in
particular to maintaining our reputation with customers.

The strength of our relationships with key specialists in our sector, such
as our partnership with high quality architects, West Hart Partnership,
is essential to the strength of our proposition to our GP tenants in
developing, investing in and managing our portfolio. We develop
buildings that allow the tenants to operate high quality services for the
benefit of the communities that they serve, and our whole supply chain
plays a part in this high quality delivery. We endeavour to use local
contractors for work on our buildings, where the appropriate expertise
for the work exists.

We have a number of policies and initiatives that we operate to ensure
suppliers are suitably qualified and compliant with relevant regulations
as well as our expectations of operating a responsible business.

SafeContractor scheme
We require that all suppliers we use at our properties are
SafeContractor verified, whether for a large repair or for small routine
maintenance on a building. The SafeContractor scheme tracks the
suitability of health and safety procedures and insurance in relation

May
– Year end results presentation
– Kempen European Seminar
– Results roadshow – London,

Edinburgh

July
– Trading statement

October
– Private wealth

manager roadshow

December
– Jefferies Healthcare

Conference

February
– Glasgow & Edinburgh

roadshow

June
– New York, Boston,

Chicago and
Toronto roadshow
– Unsecured bond

roadshow

September
– EPRA Conference

November
– Interim results
presentation

– Results roadshow –

London, Amsterdam,
Liverpool

– Investor property tour

January
– Trading statement

to the work they are set to complete. If adequate procedures and
insurance are not in place, then we will not work with the supplier.

Modern slavery and anti-bribery
We require all of our suppliers to adhere to our Modern Slavery and
Anti-Bribery and Corruption Policies, both of which are available to view
on our website.

We also communicate our Quality and Environmental policies (as
part of our procedures in relation to our ISO 9001 and ISO 14001
accreditation) to suppliers as well as making clear our policies in respect
of whistleblowing and the prevention of tax evasion. We are currently
improving our processes for tracking and auditing compliance by
our suppliers.

Assura plc Annual Report and Accounts 2019 29

Strategic reportStakeholder engagement
continued

Employees

Percentage breakdown

Male
Female

67%

57%

43%

52%

48%

33%

Board of
Directors

Senior
management

Employees

This year, our whole team came together to explore the values and
ways of working which are important to us: the things which make
Assura the company it is today. This framework now underpins our
ongoing focus on providing a great place to work whilst also supporting
our hugely knowledgeable team to reach its full potential.

Quality of service remains vital to us and we have achieved and
maintained ISO 9001 Quality Management System certification.

Learning and development
We currently have eight members of staff training for professional
qualifications, including accountancy and chartered surveyor. We
have recruited our first apprentice within the finance team and will be
maximising the benefits of the Apprenticeship Levy to support our
longer-term development needs across the organisation. We take a
continuous professional development approach to our training and
have undertaken detailed competency and skills mapping of all our
employees to ensure we invest in the development of our employees
to meet our long-term needs. To extend this, we are now giving
employees the option of working with their line manager to create a
personal development plan, looking at wider skill development beyond
the 12-month cycle of objectives. We also seek to promote from
within and there have been several internal promotions over the past
12 months.

30 Assura plc Annual Report and Accounts 2019

Team day
October 2019

Employee gender diversity

Board of Directors

Senior management

Employees

Total no. of employees (including NEDs)

Male

Female

Employee engagement and voice
The employee opinion survey conducted during 2018 highlighted
the high levels of commitment and employee satisfaction at Assura.
Highly effective leadership and people management skills were seen
as fundamental to our ongoing success. To further strengthen this,
we established our employee forum “The Voice” consisting of six
employees representing all levels and functions across the organisation.
During 2018, The Voice worked collaboratively to develop the core
principles of our employee wellbeing strategy, to be launched in 2019
and met with David Richardson, our Senior Independent Director to
discuss employee views. Our desire to be an employer of choice, both
internally and externally, continues to shape our approach to employee
engagement. This is a primary focus for our newly appointed Head
of HR.

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

Away from work, we continued our personal development grant
offering staff help to build new skills which support personal health and
wellbeing. This year, team members tried everything from flying lessons
to glass blowing for beginners.

Family friendly benefits
We are proud to put family and social values at the heart of our
employee offering and have seen an increase in the number of
flexible working requests this year. As part of our exceptional
employee benefits, we offer all employees access to an Employee
Assistance Programme for direct support to a range of professional
guidance and online tools.

Equality and diversity
Our core policies outline our commitment to equality and human rights
across all equality strands and promote best practice at all times.

All employment decisions are made on the basis of attitude and merit
alone. Equality Impact Assessments of all core policies have also been
positively concluded.

According to the Association of Women in Property, women represent
only 15% of the property and construction workforce. We are proud to
have such strong female representation in our team, as highlighted by
the Hampton-Alexander Review published in November 2018 placing
Assura fourth within the FTSE 250 in terms of female representation in
Combined Executive Committees and their Direct Reports. The positive
impact of this approach was echoed by our female employees who
indicated a high level of equality in all aspects of working life in the
employee survey this year.

Employees

Developing our team

Portfolio manager Jessica Malone achieved her chartered
surveyor status this year – further building her experience and
skills to underpin her work across our premises in the North of
England. Jess also joins George Coulson from our investment
team as part of the BPF’s Futures Network. This specialist group
for junior professionals working in all areas of UK real estate offers
development and networking opportunities to those with less than
10 years experience in the industry – as well as exposure to BPF’s
unique expertise on government decisions, thinking and policy
affecting our sector.

“To thrive as an industry, we need to be doing everything we can
to attract and retain talent – and BPF Futures will be committed
to achieving this by providing real estate’s junior professionals
with opportunities to engage with the industry at large and better
understand their potential contribution to our shared goals.”
Melanie Leech, BPF CEO, on the launch of BPF Futures in 2017

Assura plc Annual Report and Accounts 2019 31

Strategic reportStakeholder engagement
continued

Communities

From the inside out: supporting the
communities using our buildings

Our test for our community work is how it makes a difference
to the health of people using our buildings. This year, we:

…helped to fund Dementia UK’s Admiral Nurse
Helpline, giving families of people struggling
with the condition a source of expert advice on
Sundays – when other professional help can be
hard to reach. Over the year, the helpline recorded
more than 17,000 contacts from families of people
with dementia, an increase in volume of 42% on
the same period in the previous year. We also
ran a Dementia UK Time for a Cuppa event at
Warrington Hospital, raising further funds for the
charity’s work and giving dementia patients and
families the chance to talk with an Admiral Nurse.

…volunteered to
landscape a tired
part of Warrington
Hospital’s grounds,
making the site more
pleasant for patients
and visitors.

32 Assura plc Annual Report and Accounts 2019

…helped practices in
our buildings to mark the
NHS’s 70th anniversary,
donating afternoon tea
packs to staff to celebrate
the milestone.

…worked with local people in
Tonbridge who asked us to revisit
the potential to retain a tree next to
the site of a new medical centre.
We commissioned national experts
to further review the tree’s health and
advise on measures to give it the
strongest potential to cope with the
stresses of construction.

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

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

…funded four projects which improve
health for people in our home town of
Warrington: helping vulnerable homeless
people get to medical appointments;
helping to create a new playground for the
youngest patients at Warrington Hospital;
improving the hospital environment for
bereaved parents after stillbirth; and
supporting relaxation therapies for people
having chemotherapy.

…worked through our developments to support
local initiatives which improve health in the
community – helping to raise funds for an
accessible toilet in a community allotment,
giving young people and adults with a range
of physical and mental health needs the
chance to enjoy the pleasures of growing fruit
and vegetables.

Assura plc Annual Report and Accounts 2019 33

Strategic reportStakeholder engagement
continued

GPs from Westcroft Health Centre in
Milton Keynes won a share of funding
for a pop-up health café – where
anyone can come for a cuppa, a bite
to eat, information and tips on a range
of issues which can impact on mental
health. “We’ve looked to other health
centres where health cafés have
created an extra level of support for
their patients.”

GPs in our Tong Medical Practice
building nominated a scheme which
trains volunteers to support people
after the death of a loved one. “We have
patients who want to give back to their
community as volunteer befrienders –
some who have also been bereaved and
really care about others who are going
through this.”

34 Assura plc Annual Report and Accounts 2019

We funded 28 local social
prescribing schemes
nominated by the practices in our
buildings around the country – from
community cafés and gardening
projects, to volunteer drivers to get
elderly patients to medical appointments.

Musical activities are proven to have
an impact for both people living
with dementia and their carers.
Singing can reduce agitation and
anxiety while improving concentration
and conversation, sleep quality, mood
and memory – which is why GPs
in our Lanchester Medical Centre
building nominated Lanchester
Dementia Friendly Communities
for a share of our funding to buy
materials and instruments to run music
sessions in local care homes and
community venues.

Sustainability

Our environmental policy
Our purpose is to create outstanding spaces for health services in
our communities, and to achieve this it is essential that we are aware
of the impact our buildings have on the environment. We take our
environmental responsibilities seriously, and it is factored into decision
making in respect of developments.

We have in place an environmental policy (full copy available in the
Corporate Governance section of our website) which is reviewed on
an annual basis by the Board. The policy sets out the commitment
we make in addressing environmental risks in the work we carry
out, working with suppliers and partners to promote environmentally
friendly behaviours, and maintaining our ISO 14001 Environmental
Management System certification.

Our environmental impact – developments
As a developer of buildings, we are focused on ensuring our buildings
are designed with sustainability in mind. See the Sustainable
Development example included on page 36 for details of how we
do this.

During the year we completed three developments which achieved an
average EPC rating of A and the two in-house developments assessed
under BREEAM both achieved the target of “Very Good”, with the
development in Porthcawl being rated “Excellent”.

Our environmental impact – portfolio management
For the majority of our portfolio, the consumption of energy is at the
discretion of the tenants who directly purchase this from the utility
companies. For these properties, our portfolio management team
meets regularly with the tenants to understand any ways in which
we could help our tenants, including ways in which the energy
consumption in the building could be improved.

In respect of 41 properties, we purchase utilities on behalf of the tenants
which are recharged, generally through a service charge. In these
buildings, energy consumption is at the discretion of the tenant but
we are generally in more frequent discussion with these tenants, and
we are currently looking at what areas of our provision for tenants
we can improve with a view to reducing the environmental impact of
our portfolio.

We have Energy Performance Certificates (“EPC”) in place for 82% of
our portfolio by number. Of those assessed, 66% have a rating of A–C
and only a small number are currently rated as F or G. We are currently
developing plans for properties where works are required.

Ardudwy Health
Centre, Harlech

See our website
for detailed energy
disclosures
in respect of
our portfolio:
www.assuraplc.com

Assura plc Annual Report and Accounts 2019 35

Strategic reportStakeholder engagement
continued

Our environmental impact – employees
The greenhouse gas emission data below relates to the environmental
impact of Assura employees – specifically electricity consumed at the
head office and fuel usage from travelling to visit our properties.

We are conscious of the impact our employees have and regularly
encourage calls instead of travel where possible. We have also recently
employed two portfolio managers who are based in Kent and Dorset to
manage the properties in those particular areas.

Greenhouse gas emissions
The table below shows the Scope 1 and Scope 2 emissions directly
within the operational control of the group. Scope 1 relates to business
vehicles, and Scope 2 relates to grid electricity consumed at the
Company head office, both of which have been converted using
government published conversion factors.

Scope 1 – mt CO2e

mt CO2e per employee

Scope 2 – mt CO2e

mt CO2e per employee

2019

2018 Change

48.6

0.95

60.5

(20%)

0.71

(25%)

27.5

33.6

(18%)

0.54

1.29

(24%)

Total (Scope 1 plus Scope 2) – mt CO2e

76.1

94.1

(19%)

mt CO2e per employee

1.49

2.00

(26%)

We consider the most appropriate intensity factor to be the average
number of employees. Our greenhouse gas emissions have reduced
year on year, partly as a result of our employees driving 18% fewer
miles during the year and partly as a result of the change in government
published conversion factors reflecting a general reduction in electricity
produced from coal.

Ardudwy Health Centre, Harlech

Sustainable development
The environmental impact of a new building is something that
we consider from the initial design phase and maintain focus on
throughout the project. We measure this against the renowned
Building Research Establishment Environmental Assessment
Method (“BREEAM”) for which we target a score of “Very Good”
or “Excellent” on all our in-house developments.

BREEAM is a methodology for assessing the environmental,
social and economic sustainability performance of an asset.
It measures sustainable value in a range of categories (such
as energy, innovation, materials, pollution, waste and water),
assessing factors such as carbon emissions reduction, design
durability, adaptation to climate change and protection of ecology
and biodiversity.

In practice, this means that we need to select the materials in the
right way (BRE produces a Green Guide to Specification from
which materials are chosen), we commission environmental and
ecological reports from which the actions are incorporated into
our plans, and we work with the tenants to ensure that the energy
systems installed are both environmentally friendly and cost
effective. All of this needs to be completed to a high standard and
is independently assessed.

Our development in Brixworth was completed during the year and
achieved a BREEAM rating of “Very Good”. The building scored
well against the BREEAM methodology in the areas of materials
chosen (all being from the BRE Green Guide to Specification),
boilers on site being low nitrous oxide emitting, photovoltaic panels
being included on the roof and energy submetering being installed
throughout the building. In addition, we commissioned an impact
assessment on the local ecology from which we amended the
designs to include bird boxes and bat boxes.

Our development in Stow-on-the-Wold is currently on site and
due for completion early in 2019/20, being on track to achieve a
BREEAM rating of “Excellent”. This surgery has been designed
to include photovoltaic panels and air source heat pumps (which
remove the need for a boiler to be installed and are expected to
have an estimated electricity saving of 40% compared with an
electric boiler). The site chosen has been assessed as having a
low ecological impact and the build phase has incorporated a site
waste minimisation plan in which it is expected that 85% of waste
will be diverted from landfill.

100%

I N - H O U S E D E V E L O P M E N T S S I N C E
2 0 1 2 A C H I E V I N G “ V E R Y G O O D ” O R
“ E X C E L L E N T ” B R E E A M R A T I N G S

36 Assura plc Annual Report and Accounts 2019

Our development in Brixworth
includes low NOx emitting boilers,
PV panels and energy submetering
throughout the building.

Our development in
Stow-on-the-Wold has
been designed with a
waste minimisation plan,
with 85% to be diverted
from landfill.

Assura plc Annual Report and Accounts 2019 37

Strategic reportRisk management

Effective risk management
is crucial in delivering our
strategic objectives

W O O D V I L L E

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 in line with our LTV policy. 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.

W O O D V I L L E S U R G E R Y , D E R B Y S H I R E

Risks – how they map to 2019 strategic priorities

Financial
strength

Quality
buildings

Quality
service

People

Long-term
relationships

Changes to government policy

c
g
e
t
a
r
t
S

Competitor threat

Reduction in investor demand

Failure to communicate

in cost of finance

l Reduction in availability and/or increase
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

38 Assura plc Annual Report and Accounts 2019

The Risk Committee includes staff from all areas of the business;
together with the CEO and CFO it 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.
Risk Committee projects in the year included a review of standard
leases and potential breeches of covenants by tenants, a review of
technology risks (and opportunities) for the business, a review of
disaster recovery risks, IT penetration testing and cyber awareness
training. The Risk Committee reports to the Audit Committee, which
regularly monitors risk management and internal control systems and
reports to the Board. We have appointed KPMG as internal auditor to
provide the Company with appropriate independent advice and reviews
of relevant processes.

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 40 to 43.

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 38.

As during the previous financial year, the Risk Committee, the 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. The review
examined a number of potential areas where business operations
could be impacted, including property valuations, interest rates and
the supply chain, with the conclusion being that the impact from the
specific risk factor was not material or that there was no certainty
whether the impact would be positive or negative on 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.

With the majority of our 50+ staff based and working collaboratively
at our head office in Warrington, risks are quickly and easily identified.

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 prospects.

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

The Company’s prospects are assessed primarily through the
strategic and financial reporting process, including periodic
detailed reviews of the ongoing plan. 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 40 to 43, 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 have been applied on an amalgamated
basis including 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 (the secured bond
and RCF mature in the forecast period) 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.

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.

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.

Assura plc Annual Report and Accounts 2019 39

Strategic reportPrincipal risks and uncertainties

Principal risks and
uncertainties

Key

No change

L Low

M Medium

H High

Strategic risks
Changes to government policy

Risk

Avoid

Trap

Mitigate

Movement in year

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.

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.

Net risk rating

Comment
STPs highlight the need for investment in the primary care estate, and 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.

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.

Continuing use of our
specialist expertise.

Net risk rating

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

Net risk rating

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.

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.

40 Assura plc Annual Report and Accounts 2019

Key

No change

L Low

M Medium

H 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.

Comment
108 meetings have been held during the year.

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

Net risk rating

We commissioned an investor study by KPMG Makinson Cowell, which provided valuable insight into investors attitudes, values and concerns.

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.

The Group has a number
of long-term facilities which
reduce these refinancing risks,
choosing to take fixed interest
rates where possible.

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

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

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

Net risk rating

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 achieved an investment grade
rating of A- from Fitch Ratings Limited and issued its first sterling denominated senior unsecured bond of £300 million at a fixed rate of 3%.

Failure to maintain capital structure and gearing

Risk

Avoid

Trap

Mitigate

Movement in year

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

Net risk rating

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.

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

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

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

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

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

The Board regularly reviews the
capital structure of the Group.

Comment
LTV is currently at 34% and this provides generous covenant headroom.

Assura plc Annual Report and Accounts 2019 41

Strategic reportPrincipal risks and uncertainties
continued

Key

No change

L Low

M Medium

H 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 strengthened
its dedicated and experienced
development team.

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

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

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

We remain confident in 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.

Net risk rating

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.

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

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

Succession plans are in place
for each department.

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

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

Any employee resignations
are reported at each
Board meeting.

Net risk rating

Comment
The average number of employees in the year was 51 (2018: 47).

Eight members of staff are currently working towards professional qualifications.

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

42 Assura plc Annual Report and Accounts 2019

Key

No change

L Low

M Medium

H 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

Comment
Approximately 29% of leases have fixed uplifts or are linked to RPI.

Less than 5% 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.

Assura plc Annual Report and Accounts 2019 43

Strategic reportCFO review

A strong performance
in the year

Jayne Cottam
CFO

Portfolio as at 31 March 2019 £1,978.8 million
(31 March 2018: £1,732.7 million)
Our business is based on our investment portfolio of 563 properties.
This has a passing rent roll of £102.7 million (March 2018: £91.0 million),
85% of which is underpinned by the NHS. The WAULT is 12.0 years and
69% of the rent roll will still be contracted in 2029.

At 31 March 2019 our portfolio of completed investment properties was
valued at a total of £1,960.5 million, including investment properties
held for sale of £17.2 million (March 2018: £1,709.6 million and
£7.4 million), which produced a net initial yield (“NIY”, see glossary for
definition) of 4.74% (March 2018: 4.80%). 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 4.77% (March
2018: 4.98%). Adjusting this Royal Institution of Chartered Surveyors
(“RICS”) standard measure to reflect the advanced payment of rents,
the true equivalent yield is 4.91% (March 2018: 5.15%).

Our EPRA NIY, based on our passing rent roll and latest annual direct
property costs, was 4.73% (March 2018: 4.77%).

Net rental income

Valuation movement

Total Property Return

2019
£m

95.2

20.2

2018
£m

80.2

79.4

115.4

159.6

Expressed as a percentage of opening investment property plus
additions, Total Property Return for the year was 5.9%, which is lower
than the 9.7% return achieved in 2018 due to greater yield compression
in the prior year.

Our annualised Total Return over the five years to 31 December 2018 as
calculated by MSCI was 9.9% compared with the MSCI All Healthcare
Benchmark of 9.1% over the same period.

The net valuation gain in the year of £20.2 million comprises a 1.53%
uplift on a like-for-like basis net of movements relating to properties
acquired in the period. The valuation increase, whilst lower than
the previous two years, reflects yield compression in the period as
competition for property in our sector remains high. Despite the
downward pressure, the NIY on our assets continues to represent a
substantial premium over the 15-year UK gilt which traded at 1.337%
at 31 March 2019.

44 Assura plc Annual Report and Accounts 2019

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

Acquisition of completed medical centres

Developments/forward funding arrangements

Like-for-like portfolio (improvements)

Total capital expenditure

2019
£m

218.3

21.1

2.2

241.6

Net rental income

Valuation movement

Total Property Return

2019
£m

95.2

20.2

115.4

The majority of the growth in our investment portfolio has come from
the acquisition of 54 properties for £218.3 million during the period in
addition to our three completed developments.

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

5.9%

T O T A L P R O P E R T Y R E T U R N

These were at a combined total cost of £240 million with a combined
passing rent of £11.4 million (yield on cost of 4.8%) and a WAULT of
14.5 years.

We continue to source properties that meet our investment criteria for
future acquisition. The acquisition pipeline stands at £41 million, being
opportunities that are currently in solicitors’ hands and which we would
hope to complete within three to six months, subject to satisfactory
due diligence.

Our development team has had a successful year converting schemes
from our pipeline to on site, as well as replenishing the pipeline. At the
half year we reported 14 schemes in our immediate pipeline, and eight
of these moved to on site in the second half, meaning a total of 11
schemes were on site at year end.

Of the 11 developments on site at 31 March 2019, seven are under
forward funding agreements and four are in-house developments.
These have a combined development cost of £48.6 million of which
we had spent £15.4 million as at the year end.

In addition to the 11 developments currently on site, we have an
immediate pipeline of 11 properties (estimated cost £52 million) which
we would hope to be on site within 12 months. This takes the total
development pipeline to £101 million, which includes an increasing
proportion that are directly sourced and developed by our in-house
team (as opposed to being forward funded).

We recorded a revaluation gain of £1.1 million in respect of investment
property under construction (2018: £6.2 million).

Live developments and forward funding arrangements

Estimated
completion
date

Development
costs

Costs
to date

Size

£0.4m 1,491 sq.m

£2.1m 773 sq.m

£1.1m 1,170 sq.m

£0.1m 859 sq.m

£1.1m 1,247 sq.m

£0.9m 1,317 sq.m

Cinderford

Darley Dale

Great Barr

Knebworth

Netherfield

Newtown

South Woodham
Ferrers

Stafford

Stow-on-the-Wold

Timperley

Tonbridge

Apr-20

Apr-19

Jun-20

Jan-20

Feb-20

Jul-20

Jul-19

Mar-20

Aug-19

May-20

£5.5m

£2.3m

£4.6m

£3.1m

£4.7m

£6.3m

£7.2m

£2.7m

£2.0m

£5.6m

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

Portfolio management
During the year we have disposed of 12 properties where we believed
there was no further growth, generating proceeds of £7.1 million.

Our rent roll grew by £11.7 million during the year to £102.7 million.
£1.0 million of this growth was from rent reviews. We successfully
concluded 178 rent reviews during the year to generate a weighted
average annual rent increase of 2.18% (2018: 1.70%) on those
properties, which is a figure that includes 27 reviews we chose not to
instigate in the year. These reviews covered £18.5 million of our rent
roll at the start of the year and the absolute increase of £1.0 million is a
5.5% increase on this rent. Our portfolio benefits from a 29% weighting
in fixed, RPI and other uplifts which generated an average uplift of
3.17% during the period. The majority of our portfolio is subject to open
market reviews and these have generated an average uplift of 1.10%
during the period.

We have secured 13 new tenancies with an annual rent roll of
£0.2 million in addition to 6 lease re-gears (rent of £0.6 million).
We currently have a pipeline in legal hands of 12 new tenancies (rent
£0.1 million) and 11 regears (rent £1.0 million), in addition to a pipeline
of 13 asset enhancement opportunities (expenditure £7.5 million).

£3.8m 1,357 sq.m

Our EPRA Vacancy Rate was 1.5% (2018: 1.8%).

£1.7m 2,800 sq.m

£2.7m 742 sq.m

£0.2m 424 sq.m

£1.3m 1,405 sq.m

Our current rent roll is £102.7 million and, on a proforma basis, would
increase to in excess of £120 million once the acquisition pipeline and
extended development pipeline (including GPI) are completed plus rent
reviews and asset enhancements identified.

Assura plc Annual Report and Accounts 2019 45

Strategic reportCFO review
continued

Administrative expenses
The Group analyses cost performance by reference to our EPRA Cost
Ratios (including and excluding direct vacancy costs) which were 12.5%
and 11.4% respectively (2018: 13.0% and 12.0%).

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.

We also measure our operating efficiency as the ratio of administrative
costs to the average gross investment property value. This ratio during
the period equated to 0.47% (2018: 0.51%) and administrative costs
stood at £8.7 million (2018: £7.9 million).

Profit before tax
Profit before tax for the period was £84.0 million (2018: £71.8 million).
The increase reflects the higher net rental income following additions
to the portfolio, as highlighted by the EPRA earnings table below.

Financing
As we continue to grow through both acquisitions and developments,
we have obtained additional lending during the period on an unsecured
basis, in line with our financing strategy.

In July 2018, we were assigned an investment grade corporate rating
of A- (stable outlook) by Fitch Ratings Limited. As noted in the press
release issued by Fitch, the key sensitivities that may lead to a negative
impact on the rating include LTV increasing to above 40% on a
sustained basis, the net debt to EBITDA ratio being above nine times
on a sustained basis, increasing usage of secured debt and the EBITDA
net interest cover dropping below two times. As a result, we have
included these measures within our financing statistics included in
the table below.

Immediately following the rating being issued, on 12 July 2018, we
priced a £300 million unsecured bond with a tenor of 10 years at an
interest rate of 3% per annum.

As announced in our trading update at the start of July, we had
temporarily increased the revolving credit facility (“RCF”) to £400 million
to support our acquisition pipeline prior to the bond being launched.
The facility has now returned to £300 million and £30 million is drawn
as at the end of March.

Financing statistics

Net debt (see Note 22)

Weighted average debt maturity

Weighted average interest rate

% of debt at fixed/capped rates

EBITDA to net interest cover

Net debt to EBITDA

LTV

2019

2018

£667.8m £460.4m

7.3 yrs

6.0 yrs

3.24%

3.12%

96%

3.8x

7.7x

34%

73%

3.3x

6.4x

26%

Our current LTV is 34% and will increase in the short term as we draw
down on available facilities to fund the pipeline of acquisitions and
development opportunities. Our policy allows us to reach the range
of 40% to 50% should the need arise.

At 31 March 2019, 96% of our facilities are at fixed interest rates,
although this will change as we draw on the RCF which is at a variable
rate. The weighted average debt maturity is 7.3 years.

As at 31 March 2019, we had undrawn facilities and cash totalling
£287 million. Details of the outstanding facilities and their covenants
are set out in Note 16 to the accounts.

Net finance costs presented through EPRA earnings in the year
amounted to £22.4 million (2018: £22.0 million).

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

EPRA earnings

Net rental income

Administrative expenses

Net finance costs

Share-based payments and taxation

EPRA earnings

2019
£m

95.2

(8.7)

(22.4)

(0.3)

63.8

The movement in EPRA earnings can be summarised as follows:

Year ended 31 March 2018

Net rental income

Administrative expenses

Net finance costs

Year ended 31 March 2019

2018
£m

80.2

(7.9)

(22.0)

(0.3)

50.0

£m

50.0

15.0

(0.8)

(0.4)

63.8

EPRA earnings has grown 28% to £63.8 million in the year to
31 March 2019 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.

Earnings per share
The basic earnings per share (“EPS”) on profit for the period was
3.5 pence (2018: 3.7 pence).

EPRA EPS, which excludes the net impact of valuation movements,
was 2.7 pence (2018: 2.5 pence).

Based on calculations completed in accordance with IAS 33, share-
based payment schemes are currently expected to be dilutive to EPS,
with 0.5 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

3.5

2.7

3.5

2.7

Dividends
Total dividends settled in the year to 31 March 2019 were £63.3 million
or 2.65 pence per share (2018: 2.455 pence per share). £8.3 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 2018
dividend was paid as a PID and future dividends will be a mix of PID and
normal dividends as required.

46 Assura plc Annual Report and Accounts 2019

The table below illustrates our cash flows over the period:

Portfolio analysis by capital value

Opening cash

Net cash flow from operations

Dividends paid

Investment:

Property acquisitions

Development expenditure

Sale of properties

Financing:

Net proceeds from equity issuance

Net borrowings movement

Closing cash

2019
£m

28.7

72.9

2018
£m

23.5

49.9

(55.0)

(36.7)

(210.1)

(282.3)

(21.2)

(31.7)

7.1

0.9

—

195.9

18.3

397.1

(92.0)

28.7

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

Diluted EPRA NAV movement

>£10m

£5–10m

£1–5m

<£1m

Portfolio analysis by region

North

South

Midlands

Scotland

Wales

Number of
properties

Total value
£m

Total value
%

348

109

558.5

474.1

859.7

68.2

563 1,960.5

100

Number of
properties

Total value
£m

Total value
%

182

216

756.9

662.4

350.6

54.6

136.0

563 1,960.5

100

Total
rent roll £m

Total
rent roll
%

69.4

17.8

8.2

7.3

102.7

100

Pence per
share

£m

Portfolio analysis by tenant covenant

Diluted EPRA NAV at 31 March 2018

1,249.9

52.4

EPRA earnings

Capital (revaluations and capital losses)

Dividends

Other

63.8

20.2

(63.3)

8.8

2.7

0.9

(2.7)

—

GPs

NHS body

Pharmacy

Other

Diluted EPRA NAV at 31 March 2019

1,279.4

53.3

Our Total Accounting Return per share for the year ended 31 March
2019 is 6.8% of which 2.65 pence per share (5.1%) has been distributed
to shareholders and 0.9 pence per share (1.7%) is the movement on
EPRA NAV.

Non-financial information statement
As required under the Companies Act 2006, sections 414CA and
414CB, this strategic report includes certain non-financial information
as necessary to give an understanding of the activities of the
Company. Below we have included cross-references to the relevant
information, much of which is already reported under existing regulatory
frameworks, including descriptions of policies and due diligence
procedures implemented where relevant.

Environmental matters – see pages 35 to 37
Employees – see pages 30 and 31
Social matters – see pages 32 to 34
Respect for human rights – included within the employees (pages 30
and 31) and supplier (page 29) sections
Anti-corruption and anti-bribery matters – included within the
employees (pages 30 and 31) and supplier (page 29) sections
Company business model – see pages 14 and 15
Principal risks – see pages 40 and 43
Key performance indicators – see pages 24 and 25, which include both
financial and non-financial KPIs.

Jayne Cottam
CFO
20 May 2019

Assura plc Annual Report and Accounts 2019 47

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

2019

2.7

12.5

11.4

2019

53.3

52.5

4.73

4.78

1.5

2018

2.5

13.0

12.0

2018

52.4

51.8

4.77

4.81

1.8

DILUTED EPRA NAV

53.3p

2018: 52.4p

EPRA NNNAV

52.5p

2018: 51.8p

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.

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.

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 EPS

2.7p

2018: 2.5p

Diluted EPRA EPS (p)

2.7p

2018: 2.5p

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.

48 Assura plc Annual Report and Accounts 2019

EPRA NIY

EPRA “topped-up” NIY

4.73%

2018: 4.77%

4.78%

2018: 4.81%

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).

EPRA Cost Ratio (including
direct vacancy costs)

EPRA Cost Ratio (excluding
direct vacancy costs)

12.5%

2018: 13.0%

11.4%

2018: 12.0%

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.

2019
£m

2018
£m

4.1

8.7

0.3

3.3

7.9

0.3

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.

Direct property costs

Administrative expenses

Share-based payment costs

Investment property

Less developments

2019
£m

2018
£m

1,978.8

1,732.7

(23.1)

(22.2)

Completed investment property portfolio

1,955.7

1,710.5

Allowance for estimated purchasers’ costs

128.3

111.0

Gross up completed investment property – B 2,084.0

1,821.5

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 (%)

102.7

(4.1)

98.6

0.9

99.5

4.73%

4.78%

90.1

(3.3)

86.8

0.9

87.7

4.77

4.81

EPRA Vacancy Rate

1.5%

2018: 1.8%

Definition
Estimated rental value (“ERV”) of vacant space divided by ERV
of the whole portfolio.

Purpose
A “pure” (%) measure of investment property space that is vacant,
based on ERV.

ERV of vacant space (£m)

ERV of completed property portfolio (£m)

EPRA Vacancy Rate (%)

2019

1.6

104.0

1.5

2018

1.7

93.8

1.8

Net service charge costs/fees

(0.3)

Exclude:

Ground rent costs

(0.4)

EPRA Costs (including direct vacancy costs) – A

12.4

Direct vacancy costs

(1.1)

EPRA Costs (excluding direct vacancy costs) – B

11.3

Gross rental income less ground rent costs
(per IFRS)

Gross rental income – C

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

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

98.9

12.5% 13.0%

11.4% 12.0%

(0.4)

10.8

(0.8)

10.0

83.1

Assura plc Annual Report and Accounts 2019 49

Strategic reportChairman’s introduction to governance

Our strong culture
underpins our
purpose and supports
our strategy

People
The New Code calls for boards to establish a method for gathering
the views of the workforce and this has been facilitated by our Non-
Executive Director David Richardson taking Board responsibility for
workforce engagement. David met with the employee representative
group “The Voice” in January 2019 and discussed their comments
with the Board. The Board has also considered the feedback from
the employee survey carried out in the summer of 2018 and several
measures are being implemented as part of a “You said – we did”
initiative.

Engagement is also achieved through staff accompanying Board
members on site visits and new Directors gain valuable insight into
the business divisions through one on ones with employees as part of
their induction. Board meetings are regularly held at our head office in
Warrington where the majority of our 58 staff are based and employees
gain exposure to the Board through presenting their papers where
possible, while Board members take time to meet with staff before
and after these meetings.

Ed Smith, CBE
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.

Governance
As a Board we believe that good governance is key to the way we run
our business. We welcome the changes to Corporate Governance
embodied in the new Corporate Governance Code (“New Code”) and,
whilst the New Code does not apply to this reporting period, we have
closely monitored the proposed changes and adopted them in advance
where possible, for example in clearly articulating our culture and in our
engagement with our employees as referred to below.

In accordance with the Listing Rules, I am very pleased to confirm
that throughout the year ended 31 March 2019, the Company was
compliant with all the relevant provisions as set out in the Code.

Culture
Assura’s clear strategic and social purpose is to create outstanding
spaces for health services in our communities. Our strong culture
supports our strategic priorities and promotes employee engagement,
retention and productivity. We are genuine and passionate about what
we do, working collaboratively and using our expertise to find innovative
quality solutions for our tenants and the people who use our buildings.
The Board leads by example, focusing on our purpose and values in all
decision making and demonstrating the behaviours we encourage and
support in everyone at Assura.

50 Assura plc Annual Report and Accounts 2019

“ As a Board we believe that good
governance is key to the way we run
our business. We welcome the changes
to Corporate Governance embodied in
the New Code.”

Strategy
A key focus for management this year was the creation of the Five-Year
Plan. The Board was closely involved in this process, challenging
management on its targets and assumptions in order to develop a
robust plan capable of delivering the Group’s strategic objectives and
serving stakeholder interests in the long term.

Performance evaluation
We commissioned an independent, external review of Board
effectiveness from Weva Ltd – a specialist Board and leadership
consultancy – with particular emphasis on the guidance set out in the
New Code. The review was based on interviews with all members of
the Board and Executive Board plus some external advisors. The areas
covered by the review included: Board leadership; the Board’s
effectiveness as a team; and Board ways of working. The review did not
include an appraisal of the Chair or the Non-Executive Directors.

The review highlighted areas of particular strength including: the culture
of trust and openness at the Board; the effectiveness of the recent
strategic review and development of the Five-Year Plan; and balance
of support and challenge in performance oversight. It also highlighted
priority areas for further Board development which the Board has
agreed to action: an increased focus on the Company’s social purpose
and ESG impact; increased stakeholder engagement in support of the
Five-Year Plan; continuing staff engagement around the Company’s
purpose and Five-Year Plan; and continuing work to build the Board
as a high performing team.

The Board has agreed an action plan based on the review which will
help support continuous improvement in the Board’s performance and
will review its progress against the action plan towards the end of 2019.

Remuneration
We received over 98% of votes in favour of our Remuneration Report
at the 2018 AGM and I am grateful to shareholders for the level of
engagement and support during the year. We consulted with our major
shareholders on changes to our Remuneration Policy and are grateful
for all the feedback provided.

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

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

We welcomed Jonathan Davies as Non–Executive Director in June
2018 to provide succession for the Audit Chair and Senior Independent
Director as David Richardson intends to retire at the conclusion of this
year’s AGM.

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 54 and 55, which enable them to challenge, motivate and
support the business. Jonathan Davies brings excellent financial
expertise and experience, both operational and corporate, together
with strategic thinking and personal commitment to the NHS.

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

Gender diversity
The Board is committed to ensuring that the Group is free from
discrimination and equitable to all employees. We have strengthened
our Executive Board with the appointment of Belinda Lewis as Head
of HR and Claire Rick as Head of Public Affairs and were delighted to
be ranked 4th in the Hampton-Alexander Report 2018 for FTSE 250
combined Executive Committees and their Direct Reports. With 33%
female representation on our main Board, this shows our commitment
to greater gender diversity throughout the organisation.

Ed Smith, CBE
Non-Executive Chairman
20 May 2019

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

Assura plc Annual Report and Accounts 2019 51

GovernanceLeadership

July 2018 AGM – key highlights
– All resolutions passed.
– 1,709 to 1,734 million votes cast for each resolution.
– All Directors retired and, save for Simon Laffin who stepped

down from the Board, 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. Through constructive challenge and debate the Board
shaped the development of the Five-Year Plan and is monitoring
progress and delivery.

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 programme for the Board and Committee meetings is regularly
reviewed so that members are aware of upcoming matters for
discussion in advance.

The Board is committed to promoting the long-term success of the
Group for the benefit of all stakeholders and so when making its
decisions the Board considers:

– The interests and wellbeing of our employees
– Our impact on the environment
– The needs of our tenants and local healthcare communities
– Our relationships with key contractors and suppliers.

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 debt or equity raises. The relevant Board Committees are
shown below.

Governance framework

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. Details of the investor relations
programme over the year is shown on page 29.

Feedback from these meetings is regularly discussed with 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.

At the end of 2018, the Board commissioned Makinson Cowell to
undertake an investor study for Assura. This resulted in a quantitative
assessment of the business based on past performance and sell-side
forecasts of future performance, together with a qualitative assessment
based on interviews with 14 leading institutional investors spread across
the UK, Europe and North America controlling an estimated 36% of the
equity between them or approaching 50% of the shares held by active
institutional investors.

The study provided valuable insight into investors’ attitudes towards the
Company, clarity on what they value and an independent voice for their
concerns. The Board is extremely grateful to all investors who provided
feedback. Recommendations from the study are being followed up and
dialogue with all relevant shareholders will continue through ongoing
investor meetings.

BOARD

Audit Committee

Nominations Committee

Remuneration Committee

Executive Board

Risk Committee

Investment Committee

IT Committee

52 Assura plc Annual Report and Accounts 2019

The Remuneration Committee also carried out a detailed review
and an extensive consultation exercise with our major shareholders
and the main representative bodies on the proposed changes to the
Remuneration Policy. Feedback was collated and considered by the
Remuneration Committee and this resulted in modifications to certain
of the proposals of which the shareholders and main representative
bodies were then notified. The revised Policy is on pages 66 to 72
of this report and the Board would like to thank all shareholders and
representative bodies who engaged with the Company and provided
their constructive comments.

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.

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.

Division of responsibilities

Role

Chairman

CEO

CFO

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.

– Responsible for the preparation and integrity of financial information.
– Operating effective systems of risk management and control.
– Developing and implementing financial strategy and policies.

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

Senior Independent Director

of risk management and financial control.

– Chairing and/or serving on relevant Committees.

– Acting as Chair of the Board if the Chairman is conflicted.
– If necessary, acting as a conduit to the Board for communicating shareholder concerns.
– Ensuring the Chairman is provided with effective feedback on performance.
– Serving as an intermediary for other Directors when necessary.

Company Secretary

– Ensuring good information flow within the Board and Committees.
– Facilitating induction and training of Board members.
– Advising the Board on all governance matters.

Board and Committee meeting attendance

Director

Ed Smith, CBE

Jonathan Murphy

David Richardson

Jenefer Greenwood, OBE

Jayne Cottam

Jonathan Davies*

Simon Laffin**

Board

Nominations
Committee

Remuneration
Committee

Audit

Committee

6/6

5/5

2/2

n/a

2/2

n/a

5/5

n/a

4/4

2/2

4/4

3/3

1/1

Full Board and relevant Committee attendance after appointment.

*
** Full Board and relevant Committee attendance until retirement.

Assura plc Annual Report and Accounts 2019 53

GovernanceBoard of Directors

The right mix
of skills and
experience

Name

Position

Ed Smith, CBE

Jonathan Murphy

Jayne Cottam

Non-Executive Chairman

CEO

CFO

Skills and experience

Ed is an experienced Chairman with
significant business, health service
and public sector experience. He was
Chairman of NHS Improvement for
two years and Deputy Chairman of
NHS England for the previous three
years. He is a Non-Executive Director
of HS2 Ltd and chairs the Advisory
Board of HCA Healthcare UK and
Push Doctor.

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.

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. Jonathan sits on the
Advisory Board for the European
Public Real Estate Association
(“EPRA”) and is Chair of the
Healthcare Committee for the
British Property Federation.

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 PwC, holding
management roles in both the UK and
Asia. He holds an MBA from IESE and
a degree in English Literature from the
University of Durham.

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

October 2017

February 2017

September 2017

54 Assura plc Annual Report and Accounts 2019

David Richardson

Jenefer Greenwood, OBE

Jonathan Davies

Orla Ball

Senior Independent Director

Non-Executive Director

Company Secretary

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.

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.
He has announced his intention to
retire at the conclusion of the AGM.

Jonathan is Chief Financial Officer
of SSP Group plc and has extensive
experience of finance, mergers
and acquisitions and Corporate
Governance. He has been CFO of
SSP since 2004, taking it private in
2006 and listing it on the London
Stock Exchange in 2014.

Jonathan began his career in Unilever
plc’s management development
programme before joining OC&C, the
strategic management consultancy,
as a start-up in 1987, where he was
part of its rapid growth to become
a leading international consulting
firm. From 1995 to 2004 Jonathan
worked for Safeway plc, where he
was Finance Director on its Executive
Board between 1999 and 2004.

It is intended that Jonathan will be
appointed chairman of the Audit
committee and Senior Independent
Director following David Richardson’s
retirement at the conclusion of
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 is a qualified Chartered Secretary
and 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

June 2018

April 2015

Assura plc Annual Report and Accounts 2019 55

GovernanceEffectiveness

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 the issue of the Group’s first sterling denominated
senior unsecured bond of £300 million following the securing
of an investment grade rating of A- from Fitch Ratings Limited.

– Consideration of future funding requirements.
– Challenge and debate shaping and refining the Five-Year Plan.

Internal controls 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.
– Appointment of internal auditors.

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 Non-Executive Directors 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.
– Consultation with shareholders on the Remuneration Policy

and commissioning of an investor study.

– Investor roadshow feedback.
– Governance updates, particularly on the New Code.

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 and its Committees manages the Group’s growth closely
and secures its understanding of the business through comprehensive
Board papers, which include minutes of all Executive Board meetings,
and also through staff presentations. Board and committee papers are
accessed securely through an electronic platform and are designed to
share relevant information in sufficient depth to ensure debate without
being too unwieldy.

Time commitments and independence
Other directorships of the Board members are set out on pages 54 and
55. 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.

The Board regularly considers the independence of our Non-Executive
Directors and all Directors are required to declare any relationships
or interests which may constitute a conflict of interest at the
commencement of each Board meeting.

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 2019 AGM. Jonathan Davies, having been
appointed during the year, will submit himself for election.

56 Assura plc Annual Report and Accounts 2019

Non-Executive Director
induction process
Following Jonathan Davies’ appointment as Non-Executive
Director, the following induction was carried out:

Meetings with the Chairman
and other Board members

Meetings with the CEO, CFO
and Executive Board members

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

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.

Board composition

Chairman

Executive Directors

Non-Executive Directors

Board tenure (in current role)

0–4 years

4–7 years

Board gender balance

Female

Male

Executive Board

Female

Male

4 (67%)

2 (33%)

4 (67%)

4 (57%)

3 (43%)

Composition of the Board

Ed Smith, CBE
Non-Executive
Chairman
– Experienced
Chairman
– Public sector
– NHS
– Finance

Jonathan
Murphy
CEO
– Corporate
Finance

– Capital Markets
– Strategy

Jayne Cottam
CFO
– Finance &
Accounting
– Corporate
Finance

– Risk

Management

David
Richardson
Senior
Independent
Director
– Finance &
Accounting
– Mergers &

Acquisitions

– Corporate

Governance

Jonathan Davies
Non-Executive
Director
– Finance &
Accounting
– Corporate
Finance
– Strategy

Jenefer
Greenwood, OBE
Non-Executive
Director
– Real Estate
including
development
and maximising
value

– Customer Focus
– Marketing

Key:

Non-Executive Chairman

Executive Director

Non-Executive Director

Assura plc Annual Report and Accounts 2019 57

Governance

Nominations Committee Report

Maintaining the right skills
and experience to deliver
our strategy

Nominations Committee members

– Ed Smith, CBE (Committee Chair)
– Jenefer Greenwood, OBE
– Jonathan Davies
– David Richardson

Number of meetings in the year

– Two

Additional attendees – as appropriate

– Orla Ball – Company Secretary
– Jonathan Murphy – CEO

Responsibilities
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 Non-Executive Directors.
– Review of succession planning.
– Review of Board composition, Committee composition and

Committee Chair.

– Consideration of training needs and skills updating.
– Confirmation that the Non-Executive Directors were independent.

Key activities of the Committee
Board and Committee changes
The Nominations Committee (“the Committee”) met two times during
the year.

A key process for the Committee was to select a Non-Executive
Director, with strong commercial and financial expertise, to further
strengthen the Board and who could provide possible Audit Chair
succession. The Committee selected recruitment firm Russell Reynolds
Associates (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 June 2018, the Board appointed Jonathan Davies on the
Committee’s recommendation. The Committee has recommended to
the Board that Jonathan is appointed as Chair of the Audit Committee
and Senior Independent Director following David Richardson’s 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
the Committee has selected Russell Reynolds Associates to assist
with the process.

58 Assura plc Annual Report and Accounts 2019

Diversity overview

All directors

67%

Board tenure

Non-executive Directors including Chairman

67%

33%

Male

Female

0–4 years

4–7 years

Commitments of the Chairman
I am currently Non-Executive Director of HS2, Pro-Chancellor and
Chairman of Council at the University of Birmingham and Chairman
of the Advisory Boards of HCA Healthcare UK and Push Doctor.
The Committee considers that I manage my time effectively in order
to allocate sufficient time to each of my roles.

The Committee will continue to consider gender and wider aspects
of diversity such as industry 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.

Diversity
The Board believes that a diverse workforce and management team
improve the performance and culture of the organisation and add
value to the business as a whole. Russell Reynolds Associates were
particularly tasked with searching for possible Non-Executive Director
candidates who could increase the diversity of the Board.

Female representation on the Board has remained at 33%. The Group
moved from 33rd to 43rd in the Hampton-Alexander Review - FTSE
250 Rankings Women on Boards and in Leadership, but we were
delighted to be ranked 4th for FTSE 250 combined Executive
Committees and their Direct Reports.

Further details of our employee policies in respect of matters including
training, development and diversity can be found on pages 30 and 31.

Succession planning
Succession planning remained a focus of the Committee during
2018/19.

The Committee considered and approved 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 and to support
the delivery of the Five-Year Plan.

Ed Smith, CBE
Chair of the Nominations Committee
20 May 2019

Assura plc Annual Report and Accounts 2019 59

Governance
Audit Committee Report

Maintaining a rigorous
approach to financial
reporting

Audit Committee members

– David Richardson (Committee Chair)
– Jenefer Greenwood, OBE
– Ed Smith, CBE (until July 2018)
– Jonathan Davies (from June 2018)

Number of meetings in the year

– Four

Additional attendees – as appropriate

– Deloitte LLP
– Savills Commercial Limited and Jones Lang LaSalle
– Ed Smith, CBE – Non-Executive Chairman
– Jonathan Murphy – CEO
– Jayne Cottam – CFO
– Orla Ball – Company Secretary
– Paul Carroll – Financial Controller
– David Purcell – Head of Financial Reporting
– Owen Roach – Group Financial Accountant

Review of external valuers
– Received presentations from both external valuers, raised queries

on, evaluated responses and concluded.

– 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.

– Approved the appointment of KPMG to act as internal auditor.

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.

Responsibilities
Financial statements and reports
– To monitor the integrity of the half year and annual financial

statements before submission to the Board, reviewing significant
financial reporting matters and judgements, focusing particularly
on matters of material financial impact.

– To review the effectiveness of the Company’s system of

internal control.

– To conduct an annual review of the need to establish an internal

audit function.

– To discuss the issues arising from the half year review and final audit.
– 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.

Key activities of the Committee
Financial statements and reports
– Reviewed the Annual Report and financial statements and half year
financial report and made recommendations to the Board regarding
the approval of these documents.

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.

60 Assura plc Annual Report and Accounts 2019

Dear Shareholder
As Chair 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 2019.

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.

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 2019 report and appears on page 39.

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:

– Presentation of changes as a result of IFRS 15.
– Consideration of alternative performance measures presented.

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 correct 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 has appointed KPMG to complete these
reviews going forward to ensure an appropriate level of independence
exists in concluding on the effectiveness of the control environment.

Financial Reporting Council (“FRC”)
The Company received a letter from the FRC during the year.
Following a response from the Company, all queries were resolved and
no restatement of the accounts was required.

Audit/non-audit fees payable to external auditor
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 2019 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 Committee wishes to express its thanks to Rachel Argyle who
served as lead auditor from March 2015 to March 2019 and welcomes
Scott Bayne as current lead auditor. There are no current intentions to
conduct an audit tender in the next 12 months.

David Richardson
Chair of the Audit Committee
20 May 2019

Assura plc Annual Report and Accounts 2019 61

GovernanceDirectors’ Remuneration Report

Ensuring fair
remuneration relative to
Company performance

Committee members

– Jenefer Greenwood, OBE

(Committee Chair)

– Ed Smith, CBE
– Jonathan Davies
– David Richardson

Number of meetings in the year

– Five

Additional attendees – as appropriate

– Jonathan Murphy (CEO)
– Orla Ball (Company Secretary)
– FIT Remuneration Consultants LLP

Company performance and remuneration
outcomes for 2018/19
As can be seen in the CFO review on pages 44 to 49, the Company
has performed strongly during the year and this has been taken into
account in setting Director remuneration.

Strategy alignment
In setting Director remuneration, performance measures are set relative
to the strategic priorities of the business. Details of these, and which
KPIs are linked to Director remuneration, are shown on pages 24
and 25.

Shareholder engagement
Assura continues to seek an open dialogue with our shareholders and,
as part of the Policy review, consulted with its major shareholders and
the main representative bodies on the Policy proposals.

The Committee would like to thank shareholders for the constructive
feedback, which enabled it to re-assess its proposals and refine them
where appropriate (demonstrating that this was a genuine consultation
exercise given the amendments made to the original proposals).

Annual Statement
Dear Shareholder
On behalf of the Board, I am pleased to introduce the Directors’
Remuneration Report for the year ended 31 March 2019. I have
served as an independent Non-Executive Director and Remuneration
Committee member since 8 May 2012, becoming Chair of the
Committee on 23 May 2012. Accordingly, I have been closely
involved with the evolution of our Remuneration Policies and their
implementation over this period. We are now proposing a revised
Remuneration Policy which follows a detailed review and an extensive
consultation exercise with our major shareholders and the main
representative bodies.

This report is split into two parts:

– The Directors’ Remuneration Policy – which presents our
proposed Remuneration Policy given that our current Policy,
originally approved by shareholders at the 2016 AGM, will shortly
reach the end of its three year life.

– The Annual Report on Remuneration – which details the link
between Company performance and remuneration and presents
payments and awards made to the Directors for 2018/19 and how
the Remuneration Policy will be implemented for 2019/20.

The proposed Directors’ Remuneration Policy will be subject to a
binding vote at the AGM on 2 July 2019. This new Policy, if approved by
shareholders, will last for three years from the forthcoming AGM or until
another Policy is approved in a general meeting. The Annual Report on
Remuneration will be subject to an advisory shareholder
vote at the same meeting.

62 Assura plc Annual Report and Accounts 2019

New Remuneration Policy
The Committee’s view on our existing Remuneration Policy is that it is
easily understood and has a strong link between the strategy, corporate
performance and the rewards delivered to our Executive Directors
but remains uncompetitive against the market in which we compete
for executive talent, primarily due to the low salary levels. This reflects
both the Committee’s conservative approach in appointing Directors
on below market salaries and then moving them slowly towards the
market level over time as their experience increases (albeit highlighting
the increases well in advance) and the Company’s previous long-term
incentive arrangements (the 2013 Value Creation Plan, “VCP”) which
resulted in low fixed and higher variable pay potential as the Company
sought to incentivise a recovery in the share price at that time.

The aim of the Policy review has therefore been to build upon and
enhance our existing approach rather than to redesign the fundamental
basis upon which the Executive Directors are compensated. Our focus
during the review has been to ensure that the new Policy supports
the Company’s strategy and, in particular, incentivises the Executive
Directors, who are becoming increasingly established in their roles, to
deliver an enhanced performance for the benefit of our shareholders.
We have also sought to keep our remuneration structures simple and
to update our policies so that they reflect evolving best practice.

The key conclusions and outputs from the Committee’s review were
as follows:

Fixed pay
Fixed pay (e.g. base salary, pension and benefits) is conservatively
positioned against companies of a comparable size and complexity.

Jonathan Murphy was appointed as Chief Executive Officer on
27 January 2017 on a salary of £335,000. While this salary was
materially below the market rate, the Committee felt that this was
appropriate until he became established in the role (an approach set out
in our current Policy). As reported in the last Directors’ Remuneration
Report, he received a 9% increase from April 2018 (taking his
salary to £365,000) in recognition of his growing experience and
performance in his circa 12 months in the role. On the basis that this
salary level remains very conservatively positioned against companies
of a comparable size in the FTSE 250 Real Estate sector and as
his experience leading Assura continues to grow, the Committee
wishes to continue to move the CEO’s salary towards market levels
in order to provide a fair package and reduce the risk of departure
for remuneration motives. He was therefore awarded an 8.2% salary
increase to £395,000 from 1 April 2019.

Noting that Jayne Cottam was recruited as CFO on a base salary
that was significantly below market levels for a FTSE 250 Real Estate
company (£180,000) and noting the commitment given previously in the
Directors’ Remuneration Report to review the salary after 12 months
in the role, the Committee awarded a 20% salary increase to take her
salary to £222,000, effective 1 October 2018. Her next salary review
date will be 1 April 2020.

However, going forward, future base salary increases during the Policy
period will be no greater than 7% above the general workforce increase
(likely to be influenced by prevailing inflation rates) and will be dependent
upon the Committee’s assessment of both Company and individual
performance in the 12 months prior to the review date. As such, noting
the 1 April 2019 increase for the CEO and assuming two more salary
increases, with average workforce increases of 2.5% per annum, the
CEO’s and CFO’s maximum salary levels during the Policy period are
circa £474,000 and circa £266,000 respectively, both of which would
still remain relatively modest by FTSE 250 Real Estate levels.

Pension
The Committee is proposing to reduce the maximum pension provision
for Executive Directors from 20% to 13.5% of salary (which is aligned
to the pension or salary supplement offered to the current CEO and
CFO, which will remain unchanged). However, for new Executive
Director appointments to the Board, the Committee will look to align
pension provision to general workforce levels and therefore Company
contributions will be subject to a current maximum of 7.5% of salary.

Annual bonus
To ensure that the annual bonus sufficiently incentivises and rewards
the delivery of above target performance, annual bonus potential will
be increased from 100% to 125% of salary for the CEO and from 75%
to 100% of salary for the CFO. However, while the maximum potential
is being increased, there will be no change to on-target bonus levels,
which will remain at 75% of salary for the CEO and 56.25% of salary
for the CFO, with an appropriate degree of stretch above target to
reflect the additional potential. While the revised bonus potentials bring
the bonus more closely in line with market levels from a percentage of
salary perspective, it should be noted that the increases are less than
those originally outlined as part of the shareholder consultation and
the maximum value of the bonus in absolute terms remains well below
market given that the Executive Directors’ salaries are significantly
below the median of the FTSE 250 and FTSE 250 Real Estate
constituents (they are currently positioned within the lower quartile).

The current approach to bonus deferral, whereby 50% of any bonus is
deferred into Assura plc shares for two years where the shareholding
guideline has not been met, is considered to work well and will therefore
be retained. However, once the guideline is met, it is proposed that any
bonus above 100% of salary will be deferred into Assura plc shares for
two years on a compulsory basis. There is currently no bonus deferral
where an Executive Director has met the shareholding guidelines.

Long-term incentives
The Committee believes that the PSP continues to work well and
that the best approach in respect of measuring performance is to
continue to use absolute growth targets. The Committee does not
believe that there are sufficient listed comparators against which it
would be meaningful to compare Assura’s TSR performance and the
Committee noted that the use of absolute targets in the previous VCP
provided the management team with a simple, transparent long-term
incentive opportunity that was directly aligned with value creation
for shareholders. Although a target growth range of 5% p.a. to 15%
p.a. will continue to be used for both the EPS and TSR performance
conditions, the threshold vesting will be increased from 0% to 10% for
both measures to ensure that the Long-term Incentive Plan (“LTIP”)
continues to remain competitive. In addition, the 300% of salary
exceptional limit will be removed.

Shareholding guidelines
While the 300% of salary shareholding guideline will be retained for
any Executive Director who participated in the VCP (introduced in
2013 and fully vested in 2017), shareholding guidelines for Executive
Directors joining after the VCP will be reduced from 300% of salary
to a more market consistent 200% of salary. This change reflects the
Committee’s view that while a 300% of salary shareholding guideline
remains appropriate for the current CEO, this is considered excessive
for new joiners who have not benefited from the vesting of VCP awards
(e.g. the CFO).

In addition, a compulsory two-year post vesting holding period will be
introduced on PSP awards granted to Executive Directors after the
2019 AGM. This will apply irrespective of whether the shareholding
guideline has been met (currently, a two-year post vesting holding
period only applies where an Executive Director’s shareholding is
below the guideline).

Assura plc Annual Report and Accounts 2019 63

GovernanceDirectors’ Remuneration Report
continued

Regulatory changes
In carrying out the Remuneration Policy review, the Committee has
reviewed the various changes to the regulatory environment and in
particular the New Code and the new legislation requiring companies to
make additional pay disclosures.

Notwithstanding that these changes are not technically applicable to
Assura until the financial year ending 31 March 2020, the Committee
has sought to align practice and disclosures to the new requirements.
This includes:

– Ensuring that the annual bonus plan and PSP permit the necessary

Committee discretion to override formulaic outcomes (a New
Code provision);

– Introducing a formal post vesting holding period, independent of

shareholding guidelines;

– Reviewing the recovery provisions in the annual bonus plan and

PSP to ensure that they remain fit for purpose;

– Aligning pension provision for new Executive Directors to the

workforce; and

– Updating the Committee’s Terms of Reference to reflect the

expanded scope required by the New Code – i.e. (i) responsibility
for setting remuneration for the Board and senior management, and
(ii) taking account of Group-wide remuneration and policies when
setting executive pay.

In addition, the Committee has ensured that the new Policy and
practices are consistent with the six factors set out in Provision 40 of
the New Code:

– Clarity – our Policy is well understood by our management

team and has been clearly articulated to our shareholders and
representative bodies.

– Simplicity – the Committee is mindful of the need to avoid overly

complex remuneration structures which can be misunderstood and
deliver unintended outcomes. Therefore, one of the Committee’s
objectives is to ensure that our executive remuneration policies and
practices are straightforward to communicate and operate.
– Risk – our Remuneration Policy is designed to ensure that

inappropriate risk-taking is discouraged and will not be rewarded via
(i) the balanced use of both short and LTIPs which employ a blend

of financial, non-financial and shareholder return targets, (ii) the
significant role played by equity in our incentive plans (together with
shareholding guidelines) and (iii) malus/clawback provisions.

– Predictability – our incentive plans are subject to individual caps,
with our share plans also subject to market standard dilution limits.
– Proportionality – there is a clear link between individual awards,

delivery of strategy and our long-term performance. In addition, the
significant role played by incentive/‘at-risk’ pay, together with the
structure of the Executive Directors’ service contracts, ensures that
poor performance is not rewarded.

– Alignment to culture – our executive pay policies are fully aligned
to Assura’s culture through the use of metrics in both the annual
bonus and PSP that measure how we perform against our KPIs that
directly underpin the delivery of our strategy.

In addition, we have included some of the new disclosure requirements
prescribed by recent legislation, e.g. how share price appreciation
impacts executive pay in the ‘scenario charts’.

Remuneration in 2019/20
As explained above, the implementation of the new Policy for 2019/20
will be as follows:

– Base salaries – Jonathan Murphy’s and Jayne Cottam’s base

salaries are £395,000 and £222,000 respectively.

– Annual bonus – We will retain the current approach to bonus
target setting and assessment. Therefore, the performance
objectives set under the annual bonus will continue to relate to
matters such as value-added opportunities (within the portfolio and
from market activity) and financial targets. Subject to shareholder
approval, Jonathan Murphy’s maximum bonus will be 125% of
salary and Jayne Cottam’s maximum bonus will be 100% 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 meet their shareholding guideline. Once the guideline is
met, any bonus above 100% of salary will be deferred for two years.

– 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 as follows:

50% of awards

Absolute average annual
compound TSR

Vesting schedule
(% of the TSR part which vest)

EPRA EPS Growth

Vesting schedule
(% of the EPS part which vest)

<5% p.a.

5% p.a.

10%

<5% p.a.

5% p.a.

10%

Between 5% and 15% p.a.

Pro-rata between 10% and 100%

Between 5% and 15% p.a.

Pro-rata between 10% and 100%

15% p.a. or more

100%

15% p.a. or more

100%

In conclusion
I trust you find this report helpful and informative. I look forward
to receiving your support for the resolutions on the Directors’
Remuneration Policy and the Annual Report on Remuneration
at our forthcoming AGM.

Jenefer Greenwood, OBE
Chair of the Remuneration Committee
20 May 2019

64 Assura plc Annual Report and Accounts 2019

At a glance
What our Executive Directors earned during 2018/19
The following table provides a summary single total figure of remuneration for 2018/19. Further details are set out in the Annual Report
on Remuneration.

Salary

Benefits

Bonus

Pension

Jonathan Murphy

Jayne Cottam

365

202

223

102

How our Executive Directors will be paid in 2019/20
A summary of how the Committee intends to operate the Remuneration Policy for 2019/20 is as follows:

Long-term
incentives

109

–

Total

760

344

Component

Base salary

Pension allowance
(% of salary)

Annual bonus maximum
(% of salary)

Annual bonus
deferral

PSP
(% of salary)

PSP performance
conditions

Post vesting holding
period

Changes from previous Policy

Jonathan Murphy

Jayne Cottam

Cap on increases equal
to 7% above the general
workforce increase

Policy maximum reduced
from 20% to 13.5%

Policy maximum increased
to 125% from 100%
(but on-target levels unchanged)

Introduced compulsory
deferral irrespective of
shareholding guideline

Normal maximum unchanged.
300% exceptional limit removed

Threshold vesting increased
from 0% to 10%

£395,000
(Increased by 8.2%
from 1 April 2019)

£222,000
(Increased by 20%
from 1 October 2018)

13.5%

125%
(increased from 100%)

100%
(increased from 75%)

Any bonus payable over
100% of salary deferred
into shares for 2 years

50% of any bonus deferred
for 2 years until shareholding
guideline is met

150%

50% TSR and 50% EPS

Now formally incorporated into policy

Two years

Shareholding guidelines
(% of salary)

Level of 200% of salary introduced
for non-VCP participants

300%

200%

Remuneration scenarios for 2019/20
The chart below, shows actual pay received for 2018/19 and how total pay for the Executive Directors varies under four different performance
scenarios for 2019/20: minimum; target; maximum; and maximum with share price growth.

£2,000k

£1,800k

£1,600k

£1,400k

£1,200k

£1,000k

£800k

£600k

£400k

£200k

£1,845k

£1,550k

16%

38%

32%

27%

£760k
15%
29%

£463k

£1,055k

28%

56%

100%

44%

30%

25%

£821k

41%

27%

32%

£558k
30%
22%

48%

£988k
17%

34%

22%

27%

£344k
30%
70%

£266k

100%

Single Total
Figure 2018/19

Minimum

Target

CEO

Maximum Maximum
with share
price growth

Single Total
Figure 2018/19

Minimum

Target

CFO

Maximum Maximum
with share
price growth

Fixed pay

Annual bonus

PSP

Share price growth

Assura plc Annual Report and Accounts 2019 65

GovernanceA summary of the key changes from the policy approved by
shareholders in 2016 is follows:

– An increase to the annual bonus maximum from 100% of salary
to 125% of salary for the CEO and from 75% of salary to 100%
of salary for the CFO. The on-target levels will be maintained at
the current level.

– Bonus deferral will be made compulsory for all bonus
payments in excess of 100% of salary (irrespective of
an individual’s shareholding).

– The exceptional award limit which permits PSP awards of up

to 300% of salary has been removed.

– The threshold level of vesting under the PSP will be set at

10% of the award.

– The two-year post vesting holding period on PSP awards has been

formalised within the policy.

– The shareholding guidelines for Executive Directors that did not

participate in the VCP has been set at 200% of salary (shareholding
guidelines for the current CEO will remain at 300% of salary).
– Malus and clawback provisions in the bonus and LTIP have been

reviewed and enhanced where necessary.

Directors’ Remuneration Report
continued

Directors’ Remuneration Policy
Policy scope
The Policy applies to the Chairman, Executive Directors and
Non-Executive Directors.

Policy duration
The current Remuneration Policy was passed by a binding shareholder
vote at the Company’s 2016 AGM and became effective from the date
of that meeting. For the reasons set out in the Annual Statement a new
policy, as set out below, will be proposed as a resolution subject to a
binding shareholder vote at the Company’s 2019 AGM.

The new policy takes into account the provisions of the New Code,
which is effective for financial years starting after 1 January 2019, and
other good practice guidelines from institutional shareholders and
shareholder bodies. Subject to approval by shareholders, it will become
effective from the 2019 AGM date and shall be in place for the next
three-year period unless a new Policy is presented to shareholders
before then. All payments to Directors during the Policy period will be
consistent with the approved Policy.

Overview of Remuneration Policy
The Committee considers that the Group’s Remuneration Policies
should align to Assura’s values and behaviours, encourage a strong
performance culture and emphasise long-term shareholder value
creation in order to be aligned with its shareholders’ interests.

The Policy, developed following a comprehensive remuneration review
and consultation exercise, has the following objectives:

– To develop a remuneration structure which supports the Company’s

strong performance culture and our key objective of creating
long-term shareholder value.

– To enable the Company to recruit and retain executives with the
capability to lead the Company on its ambitious growth path.

– To reflect principles of best practice.
– To ensure our remuneration structures are transparent and easily

understood both internally and externally.

66 Assura plc Annual Report and Accounts 2019

Based on the above, the new Policy is set out below:

Objective and link to strategy

Operation

Maximum opportunity

Performance measurement
and assessment

None.

Fixed remuneration

Base salary
Core element of remuneration set
at a level that recognises the size and
complexity of the Company and, when
combined with the performance based
variable remuneration potential, can
attract and retain Executive Directors
of the quality required to execute
the strategy.

Benefits
The Company provides benefits in line
with market practice.

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.

Any changes normally take effect from
1 April each year.

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 the Company’s
peers.

It should be noted that the results of
any benchmarking will only be one of
many factors taken into account by the
Committee. Other factors include:

– Individual performance and

experience.

– Pay and conditions for employees

across the Group.

– The general performance of the

Company; and

– The economic environment.

No recovery provisions apply to
base salary.

Executive Directors may receive a
benefit package which includes:

– Health insurance.
– Death in service benefits.
– Company car allowance; and
– Other benefits as provided from

time to time.

Benefits are reviewed periodically
to ensure that they remain market
competitive.

The payments are not included in
salary for the purposes of calculating
any benefit or level of participation in
incentive arrangements.

No recovery provisions apply
to benefits.

Any increase in salary for Executive
Directors will take into account salary
levels of comparable FTSE Real
Estate companies and companies of
comparable size and complexity.

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
although the maximum increase in
any year will be 7% above the general
workforce increase.

None.

Benefit values vary year on year
depending on premiums and the
maximum value is the cost of the
provision of these benefits. The
Committee will monitor the costs of
benefits in practice and will ensure that
the overall costs do not increase by
more than the Committee considers
appropriate in all the circumstances.

Pension
The Company provides a level of
pension contribution in order to be
competitive and to ensure that it
has the ability to recruit and retain
Executive Directors

Executive Directors may receive
pension contributions to personal
pension arrangements or a cash
supplement. Pension-related payments
are not included for the purposes
of calculating any benefit or level of
participation in incentive arrangements.
No recovery provisions apply.

The maximum employer’s contribution
is 13.5% of base salary for the current
Executive Directors.

None.

For any new Executive Director
appointments to the Board, the
Committee will look to align pension
provision to general workforce levels.

Assura plc Annual Report and Accounts 2019 67

GovernanceDirectors’ Remuneration Report
continued

Objective and link to strategy

Operation

Maximum opportunity

Performance measurement
and assessment

Performance-based variable remuneration

Bonus
Incentivises the achievement of a range
of key performance targets that are key
to the success of the Company

Long-term incentives
To motivate and incentivise delivery of
sustained performance over the long-
term, and to promote alignment with
shareholders’ interests, the Company
intends to operate the Performance
Share Plan (“PSP”).

Awards may be made annually.

The performance period is one financial
year. 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.

Where an element of bonus is payable
as deferred shares, individuals may be
able to receive a dividend equivalent
in cash or shares equal to the value of
dividends which would have accrued
during the vesting period.

50% of any bonus is deferred into
shares for two years where the
shareholding guideline has not been
met. Additionally any bonus payment
above 100% of salary will be deferred
into shares for two years.

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

Awards under the PSP may be
granted as nil/nominal-cost options
or conditional awards which vest to
the extent performance conditions
are satisfied over a period of at least
three years, with a two year post
vesting holding period also applying.
In exceptional circumstances, vested
awards may also be settled in cash.

PSP awards may be increased to reflect
the value of dividends that would have
been paid in respect of any ex-dividend
dates falling between the grant of
awards, and the expiry of the vesting
period and any holding period.

Clawback and malus provisions apply
to PSP awards.

The maximum annual bonus for
Executive Directors is 125% of salary.
At threshold performance 0% of
maximum can be earned.

Performance measures are set annually
based on a number of financial and
strategic measures which may include
(but are not limited to) for example:

The CEO has a maximum bonus
opportunity of 125% of salary and
an on-target level of 75% of salary.

The CFO has a maximum bonus
opportunity of 100% of salary and an
on-target level of 56.25% of salary.

The PSP allows for awards over shares
with a maximum value of 150% of base
salary per financial year.

– Delivering specific added value

activities.

– Delivering financial goals.
– Improving operational performance;

and

– Developing the performance

capability of the team.

The Committee has the discretion
to vary the performance targets
depending on economic conditions and
Company-specific circumstances that
may occur during the year.

At the end of each financial year the
Committee takes into account the
Company’s financial performance and
achievement against key short-term
objectives established at the beginning
of the year. This involves establishing
in advance what constitutes success
for good, strong or outstanding
performance. It is the Committee’s
approach to view the performance in
the round at the end of the year, taking
into account extraneous events and
changing priorities, where relevant.

The Committee may set such
performance conditions on PSP
awards as it considers appropriate
(whether financial or non-financial and
whether corporate, divisional
or individual).

Performance periods may be over such
periods as the Committee selects at
grant, which will not be less than (but
may be longer than) three years.

No more than 10% of awards vest
for attaining the threshold level of
performance conditions.

In addition, while performance
measures and targets used in the PSP
will generally remain unaltered, if, in the
Committee’s opinion, circumstances
are such that a different or amended
target would be a fairer measure
of performance, such amended or
different target can be set provided that
it is not materially more or less difficult
to satisfy than the original target was at
the time it was set.

Shareholding requirement
To ensure alignment between Executive
Directors and shareholders’ interests
over a longer time horizon.

The Committee operates shareholder
guidelines to encourage long-term
share ownership by the Executive
Directors.

200% of salary.

Where an Executive Director has
participated in the former VCP the
requirement is 300% of salary.

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.

Notes to the future Policy for Executive Directors
Performance measures and targets
The annual bonus plan measures are selected to provide direct alignment with the short-term operational targets of the Company. Care is taken to
ensure that the short-term performance measures are always supportive of the long-term objectives. This is especially important in a business which
has a long-term investment horizon. Short-term targets are stretching and geared to encourage outstanding performance, which if delivered can earn
the Executive up to the maximum under the plan.

68 Assura plc Annual Report and Accounts 2019

The PSP targets are selected to ensure that the executives are encouraged in, and appropriately rewarded for, delivering against the Company’s key
long-term strategic goals so as to ensure a clear and transparent alignment of interests between executives and shareholders and the generation of
sustainable long-term returns.

Discretion
The Committee has discretion in several areas of the Policy as set out in this report. The Committee may also exercise operational and administrative
discretions under relevant plan rules approved by shareholders. In addition, the Committee has the discretion to amend the Policy with regard
to minor or administrative matters where it would be, in the opinion of the Committee, disproportionate to seek or await shareholder approval.
In addition, for the avoidance of doubt, in approving this Policy, authority is given to the Company to honour any commitments entered into with
current or former Directors prior to the adoption of this Policy.

Differences in Remuneration Policy for all employees
Any differences in the types of rewards between Directors and staff reflect common practice. All employees are entitled to base salary, benefits and
defined contribution pension payments and are eligible for annual bonuses and to participate in the PSP (although actual participation in the PSP will
be limited to the most senior executives within the Company). The bonus targets for staff are more focused on specific personal goals that further the
Company’s interests. The maximum bonus opportunity available is based on the seniority and responsibility of the role.

Travel and hospitality
While the Committee does not consider it to form part of benefits in the normal usage of that term, it has been advised that corporate hospitality,
whether paid for by the Company or another, and business travel for Directors and in exceptional circumstances their families may technically come
within the applicable rules and so the Committee expressly reserves the right for the Committee to authorise such activities within its agreed policies.

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
it 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 satisfied.
– 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 2019/20 at minimum, on-target, maximum
performance and maximum with share price growth scenarios are set out in the charts below:

£2,000k

£1,800k

£1,600k

£1,400k

£1,200k

£1,000k

£800k

£600k

£400k

£200k

£1,845k

16%

£1,550k

38%

32%

27%

30%

25%

£1,055k

28%

44%

£463k

100%

£558k
30%
22%

48%

£266k

100%

£821k

41%

27%

32%

Minimum

Target

Maximum

CEO

Maximum
with share
price growth

Minimum

Target

Maximum

CFO

Fixed pay

Annual bonus

PSP

Share price growth

£988k
17%

34%

22%

27%

Maximum
with share
price growth

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

Minimum – base salary at 1 April 2019, estimated 2019/20 benefits and 13.5% of salary for pension provision (or cash allowance).

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 salary for Jonathan Murphy and 56.25% of salary for Jayne Cottam).
– 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 125% of salary for Jonathan Murphy and 100% of salary for Jayne Cottam.
– Long-term incentive: consists of the face value of awards (at 150% of salary).

Maximum with share price growth – as per maximum but with a 50% share price growth assumed on PSP awards.

Assura plc Annual Report and Accounts 2019 69

GovernanceDirectors’ Remuneration Report
continued

Approach to recruitment remuneration and promotions
The remuneration package for any new recruit would be assessed following the same principles as for the Executive Directors, as set out in the
Remuneration Policy table. The Committee will have regard to guidelines and shareholder sentiment regarding one-off or enhanced short or long-
term incentive payments made on recruitment and the appropriateness of any performance measures associated with an award.

Where an existing employee is promoted to the Board, the Policy set out above would apply from the date of promotion but there would be no
retrospective application of the Policy in relation to existing incentive awards or remuneration arrangements. Accordingly, prevailing elements of the
remuneration package for an existing employee would be honoured and form part of the ongoing remuneration of the employee. These would be
disclosed to shareholders in the following year’s Annual Report on Remuneration.

The table below summarises our key policies with respect to recruitment remuneration:

Element

Policy

Fixed remuneration

The salary level, benefits and pension entitlement will be set taking into account a number of factors including market practice, the
individual’s experience and responsibilities and the policies for salary, benefits and pensions for existing Executive Directors as set out
in the Remuneration Policy table.

In certain circumstances the Committee may choose to recruit Executive Directors at a salary below the market rate with a view to
providing above average increases in salary until an appropriate salary positioning is achieved, subject to performance, experience
and the individual proving themselves in the role.

Performance-based
variable remuneration

The recruited Executive Director will be eligible to participate in the annual bonus plan and the PSP as set out in the Remuneration
Policy table.

The maximum annual variable remuneration that an Executive Director can receive is limited to 275% of salary (i.e. the annual bonus plan
maximum of 125% of salary plus the long-term incentive maximum of 150%).

Share buyouts/
replacement awards

The Committee’s policy is not to provide buyouts as a matter of course. However, should the Committee determine that the individual
circumstances of a recruitment justified the provision of a buyout, the value of any incentives that will be forfeited on cessation of an
Executive Director’s previous employment will be calculated taking into account the following:

– The proportion of the performance period completed on the date of the Director’s cessation of employment.
– The performance conditions attached to the vesting of these incentives and the likelihood of them being satisfied.
– Any other terms and conditions having a material effect on their value (“lapsed value”).

The Committee may then grant up to the estimated equivalent value as the lapsed value, where possible, under the Company’s incentive
plans. To the extent that it was not possible or practical to provide the buyout within the terms of the Company’s existing incentive plans,
a bespoke arrangement would be used to grant up to the estimated equivalent value.

Relocation policies

In instances where the new Executive is relocated from one work base to another, the Company may provide compensation to reflect the
cost of relocation for the Executive at the discretion of the Committee.

The level of the relocation package will be assessed on a case by case basis but will take into consideration any incremental cost of living
differences and/or housing and schooling costs.

Non-Executive Directors would be recruited on the terms set out herein in respect of the main Policy for such Directors.

Approach to service contracts and cessation of employment
Service contracts
Each of the Executive Directors has a service contract with the Company which is terminable by the Company on six months’ notice and by the
Director on six months’ notice. Jonathan Murphy’s contract is dated April 2017 and Jayne Cottam’s contract is dated August 2017.

The Company’s practice is to appoint the Non-Executive Directors, including the Chairman, under letters of appointment. Their appointment is usually
for a term of three years subject to annual re-election by the shareholders at the Company’s AGM. When setting notice periods, the Committee has
regard for market practice and Corporate Governance best practice.

All service contracts and letters of appointment are available for viewing at the Company’s registered office.

When determining any loss of office payment for a departing Director, the Committee will always seek to minimise cost to the Company whilst
complying with the contractual terms and seeking to reflect the circumstances in place at the time. The Committee reserves the right to make
additional payments where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of
such an obligation); or by way of settlement or compromise of any claim arising in connection with the termination of an Executive Director’s office
or employment.

70 Assura plc Annual Report and Accounts 2019

Good leaver status
The Committee has discretion to determine whether an individual is a “good leaver” under the Company’s incentive plans. Where the Committee
uses its general discretion to determine that an Executive Director is a good leaver, it will provide a full explanation to shareholders of the basis for its
determination. The table below sets out, for each element of total remuneration, the Company’s policy on payment for loss of office in respect
of Executive Directors and any additional discretion available to the Committee:

Element

Cessation of employment

Base salary, benefits,
pension

There will be no compensation for normal resignation or in the
event of termination by the Company due to gross misconduct. In
other circumstances, Executive Directors will be entitled to receive
payment in lieu of notice.

Salary, benefits and pension contributions/salary supplement will
normally be paid over the notice period. The Company has discretion
to make a lump sum payment on termination for the salary, value of
benefits and pension amounts payable during the notice period. In all
cases the Company will seek to mitigate any payments due.

Change of control

No special provisions.

Bonus plan

Where an Executive Director’s employment is terminated after
the end of a performance year but before the payment is made,
the Executive may be eligible for an annual bonus award for that
performance year subject to an assessment based on performance
achieved over the period.

On a change of control triggering the Executive’s termination of
contract, the extent to which the performance requirements are
satisfied will determine the annual bonus which is earned.

Note that this excludes a reorganisation or reconstruction where
ownership does not materially change.

PSP
The treatment of awards
granted under the PSP
will be governed by
the rules, as approved
by shareholders.

Where an Executive Director’s employment is terminated during a
performance year and provided the individual is a “good leaver”,
a pro-rata annual bonus award for the period worked in that
performance year may be payable at the Committee’s discretion
subject to an assessment based on performance achieved over the
period. No award will be made in the event of gross misconduct.

Normally, on termination of employment before the end of the
performance period, awards lapse in full. However, in good leaver
situations (e.g. death, injury, ill-health, disability, retirement with
agreement of employer, sale of business/subsidiary, or otherwise
in the Committee’s discretion), awards will not lapse but will instead
continue and will vest at the normal vesting date or on cessation,
subject in both cases to satisfaction of the performance conditions
and a pro-rata reduction as the Committee determines to reflect the
shortened length of service. In addition, reflecting standard practice,
the Committee can waive pro-rating in its discretion.

The Committee will take into account such factors as it consider
relevant in relation to the bonus plan payment for the year in which
the event occurs.

On a change of control (takeover, reconstruction, amalgamation,
winding up or demerger), unvested awards will vest subject to
the application of the performance conditions and subject to time
pro-rating. The Committee will also retain a standard discretion to
vary/waive time pro-rating on a takeover. There will be compulsory
roll-over of awards on an internal reconstruction.

Future policy table – Non-Executive Directors

Objective and link to strategy

Operation

Maximum opportunity

The Company sets fee levels necessary
to attract and retain experienced and
skilled Non-Executive Directors to
advise and assist with establishing and
monitoring the strategic objectives of
the Company.

Fee levels are sufficient to attract individuals
with appropriate knowledge and experience.

Non-Executive Directors are paid a base
fee and additional fees for Chairmanship
of Committees and/or acting as the Senior
Independent Director.

Fees will take account of fee levels
of comparable companies within the
FTSE Real Estate Investment Trusts
and FTSE Real Estate Investment
Services sectors, and companies of
comparable size and complexity.

Performance measurement
and assessment

None.

The aggregate fees and any benefits of
Non-Executive Directors will not exceed
the limit from time to time prescribed
within the Company’s Articles of
Association for such fees (currently
£700,000 p.a. in aggregate).

Fees are reviewed periodically with any
changes generally effective from 1 April.

In exceptional circumstances, fees may
also be paid for additional time spent on
the Company’s business outside of the
normal duties.

Non-Executive Directors do not receive a
bonus, do not participate in awards under the
Company’s share plans and are not eligible
to join the Company’s pension scheme.

The Company reserves the right to provide
benefits (including travel and office support)
to the Non-Executive Directors.

Consideration of employment conditions elsewhere in Assura when developing the Policy
In setting the Remuneration Policy for Directors, the pay and conditions of other employees of Assura are taken into account, including any base
salary increases awarded. The Committee is provided with data on the remuneration structure for all staff and uses this information to ensure
consistency of approach throughout the Company.

The Company applies the same broad policy in relation to incentive compensation throughout the organisation. All employees are eligible for annual
bonuses and to participate in the PSP (although, in practice, participation in the PSP will be limited to senior executives).

Although the Committee takes into account the pay and conditions of other employees, the Company did not consult with employees when drawing
up the Policy report.

Assura plc Annual Report and Accounts 2019 71

GovernanceDirectors’ Remuneration Report
continued

Consideration of shareholder views
The Committee takes the views of the shareholders seriously and these views are taken into account in shaping Remuneration Policy and
practice. Shareholder views are considered when evaluating and setting remuneration strategy and the Committee commits to consulting with
key shareholders prior to any significant changes to its Remuneration Policy (as has been the case in relation to the recent Policy changes).

External appointments
The Company’s policy is to permit an Executive Director to serve as a Non-Executive Director elsewhere when this does not conflict with the
individual’s duties to the Company, and where an Executive Director takes such a role they may be entitled to retain any fees which they earn
from that appointment.

Annual Report on Remuneration

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 2019. 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 2019 AGM.

Consideration by the Committee of matters relating to Directors’ remuneration
The members of the Committee during 2018/19 were Jenefer Greenwood (Committee Chair), Ed Smith, David Richardson, Jonathan Davies (from
1 June 2018) and Simon Laffin (to 10 July 2018). 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 and the executive tier directly below Board. 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 five meetings during the year. Its activities during and relating to the financial year 2018/19 included:

– Consideration of objectives and targets for annual bonuses
– Consideration of annual pay awards and bonuses
– Consideration of targets and awards under the PSP
– Oversight of the Executive Board’s remuneration structures and levels
– Considering appropriate changes to the Directors’ Remuneration Policy
– Consider final proposed Directors’ Remuneration Policy in light of shareholder feedback received
– Preparing this report.

Advisors to the Committee
During 2018/19 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 £45,000 (ex. VAT). 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 Murphy

Jayne Cottam1

Andrew Darke2

Year

Salary

Pensions

Taxable benefits

Bonus3

2018/19

2017/18

2018/19

2017/18

365

335

202

229

223

281

102

128

Long-term
incentives4

109

838

–

958

Total

760

1,513

344

169

1,359

Notes
1. Jayne Cottam joined the Company on 25 September 2017. The 2017/18 figures above relate to the part year from appointment.
2. Andrew Darke stepped down from the Board on 31 March 2018.
3. A portion of bonus is deferred as explained on page 73.
4.

The outturn for the 2016 PSP which vests in 2019 will vest at 31.7% and the vesting share price has been estimated at 56.87 pence, based on the three-month average
share price ended 31 March 2019. Further details are set out on page 74.

72 Assura plc Annual Report and Accounts 2019

Total pension entitlements
The Executive Directors received payments in lieu of pension contributions equivalent to 13.5% of salary respectively for 2018/19.

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

2018/19 annual bonus plan outcome
In determining the award for 2018/19, 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 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 2018/19 the maximum potential bonus awards were 100% of salary for Jonathan Murphy as CEO and 75% of salary for
Jayne Cottam as CFO.

Value added activity

Performance measures

Actual targets set at the
beginning of the year

Actual performance outcome

Potential

(% of max)

Payout
(% of max)

Grow the portfolio through income
producing property additions

Good £160 million, Strong
£190 million, Outstanding £230 million

Outstanding £240 million
acquisition spend

Increase the community assets within
the portfolio

Good £25 million, Strong £50 million,
Outstanding £75 million

Partially met

Increase the number of developments

Good £32 million, Strong £35 million,
Outstanding £40 million

Outstanding £43.7 million developments
commenced during the year

Achieve unconditional sign off of new
developments in year

Good 10 schemes, Strong 11
schemes, Outstanding 12 schemes

Partially met

Grow rent through physical extensions Good 5, Strong 6, Outstanding 7

Not met

Rental growth to be achieved

Let vacant space

Add value through lease re-gears and
increase WAULT

Operations and finance

Deliver EPRA profit budget

Good 1.8%, Strong 1.9%, Outstanding
2.0%

Outstanding 2.18%

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

Partially met

Good 11, Strong 13, Outstanding 15

Not met

Good £63.5 million, Strong
64.5 million, Outstanding £65.5 million Good £63.8 million

Obtain new debt at lower margins
than previous

Good 15bps, Strong 20bps,
Outstanding 25bps

Good 18bps

Personal objectives

Both Jonathan Murphy and
Jayne Cottam

Total

100

–

The Committee reviewed the performance of Jonathan Murphy. His financial targets were as above, overall being rated Good. His individual targets
were to continue to strengthen the public affairs strategy, develop a strategy for developing strategic alliances with key NHS entities, establish the
newly formed Executive Board as a high performing team and deliver innovation in technology and/or sustainability. 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 £222,650 equating to 61% (61% of maximum bonus) of his total salary.

The Committee reviewed the performance of Jayne Cottam. Her financial targets were as above overall being rated Good. Her individual targets were
to evaluate and implement a debt capital funding strategy, develop external relationships particularly investor relations, work with the property team
to create efficiencies in processes, develop a mentoring programme and Group-wide equality and diversity policy and develop the Head of Financial
Reporting and Investor Relations.

The Committee concluded that Jayne 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 Jayne a bonus of £101,565 equating to 45.75% (61% of maximum bonus) of her total salary,
of which 50% will be deferred into shares for two years in accordance with the shareholding guidelines.

Assura plc Annual Report and Accounts 2019 73

GovernanceDirectors’ Remuneration Report
continued

Vesting of long-term incentive awards based on performance to 31 March 2019
The LTIP value included in the single figure relates to awards granted to Jonathan Murphy in 2016 which will vest in August 2019 dependent on TSR
and NAV performance.

Under the TSR performance target (50% of awards) which uses a sliding scale, 0% of this part of an award vests for TSR of 5% p.a. increasing
pro-rata to full vesting for TSR of 15% p.a., measured over the three years to 31 March 2019:

Performance target

TSR (50% of awards)

Threshold TSR

Maximum TSR

5% p.a.

15% p.a.

Actual TSR

6.51% p.a.

Vesting %
(max 100%)

15.1%

Under the NAV performance target (50% of awards) which uses a sliding scale, 0% of this part of an award vests for NAV per share growth of 5% p.a.
increasing pro-rata to full vesting for NAV per share growth of 15% p.a., measured over the three years to 31 March 2019:

Performance target

NAV (50% of awards)

Threshold NAV
growth

Maximum NAV
growth

Actual NAV growth

5% p.a.

15% p.a.

9.82% p.a.

Vesting %
(max 100%)

48.2%

As a result of TSR (15.1% of awards vest) and NAV per share (48.2% of awards vest) performance, the total vesting percentage is 31.7% and the gross
value of LTIP share awards expected to vest in 2019 are as follows:

Jonathan Murphy

56.87p

31.7%

192,356

109

Share price at
31 March 20191

Proportion to vest

Shares to vest2

Total £’000

Notes
1. The share price at 31 March 2019 is based on a three-month average to 31 March 2019.
2. Additional shares will be awarded in respect of dividend equivalents accrued over the vesting period.

Performance Share Plan
The following awards were made under the PSP to the Executive Directors during the year:

Executive

Jonathan Murphy

Jayne Cottam

Date of grant

Basis of award

3 July 20181

150% of salary

3 July 20181

150% of salary

Face value
of award £

£547,341

£276,670

Number of shares

End of performance
period

951,897

31 March 2021

481,165

31 March 2021

Notes
1.

The awards made on 3 July 2018 were granted using the average mid-market share price on the three dealing days prior to the date of grant (57.5 pence). The exercise
price is nil.

Details of the outstanding PSP awards are:

Executive

Date of grant

Awards
outstanding at
01/04/18

Awards granted
during the year

Awards vested
during the year

Awards lapsed
during the year

Jonathan Murphy

8 August 2016

607,759

18 July 2017

803,781

–

3 July 2018

–

951,897

Andrew Darke

8 August 2016

530,172

Jayne Cottam

18 July 2017

539,853

9 February
2018

230,967

–

3 July 2018

–

481,165

–

Interests
outstanding at
31/03/19

Normal vesting/
exercise date1

607,759

From 8 August
2019

803,781

951,897

From 18 July
2020

From 3 July
2021

From 8 August
2019

From 18 July
2020

–

230,967

From 9
February 2021

481,165

From 3 July
2021

(239,183)

290,989

(413,264)

126,589

Notes
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 for the CEO and 200% for the CFO).

For PSP awards granted after the 2019 AGM, a post vesting holding period will apply irrespective of shareholdings.

The minimum share price in 2018/19 was 52.4 pence and the maximum share price was 60.4 pence. The closing share price on 31 March 2019 was
57.4 pence.

74 Assura plc Annual Report and Accounts 2019

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:

2016 and 2017 LTIP awards:

50% of awards

Absolute average annual

compound TSR

Vesting schedule
(% of the TSR part which vest)

<5% p.a.

5% p.a.

NAV growth

<5% p.a.

5% p.a.

Vesting schedule
(% of the NAV part which vest)

Between 5% and 15% p.a.

Pro-rata between 0%
and 100%

Between 5% and 15% p.a.

Pro-rata between 0%
and 100%

15% p.a. or more

100%

15% p.a. or more

100%

2018 LTIP awards:

50% of awards

Absolute average annual
compound TSR

Vesting schedule
(% of the TSR part which vest)

EPRA EPS growth

Vesting schedule
(% of the EPS part which vest)

<5% p.a.

5% p.a.

<5% p.a.

5% p.a.

Between 5% and 15% p.a.

Pro-rata between 0% and 100%

Between 5% and 15% p.a.

Pro-rata between 0% and 100%

15% p.a. or more

100%

15% p.a. or more

100%

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)

Ed Smith1, CBE

David Richardson

Jenefer Greenwood, OBE

Jonathan Davies2

Simon Laffin3

Basic fees

Additional fees4

2018/19

2017/18

2018/19

2017/18

2018/19

2017/18

2018/19

2017/18

119.6

17.4

38.6

37.7

38.6

37.7

32.2

41.5

133.4

–

17.4

17.0

8.7

8.5

–

Total fees

119.6

17.4

56.0

54.7

47.3

46.2

32.2

41.5

133.4

Notes
1. Ed Smith was appointed to the Board on 10 October 2017 and as Chairman on 10 July 2018.
2. Jonathan Davies was appointed to the Board on 1 June 2018.
3. Simon Laffin retired from the Board on 10 July 2018.
4. Additional fees represent Senior Independent Director and Chair of Board Committee fees.

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 if they participated in the former VCP or 200% of salary for other Executive Directors.

Shareholding and other interests at 31 March 2019

Director

Jonathan Murphy

Jayne Cottam

Ed Smith, CBE

David Richardson

Jenefer Greenwood, OBE

Jonathan Davies

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 2019

Total interests
held at
1 April 2018

Shareholding
requirement met?

300

200

–

1,907,666

2,393,349

773,519

–

43,543

90,779

485,010

117,256

–

43,543

90,779

485,010

117,256

–

17,543

87,719

485,010

117,256

–

Yes

n/a

Notes
1. Shareholding requirement calculation is based on the share price at the end of the year (57.4 pence at 31 March 2019).
2. Beneficial interests include shares held directly or indirectly by connected persons.

Assura plc Annual Report and Accounts 2019 75

GovernanceDirectors’ Remuneration Report
continued

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, other than in respect of Ed Smith who received 1,077 shares through
the scrip dividend scheme in lieu of the April 2019 payment. The small holdings of Independent Directors is highlighted to shareholders and is not
considered to impact their independence.

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 10-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
11

Mar
10

Mar
09
Assura
FTSE Real Estate Investment Trusts
FTSE All Share

Mar
12

Mar
13

Mar
14

Mar
15

Mar
16

Mar
17

Mar
18

Mar
19

The table below shows the CEOs’ remuneration packages over the past 10 years:

Year

2018/19

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)

Single figure
£’0002

Bonus
(% of max)

Long-term incentives
(% of max)

760

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.

76 Assura plc Annual Report and Accounts 2019

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

CEO

Total employee pay

Average employee pay

Salary
% change

Taxable benefits
% change

Bonus
% change

9.0

6.9

7.2

–

4.5

(20.6)

(0.8)

0.5

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

2018/19
£m

4.8

63.3

2017/18
£m

4.4

46.4

% change

9.1

36.4

Payments to past Directors or for loss of office
No Executive Director left the Company during the year. No payments for compensation for loss of office were paid to, or receivable by, any Director
for that or any earlier year.

Statement of shareholder voting
The table below shows the advisory vote on the 2017/18 Directors’ Remuneration Report at the AGM held on 7 June 2018 and the binding vote on the
Remuneration Policy at the AGM held on 14 June 2016:

AGM resolution

Votes for

Votes against

Annual Report on Remuneration (2018 AGM)

1,703,887,576

Remuneration Policy (2016 AGM)

1,322,798,958

98.26

99.25

30,135,838

10,029,694

1.74

0.75

Votes withheld

104,156

8,359

Statement of implementation of Remuneration Policy for 2019/20
Executive Directors
Salary
In setting salary levels for 2019/20 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 2019/20 and the relative increases are set out below:

Executive Director

Jonathan Murphy

Jayne Cottam

1 April 2018 salary
£’000

1 October 2018 salary
£’000

1 April 2019 salary
£’000

365

184.5

365

222

395

222

1 April 2018 to
1 April 2019
% change

8.2

20.3

Noting the commitment given in last year’s Directors’ Remuneration Report to review the CFO’s salary after 12 months in the role, the Committee
awarded a salary increase to take her salary to £222,000, effective 1 October 2018. Her next review date will be 1 April 2020.

The CEO received a salary increase of 8.2% (from £365,000 to £395,000) in recognition of his growing experience and performance in the role
(noting that he has now served two compete financial years 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
In line with the new Remuneration Policy, albeit subject to shareholder approval, the maximum bonus opportunity for 2019/20 will be 125% of salary
for Jonathan Murphy and 100% of salary for Jayne Cottam. The on-target levels will remain at the current levels of 75% of salary for Jonathan and
56.25% of salary for Jayne.

The performance objectives under the annual bonus plan for 2019/20 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.

Assura plc Annual Report and Accounts 2019 77

GovernanceDirectors’ Remuneration Report
continued

As was the case with the 2018/19 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 equal to the relevant
shareholding guideline (300% of salary for the CEO and 200% of salary for the CFO). In addition, any bonus earned above 100% of salary will be
similarly deferred (regardless of shareholding).

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 TSR and EPRA EPS performance targets are satisfied. No changes will be made to the required growth
ranges but as outlined in the Chair’s Annual Statement the threshold vesting percentage will be increased from 0% to 10%. As such, the performance
targets for the 2019 PSP awards, which are expected to be granted in July 2019, will be as follows:

50% of awards

Absolute average annual
compound TSR

Vesting schedule
(% of the TSR part which vest)

EPRA EPS growth

Vesting schedule
(% of the EPS part which vest)

<5% p.a.

5% p.a.

10%

<5% p.a.

5% p.a.

10%

Between 5% and 15% p.a.

Pro-rata between 10% and 100%

Between 5% and 15% p.a.

Pro-rata between 10% and 100%

15% p.a. or more

100%

15% p.a. or more

100%

A two-year 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. For awards made following the introduction of the new Policy at the 2019 AGM the two-year holding period will apply to all awards.

Non-Executive Directors
The following table sets out the fee rates for the Non-Executive Directors from 1 April 2019:

Chairman fee

Non-Executive Director base fee

Additional fee for Chairing Audit and Remuneration Committees

Additional fee for Senior Independent Director

2019/20
£’000

153.0

39.4

8.9

2018/19
£’000

150.0

38.6

8.7

% change

Fee rates for Non-Executive Directors have been increased by 2%, in line with the inflationary increase applied to all employees.

By order of the Board

Jenefer Greenwood, OBE
Chair of the Remuneration Committee
20 May 2019

78 Assura plc Annual Report and Accounts 2019

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 2019. The Corporate Governance
Statement set out on page 50 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 119.

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.

CFO 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 in the CFO Review on pages 44 to 47, which are incorporated
in this report by reference.

Future developments
Details of future developments are discussed on pages 44 to 47 in the
CFO Review.

Going concern
Assura’s business activities together with factors likely to affect its
future performance are set out in the CFO review on pages 44 to 47.
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 £16.5 million at
31 March 2019 (2018: £26.7 million), the Group has undrawn facilities
of £270 million at the balance sheet date, with commitments as at year
end of £32.5 million (see Note 23).

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 WAULT of 12.0 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 regarding 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 39.

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.

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.

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 2018 dividend was paid as a PID.

Details of the Group’s dividend policy can be found in the CFO review
on page 46.

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 2019, the average number of days taken by the Group to pay
its suppliers was 15 days (2018: 12 days). Further details of supplier
policies can be found on page 29.

Donations
In the year to 31 March 2019, Assura donated £85,000 to charities
(2018: £23,000), all of which were UK registered charities, and no
contributions were made for political purposes (2018: nil). More details
of our chosen charities can be found on our website and pages 11
and 32.

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

Assura plc Annual Report and Accounts 2019 79

GovernanceDirectors’ Report
continued

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.
Further details are provided on page 31.

Share capital
Assura has a single class of share capital which is divided into Ordinary
Shares of nominal value 10 pence each ranking pari passu. No other
securities have been issued by the Company. At 31 March 2019, there
were 2,398,371,795 Ordinary Shares in issue and fully paid, none of
which are held in treasury. No shares were bought back during the year.
Further details relating to share capital, including movements during the
year, are set out in Note 17 to the financial statements.

The Board manages the business of Assura under the powers set out
in the Articles of Association. These powers include the Directors’ ability
to issue or buy back shares. Shareholders’ authority to empower the
Directors to make market purchases of up to 10% of its own Ordinary
Shares is sought at the AGM each year.

All the issued and outstanding Ordinary Shares of Assura have equal
voting rights with one vote per share. There are no special control rights
attaching to them save that the control rights of Ordinary Shares held
in the Employee Benefit Trust (“EBT”) can be directed by the Company
to satisfy the vesting of outstanding awards under the PSP.

The rights, including full details relating to voting of shareholders and
any restrictions on transfer relating to Assura’s Ordinary Shares, are
set out in the Articles and in the explanatory notes that accompany
the Notice of the 2018 AGM. These documents are available on
Assura’s website at: www.assuraplc.com. Assura is not aware of any
agreements or control rights between existing shareholders that may
result in restrictions on the transfer of securities or on voting rights.

The EBT is used to act as a vehicle for the issue of new shares under
the PSP. As at 31 March 2019, the EBT did not hold any Ordinary
Shares. A dividend waiver is in place from the Trustee in respect of
all dividends payable by Assura on shares which it holds in trust.

Interests in voting rights
As at 17 May 2019, the Company had been notified of the following
interests in accordance with Disclosure Guidance and Transparency
rules 5:

Name of shareholder

Invesco Limited

BlackRock Inc.

Artemis Investment Management

Standard Life Aberdeen

Resolution Capital Limited

Schroders plc

Legal & General Group plc

31 March
2019

17 May
2019

Percentage
of Ordinary
Shares

9.85

9.45

8.71

7.12

6.29

5.04

3.01

<5%

no change

80 Assura plc Annual Report and Accounts 2019

Directors
The appointment and replacement of Directors is governed by Assura’s
Articles of Association, the UK Corporate Governance Code, the
Companies Act 2006 (“The Act”) and related legislation. The Board may
appoint a Director either to fill a casual vacancy or as an addition to the
Board so long as the total number of Directors does not exceed the limit
prescribed in the Articles. An appointed Director must retire and seek
election to office at the next AGM. In addition to any power of removal
conferred by the Act, Assura may by ordinary resolution remove any
Director before the expiry of their period of office and may, subject to
the Articles, by ordinary resolution appoint another person who is willing
to act as a Director in their place. In line with the Code and the Board’s
policy, all Directors are required to stand for re-election at each AGM.

There are no agreements between the Company and its Directors or
employees providing for compensation for loss of office or employment
or otherwise that occurs specifically because of a takeover.

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

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
Details of greenhouse gas emissions from employee and head office
activities can be found on page 36.

Auditor
Each of the persons who is a Director at the date of approval of this
Annual Report confirms that:

– So far as the Director is aware, there is no relevant audit information

of which the Company’s auditor is unaware; and

– The Director has taken all the steps that he/she ought to have taken
as a Director in order to make himself/herself aware of any relevant
audit information and to establish that the Company’s auditor is
aware of that information.

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

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 2020.

Amendments to the Articles of Association
The Articles can only be amended, or new Articles adapted, by a
resolution passed by shareholders in general meeting and being
approved by at least three quarters of the votes cast.

Change of control
The Group’s financing agreements afford the lender a right to
mandatory repayment on change of control following a takeover.
The Company’s PSP contains provisions that take effect in such an
event but do not entitle participants to a greater interest in the shares
of the Company than created by the initial grant or award under the
relevant plan.

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 2 July 2019 at 11am.

Both the Directors’ Report on pages 79 to 80 and the Strategic Report
on pages 1 to 49 were approved by the Board and signed on its behalf.

Orla Ball
Company Secretary
20 May 2019

Directors’ Responsibility Statement

Directors’
Responsibility
Statement

The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.

We confirm that to the best of our knowledge:

– The financial statements, prepared in accordance with IFRSs as

adopted by the EU, give a true and fair view of the assets, liabilities,
financial position and profit of the Company and the undertakings
included in the consolidation taken as a whole;

– The Strategic Report includes a fair review of the development and
performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face; and

– The Annual Report and financial statements, taken as a whole,

is fair, balanced and understandable and 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
20 May 2019

Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required to
prepare the Group financial statements in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted by the European
Union (“EU”) and Article 4 of the IAS Regulation and have also chosen
to prepare the Parent Company financial statements under IFRSs as
adopted by the EU. Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Company and of the profit or
loss of the Company for that period.

In preparing these financial statements, IAS 1 requires that Directors:

– Properly select and apply accounting policies;
– Present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and
understandable information;

– Provide additional disclosures when compliance with the specific

requirements in IFRSs are insufficient to enable users to understand
the impact of particular transactions, other events and conditions on
the entity’s financial position and financial performance; and
– Make an assessment of the Company’s ability to continue as a

going concern.

The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and
other irregularities.

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.

Assura plc Annual Report and Accounts 2019 81

GovernanceIndependent Auditor’s Report to the members of Assura plc

Report on the audit of
the financial statements

Opinion
In our opinion:
– the financial statements of Assura plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of the state of the group’s

and of the parent company’s affairs as at 31 March 2019 and of the group’s profit for the year then ended;

– the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted

by the European Union;

– the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as

applied in accordance with the provisions of the Companies Act 2006; and

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

statements, Article 4 of the IAS Regulation.

We have audited the financial statements 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 and, as
regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

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 Financial Reporting Council’s (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.

Within this report, any new key audit matters are identified with ^ and any key audit matters which are the same as the prior year identified with >.

Materiality
The materiality applied for the group financial statements was £25.5 million which was determined on the basis of 2% of net assets and specific
materiality applied was £3.1 million which was determined on the basis of <5% of EPRA earnings (as defined in Note 7).

Scoping
The Group audit team performed full scope audit procedures giving a 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.

82 Assura plc Annual Report and Accounts 2019

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

We considered as part of our risk assessment the nature of the group, its business model and related
risks including where relevant the impact of Brexit, the requirements of the applicable financial reporting
framework and the system of internal control. We evaluated the directors’ assessment of the group’s
ability to continue as a going concern, including challenging the underlying data and key assumptions
used to make the assessment, and evaluated the directors’ plans for future actions in relation to their
going concern assessment.

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.

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 38-43 that describe the principal risks and explain how they are being

managed or mitigated;

– the directors’ confirmation on page 39 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 39 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.

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

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.

Assura plc Annual Report and Accounts 2019 83

Financial statementsIndependent Auditor’s Report to the members of Assura plc
continued

Valuation of property portfolio excluding properties under development

Key audit matter
description

The Group owns and manages a portfolio of 563 (2018: 515) modern primary healthcare properties that are carried at fair
value in the financial statements. The portfolio is valued at £1,955.7 million as at 31 March 2019 (2018: £1,710.5 million) 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. The key input into the valuation exercise is yield, which is 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
in page 61. Further details are disclosed in note 10 to the financial statements.

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 experts (qualified chartered surveyors) to assist us in our audit of this key audit matter. We also
considered any potential effect of Brexit.

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

We compared the yields used by the Valuers to an estimated range of expected yields, determined via reference to
published benchmarks, and to recent transactions. We also considered the reasonableness of other assumptions that
are not so readily comparable to published benchmarks, such as Estimated Rental Value and void rates. Additionally,
we evaluated year-on-year movements in capital value with reference to published benchmarks. Where assumptions
were outside the expected range or otherwise deemed unusual, and/or valuations appeared to experience unexpected
movements, we undertook further investigations and, where necessary, held further discussions with management and
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 notes 2 and 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.

84 Assura plc Annual Report and Accounts 2019

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
£25.5 million (2018: £25 million)

Basis for determining
materiality

2% (2018: 2%) of net assets

Specific Group materiality
£3.1 million (2018: £2.5 million)
Applied to EPRA earnings
impacting balances

< 5% (2018: < 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
£3.1 million based on 5% of that
measure for testing of all impacted
balances, classes of transactions
and disclosures.

Parent company financial
statements

£2.8 million (2018: £2.2 million)

The parent company materiality
represents 2% (2018: 2%)
of equity which is capped at
90% (2018: 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.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1,280,000 (2018: £1,250,000), or
£159,500 (2018: £124,000) 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, and ranged between £0.2 million and £7.4 million. This results in full scope
audit procedures performed on 100% (2018: 100%) 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.

Assura plc Annual Report and Accounts 2019 85

Financial statementsIndependent Auditor’s Report to the members of Assura plc
continued

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.

We have nothing to
report in respect of
these matters.

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.

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, 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 Group’s and the parent 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 Group or the parent 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.

Details of the extent to which the audit was considered capable of detecting irregularities, including fraud are set out below.

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

Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design and perform audit
procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.

Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations,
our procedures included the following:
– enquiring of management and the audit committee, including obtaining and reviewing supporting documentation, concerning the Group’s policies

and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations;

– discussing among the engagement team and involving relevant internal experts, regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud. As part of this discussion, we identified potential for fraud in the following areas: valuation of
investment property (excluding properties under development); and

– obtaining an understanding of the legal and regulatory framework that the Group operates in, focusing on those laws and regulations that had
a direct effect on the financial statements or that had a fundamental effect on the operations of the Group. The key laws and regulations we
considered in this context included the UK Companies Act, Listing Rules, and REIT and tax legislation.

86 Assura plc Annual Report and Accounts 2019

Audit response to risks identified
As a result of performing the above, we identified valuation of investment property (excluding development properties) as a key audit matter. The key
audit matters section of our report explains the matter in more detail and also describes the specific procedures we performed in response to that key
audit matter.

In addition to the above, our procedures to respond to risks identified included the following:
– reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and regulations

discussed above;

– enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and claims;
– performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
– reading minutes of meetings of those charged with governance, and
– in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments;

assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale
of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal experts,
and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

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

We have nothing to
report in respect of
these matters.

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.

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 ending 31 March 2012 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and
reappointments of the firm is eight years, covering the years ending 31 March 2012 to 31 March 2019.

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).

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.

Rachel Argyle (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Manchester, United Kingdom
20 May 2019

Assura plc Annual Report and Accounts 2019 87

Financial statementsFinancial statements

Consolidated income statement
For the year ended 31 March 2019

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

2019
Capital

and non-
EPRA
£m

3.1
(3.1)

–

–
20.2
–
–
–

–
–

20.2

–

EPRA
£m

99.3
(4.1)

95.2

(8.7)
–
–
(0.3)
0.1

(22.5)
–

63.8

–

Total
£m

102.4
(7.2)

95.2

(8.7)
20.2
–
(0.3)
0.1

(22.5)
–

84.0

–

2018*
Capital

and non-
EPRA
£m

2.6
(2.6)

–

–
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

–

Total
£m

86.1
(5.9)

80.2

(7.9)
79.4
(0.3)
(0.3)
0.1

(23.0)
(56.4)

71.8

–

63.8

20.2

84.0

50.0

21.8

71.8

2.7p

2.5p

3.5p

3.7p

Note

4
10

19
3

5
5

7
7

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 arises from continuing operations. See Note 2 for definition of income statement columns.

*2018 restated to include comparative IFRS 15 disclosures (see Note 2), with no impact on net rental income or profit for the year.

(cid:1)

88 Assura plc Annual Report and Accounts 2019

Consolidated balance sheet
As at 31 March 2019

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

Retained earnings

Total equity

NAV per Ordinary Share

– basic & diluted

EPRA NAV per Ordinary Share – basic & diluted

Note

10
11
21

12
13
10

14
16
15

16
14
15

2019
£m

1,978.8
0.2
0.5

1,979.5

18.3
14.7
17.6

50.6

2018
£m

1,732.7
0.4
0.5

1,733.6

28.7
13.7
8.4

50.8

2,030.1

1,784.4

37.5
11.0
21.3

69.8

672.3
2.8
5.3

680.4

750.2

20.2
–
19.0

39.2

486.3
2.8
5.7

494.8

534.0

1,279.9

1,250.4

239.8
587.4
231.2

221.5

238.3
580.4
231.2

200.5

1,279.9

1,250.4

53.4p

53.3p

52.5p

52.4p

The financial statements were approved at a meeting of the Board of Directors held on 20 May 2019 and signed on its behalf by:

Jonathan Murphy
CEO

Jayne Cottam
CFO

(cid:1)

Assura plc Annual Report and Accounts 2019 89

Financial statements

Consolidated statement of changes in equity
For the year ended 31 March 2019

1 April 2017

Profit attributable to equity holders

Total comprehensive income

Issue of Ordinary Shares

Issue costs

Dividends

Employee share-based incentives

31 March 2018

Profit attributable to equity holders

Total comprehensive income

Issue of Ordinary Shares

Dividends

Employee share-based incentives

31 March 2019

(cid:1)

Note

Share
capital
£m

165.5

–

70.9

–

1.6

0.3

Share
premium
£m

246.1

–

338.2

(12.0)

8.1

–

Merger
reserve
£m

231.2

–

Retained
earnings
£m

175.2

71.8

–

(46.4)

(0.1)

Total
equity
£m

818.0

71.8

409.1

(12.0)

(36.7)

0.2

238.3

580.4

231.2

200.5

1,250.4

–

1.5

–

0.2

6.8

–

84.0

–

(63.3)

0.3

84.0

0.2

(55.0)

0.3

239.8

587.4

231.2

221.5

1,279.9

90 Assura plc Annual Report and Accounts 2019

Financial statements continued

Consolidated cash flow statement
For the year ended 31 March 2019

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

Net cash outflow from investing activities

Financing activities
Issue of Ordinary Shares
Issue costs paid on issuance of Ordinary Shares
Dividends paid
Repayment of loans
Long-term loans drawdown

Early repayment costs
Loan issue costs

Net cash inflow from financing activities

(Decrease)/increase in cash and cash equivalents

Opening cash and cash equivalents

Closing cash and cash equivalents

(cid:1)

Note

18
16
16

2019
£m

100.8
(16.7)

0.9
0.1
(12.2)

72.9

(210.1)
(21.2)
7.1

(224.2)

–
–
(55.0)
(100.0)
298.4

–
(2.5)

140.9

(10.4)

28.7

18.3

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

5.2

23.5

28.7

Assura plc Annual Report and Accounts 2019 91

Financial statements

Notes to the accounts
For the year ended 31 March 2019

1. Corporate information and operations
The Company is a public limited company, limited by shares, incorporated and domiciled in England and Wales, whose shares are publicly
traded on the main market of the London Stock Exchange.

With effect from 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 79 and are presented in
pounds 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 2019. 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):

IFRS 9 Financial Instruments (1 January 2018)

−(cid:1)
−(cid:1) Amendments to IAS 40 Transfers of investment property (1 January 2018)
−(cid:1) Amendments to IFRS 2 Classification and measurement of share-based payment transactions (1 January 2018)
−(cid:1) Annual Improvements to IFRS Standards 2014–2016 Cycle (1 January 2018)

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 the only impact has been to show service charge income gross within rental income and service charge expense gross within
property operating expenses. The cumulative impact of the standard is £nil, although there has been an equal increase in gross rental and
related income and property operating expenses of £3.1 million (2018: £2.6 million). This has been presented in the capital and non-EPRA
column of the income statement in accordance with EPRA guidelines, and the 2018 figures have been restated. The Group has elected to apply
to the practical expedient in respect over time constraints which have a duration of less than one year.

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).

−(cid:1) Annual Improvements to IFRS Standards 2015–2017 Cycle (1 January 2019)
−(cid:1) Amendments to long-term interests in associates and joint ventures (1 January 2019)
−(cid:1) Amendments regarding the definition of materiality (1 January 2020)

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, replacing the current
operating lease charge. 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 and is estimated to be in the range £3.5 million to £4.5 million.
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 uncertainty
The key assumptions concerning the future, and other key sources of estimation 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.(cid:1)

92 Assura plc Annual Report and Accounts 2019

Financial statements continued
2. Significant accounting policies continued
Property valuations
The key source of estimation 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 arms-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 and details of the accounting policies applied in respect of valuation are set out
below. Note 10 includes details of the key unobservable inputs relating to the valuations, and a sensitivity analysis in respect of a movement in
the equivalent yield or Estimated Rental Value (“ERV”), which are considered to be the two key assumptions with the highest risk of causing a
material movement in the next financial year.

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, other than in respect of property valuations as described above.

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 power over the entity, exposure to variable returns and the ability
to use its power over the entity to affect the amount of returns.

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 property 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. Properties classified as assets held for sale are recorded at fair value less costs to sell.

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.

(cid:1)

Assura plc Annual Report and Accounts 2019 93

Financial statements
Notes to the accounts continued
For the year ended 31 March 2019

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. Appropriate provisions are made for expected credit losses considering historical credit losses incurred and future
expected losses.

Other investments are shown at amortised cost and held as loans and receivables. Loans and receivables are initially valued at fair value less
directly attributable transaction costs. After recognition, 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 amount of the change in fair value will be recognised in other comprehensive
income as attributable to changes in credit risk.

Cash equivalents are limited to instruments with a maturity of less than three months measured at amortised cost.

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 non-EPRA 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 and management assess performance as one business and as such no segmental analysis is presented for the current or prior
year results.(cid:1)

(cid:1)

94 Assura plc Annual Report and Accounts 2019

Financial statements continued

3. Net rental income

Rental revenue

Service charge income
Other related income

Gross rental and related income

Finance revenue

Bank and other interest

Total revenue

Gross rental and related income
Direct property expenses
Service charge expenses

Net rental income

2019
£m

98.4

3.1
0.9

102.4

0.1

102.5

2019
£m

102.4
(4.1)
(3.1)

95.2

2018
£m

82.7

2.6
0.8

86.1

0.1

86.2

2018
£m

86.1
(3.3)
(2.6)

80.2

Following the adoption of IFRS 15, gross rental and related income and direct property expenses have been restated and are now
shown gross of service charge income and expenses. There has been no impact on net rental income or any measure of profit as a result
of this change. See note 2 for further explanation.

4. Administrative expenses

Wages and salaries
Social security costs

Auditor’s remuneration
Directors’ remuneration and fees
Other administrative expenses

a) Auditor’s remuneration

Note

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

Total audit fees

Other assurance services (total non-audit fees) – half year review and reporting accountant services

Key management staff (Executive Board)
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

The average number of employees in the year was 51 (2018: 47).

2019
£m

3.4
0.5

3.9
0.3
1.3
3.2

8.7

2019
£m

0.1
0.1

0.2

0.1

0.3

2019
£m

1.7
0.3

0.3

2.3

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

Assura plc Annual Report and Accounts 2019 95

Financial statements

Notes to the accounts continued
For the year ended 31 March 2019

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

Total finance costs

2019
£m

21.8

(0.5)
1.2

22.5
–
–

22.5

2018
£m

21.9

(0.7)
0.9

22.1
0.9
56.4

79.4

Interest was capitalised on property developments at the appropriate cost of finance at commencement. During the year this ranged from 4%
to 5% (2018: 4% to 5%).

Loan costs written off related to facilities terminated prior to their maturity, and early repayment costs were amounts paid in the prior year to
terminate the Aviva facilities.

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% (2018: 19%)
Effects of:
Non-taxable income (including REIT exempt income)
Movement in unrecognised deferred tax

2019
£m

–

2019
£m

84.0

16.0

(16.0)
–

–

2018
£m

–

2018
£m

71.8

13.6

(13.5)
(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 2019/20 (2018/19: 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 a PID as part of the October 2018 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 2019.

Further reductions in the main rate of corporation tax have been substantively enacted; the rate reduced to 19% from 1 April 2018 and will
reduce to 17% from 1 April 2020. These changes have been reflected in the calculation of deferred tax.

(cid:1)

96 Assura plc Annual Report and Accounts 2019

Financial statements continued

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
2019
£m

84.0

Earnings
2018
£m

71.8

EPRA
earnings
2019
£m

84.0

–
(20.2)

–
–

63.8

EPRA
earnings
2018
£m

71.8

56.4
(79.4)

0.3
0.9

50.0

Weighted average number of shares in issue – basic

2,391,704,889

1,963,754,891

Potential dilutive impact of share options

560,853

210,307

Weighted average number of shares in issue – diluted

2,392,265,742

1,963,965,198

Earnings per Ordinary Share – basic & diluted

3.5p

2.7p

3.7p

2.5p

8. NAV per Ordinary Share

Net assets

Deferred tax

EPRA NAV

NAV
2019
£m

1,279.9

EPRA
NAV
2019
£m

1,279.9

(0.5)

1,279.4

NAV

2018
£m

1,250.4

EPRA
NAV
2018
£m

1,250.4

(0.5)

1,249.9

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

Diluted number of shares in issue

2,398,371,795
560,853

2,383,122,112
210,307

2,398,932,648

2,383,332,419

NAV per Ordinary Share – basic & diluted

53.4p

53.3p

52.5p

52.4p

EPRA NAV
Mark to market of fixed rate debt

EPRA NNNAV

EPRA NNNAV per Ordinary Share – basic

EPRA
NNNAV
2019
£m

1,279.4
(19.2)

1,260.2

52.5p

EPRA
NNNAV
2018
£m

1,249.9
(14.4)

1,235.5

51.8p

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.

(cid:1)

Assura plc Annual Report and Accounts 2019 97

Financial statements

Notes to the accounts continued
For the year ended 31 March 2019

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

Property investment companies

Assura (SC1) Ltd*
Assura (SC2) Ltd*
Assura Aspire Ltd*
Assura Aspire UK Ltd*

Assura GHC Ltd*
Assura HC Ltd*
Assura HC UK Ltd*
Assura Health Investments Ltd*
Assura Medical Centres Ltd*
Assura Primary Care Properties Ltd*

Assura Properties plc*

Holding or dormant companies

Assura Properties UK Ltd*
Assura Trellech Ltd*
BHE (Heartlands) Ltd*
BHE (St James) Ltd*

Community Ventures Hartlepool Ltd*
Donnington Healthcare Ltd*
GP Premises Holdings Ltd*
GP Premises Ltd*
Malmesbury Medical Enterprise Ltd*
Medical Properties Limited*

Meridian Medical Services 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*
Surgery Developments Ltd*
Trinity Medical Properties Ltd*

Abbey Healthcare Group Ltd*
Abbey Healthcare Property Investments Ltd*
AH Medical Properties Ltd*
Ashdeane Investments Ltd*
Assura (AHI) Ltd*
Assura Aylesham Ltd*

Assura Pharmacy Holdings Ltd* (Guernsey)
Assura Pharminvest Ltd*
Assura Property Ltd* (Guernsey)
Assura Property Management Ltd*
Assura Retail York Ltd*
Assura Services Ltd*

PH Investment (No. 1) Ltd*
Primary Care Initiatives (Macclesfield) Ltd*
PVR Investments Ltd*
Riddings Pharmco Ltd*
SHC Holdings Ltd* (Jersey)
South Kirkby Property Ltd*

Assura Banbury Ltd*
Assura Beeston Ltd*
Assura CS Ltd*
Assura CVSK Ltd*
Assura Financing Ltd*
Assura Grimsby Ltd*

Assura Southampton Ltd*
Assura Stanwell Ltd*
Assura Todmorden Ltd*
Assura Tunbridge Wells Ltd*
Birchdale Investments Ltd*
Broadfield Surgery Ltd*

SPCD (Balsall Common) Ltd*
SPCD (Crawcrook) Ltd*
SPCD (Davyhulme) Ltd*
SPCD (Didcot) Ltd*
SPCD (Kincaidston) Ltd*
SPCD (Rugeley) Ltd*

Assura Group Ltd (Guernsey)
Assura HC Holdings Ltd*
Assura IH Ltd
Assura Investments Ltd*
Assura Kensington Ltd*
Assura Management Services Ltd*

Cae Court Developments Ltd*
Cloverleaf Investments Ltd*
Community Ventures Hartlepool Midco Ltd*
Destra Hartlepool Ltd*
F.P. Projects Ltd*
MP Realty Holdings Ltd*

SPCD (Silsden) Ltd*
SPCD (Sutton in Ashfield) Ltd*
Stonebrites Ltd*
Stratford Healthcare Ltd*
The 3P Development Ltd*
The Third Party Development Corporation*

Assura PCP UK Ltd*

PCI Management Ltd*

Trinity Medical Developments Ltd*

Indicates subsidiary owned by intermediate subsidiary of Assura plc.

All companies are wholly owned by the Group and registered in England unless otherwise indicated. All companies registered in England have
a registered address of The Brew House, Greenalls Avenue, Warrington, WA4 6HL. The companies registered in Guernsey have a registered
address of PO Box 286, Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey and the Jersey company has a registered address
of 44 Esplanade, St Helier, Jersey. Taking into consideration the facts of each transaction, acquisitions of companies owning property
completed during the years ended 31 March 2019 and 31 March 2018 have been accounted for as asset purchases as opposed to
business combinations.

The Group also holds an investment in Virgin Healthcare Holdings Limited, a healthcare service provider, made up of a 0.7% equity holding
(book value £nil) and a £4 million loan note receivable (book value £nil, 2018: £nil). The registered address is Lynton House, 7-12 Tavistock
Square, London, WC1H 9LT.

98 Assura plc Annual Report and Accounts 2019

Financial statements continued

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 2019. 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.

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
2019
£m

1,707.7

218.3
2.2

220.5
–
22.0
(9.3)

–
(7.1)
19.1

IPUC
2019
£m

22.2

–
–

–
21.1
(22.0)
0.2

0.5
–
1.1

Total
2019
£m

Investment
2018
£m

1,729.9

1,321.7

218.3
2.2

220.5
21.1
–
(9.1)

0.5
(7.1)
20.2

278.9
6.0

284.9
–
35.5
(7.4)

–
(0.2)
73.2

1,952.9

23.1

1,976.0

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

1,341.9

278.9
6.0

284.9
31.7
–
(7.6)

0.7
(1.1)
79.4

1,729.9

2.8

–

2.8

–

2.8

1,955.7

23.1

1,978.8

1,710.5

22.2

1,732.7

Market value of investment property as estimated by valuer

Add IPUC
Add capitalised lease premiums and rental payments
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

2019
£m

2018
£m

1,943.3

1,702.2

23.1
9.6
2.8

22.2
5.5
2.8

1,978.8

1,732.7

17.2

0.4

7.4

1.0

1,996.4

1,741.1

At March 2019, 19 assets are held as available for sale (2018: 15 assets).

The total value of investment property is £1,960.5 million, which is completed investment property of £1,943.3 million plus £17.2 million
of investment properties held for sale. Disposals during the year of £7.1 million include properties that were classified as held for sale at
March 2018.

(cid:1)

Assura plc Annual Report and Accounts 2019 99

Financial statements

Notes to the accounts continued
For the year ended 31 March 2019

10. Property assets continued
Fair value hierarchy
The fair value measurement hierarchy for all investment property and IPUC as at 31 March 2019 was Level 3 – Significant unobservable inputs
(2018: 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 an
asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arms-length transaction after proper
marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

Unobservable inputs
The key unobservable inputs in the property valuation are the equivalent yield and the ERV.

The equivalent yield ranges from 4.00% to 8.00% (2018: 4.10% to 8.00%), in respect of 97% of the portfolio by value. A decrease in the
equivalent yield applied to a property would increase the market value. Factors that affect the equivalent yield applied to a property include the
weighted average unexpired lease term, the estimated future increases in rent, the strength of the tenant covenant and the physical condition of
the property. Lower yields generally represent properties with index-linked reviews, 100% NHS tenancies and longer unexpired lease terms,
ranging from 4.00% to 4.65%. Higher yields (range 5.60% to 8.00%) are applied for a weaker tenant mix and leases approaching expiry. Our
properties have a range of tenant mixes, rent review basis and unexpired terms. A 0.25% shift of equivalent yield would have approximately a
£108.5 million (2018: £90.3 million) impact on the investment property valuation.

The ERV ranges from £100 to £425 per sq.m (2018: £100 to £405 per sq.m), in respect of 98% of the portfolio by value. An increase in the ERV
of a property would increase the market value. A 1% increase in the ERV would have approximately a £19.6 million (2018: £17.1 million)
increase in the investment property valuation. The nature of the sector we operate in, with long unexpired lease terms, low void rates, low tenant
turnover and upward only rent review clauses, means that a significant fall in the ERV is considered unlikely.

11. Property, plant and equipment
The Group holds computer and other equipment assets with cost of £1.0 million (2018: £1.2 million) and accumulated depreciation
of £0.8 million (2018: £0.8 million), giving a net book value of £0.2 million (2018: £0.4 million).

There were no additions during the year (2018: £0.2 million) and depreciation charged to the income statement was £0.2 million (2018: £0.2
million).

12. Cash, cash equivalents and restricted cash

Cash held in current account
Restricted cash

2019
£m

16.5
1.8

18.3

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

2019
£m

8.9
3.8
2.0

14.7

2018
£m

9.1
2.0
2.6

13.7

Trade and other receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.

The Group’s principal customers are invoiced and pay quarterly in advance, usually on the English quarter days. Other debtors are generally
on 30–60 days’ terms. No bad debt provision was required during the year (2018: £nil).

100 Assura plc Annual Report and Accounts 2019

Financial statements continued

13. Trade and other receivables continued
As at 31 March 2019 and 31 March 2018, the analysis of trade debtors that were past due but not impaired is as follows:

2019

2018

Past due but not impaired

Neither past due
nor impaired
£m

>30 days
£m

>60 days
£m

>90 days
£m

7.6

6.9

0.5

1.1

0.2

0.6

0.5

Total
£m

8.9

9.1

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

2019
£m

2.2

32.1
3.2

37.5

2018
£m

2.3

15.1
2.8

20.2

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 (2018: £2.8 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. Other creditors and accruals includes £5.0 million in respect of deferred
consideration for a property acquisition. The amount is contingent on a lease being signed, and has been recognised in full as it is considered
highly probable the full amount will be paid.

15. Deferred revenue

Arising from rental received in advance
Arising from pharmacy lease premiums received in advance

Current
Non-current

(cid:1)

2019
£m

20.9
5.7

26.6

21.3
5.3

26.6

2018
£m

18.5
6.2

24.7

19.0
5.7

24.7

Assura plc Annual Report and Accounts 2019 101

Financial statements

Notes to the accounts continued
For the year ended 31 March 2019

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:

2019
£m

486.3

298.4
(100.0)
(2.5)
1.1
–

683.3

11.0
672.3

683.3

2018
£m

520.1

180.0
(213.8)
(1.8)
0.9
0.9

486.3

–
486.3

486.3

1. 10-year senior secured bond for £110 million at a fixed interest rate of 4.75% maturing in December 2021. The secured bond carries a loan
to value (“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 request repayment of £5.5 million every six months. The WAULT of the charged properties is below 10 years at
31 March 2019 and £11.0 million has therefore been shown as due within one year, at the option of the bondholder. At the date of this
report, the option has not been taken up.

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 2019, £30 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.

5. 10-year senior unsecured bond of £300 million at a fixed rate of 3% maturing July 2028. The facility is subject to an interest cover requirement
of at least 150%, maximum LTV of 65% and priority debt not exceeding 0.25:1. In accordance with pricing convention on the bond market,
the coupon and quantum of the facility are set to round figures with the proceeds adjusted based on market rates on the day of pricing.

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

(cid:1)

102 Assura plc Annual Report and Accounts 2019

Financial statements continued

17. Share capital

Ordinary Shares issued and fully paid

At 1 April
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
Issued 18 April 2018 – scrip

Issued 19 July 2018 – scrip
Issued 17 October 2018 – scrip
Issued 16 January 2019 – scrip
Issued 14 February 2019

At 31 March

Own shares held

Total share capital

Number
of shares
2019

Share
capital
2019
£m

Number
of shares
2018

2,383,122,112
–
–

238.3
–
–

1,655,040,993
1,514,247
163,999,820

–
–
–
–
–
2,355,911

6,467,532
1,945,311
4,195,055
285,874

–
–
–
–
–
0.2

0.7
0.2
0.4
–

3,861,017
3,226,687
3,061,389
545,124,813
7,293,146
–

–
–
–
–

2,398,371,795

239.8

2,383,122,112

–

2,398,371,795

239.8

2,383,122,112

Share
capital
2018
£m

165.5
0.2
16.4

0.4
0.3
0.3
54.5
0.7
–

–
–
–
–

238.3

–

238.3

The Ordinary Shares issued in April 2017, July 2017, October 2017, January 2018, April 2018, July 2018, October 2018 and January 2019
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, 3,226,687 Ordinary Shares were issued following employees exercising nil-cost options awarded under the Value Creation
Plan, which was a long-term incentive plan that is now completed. Full details of amounts paid can be found in the 2018 accounts.

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.(cid:1)

On 14 February 2019, 285,874 Ordinary Shares were issued as part consideration for the acquisition of a medical centre.

The merger reserve relates to the capital restructuring in January 2015 whereby Assura plc replaced Assura Group Limited as the top company
in the Group and was accounted for under merger accounting principles.

(cid:1)

Assura plc Annual Report and Accounts 2019 103

Financial statements

Notes to the accounts continued
For the year ended 31 March 2019

18. Dividends paid on Ordinary Shares

Payment date

19 April 2017

19 July 2017
18 October 2017
17 January 2018
18 April 2018
18 July 2018
17 October 2018

16 January 2019

Pence per
share

Number of
Ordinary Shares

0.60

0.60
0.60
0.655
0.655
0.655
0.655

0.685

1,656,555,240

1,656,555,240
1,827,642,764
2,383,122,112
2,383,122,112
2,385,478,023
2,391,945,555

2,393,890,866

2019
£m

–

–
–
–
15.6
15.6
15.7

16.4

63.3

2018
£m

9.9

9.9
11.0
15.6
–
–
–

–

46.4

The April dividend for 2019/20 of 0.685 pence per share was paid on 17 April 2019 and the July dividend for 2019/20 of 0.685 pence per share
is currently planned to be paid on 17 July 2019 with a record date of 14 June 2019.

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 and October 2018 dividends were PIDs 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 2019, the Group had one long-term incentive scheme in place – the Performance Share Plan (“PSP”). Further details in respect
of the PSP can be found in the Remuneration Committee Report on pages 74 and 75.

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 2019, the Employee Benefit Trust did not hold any (2018: nil) 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, 1,836,919 nil-cost options were awarded to senior management under the PSP. Participants’ awards will vest if certain targets
relating to TSR and growth in EPS are met, as detailed in the Remuneration Committee Report.

The following table illustrates the movement in options outstanding:

Options outstanding at 1 April 2018
Options issued during the year

Options outstanding at 31 March 2019

(cid:1)

2,060,085
1,836,919

3,897,004

104 Assura plc Annual Report and Accounts 2019

Financial statements continued

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)

2019

22
0.70
3

2018

22
0.26–0.88
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 2019 was £639,155 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 (2018: £0.3 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

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

(cid:1)

2019
£m

84.0

(0.8)
8.7

(20.2)
(0.5)
–
0.2
–
0.3

1.2
–

72.9

2018
£m

71.8

(4.3)
3.8

(79.4)
(0.7)
0.3
–
56.4
0.2

0.9
0.9

49.9

Assura plc Annual Report and Accounts 2019 105

Financial statements

Notes to the accounts continued
For the year ended 31 March 2019

21. Deferred tax
Deferred tax consists of the following:

At 1 April
Income statement movement

At 31 March

2019
£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

2019
£m

212.8
1.4

214.2

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

2019
£m

36.2
0.2

36.4

2018
£m

0.5
–

0.5

2018
£m

214.0
2.1

216.1

2018
£m

36.4
0.4

36.8

22. Derivatives and other financial instruments
The Group and subsidiaries (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 £25 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 1,100 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.

(cid:1)

106 Assura plc Annual Report and Accounts 2019

Financial statements continued

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 WAULT of 12.0 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:

31 March 2019

Non-cancellable leases
Trade and other receivables

31 March 2018

Non-cancellable leases
Trade and other receivables

On
demand
£m

Less than
3 months
£m

–
–

–

On
demand
£m

–
–

–

25.5
14.8

40.3

Less than
3 months
£m

22.5
13.7

36.2

3 to 12
months
£m

76.5
–

76.5

3 to 12
months
£m

67.5
–

67.5

1 to 5
years
£m

408.5
–

408.5

1 to 5
years
£m

357.3
–

357.3

>5 years
£m

841.0
–

841.0

>5 years
£m

767.8
–

767.8

Total
£m

1,351.5
14.8

1,366.3

Total
£m

1,215.1
13.7

1,228.8

The table below summarises the maturity profile of the Group’s financial liabilities, including interest, at 31 March 2019 and 31 March 2018
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 2019

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

Total financial liabilities

Payables as at 31 March 2018

Non-derivative financial liabilities:

Interest bearing loans and borrowings
Trade and other payables

Total financial liabilities

(cid:1)

On
demand
£m

Less than
3 months
£m

3 to 12
months
£m

–
–

–

5.5
31.6

37.1

On
demand
£m

Less than
3 months
£m

–
–

–

3.8
16.5

20.3

27.5
6.1

33.6

3 to 12
months
£m

11.3
3.7

15.0

1 to 5
years
£m

204.3
0.3

204.6

1 to 5
years
£m

291.5
0.3

291.8

>5 years
£m

Total
£m

597.5
2.5

600.0

>5 years
£m

266.5
2.5

269.0

834.8
40.5

875.3

Total
£m

573.1
23.0

596.1

Assura plc Annual Report and Accounts 2019 107

Financial statements

Notes to the accounts continued
For the year ended 31 March 2019

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. Any swaps (there are none at March 2019) 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 2019 was
as follows:

Floating rate asset
Cash

Liabilities (fixed rate unless stated)
Long-term loans:
Revolving credit facility (variable rate)

Private placements
Secured bond
Unsecured bond
Payments due under finance leases

Within
1 year
£m

1 to 5
years
£m

>5 years
£m

18.3

–

–
(11.0)
–
–

(30.0)

–
(99.0)
–
(0.3)

–

(250.0)
–
(300.0)
(2.5)

Total
£m

18.3

(30.0)

(250.0)
(110.0)
(300.0)
(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%.

On 12 July 2018, the Group agreed £300 million in a 10-year unsecured bond. The bond bears interest at 3.00%.

The ageing analysis of the financial assets and liabilities excluding trade receivables and payables of the Group at 31 March 2018 was
as follows:

Within
1 year
£m

28.7

–
–
–

–

1 to 5
years
£m

>5 years
£m

–

(130.0)
–
(110.0)

(0.3)

–
(250.0)
–

(2.5)

Total
£m

28.7

(130.0)
(250.0)
(110.0)

(2.8)

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

(cid:1)

108 Assura plc Annual Report and Accounts 2019

Financial statements continued

22. Derivatives and other financial instruments continued
Sensitivity analysis
The table below shows the book and fair value of financial instruments. As at 31 March 2019, 96% of debt drawn by the Group is subject to
fixed interest rates. A 0.25% movement in interest rates would change profit by £0.1 million, based on the amount of variable rate debt drawn
at the period end.

Long-term loans – fair value hierarchy Level 1
– fair value hierarchy Level 2
– Other

Cash
Payments due under finance leases

Book value

Fair value

2019
£m

408.4
250.0
30.0

18.3
2.8

2018
£m

110.0
250.0
130.0

28.7
2.8

2019
£m

424.3
253.3
30.0

18.3
2.8

2018
£m

125.4
249.0
130.0

28.7
2.8

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. The fair value of long-term loans has been included by reference to either quoted prices
in active markets (Level 1), calculated by reference to observable estimates of interest rates (Level 2), or book value is determined to be
approximately equal to fair value for variable rate debt (other).

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 34% at 31 March 2019 (26% at 31 March 2018).

Investment property
Investment property under construction
Held for sale

Total property

Loans
Finance lease

Cash

Net debt

LTV

2019
£m

1,955.7
23.1
17.6

1,996.4

2019
£m

683.3
2.8

(18.3)

667.8

2018
£m

1,710.5
22.2
8.4

1,741.1

2018
£m

486.3
2.8

(28.7)

460.4

34%

26%

23. Commitments
At the year end the Group had 11 (2018: five) committed developments which were all on site with a contracted total expenditure of
£48.7 million (2018: £23.6 million) of which £15.3 million (2018: £13.9 million) had been expended.

24. Related party transactions
Details of transactions during the year and outstanding balances at 31 March 2019 in respect of investments held are detailed in Note 9.

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

(cid:1)

Assura plc Annual Report and Accounts 2019 109

Financial statements

Company income statement
For the year ended 31 March 2019

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

2019
£m

75.0
2.6

77.6

(2.9)
(0.3)
(39.0)

35.4

–

35.4

2018
£m

50.0
2.5

52.5

(3.1)
(0.3)
(36.5)

12.6

–

12.6

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.

(cid:1)

110 Assura plc Annual Report and Accounts 2019

Financial statements continued

Company balance sheet
As at 31 March 2019

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

Retained earnings

Total equity

Note

2019
£m

297.0

0.1
0.1
810.3

810.5

2018
£m

336.0

0.3
0.1
790.3

790.7

(1.1)

(1.2)

1,106.4

1,125.5

239.8
587.4
108.2

171.0

238.3
580.4
147.2

159.6

1,106.4

1,125.5

The financial statements were approved at a meeting of the Board of Directors held on 20 May 2019 and signed on its behalf by:

Jonathan Murphy
CEO

Jayne Cottam
CFO

Company registered number: 9349441

(cid:1)

Assura plc Annual Report and Accounts 2019 111

Financial statements

Company statement of changes in equity
For the year ended 31 March 2019

Note

Share
capital
£m

165.5

–

70.9

–

1.6

0.3

Share
premium
£m

246.1

–

338.2

(12.0)

8.1

–

Merger
reserve
£m

183.7

–

(36.5)

–

Retained
earnings
£m

157.0

12.6

36.5

–

(46.4)

(0.1)

Total
equity
£m

752.3

12.6

–

409.1

(12.0)

(36.7)

0.2

238.3

580.4

147.2

159.6

1,125.5

–

1.5

–

0.2

6.8

–

(39.0)

–

35.4

39.0

–

(63.3)

0.3

35.4

–

0.2

(55.0)

0.3

239.8

587.4

108.2

171.0

1,106.4

1 April 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

Profit attributable to equity holders

Total comprehensive income

Merger reserve release

Issue of Ordinary Shares

Dividends

Employee share-based incentives

31 March 2019

(cid:1)

112 Assura plc Annual Report and Accounts 2019

Financial statements continued

Company cash flow statement
For the year ended 31 March 2019

Operating activities
Charges received from subsidiaries
Amounts paid to suppliers and employees

Net cash (outflow)/inflow from operating activities

Investing activities
Net balances received/(advanced) to subsidiaries

Net cash inflow/(outflow) from investing activities

Financing activities
Issue of Ordinary Shares
Issue costs paid on issuance of Ordinary Shares
Dividends paid

Net cash (outflow)/inflow from financing activities

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

Cash and cash equivalents at end of period

(cid:1)

Note

2019
£m

2.6
(2.8)

(0.2)

55.0

–
–
(55.0)

(55.0)

(0.2)
0.3

0.1

2018
£m

2.5
(2.0)

0.5

(360.6)

409.1
(12.0)
(36.7)

360.4

0.3
–

0.3

Assura plc Annual Report and Accounts 2019 113

Financial statements

Notes to the Company accounts
For the year ended 31 March 2019

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 72 to 77 and form part of these accounts.

B. Investments in subsidiary companies

Cost
Provision for diminution in value

2019
£m

484.2
(187.2)

297.0

2018
£m

484.2
(148.2)

336.0

Details of all subsidiaries as at 31 March 2019 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 (2018: £50 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 £39.0 million (2018: £36.5 million) was recorded, which was determined by reference to the net assets of
subsidiaries which is considered to be equivalent to the fair value less costs to sell. The net assets are driven by the investment property valuations,
in addition to intragroup dividends, and sensitivities in respect of property valuations and appropriate Level 3 unobservable input disclosures are
provided in Note 10 to the Group accounts. 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. Amounts owed by subsidiary companies – current

Amounts owed by Group undertakings

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

2019
£m

0.1

2019
£m

810.3

2018
£m

0.3

2018
£m

790.3

The recoverable amount of amounts 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 amount is not considered recoverable. No provision has been deemed necessary.

Charges
received
£m

2.6
2.5

Dividends
received
£m

75.0
50.0

Amounts
owed by
£m

810.3
790.3

Amounts
owed to
£m

–
–

E. Related party transactions

Group undertakings

31 March 2019
31 March 2018

The above transactions are with subsidiaries.(cid:1)

(cid:1)

114 Assura plc Annual Report and Accounts 2019

Financial statements continued

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 £1.1 million at 31 March 2019 (31 March 2018: £1.2 million).

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

Assura plc Annual Report and Accounts 2019 115

Financial statements
Appendix

Medical centres valued over £10 million

Building official name

Ashfields Health Centre

Aspen Centre

Birkenhead Medical Building

Bonnyrigg Medical Centre

Church View Medical Centre

Church View Primary Care Centre

Crompton Health Centre

Dene Drive Primary Care Centre

Dickson House

Durham Diagnostic Treatment Centre

Eagle Bridge Health and Wellbeing Centre

Fleetwood Health and Wellbeing Centre

Freshney Green Primary Care Centre

Frome Medical Centre

Hall Green Health Centre

Heysham Primary Care Centre

Malmesbury Primary Care Centre

Market Drayton Primary Care Centre

Moor Park Medical Centre

Northgate Health Centre

North Ormesby Health Village

One Life Building

Parkshot Medical Centre

Severn Fields Health Village

South Bar House

St Annes Health Centre

Stratford Healthcare Centre

Sudbury Community Health Centre

Tees Valley Treatment Centre

The Montefiore Medical Centre

The Surgery @ Wheatbridge

Todmorden Medical Centre

Turnpike House Medical Centre

Waters Green Medical Centre

Town

Build date

Sandbach

Gloucester

Birkenhead

Bonnyrigg

South Kirkby

Nantwich

Bolton

Winsford

Basingstoke

Durham

Crewe

Fleetwood

Grimsby

Frome

Birmingham

Heysham

Malmesbury

Market Drayton

Blackpool

Bridgnorth

North Ormesby

Middlesbrough

Richmond

Shrewsbury

Banbury

Lytham St Annes

Stratford-upon-Avon

Sudbury

Middlesbrough

Ramsgate

Chesterfield

Todmorden

Worcester

Macclesfield

2004

2014

2010

2005

2013

2008

2007

2018

2007

2012

2009

2012

2003

2012

2008

2005

2011

2007

2005

2014

2012

2009

2006

2014

2018

2006

2008

2006

Sq.m

2,759

3,481

2,636

4,083

2,812

3,271

2,964

2,793

2,316

2,069

6,809

5,204

7,170

4,062

2,409

3,077

3,205

3,589

4,964

3,589

7,652

3,327

1,221

6,003

3,691

3,393

5,988

2,937

4,389

2,632

2,943

4,166

4,132

6,018

List size NHS rent %

25,384

29,689

16,327

22,168

14,447

24,234

12,440

24,361

37,596

88%

83%

92%

97%

90%

88%

86%

87%

66%

–

100%

56,979

11,911

27,904

29,125

25,424

59,968

15,840

17,545

28,852

16,466

22,384

10,148

12,753

17,008

33,253

12,478

18,215

10,061

–

27,698

15,269

13,520

28,542

61,450

90%

91%

85%

83%

86%

93%

90%

94%

90%

66%

94%

100%

94%

89%

96&

98%

100%

n/a

85%

83%

91%

93%

Portfolio statistics

Portfolio
statistics

North East

Midlands

North West

South East

London

South West

Wales

Scotland

Number

Rent (£m)

WAULT
(years)

Total floor
area (m2)

124

105

23.9

17.6

15.8

17.0

10.4

7.8

7.2

3.0

12.7

13.1

12.5

9.0

11.5

13.0

12.0

11.6

125,369

97,938

81,751

88,402

47,245

48,953

48,872

18,537

Value

440.2

350.4

317.1

309.2

204.4

148.8

135.8

54.6

<£1m

£1-5m

£5-10m

>£10m

9.3

9.4

10.0

13.8

3.8

9.3

8.6

3.6

207.8

136.8

68.2

160.1

120.6

60.3

77.0

29.0

100.2

102.3

33.1

89.5

56.5

36.2

50.2

6.1

122.9

101.9

205.8

45.9

23.6

43.0

–

16.0

563

102.7

12.0

557,067

1,960.5

67.8

859.7

474.1

558.9

116 Assura plc Annual Report and Accounts 2019

Glossary

AGM is Annual General Meeting.

GMS is General Medical Services.

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. See also
New Code.

Company is Assura plc.

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. 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.

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.

Integrated Care Systems (“ICSs”) are collaborations, evolved from
STPs, where NHS organisations work with local councils and others to
take collactive responsibility for managing resources, delivering NHS
standards, and improving the health of the population they serve.

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.

KPI is a Key Performance Indicator.

Like-for-like represents amounts calculated based on properties
owned at the previous year end.

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.

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

MSCI provides performance analysis for most types of real estate and
produces an independent benchmark of property returns.

MSCI All Healthcare Index is MSCI’s UK Annual Healthcare
Property Index.

MSCI 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 MSCI.

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.

New Code is the UK Corporate Governance Code 2018, a full copy of
which is available on the website of the Financial Reporting Council.

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.

Assura plc Annual Report and Accounts 2019 117

Additional information
Glossary
continued

PSP is Performance Share Plan.

Corporate information

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.

Registered
Office:

Company
Secretary:

Auditor:

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.

Legal
Advisors:

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.

Stockbrokers:

The Brew House
Greenalls Avenue
Warrington
WA4 6HL

Orla Ball

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

Lloyds Bank plc

Santander UK plc

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

Sustainability and Transformation Partnerships (“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 contracted rent roll is the total amount of rent to be received
over the remaining term of leases currently contracted.

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.
The share price at 31 March 2019 was 57.4 pence (2018: 59.3 pence).

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.

118 Assura plc Annual Report and Accounts 2019

Forward-looking statements
This document contains certain statements that are neither reported
financial results nor other historical information. These statements are
forward-looking in nature and are subject to risks and uncertainties.
Actual future results may differ materially from those expressed in or
implied by these statements. Many of these risks and uncertainties
relate to factors that are beyond Assura’s ability to control or estimate
precisely, such as future market conditions, the behaviour of other
market participants, the actions of governmental regulators and
other risk factors such as the Company’s ability to continue to obtain
financing to meet its liquidity needs, changes in the political, social
and regulatory framework in which the Company operates or in
economic or technological trends or conditions, including inflation
and consumer confidence, on a global, regional or national basis.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date of this document.
Assura does not undertake any obligation to publicly release any
revisions to these forward-looking statements to reflect events or
circumstances after the date of this document. Information contained in
this document relating to the Company should not be relied upon as a
guide to future performance.

Assura plc Annual Report and Accounts 2019 119

Additional informationNotes

120 Assura plc Annual Report and Accounts 2019

Consultancy, design and production
www.luminous.co.uk

Design and production

www.luminous.co.uk

Assura plc
The Brew House
Greenalls Avenue
Warrington
WA4 6HL

T: 01925 420660
F: 01925 234503

E: info@assura.co.uk
www.assuraplc.com