Full Year Results

RNS Number : 8495N

Assura PLC

21 May 2015

 

Assura plc

A transformational year

21 May 2015

Assura plc ("Assura"), the leading primary care property investor and developer, announces its preliminary results for the year ended 31 March 2015.

Strong financial performance driven by acquisitions

·      27.5% increase in net rental income to £48.2 million (2014: £37.8 million)

·      45.9% increase in underlying profit from continuing operations to £15.9 million (2014: £10.9 million)

·      51.2% increase in profit before tax to £36.6 million (2014: £24.2 million)

·      Fully covered dividend, current quarterly dividend 0.5 pence, 2.0 pence per share on an annualised basis

Significant growth in investment portfolio

·      40.9% increase in investment property to £925 million (2014: £657 million)

·      33.0% increase in total rent roll to £55.6 million (2014: £41.8 million)

·      Completed acquisitions totalling £230 million

·      Completed four developments at a cost of £19.6 million with a margin over the revaluation yield in excess of 100 basis points, with a lease length of 20 years

Strong balance sheet

·      £175m equity raise in October 2014, net of expenses

·      97.0% increase in adjusted (EPRA) net assets and 3.4% increase in adjusted EPRA NAV per share to 44.9 pence (2014: 43.4 pence)

·      £57 million borrowings redeemed and £177 million restructured with reduced interest rate, LTV now 48%

·      New £60 million RCF at 170bps initial margin

Efficient, internally managed operating model

·      57 properties acquired and fully integrated

·      EPRA Cost Ratio reduced to 18% (2014: 20%)

·      New UK plc holding company and inclusion in the EPRA/NAREIT index

Positive sector outlook

·      Ever increasing demands on health service from an ageing population, rising public expectation and medical advances

·      Government has recently committed funding to back new premises development

·      Low volatility of property returns with low default risk and a link with cost inflation

Assura is well positioned to continue outperforming the market

·      Deep understanding of primary care real estate with proven inhouse skills in medical investment and development

·      Established brand with GPs

·      Strong development and acquisitions pipeline

·      Re-capitalised business has lower gearing, greater financial flexibility and capacity for future growth

Graham Roberts, Chief Executive, said:

"Our business is driven by the continuing and growing need for community based health and social care in the UK. We are at a point in time when this need is growing as never before. The challenge has been recognised by the NHS and Government and resources for primary care infrastructure are being prioritised. Following our substantial increase in scale and financial resources this year, we are well placed to contribute with both skills and capital to this important endeavour."  

For further information, please contact:

Assura plc: Graham Roberts Jonathan Murphy Carolyn Jones	Tel: [phone]
Finsbury: Gordon Simpson	Tel: [phone]

Presentation and webcast:

A presentation will be held for analysts and investors on 21 May 2015 at 11am London time, with a webcast available from our website or via the following link:

http://webcasting.brrmedia.co.uk/broadcast/138514/?popup=true

Alternatively to listen to the audio of the presentation live, dial:

0808 109 0700, [phone]

Password: Assura

 

 

Chairman's Statement

 

DEAR SHAREHOLDER

It has been another busy and successful year for Assura. We have added significantly to our property portfolio through both acquisition and new developments. Thanks to the support of our shareholders, we were able to raise £175 million, net of expenses, in a fund raise during the year. We had a clear plan of how to use these proceeds and are now well advanced in executing that plan. Since the fund raise, we have made property additions of £105 million and we have a pipeline of further property acquisitions and developments of £100 million. Our gearing is now at 48%, well within our target range.

Uniquely in our sector we provide all of the elements of the property service for GPs, which enables us to offer a long-term partner approach throughout the lifecycle of a medical centre. This ability to "develop, invest and manage" gives us a crucial advantage in securing new development opportunities and other asset management initiatives. Our internally managed structure provides a highly scalable model that means as we grow, the benefits of scale accrue to shareholders and drive our progressive dividend policy.

The efficiency of this model has been a key contributor to the results delivered this year. We have increased our rent roll by 33% to £55.6 million while reducing our European Public Real Estate Association ("EPRA") Cost Ratio from 20% to 18%. This has enabled us to deliver a growth in underlying profit of 46% to £15.9 million.

In November 2014 we increased our quarterly dividend by 11% to 0.5 pence per share and we retain our policy to pay fully covered dividends, which will grow broadly in line with the geared underlying rental growth. Since we resumed dividend payments three years ago, we have grown the quarterly dividend per share by 75%.

The results delivered this year have contributed to a Total Shareholder Return of 50%. Over the past three years our strategy of refocusing the business on the primary care sector has delivered a Total Shareholder Return of 118%.

Market developments

We have been engaging widely with the NHS and Government during the year to make the case for further investment in primary care infrastructure, primarily through the British Property Federation's Healthcare Committee. It is very encouraging that recent announcements in the form of the NHS's Five Year Forward View, the creation of the Primary Care Infrastructure Fund and the Better Health for London report all recognise the key role investment in primary care property can play in improving efficiencies and health outcomes for the NHS. The current Government is committed to increased funding for the NHS and an increased role for primary care service provision.

The provision of a broader range of services from a modern facility with a larger number of GPs to facilitate extended hours without the need to refer patients to the more costly secondary care sector is an achievable aim in all of our new premises. We remain ready to provide the expertise and the capital to support this essential investment in our primary care infrastructure and to do so at competitive rental levels. It is a highly efficient and cost effective model for the private sector funding of state infrastructure.

Shareholders

We are committed to the highest standards of financial transparency and believe a significant investment in investor relations activity is a key responsibility for any company. We have held 114 meetings with investors during the year and I am delighted to welcome seven new shareholders into our 20 largest investors. We are very grateful to our shareholders for the level of support demonstrated during the year which enabled us to increase our equity base by 90%. In addition the increasing profile of the business has led to an improved level of liquidity in our shares. We successfully met the criteria for inclusion in the EPRA/NAREIT index in March 2015 and this provides further exposure for the Group to this group of specialist real estate focused investors.

Our people and the Board

We have 30 people in Assura and I would like to thank each and every one for their hard work and contribution to the success of the business. There have been no changes to the Board during the year.

New corporate structure

During the year we undertook a scheme of arrangement to insert a new UK plc as our ultimate holding company. This replaced a Guernsey registered holding company and aligned the Group with its UK tax jurisdiction and should enable it to develop even better commercial relationships with the NHS and GPs, which are the Group's principal customers.

The future

Over the past three years we have made substantial progress in deploying capital in this highly attractive sector. We have strong brand recognition with GPs and proactively engage with the NHS to make the case for further investment in modern primary care facilities, with a unique offering as developer, landlord and asset manager.

The overwhelming need for replacement and upgrade of GP surgeries is rising up the priorities of the NHS. We remain well placed to meet this substantial investment in our nation's primary care infrastructure.

Simon Laffin

Chairman

20 May 2015

Chief Executive's strategic review

I am pleased to report a period of significant growth for Assura, where we have delivered on our long-held ambition to increase significantly the scale of the business. In the year we have completed £245 million of property additions, which was the largest contributor to the £269 million increase in investment property in the year. This growth in our portfolio has enabled us to increase our rent roll by 33% to £55.6 million. We have successfully converted this increased investment into growth in underlying profit of 46% to £15.9 million and increased the quarterly dividend by 11% to 0.5 pence per share which remains fully covered.

Included in the property additions during the year were two significant portfolio acquisitions completed through off market transactions for an aggregate consideration of £170 million. The portfolios represented 39 medical centres with a total rent roll of £9.4 million and a weighted average unexpired lease length in excess of 16 years. In addition we were able to secure four future sites with an estimated value of £21 million under a forward funding agreement with the same vendors. The assets have been rapidly integrated and the team has reviewed for asset management opportunities which has already generated a significant letting at one of the sites of more than 2,100 square metres.

The equity fund raise of £175 million, net of expenses, in October 2014 was key to delivering this substantial investment. We are grateful to our shareholders for their support and the level of demand enabled us to secure an increase in our equity base of 90%. Our increased equity base has reduced our loan to value ratio to 48%. We believe a range of 45% to 55% provides us with the financial flexibility to take advantage of future acquisition and development opportunities and we will look to maintain this level over the medium term.

The longevity and security of our cash flows and the inflation-tracking characteristics of our income stream underpins our future dividend growth.

We continue to see excellent risk adjusted returns in primary care real estate and there are positive signs of investment in new developments returning to our sector.

Since the fund raise we have been focused on the twin objectives of making further additions to our property portfolio and reducing our borrowings. Since October we have secured further property additions of £105 million at a yield on cost of 5.2% and a weighted average unexpired lease term of 16.7 years. This represents 25 properties with a wide geographic spread. The attractiveness of our sector is becoming increasingly understood and so this has been achieved against a backdrop of an increasingly competitive market. Our strong brand recognition, long experience in the sector and our reputation amongst the GP community have all been factors in successfully securing this pipeline of opportunities.

In addition to the completed transactions we also have a further pipeline of development opportunities and acquisitions of more than £100 million. We remain focused on further growth through acquisition and our dedicated team of property professionals are active in sourcing new opportunities across the country.

We are also committed to strengthening our balance sheet and have redeemed borrowings of £57 million and restructured facilities of £177 million, reducing our ongoing interest cost. Our current borrowings have a weighted maturity of 11.9 years and a weighted average cost of 5.28%.

Property returns

The enlarged property portfolio has delivered a Total Property Return of 7.8%. Assura is a constituent of the IPD Healthcare Index and since its inception in 2007 we have delivered a return of 7.6% against the index of 5.9%. This level of consistent outperformance over a long period is a testament to the skills and dedication of our property team and to the specialist knowledge we have in our sector.

The IPD Index also captures the performance of the primary care property sector as a whole and since the launch of the index it has delivered a very consistent level of return. The relatively low volatility results in an excellent risk adjusted return when compared with other sectors as indicated in the chart below:

The key driver of our property return is the income from our long-term leases and in the year we have delivered rental growth of 1.3% from settled rent reviews which is ahead of inflation. The majority of our rent reviews are on an open market basis set by reference to rental awards agreed with the District Valuer on new schemes. The basis of these reviews effectively means that they are influenced by land and construction cost inflation over the medium term. Over the last 12 months this inflation has picked up. This increased cost is not currently reflected in our passing rents as rents are set by reference to new developments and there has been a slowdown in the approval of new schemes.

Our portfolio is well placed to capture this rental growth once new developments recommence and this gives us confidence for the medium term prospects for rental growth in our sector.

The balance of the return is generated from our capital growth, which has seen a like for like valuation growth of 5.2% in the past year. This increase has primarily come from a movement in our yields with our equivalent yield moving by 30 basis points in the past year. This relatively moderate repricing over the past year still leaves our yields maintaining a premium over fixed return gilts in excess of 360 basis points.

We also add value through our development activities. We have completed four developments during the year with a total development cost of £19.6 million. This has added £1.4 million to our annual rent roll and generated a margin over the revaluation yield in excess of 100 basis points. The level of development expenditure in the year is significantly below the levels we would normally expect. This reflects the delays in the approval of new schemes following the introduction in 2013 of the reforms to the NHS in the Health and Social Care Act 2012.

Our in-house development capability gives us the opportunity to source new premises at levels significantly cheaper than we could achieve through purchasing completed properties from developers. On a typical scheme we are able to source a development at a 1% higher yield on cost than for an equivalent property acquired in the investment market by taking on the risk of development. This provides an incremental return to our shareholders. In addition, by being involved as a developer, long-term landlord and asset manager we are able to build effective long-term relationships with our GPs and this provides us with a unique positioning and market insight in our sector.

Operational efficiency

The £245 million of property additions have been integrated seamlessly without any increase in headcount. This was facilitated by the restructuring of our in-house property management team during the year to create a team with the sole focus of client interaction and management. By understanding the evolving needs and demands of our GPs we can position ourselves to be at the forefront of the significant investment required in improving premises in the future.

We have created a separate team of investment managers who have responsibility for identifying value enhancing asset management opportunities such as lease extensions and redevelopments within our existing estate as well as new acquisition opportunities. This revised focus is already starting to result in an increased pipeline of potential acquisitions and a number of asset management opportunities. This highlights the advantages of our scalable internal management model. We can integrate acquisitions without significant additional costs and we have the skills in-house to maximise the value of the portfolio.

This structure enables us to ensure that we can maximise the efficiency with which we can translate increased rental income into underlying profit and hence dividends. In the year we have delivered 46% growth in underlying profit to £15.9 million. This has been achieved from 41% growth in our investment property value and a reduction in our EPRA Cost Ratio from 20% to 18%.

The overall impact of all of these factors is reflected in a 51% increase in our profit before tax to £36.6 million and our dividends increasing from £7.2 million to £14.4 million.

Market outlook

The primary care sector displays very strong real estate fundamentals: excellent occupier covenants, minimal development risk, restricted supply with no speculative development and long leases without breaks. In addition the underlying open market rent review mechanism most common in the sector has provided inflation tracking returns over the medium term.

A secure and predictable income stream with an underpinning of inflation linkage is a highly attractive proposition to the investor in all economic conditions. In addition the sector is experiencing increasing demand at a time when supply has been heavily restricted by the approval processes of the NHS. There are increasing signs that this situation is improving and the unblocking of the significant investment required in primary care property is becoming more likely.

Increasing demand

Assura as a developer and investor in primary care property provides bespoke, purpose built premises that meet the evolving needs of GPs as they look to meet the increasing health requirements of the UK population.

GPs are the cornerstone of the UK health model and provide consultations with over 1.3 million patients every day¹. Many of these consultations take place in outdated and unsuitable premises that are not able to provide the broad range of additional services that are available in our modern purpose built premises. In the 2014 BMA Survey of GP practices 40% of GPs stated that their premises were not fit for purpose².

The demands on our health service are increasing. An ageing population places greater demands on our GPs. There are 4.2 million people aged over 75 in England and this age group has twice as many GP consultations as the average person. Population forecasts predict a 30% increase in this demographic over the next ten years and this will have a corresponding increase in the demands on GPs.

In addition to an ageing population the number of people with long-term conditions is also increasing and the number of people living with more than one long-term condition is forecast to increase from 1.9 million in 2008 to 2.9 million in 2018.

These increasing demands on primary care will be in the context of wider demands on the NHS in the decades to come. The NHS budget has increased from £80 billion to £120 billion in the last decade. This rate of growth is not sustainable and efficiencies need to be found to support the funding of the NHS.

The migration of services out of the acute, secondary sector and into the community, primary care sector is both a clinical and financial imperative to meet the increasing health needs of the population within reasonable budgetary constraints. A study from management consultants Deloitte LLP, commissioned by the Royal College of GPs, says that increasing the GP budget would save £5 for every £1 put in³.

The increasing role of the primary care sector and the importance of greater service provision in the community is highlighted in the NHS England Five Year Forward View. This document sets out the strategic priorities for the NHS and commits to invest more in primary care in order to generate overall savings in the NHS budget. This commitment has been continued with the announcement in December of the £1 billion Primary Care Infrastructure Fund, which provides capital for GP premises to support the greater provision of services, extended opening hours and new ways of working.

A further development is the increasing coordination of health and social care and the greater involvement of GPs in this service provision, as evidenced by the recent announcement of the devolved healthcare budget for Greater Manchester. This provides a unified funding model for primary care, secondary care and social care and is likely to be a model employed elsewhere in the country. A GP led model of integrated primary and social care in the community would be attractive to the NHS and enable these services to be delivered in an integrated and cost effective manner.

Restricted supply

The reorganisation of the NHS that was implemented in April 2013 led to a reduction in the number of approvals of new developments as the new organisational structures took time to be bedded in. Recent announcements by the NHS point to the approval process being at last resolved and we have recently received our first approval under the new process.

We are hopeful that approvals for new schemes will be forthcoming in the near future and we remain ready to provide the expertise and the capital to support this essential investment in the infrastructure of the NHS.

People

One of our core strategic priorities is Culture and we are committed to the development and training of our people. We have a small head office team of 30 people and crucial to our success is enhancing the skills of our teams. We have six people currently undergoing formal training. As a small team we outsource a number of functions and this is something that we constantly review. We have recently decided to recruit an experienced solicitor to join our senior leadership team as Head of Legal and we continue to monitor our resource requirements to make appropriate investment where necessary.

Outlook

We enter the new financial year with a strengthened financial position that has enhanced our ability to take advantage of a fragmented market place and the significant opportunity to support the NHS in its future plans for the increased provision of care in the primary care setting. Primary care continues to provide strong property fundamentals with good prospects for capital and income growth and the Board believes Assura's brand, expertise and scale position it well to capitalise on this.

Graham Roberts

Chief Executive

20 May 2015

¹    RCGP, January 2015

²    BMA, July 2014

³    Deloitte LLP, November 2014

 

Business Review

Portfolio as at 31 March 2015 £908.3 million (2014: £631.6 million)

Our business is based on our investment portfolio of 265 properties. This has a passing rent roll of £55.6 million (2014: £41.8 million), 87% of which is underpinned by the NHS. The WAULT is 14.4 years and 93% of the rent roll will still be contracted in 2025.

At 31 March 2015 our portfolio of completed investment properties was valued at a total of £908.3 million (2014: £631.6 million), which produced a net initial yield ("NIY") of 5.56% (2014: 5.98%). Taking account of potential lettings of unoccupied space and any uplift to current market rents on review, our valuers assess the net equivalent yield to be 5.77% (2014: 6.07%). Adjusting this Royal Institute of Chartered Surveyors standard measure to reflect the advanced payment of rents, the true equivalent yield is 5.98% (2014: 6.31%).

Our EPRA NIY, based on our passing rent roll and latest annual direct property costs, was 5.43% (2014: 5.85%).

	2015 £m	2014  £m
Net rental income	48.2	37.8
Valuation movement	21.4	12.4
Total Property Return	69.6	50.2

Expressed as a percentage of opening investment property plus additions, Total Property Return was 7.8% compared with 7.9% in 2014.

Our annualised Total Return over the last five years as calculated by IPD was 9.1% compared with the IPD All Healthcare Benchmark of 7.2% over the same period.

The valuation gain in the year of £21.4 million represents a 5.2% uplift on a like-for-like basis, as well as movements relating to properties acquired in the year, and has arisen as a result of the downward pressure on yields with increased competition for acquiring assets in the sector. Despite the downward pressure, the NIY on our assets continues to represent a substantial premium over the 15 year gilt which traded at 1.96% at 31 March 2015.

Investment and development activity

Despite the recent hiatus in NHS development approvals, we have invested substantially during the year.

Although this growth has primarily been through numerous acquisitions of completed investment properties, we have still completed four developments during the year with a total development cost of £19.4 million. This has added £1.4 million to our annual rent roll and generated a 7.2% yield on cost.

We recorded an unrealised revaluation deficit of £0.9 million during the year in respect of investment property under construction (2014: surplus of £1.3 million). Excluding the £3.3 million revaluation deficit in respect of the land at Scarborough, we recorded a gain of £2.4 million.

Despite the reduction in developments being approved we were able to source a number of properties through forward funding agreements.  As at 31 March 2015, we had five developments on site under such agreements, with a total committed investment value of £22.2 million, and a further two which we would hope to be on site shortly (estimated cost of £9.5 million).

The bulk of the growth in our investment portfolio has come from the acquisition of two portfolios and a number of standing investments. The table below highlights the main transactions:

Date	Portfolio/property	Property cost £m
Jun-14	MP Realty (28 properties)	107.0
Nov-14	Metro (11 properties)	63.1
Jul-14	One Life Building, Middlesbrough	12.3
Dec-14	South Kirkby	10.1
	Other (16 properties)	37.8
	Total	230.3

 

Portfolio management

We have continued to deliver rental growth and have successfully concluded on 137 rent reviews during the year to generate a weighted average annual rent increase of 1.27% (2014: 1.89%) on those properties. Our portfolio benefits from a 21% weighting in fixed and Retail Price Index ("RPI") uplifts which generated an average uplift of 3.06% during the year. The majority of our portfolio is subject to open market reviews and these have generated an average uplift of 0.38% during the year.

We work very hard at developing and maintaining customer relationships. This approach is carried across the range of services we provide both during development and after completion, as a portfolio manager. We have a dedicated team of asset managers who are in regular communication with our customers and we monitor progress through regular customer satisfaction surveys. All asset managers are appraised on their success in a continuous improvement on tenant interaction.

During the year we have successfully secured six new tenancies with an annual rent roll of £0.1 million covering 550 square metres. In addition we have significantly extended the lease on four properties.

Our EPRA Vacancy Rate was 3.2% (2014: 1.8%) which has increased during the year due to the level of expansion space included in portfolios acquired during the year. One of our focuses for the coming year is to reduce the vacancy rate.

Administrative expenses

The Group measures its operating efficiency as the proportion of administrative costs to the average gross investment property value. This ratio during the year was 0.72% (2014: 0.82%) and administrative costs stood at £5.7 million (2014: £5.0 million).

We also analyse cost performance by reference to our EPRA Cost Ratios (including and excluding direct vacancy costs) which were 17.7% and 16.3% respectively (2014: 20.2% and 18.4%). This is now our key KPI as reported on page 28 of our Annual Report 2015.

Financing

From a financing perspective, the highlight of the year was the successful equity issuance in October 2014, which raised proceeds of £175 million, net of costs.

Our focus since then has been on investing the proceeds in primary care property but we have also made some adjustments to our lending arrangements to increase flexibility and take advantage of long-term interest rates which remain at historically low levels.

We have repaid our debt with Santander along with the associated interest rate swap, which was due for refinancing in November 2016, creating a large pool of unsecured assets.  When debt has been assumed alongside acquired properties we have negotiated an allowance from the vendor to reflect the cost of assumed debt.  These allowances have been utilised in full during the year to secure reduced interest rates on these facilities.

Further to this, we announce today that we have secured an increase in our available revolving credit facility from £30 million to £60 million for an initial five year term, with interest variable at 170 basis points above LIBOR further diversifying our available funding sources.

We continue to hold discussions with lenders to broaden our base of lenders, who have maintained their appetite to lend into our sector, and to ensure facilities are in place to support future acquisitions. At 31 March 2015, we had undrawn facilities and cash of £96.5 million.

Financing statistics	2015	2014
Net debt	£450.0m	£414.8m
Weighted average debt maturity	11.9 years	10.9 years
Weighted average interest rate	5.28%	5.28%
% of debt at fixed/capped rates	100%	98%
Interest cover1	160%	150%
Loan to value	48%	62%

¹    Interest cover is the number of times net interest payable is covered by underlying profit before net interest.

Our loan to value ratio currently stands at 48%, which is a level that the quality of our cash flows can comfortably support. 100% of the debt facilities are fixed with a weighted average debt maturity of 11.9 years compared with a WAULT of 14.4 years, which highlights the security of the cash flows of the business however, our new RCF give us access to variable rate funding.

Details of the facilities and their covenants are set out in Note 12 to this announcement.

Net finance costs in the year amounted to £26.6 million (2014: £21.9 million).

Underlying profit

	2015 £m	2014 £m
Net rental income	48.2	37.8
Administrative expenses	(5.7)	(5.0)
Net finance costs	(26.6)	(21.9)
Underlying profit	15.9	10.9

The movement in underlying profit can be summarised as follows:

	£m
Year ended 31 March 2014	10.9
Net rental income	10.4
Administrative expenses	(0.7)
Net finance costs	(4.7)
Year ended 31 March 2015	15.9

Underlying profit has grown 45.9% to £15.9 million in the year to 31 March 2015 following the property acquisitions completed during the year.

Underlying profit differs from EPRA earnings as it excludes accounting adjustments such as IFRS 2 charges for share-based payments and one-off expenses that we consider to be exceptional and not reflective of continuing underlying performance.

Earnings per share

The basic earnings per share ("EPS") from continuing operations for the year was 4.9 pence (2014: 4.5 pence) and on profit for the year was 4.9 pence (2014: 6.6 pence).

EPRA EPS, which excludes the net impact of valuation movements and gains on disposal, was 2.1 pence (2014: 1.7 pence).

Underlying profit per share omits accounting adjustments and certain exceptional items and has remained at 2.1 pence (2014: 2.1 pence) as the investment proceeds are still in the process of being deployed.

Based on calculations completed in accordance with IAS 34, share-based payment schemes are currently expected to be dilutive to EPS, with 20.7 million new shares expected to be issued based on the average share price for the three months to 31 March 2015. The following illustration is an extraction. Further details are provided in Note 5 to this announcement.

EPS measure	Basic	Diluted
Continuing operations	4.9p	4.7p
Profit for year	4.9p	4.7p
EPRA	2.1p	2.0p
Underlying	2.1p	2.0p

Dividends

Total dividends paid in the year to 31 March 2015 were £14.4 million or 1.85 pence per share (2014: 1.36 pence per share).

As a result of brought forward tax losses all dividends paid during the year were normal dividends (non-PID) with an associated tax credit.

We remain committed to maintaining a covered dividend that is progressive broadly in line with underlying rental growth.

The table below illustrates how our cash flows support the dividend we pay:

	2015 £m	2014 £m
Opening cash	38.6	35.7
Net cash flow from operations	16.9	7.9
Dividends paid	(14.4)	(7.2)
Investment:
Property and business acquisitions	(64.3)	(9.1)
Development expenditure	(14.0)	(23.5)
Sale of properties	4.2	3.3
Sale of discontinued operations	-	27.4
Other	0.1	-
Financing:
Proceeds from equity issuance	173.5	-
Net borrowings movement	(74.1)	4.1
Closing cash	66.5	38.6

Property additions during the year were £230.3 million, although the cash outflow was only £64.3 million after taking into account shares issued as consideration (£28.3 million), associated debt (£135.3 million) and net working capital assumed (£2.4 million).

Net assets

EPRA NAV movement

	£m	Pence per share
EPRA NAV at 31 March 2014	229.6	43.4
Underlying profit	15.9	2.1
Capital (revaluations and capital gains)	21.3	2.8
Dividends	(14.4)	(1.9)
Equity issuance	201.8	(1.4)
Other	(1.8)	(0.1)
EPRA NAV at 31 March 2015	452.4	44.9

Our Total Accounting Return per share for the year ended 31 March 2015 is 7.7% of which 1.85 pence per share (4.3%) has been distributed to shareholders and 1.5 pence per share (3.4%) is the movement on EPRA NAV including an element of dilution associated with the equity issuance in October 2014.

The equity issuance saw the Company raise proceeds of £175 million net of issuance costs. In addition, the Company issued 44,264,196 shares to the vendors of the MP Realty portfolio in June 2014 and a further 18,834,148 shares to the vendors of the Metro portfolio in November 2014. These shares issued as part consideration were priced based on the market value of the Company shares at the time of completion.

In January 2015, Assura plc replaced Assura Group Limited as the top company in the Group. This was completed through a scheme of arrangement, sanctioned by the Royal Court of Guernsey, which saw shares exchanged on a one-for-one basis. There was no change in the number of issued shares. The change was completed to align the Group's corporate structure with its tax jurisdiction and should enable it to develop even better commercial relationships with GPs and the NHS, which are the Group's principal customers.

Portfolio analysis by capital value

	Number of properties	Total value £m	Total value %
<£1m	37	25.2	3
£1-5m	180	451.6	50
£5-10m	36	253.3	27
>£10m	12	178.2	20
	265	908.3	100

Portfolio analysis by region

	Number of properties	Total value £m	Total value %
North	109	411.2	45
South	74	221.4	24
Midlands	55	201.2	22
Scotland	9	23.9	3
Wales	18	50.6	6
	265	908.3	100

 

 

Portfolio analysis by tenant covenant

	Total rent roll £m	Total rent roll %
GPs	38.1	69
NHS body	10.2	18
Pharmacy	4.3	8
Other	3.0	5
	55.6	100

 

Consolidated income statement

For the year ended 31 March 2015

		Note		Underlying £m	2015 Capital and other £m	Total £m	Underlying £m	2014 Capital and other £m	Total £m
Continuing operations
Gross rental and related income		2		51.1	-	51.1	39.9	-	39.9
Property operating expenses				(2.9)	-	(2.9)	(2.1)	-	(2.1)
Net rental income				48.2	-	48.2	37.8	-	37.8
Administrative expenses				(5.7)	-	(5.7)	(5.0)	-	(5.0)
Revaluation gains		7		-	21.4	21.4	-	12.4	12.4
(Loss)/gain on sale of property				-	(0.1)	(0.1)	-	0.2	0.2
Share-based payment charge				-	(0.7)	(0.7)	-	(0.7)	(0.7)
Exceptional items				-	-	-	-	(0.4)	(0.4)
Finance revenue				0.4	-	0.4	0.3	-	0.3
Finance costs		3		(27.0)	-	(27.0)	(22.2)	-	(22.2)
Gain on derivative financial  instruments			3	-	0.1	0.1	-	1.8	1.8
Profit before taxation				15.9	20.7	36.6	10.9	13.3	24.2
Taxation		4				0.6			(0.4)
Profit for the year from continuing operations						37.2			23.8
Discontinued operations
Profit for the year and gain on disposal from discontinued operations						-			11.2
Profit for the year attributable to equity holders of the parent						37.2			35.0
Earnings per share
from underlying profit	- basic		5	2.1p			2.1p
from continuing operations              - basic			5			4.9p			4.5p
	- diluted		5			4.7p			4.5p
on profit for year              - basic			5			4.9p			6.6p
- diluted			5			4.7p			6.6p

There were no items of other comprehensive income or expense and therefore the profit for the year also reflects the Group's total comprehensive income.    

 

Consolidated balance sheet

As at 31 March 2015

	Note	2015 £m	2014 £m
Non-current assets
Investment property	7	925.3	656.7
Investments		0.4	0.5
Property, plant and equipment		0.1	0.1
Deferred tax asset		1.3	0.7
		927.1	658.0
Current assets
Cash, cash equivalents and restricted cash	8	66.5	38.6
Trade and other receivables	9	8.3	5.5
Property assets held for sale	7	5.4	11.6
		80.2	55.7
Total assets		1,007.3	713.7
Current liabilities
Trade and other payables	10	18.9	14.8
Borrowings	12	8.0	5.9
Deferred revenue	11	12.7	9.9
Provisions		0.1	0.1
		39.7	30.7
Non-current liabilities
Borrowings	12	505.5	444.4
Obligations due under finance leases	10	3.0	3.0
Derivative financial instruments at fair value		-	1.8
Deferred revenue	11	6.9	6.8
Provisions		0.3	0.4
		515.7	456.4
Total liabilities		555.4	487.1
Net assets		451.9	226.6
Capital and reserves
Share capital	13	100.7	53.0
Own shares held	13	(1.8)	(1.9)
Share premium		-	77.1
Merger reserve		231.2	-
Reserves		121.8	98.4
Total equity		451.9	226.6
Net asset value per Ordinary Share      - basic	6	44.9p	42.8p
- diluted	6	44.0p	42.8p
Adjusted (EPRA) net asset value per Ordinary Share - basic	6	44.9p	43.4p
- diluted	6	44.0p	43.4p

The financial statements were approved at a meeting of the Board of Directors held on 20 May 2015 and signed on its behalf by:

Graham Roberts, Chief Executive                     Jonathan Murphy, Finance Director

 

 

Consolidated statement of changes in equity

For the year ended 31 March 2015

	Note		Share capital £m		Own shares held £m		Share premium £m		Merger reserve £m		Reserves £m		Total equity £m
1 April 2013				53.0		(1.9)		77.1		-		69.9	198.1
Profit attributable to equity holders				-		-		-		-		35.0	35.0
Total comprehensive income				-		-		-		-		35.0	35.0
Dividends		14		-		-		-		-		(7.2)	(7.2)
Employee share-based incentives				-		-		-		-		0.7	0.7
31 March 2014				53.0		(1.9)		77.1		-		98.4	226.6
Profit attributable to equity holders				-		-		-		-		37.2	37.2
Total comprehensive income				-		-		-		-		37.2	37.2
Issue of Ordinary Shares		13		47.7		-		160.8		-		-	208.5
Issue costs				-		-		(6.7)		-		-	(6.7)
Scheme of arrangement		13		-		-		(231.2)		231.2		-	-
Dividends		14		-		-		-		-		(14.4)	(14.4)
Own shares held				-		0.1		-		-		(0.1)	-
Employee share-based incentives				-		-		-		-		0.7	0.7
31 March 2015				100.7		(1.8)		-		231.2		121.8	451.9

 

 

Consolidated cash flow statement

For the year ended 31 March 2015

	Note	2015 £m	2014 £m
Operating activities
Rent received		50.8	39.3
Interest paid and similar charges		(26.9)	(22.3)
Fees received		1.0	0.9
Interest received		0.4	0.8
Cash paid to suppliers and employees		(8.4)	(10.8)
Net cash inflow from operating activities		16.9	7.9
Investing activities
Purchase of investment property		(64.3)	(2.5)
Development spend		(14.0)	(23.5)
Proceeds from sale of property		4.2	3.3
Proceeds from sale of LIFT investments		-	21.7
Proceeds from sale of businesses		-	6.0
Net loans received from/(advanced to) associated companies		0.1	(0.3)
Subsidiaries acquired		-	(6.6)
Net cash outflow from investing activities		(74.0)	(1.9)
Financing activities
Issue of Ordinary Shares		180.2	-
Issue costs paid on issuance of Ordinary Shares		(6.7)	-
Dividends paid	14	(14.4)	(7.2)
Repayment of loans	12	(64.1)	(5.1)
Long-term loans drawdown	12	-	9.2
Cash settlement of loan fair value adjustments		(7.8)	-
Swap cash settlement		(1.7)	-
Loan issue costs		(0.5)	-
Net cash inflow/(outflow) from financing activities		85.0	(3.1)
Increase in cash and cash equivalents		27.9	2.9
Opening cash and cash equivalents		38.6	35.7
Closing cash and cash equivalents	8	66.5	38.6

 

Notes to the preliminary results
for the year ended 31 March 2015

1. Significant accounting policies

Basis of preparation

The financial information set out in this preliminary announcement is derived from but does not constitute the Group's statutory accounts for the year ended 31 March 2015 and 31 March 2014, and as such, does not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards ("IFRSs"). The financial information has been extracted from the Group's audited consolidated statutory accounts upon which the auditor has issued has unqualified opinion.

The Annual Report will be posted to Shareholders on or before 31 July 2015.

The Preliminary Announcement was approved by the Board of Directors on 20 May 2015.

The Announcement can also be accessed on the internet at www.assuraplc.com.

Standards affecting the financial statements

The following standards and amendments became effective for the Company in the year ended 31 March 2015. The pronouncements either had no material impact on the financial statements or resulted in changes in presentation and disclosure only:

·  IFRS 10 Consolidated Financial Statements

·  IFRS 11 Joint Arrangements

·  IFRS 12 Disclosure of Interests in Other Entities

·  IAS 27 Separate Financial Statements (2011)

·  IAS 28 Investments in Associates and Joint Ventures (2011)

·  Amendments to IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities

·  Amendments to IAS 36 Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets

·  Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting

Standards in issue not yet effective

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

- IFRS 9 Financial Instruments (1 January 2018)

- IFRS 15 Revenue from Contracts with Customers (1 January 2018)

- Amendments to IAS 1 Disclosure Initiatives (1 January 2017)

The financial statements are prepared on a going concern basis as explained in the Directors' report on page 73 of the Annual Report 2015 and are presented in sterling.

The accounting policies have been applied consistently to the results, other gains and losses, liabilities and cash flows of entities included in the consolidated financial statements. All intragroup balances, transactions, income and expenses are eliminated on consolidation.

Significant judgements and key estimates

The preparation of the financial statements requires management to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

Property valuations

The key source of estimation and uncertainty relates to the valuation of the property portfolio, where a valuation is obtained twice a year from professionally qualified external valuers. The evidence to support these valuations is based primarily on recent, comparable market transactions on an arm's length basis. However, the assumptions applied are inherently subjective and so are subject to a degree of uncertainty. Property valuations are one of the principal uncertainties of the Group.

Accounting for acquisitions and disposals

A degree of judgement is required in relation to acquisitions to determine whether they should be accounted for as business combinations under IFRS 3 or as asset purchases. Consideration is taken of all the facts concerning the transaction in making the appropriate judgement. In addition, the fair value of assets and liabilities acquired as part of the transaction must be determined, which is based on external market evidence where available.

Basis of consolidation

Subsidiaries

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities.

In the Company financial statements, investments in subsidiaries are held at cost less any provision for impairment.

Where properties are acquired through the purchase of a corporate entity but the transaction does not meet the definition of a business combination under IFRS 3, the purchase is treated as an asset acquisition. Where the acquisition is considered a business combination, the excess of the consideration transferred over the fair value of assets and liabilities acquired is held as goodwill, initially recognised at cost with subsequent impairment assessments completed at least annually. Where the initial calculation of goodwill arising is negative, this is recognised immediately in the income statement.

Property portfolio

Properties are externally valued on an open market basis as at the balance sheet date and are recorded at valuation.

Any surplus or deficit arising on revaluing investment properties and investment property under construction ("IPUC") is recognised in the income statement.

All costs associated with the purchase and construction of IPUC are capitalised including attributable interest. Interest is calculated on the expenditure by reference to specific borrowings where relevant and otherwise on the average rate applicable to short-term loans. When IPUC are completed, they are classified as investment properties.

In determining whether leases and related properties represent operating or finance leases, consideration is given to whether the tenant or landlord bears the risks and rewards of ownership.

Leasehold properties that are leased out to tenants under operating leases are classified as investment properties or development properties, as appropriate, and included in the balance sheet at fair value.

Where an investment property is held under a head lease it is initially recognised as an asset as the sum of the premium paid on acquisition and the present value of minimum ground rent payments. The corresponding rent liability to the head leaseholder is included in the balance sheet as a finance lease obligation.

The market value of investment property as estimated by an external valuer is increased for the unamortised pharmacy lease premium held at the balance sheet date.

Net rental income

Rental income is recognised on an accruals basis and recognised on a straight line basis over the lease term. A rent adjustment based on open market estimated rental value is recognised from the rent review date in relation to unsettled rent reviews. Pharmacy lease premiums received from tenants are spread over the lease term, even if the receipts are not received on such a basis. The lease term is the non-cancellable period of the lease.

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

Gains on sale of properties

Gains on sale of properties are recognised on the completion of contract, and are calculated by reference to the carrying value at the end of the previous reporting period, adjusted for subsequent capital expenditure.

Financial assets and liabilities

Trade receivables and payables are initially recognised at fair value and subsequently measured at amortised cost and discounted as appropriate.

Other investments are shown at amortised cost and held as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate.

Debt instruments are stated at their net proceeds on issue. Finance charges including premiums payable on settlement or redemption and direct issue costs are spread over the period to redemption at a constant rate on the carrying amount of the liability.

Financial instruments

Where the Group uses derivative financial instruments, in the form of interest rate swaps, to hedge its risks associated with interest rate fluctuations they are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
re-measured at their fair value by reference to market values for similar instruments. The resulting gains or losses are recognised through the income statement.

Cash equivalents are limited to instruments with a maturity of less than three months.

Tax

Current tax is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are not taxable (or tax deductible).

Deferred tax is provided on items that may become taxable at a later date, on the difference between the balance sheet value and tax base value, on an undiscounted basis.

Income statement definitions

Underlying profit represents adjusted earnings, with further Company adjustments to exclude items such as property revaluations, exceptional items and share-based payment charges. These adjustments have been made on the basis they are non-cash fair value adjustments, which are not reflective of the underlying performance of the business.

Capital and other represents all other statutory income statement items that are not considered underlying, including exceptional items.

Employee costs

Defined contribution pension plans

Obligations for contributions to defined contribution pension plans are charged to the income statement as incurred.

Share-based employee remuneration

Share-based employee remuneration is determined with reference to the fair value of the equity instruments at the date at which they are granted and charged to the income statement over the vesting period on a straight line basis. The fair value of share options is calculated using the Black Scholes option pricing model or the Monte Carlo Model and is dependent on factors including the exercise price, expected volatility, option life and risk-free interest rate. IFRS 2 Share-based Payment has been applied to share options granted.

Segmental information

In previous periods, the Group ran more than one operating segment. Following the sale of the majority of assets in the Non-Core segment, the Group is now run as one business and as such no segmental analysis is presented for the current or prior year results.

2. Revenue

	2015 £m	2014 £m
Rental revenue	50.1	39.0
Other related income	1.0	0.9
Gross rental and related income	51.1	39.9
LIFT interest (through discontinued operations)	-	0.6
Bank and other interest	0.4	0.3
	0.4	0.9
Total revenue	51.5	40.8

3. Finance costs

	2015 £m	2014 £m
Interest payable	27.1	22.4
Interest capitalised on developments	(0.4)	(0.6)
Amortisation of loan issue costs	0.6	0.5
Amortisation of loan fair value adjustments	(0.3)	(0.1)
	27.0	22.2
Change in fair value of interest rate swaps	(0.1)	(1.8)
	26.9	20.4

Interest was capitalised on property developments at 5% (2014: 5%).

 

 

4. Taxation

Consolidated income tax	2015 £m	2014 £m
Deferred tax
Relating to origination and reversal of temporary differences	(0.6)	0.4
Income tax (credit)/charge reported in consolidated income statement	(0.6)	0.4

The differences from the standard rate of tax applied to the profit before tax may be analysed as follows:

	2015 £m	2014 £m
Profit from continuing operations before taxation	36.6	24.2
Profit from discontinued operations before taxation	-	11.2
Net profit before taxation	36.6	35.4
UK income tax at rate of 21% (2014: 23%)	7.7	8.1
Effects of:
Non-taxable income (including REIT exempt income)	(8.9)	(7.8)
Expenses not deductible for tax purposes	2.2	0.5
Movement in unrecognised deferred tax	(1.6)	(0.4)
	(0.6)	0.4

The Group elected to be treated as a UK REIT with effect from 1 April 2013. The UK REIT rules exempt the profits of the Group's property rental business from corporation tax. Gains on properties are also exempt from tax, provided they are not held for trading or sold in the three years post completion of development. The Group will otherwise be subject to corporation tax at 20% (2015: 21%).

The Group tax (credit)/charge relates to its non-property income. As the Group has sufficient brought forward tax losses, no tax is due and so the amount represents the movement in deferred tax.

As a REIT, the Group is required to pay Property Income Distributions ("PIDs") equal to at least 90% of the Group's rental profit calculated by reference to tax rules rather than accounting standards. In the year to 31 March 2015 the taxable rental profit of the Group was £nil as a result of capital allowances available, and consequently no PID was required.

To remain as a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activities and the balance of business. The Group remains compliant at 31 March 2015.

A further reduction in the main rate of corporation tax has been substantively enacted; the rate reduced to 20% from 1 April 2015. This change has been reflected in the calculation of deferred tax.

 

 

5. Earnings per Ordinary Share

	Earnings	Adjusted (EPRA) earnings	Earnings	Adjusted (EPRA) earnings
	2015 £m	2015 £m	2014 £m	2014 £m
Profit for the year from continuing operations	37.2	37.2	23.8	23.8
Acquisition costs and negative goodwill		-		(0.2)
Revaluation gains		(21.4)		(12.4)
Revaluation of derivative financial instruments		(0.1)		(1.8)
Loss/(gain) on sale of property		0.1		(0.2)
Adjusted (EPRA) earnings		15.8		9.2
Weighted average number of shares in issue - basic	763,163,756	763,163,756	529,548,924	529,548,924
Potential dilutive impact of VCP	20,723,772	20,723,772	-	-
Weighted average number of shares in issue - diluted	783,887,528	783,887,528	529,548,924	529,548,924
Earnings per Ordinary Share from continuing operations	4.9p	2.1p	4.5p	1.7p
Earnings per Ordinary Share from discontinued operations	-	-	2.1p	2.1p
Earnings per Ordinary Share - basic	4.9p	2.1p	6.6p	3.8p
Earnings per Ordinary Share from continuing operations	4.7p	2.0p	4.5p	1.7p
Earnings per Ordinary Share from discontinued operations	-	-	2.1p	2.1p
Earnings per Ordinary Share - diluted	4.7p	2.0p	6.6p	3.8p

Underlying profit per share of 2.1 pence (2014: 2.1 pence) has been calculated as underlying profit for the year as presented on the income statement of £15.9 million (2014: £10.9 million) divided by the weighted average number of shares in issue of 763,163,756 (2014: 529,548,924). Based on the diluted weighted average shares, underlying profit per share is 2.0 pence (2014: 2.1 pence).

As set out on page 66 of the Annual Report 2015, the current estimated number of shares over which nil-cost options may be issued to participants is 24.6 million. After allowing for shares held by the Employee Benefit Trust, this would amount to a potential issuance of a further 20.7 million shares over the course of the next three years.

 

6. Net asset value per Ordinary Share

	Net asset value 2015 £m	Adjusted (EPRA) net asset value 2015 £m	Net asset value 2014 £m	Adjusted (EPRA)  net asset value 2014 £m
Net assets	451.9	451.9	226.6	226.6
Own shares held		1.8		1.9
Derivative financial instruments		-		1.8
Deferred tax		(1.3)		(0.7)
NAV in accordance with EPRA		452.4		229.6
Number of shares in issue	1,006,900,141	1,006,900,141	529,548,924	529,548,924
Potential dilutive impact of VCP (Note 5)	20,723,772	20,723,772	-	-
Diluted number of shares in issue	1,027,623,913	1,027,623,913	529,548,924	529,548,924
NAV per Ordinary Share - basic	44.9p	44.9p	42.8p	43.4p
NAV per Ordinary Share - diluted	44.0p	44.0p	42.8p	43.4p

		Adjusted net asset value 2015 £m		Adjusted net asset value 2014 £m
EPRA NAV		452.4		229.6
Mark to market of derivative financial instruments		-		(1.8)
Mark to market of fixed rate debt		(90.7)		(5.5)
EPRA NNNAV		361.7		222.3
EPRA NNNAV per Ordinary Share		35.9p		42.0p

The EPRA measures set out above are in accordance with the Best Practices Recommendations of the European Property Real Estate Association dated December 2014.

Mark to market adjustments have been provided by third party valuers in the case of fixed rate debt or the counterparty in the case of derivative financial instruments.

 

 

7. Property assets

Investment property and investment property under construction ("IPUC")

Properties are stated at fair value, which has been determined for the Group by Savills Commercial Limited and Jones Lang LaSalle as at 31 March 2015. The properties have been valued individually and on the basis of open market value in accordance with RICS valuation - Professional Standards 2014 ("the Red Book").

Initial yields mainly range from 5.25% to 5.50% (2014: 5.60% to 5.80%) for prime units. For properties with weaker tenants, poorer units or held under short leaseholds, the yields range between 6.25% and 22.40% (2014: 6.50% and 18.30%).

A 0.25% shift of valuation yield would have approximately a £42.8 million (2014: £27.7 million) impact on the investment property valuation.

	Investment 2015 £m	IPUC 2015 £m	Total 2015 £m	Investment 2014 £m	IPUC 2014 £m	Total 2014 £m
Opening fair value	638.8	14.8	653.6	539.9	14.3	554.2
Additions:
- acquisitions	229.8	0.5	230.3	63.5	-	63.5
- improvements	0.7	-	0.7	1.9	-	1.9
	230.5	0.5	231.0	65.4	-	65.4
Development costs	-	14.0	14.0	-	23.7	23.7
Transfers	24.5	(24.5)	-	24.8	(24.8)	-
Transfer from assets held for sale	1.5	4.7	6.2	0.2	0.2	0.4
Capitalised interest	-	0.4	0.4	-	0.6	0.6
Disposals	(2.0)	(2.3)	(4.3)	(2.6)	(0.5)	(3.1)
Unrealised surplus/(deficit) on revaluation	22.3	(0.9)	21.4	11.1	1.3	12.4
Closing market value	915.6	6.7	922.3	638.8	14.8	653.6
Add finance lease obligations recognised separately	3.0	-	3.0	3.1	-	3.1
Closing fair value of investment property	918.6	6.7	925.3	641.9	14.8	656.7

	2015 £m	2014 £m
Market value of investment property as estimated by valuer	908.3	631.6
Add IPUC	6.7	14.8
Add pharmacy lease premiums	7.3	7.2
Add finance lease obligations recognised separately	3.0	3.1
Fair value for financial reporting purposes	925.3	656.7
Investment property held for sale	-	2.0
Vacant property held for sale	0.6	0.1
Land held for sale	4.8	9.5
Total property assets held for sale	5.4	11.6
Total property assets	930.7	668.3

Three property investments and eight land sites are held as available for sale (2014: two property investments and 10 land sites).

Fair value hierarchy

The fair value measurement hierarchy for all investment property and investment property under construction as at 31 March 2015 was Level 3 - Significant unobservable inputs (2014: Level 3). There were no transfers between Levels 1, 2 or 3 during the year.

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

Valuation techniques: market comparable method

Under the market comparable method (or market comparable approach), a property's fair value is estimated based on comparable transactions.

Unobservable inputs

These include: estimated rental value ("ERV") based on market conditions prevailing at the valuation date; estimated average increase in rent based on both market estimations and contractual situations; equivalent yield (defined as the weighted average of the net initial yield and reversionary yield); and the physical condition of the property determined by inspections on a rotational basis.

8. Cash, cash equivalents and restricted cash

	2015 £m	2014 £m
Cash held in current account	65.3	27.6
Restricted cash	1.2	11.0
	66.5	38.6

Restricted cash arises where there are interest payment guarantees, cash is ring-fenced for committed property development expenditure, which is released to pay contractors' invoices directly, or under the terms of security arrangements under the Group's banking facilities or its bond.

9. Trade and other receivables

	2015 £m	2014 £m
Trade receivables	5.6	3.4
Prepayments and accrued income	1.1	1.4
Other debtors	1.6	0.7
	8.3	5.5

Trade and other receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.

The Group's principal customers are invoiced and pay quarterly in advance, usually on the English quarter days. Other debtors are generally on 30-60 days' terms. No bad debt provision was required during the year (2014: £nil).

As at 31 March 2015 and 31 March 2014, the analysis of trade debtors that were past due but not impaired is as follows:

			Past due but not impaired
	Total £m	Neither past due nor impaired £m	>30 days £m	>60 days £m	>90 days £m	>120 days £m
2015	5.6	5.0	0.4	-	0.2	-
2014	3.4	2.8	0.1	-	0.1	0.4

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

The amount due over 120 days related to one property for which there was a legal dispute to clarify the terms of the lease.

10. Trade and other payables

	2015 £m	2014 £m
Trade creditors	2.5	1.6
Other creditors and accruals	13.5	11.7
VAT creditor	2.9	1.4
Payments due under finance leases	-	0.1
	18.9	14.8

Finance lease arrangements are in respect of investment property held by the Group on leasehold property. The amounts due after more than one year, which total £3.0 million (2014: £3.0 million), have been disclosed in non-current liabilities on the consolidated balance sheet.

The fair value of the Group's lease obligations is approximately equal to their carrying value.

 

 

11. Deferred revenue

	2015 £m	2014 £m
Arising from rental received in advance	12.3	9.5
Arising from pharmacy lease premiums received in advance	7.3	7.2
	19.6	16.7
Current	12.7	9.9
Non-current	6.9	6.8
	19.6	16.7

 

12. Borrowings

	2015 £m	2014 £m
At 1 April	450.3	392.1
Amount issued or drawn down in year	-	9.2
Amount repaid in year	(64.1)	(5.1)
Assumed with acquisition of properties/subsidiaries	135.3	53.7
Amortisation of loan fair value adjustments	(0.3)	(0.1)
Cash settlement of loan fair value adjustments	(7.8)	-
Loan issue costs	(0.5)	-
Amortisation of loan issue costs	0.6	0.5
At 31 March	513.5	450.3
Due within one year	8.0	5.9
Due after more than one year	505.5	444.4
At 31 March	513.5	450.3

The Group has the following bank facilities:

1.   10-year senior secured bond for £110 million at a fixed interest rate of 4.75% maturing in December 2021. The secured bond carries a loan to value covenant of 75% (70% at the point of substitution of an investment property or cash) and an interest cover requirement of 1.15 times (1.5 times at the point of substitution).

2.   Loans from Aviva with an aggregate balance of £406.6 million at 31 March 2015 (2014: £284.5 million), including £127.6 million of loans following the various acquisitions during the year. The Aviva loans are partially amortised by way of quarterly instalments and partially repaid by way of bullet repayments falling due between 2021 and 2044 with a weighted average term of 13 years to maturity; £8.0 million is due within a year. These loans are secured by way of charges over specific medical centre investment properties with cross-collateralisation between the loans and security. The loans are subject to fixed all-in interest rates ranging between 4.11% and 6.66%, and a weighted average of 5.43% and do not have loan to value covenants. The loans carry a debt service cover covenant of 1.05 times, calculated across all loans and secured properties.

      The principal amount of the debt assumed with the various acquisitions during the year was £128.8 million. The debt has been recorded on the balance sheet at £135.3 million, which represents the fair value as determined by the Group at the point of acquisition. In December 2014, an amount equal to the unamortised fair value provision of £7.8 million was paid to Aviva to reset the interest rate on all mortgages assumed with the acquisitions completed in the 2014 and 2015 financial years. The interest rate on loans with principal outstanding of £177.5 million was reset, with the weighted average rate on these loans reducing from 5.54% to 5.12%.

3.   Five-year club revolving credit facility with RBS and Barclays for £30.0 million at an initial margin of 1.85% above LIBOR, expiry in May 2019. The facility reduces to £27.5 million and £25.0 million in years four and five respectively, with the loan to value covenant also reducing from 65% to 60% in these years. The facility is also subject to a historical interest cover requirement of at least 1.75% and a weighted average lease length of nine years. The margin increases to 2.2% where amounts are drawn and the loan to value ratio is in excess of 60%. The facility attracts a non-utilisation fee equal to 40% of the applicable margin. The facility was undrawn at 31 March 2015.

As at 31 March 2014, the Group had drawn £57.4 million under an investment facility from Santander. This loan had an interest rate of 1.95% above LIBOR, with an interest rate swap taken out on £50.0 million at 2.575% to hedge against investments in LIBOR. The debt was repaid in full on 4 November 2014 along with the associated swap liability.

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

13. Share capital

	Number of shares 2015	Share capital 2015 £m	Number of shares 2014	Share capital 2014 £m
Ordinary Shares issued and fully paid
At 1 April	529,548,924	53.0	529,548,924	53.0
Issued 13 June 2014	44,264,196	4.4	-	-
Issued 15 October 2014	414,252,873	41.4	-	-
Issued 6 November 2014	18,834,148	1.9	-	-
At 31 March	1,006,900,141	100.7	529,548,924	53.0
Own shares held	(3,911,551)	(1.8)	(4,064,885)	(1.9)
Total share capital	1,002,988,590	98.9	525,484,039	51.1

On 13 June 2014, 44,264,196 Ordinary Shares were issued as part consideration for the acquisition of the MP Realty portfolio. Based on the closing share price on 12 June 2014 of 42.75 pence per Ordinary Share the shares were valued at £18.9 million and this has been allocated accordingly between share capital (£4.4 million) and share premium (£14.5 million). Issue costs totalling £0.2 million were incurred and have been allocated against share premium.

On 15 October 2014, 414,252,873 Ordinary Shares were issued by way of a Firm Placing, Placing and Open Offer and Offer for Subscription at a price of 43.5 pence per Ordinary Share. Gross proceeds to the Company were £180.2 million, which has been allocated accordingly between share capital (£41.4 million) and share premium (£138.8 million). Issue costs totalling £5.8 million were incurred and have been allocated against share premium.

On 6 November 2014, 18,834,148 Ordinary Shares were issued as part consideration for the acquisition of the Metro portfolio. Based on a closing share price on 5 November 2014 of 50 pence per Ordinary Share the shares were valued at £9.4 million and this has been allocated accordingly between share capital (£1.9 million) and share premium (£7.5 million). No issue costs were incurred.

On 28 January 2015, a scheme of arrangement proposed by the Group under Part VIII of the Companies (Guernsey) Law, 2008, as sanctioned by the Royal Court of Guernsey became effective resulting in Assura plc replacing Assura Group Limited as the top company in the Group. The scheme was implemented through all shareholders at 27 January 2015 exchanging shares on a one-for-one basis. The newly issued shares in Assura plc were admitted to trading on the London Stock Exchange at 8.00am on 28 January 2015. The share capital of Assura plc is 1,006,900,141. The accounting for group reorganisations is not within the scope of IFRS 3 and accordingly, as required under IAS 8, the Company has referred to current UK GAAP for suitable guidance. This capital restructuring has been accounted for under merger accounting principles meaning the consolidated accounts are presented as if the Group had always been constructed this way.

Movements in the above table prior to 28 January 2015 relate to Assura Group Limited, with all subsequent movements relating to Assura plc.

Assura plc was incorporated on 10 December 2014 with total share capital of £50,000, being two Ordinary Shares of 10 pence and 499,998 redeemable preference shares of 10 pence. These shares were redeemed and cancelled following the scheme of arrangement.

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

 

14. Dividends paid on Ordinary Shares

Payment date	Pence per share	Number of Ordinary Shares	2015 £m	2014 £m
21 January 2015	0.5	1,006,900,141	5.0	-
5 November 2014	0.45	988,065,993	4.4	-
23 July 2014	0.45	573,813,120	2.6	-
23 April 2014	0.45	529,548,924	2.4	-
22 January 2014	0.45	529,548,924	-	2.4
23 October 2013	0.3025	529,548,924	-	1.6
24 July 2013	0.3025	529,548,924	-	1.6
24 April 2013	0.3025	529,548,924	-	1.6
			14.4	7.2

A dividend of 0.5 pence per share was paid to shareholders on 30 April 2015.

A quarterly dividend for 2015/16 of 0.5 pence per share is currently planned to be paid on 22 July 2015 to shareholders on the share register at 10 July 2015.

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

All dividends up to and including 21 January 2015 were paid by Assura Group Limited. Following the scheme of arrangement, all dividends from 30 April 2015 will be paid by Assura plc.

15. Commitments

At the year end the Group had five (2014: five) developments on-site with a contracted total expenditure of £22.2 million (2014: £21.5 million) of which £6.1 million (2014: £12.5 million) had been expended. 

16. Post balance sheet events

Subsequent to the year end, a subsidiary of the Group has extended the existing revolving credit facility from £30 million to £60 million with the potential to extend further to £90 million.

 

END

 

 

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