Annual Report • Mar 31, 2013
Annual Report
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20 13
INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY
| OVERVIEW | |
|---|---|
| Business highlights | 4 |
| Chairman's statement | 5 |
| Chief Executive's statement | 7 |
| The Assura portfolio | 9 |
| Case studies | 10 |
| BUSINESS & FINANCIAL REVIEW | |
| Our market | 13 |
| Key performance indicators | 17 |
| Business review | 21 |
| Risk management | 31 |
| GOVERNANCE | |
| The Board | 34 |
| Corporate Governance | 35 |
| Remuneration Committee report | 48 |
| Statement of Directors' responsibilities | 64 |
| Independent auditor's report | 65 |
|---|---|
| Consolidated income statement | 66 |
| Consolidated balance sheet | 67 |
| Consolidated statement of changes in equity |
68 |
| Consolidated cash flow statement | 69 |
| Notes to the accounts | 70 |
| Independent auditor's report | 105 |
| Company income statement | 106 |
| Company balance sheet | 107 |
| Company statement of changes in equity |
108 |
| Company cash flow statement | 109 |
| Notes to the company financial statements |
110 |
| OTHER INFORMATION | |
| Corporate information | 113 |
| Charities | 1 14 |
We believe patients and health professionals deserve modern primary care property which promotes wellbeing at the heart of the community.
for the year ended 31 March 2013
Converted to REIT status from 1 April 2013, enabling the Group to compete with other tax efficient investors and access a global specialist investor base
2 Dividend cover calculated on an annual basis and related to underlying profit
Net Asset Value – note 12
for the year ended 31 March 2013
This has been the year that Assura has started once again to deliver value to our shareholders by developing, owning and managing primary care properties. We completed the formation of a totally new Board with two appointments, Jenefer Greenwood as a Non-Executive Director, and Jonathan Murphy as Finance Director. This is on top of the appointment of Graham Roberts as Chief Executive right at the start of the financial year.
The turnaround of Assura has been based on a number of steps. Firstly, on appointment as Chairman in September 2011, I led the refinancing, Rights Issue and clear out of a historical derivative, as well as the completion of the refocusing of the business back to a pure primary care property group and the assembling of a 'FTSE 100 quality' Board. The appointment of Graham Roberts in March 2012 has since enabled him to take the business forward; building the strongest management team in the sector, investing in new properties for growth, selling non-core assets, and rebuilding Assura's reputation with investors.
Your Board believes that the primary care property market remains a highly attractive one with excellent risk-adjusted returns. Our business model, with internal management, means that we are, by some way, the lowest cost operator in the sector. It also means that we can capture more of the development opportunity and profits by providing an integrated 'develop, own & manage' service. It also means that as we grow, all of the benefits and scale gains accrue directly to our shareholders, and thence drive a progressive dividend. Everyone at Assura works for the benefit of our shareholders.
Finally we believe in being open and straightforward. We pay dividends out of earnings, not debt nor equity. We fully disclose our key metrics and operate a transparent balance sheet.
The performance of Assura has indeed reflected the success of this strategy, and we continue to lead the sector in delivering long-term property returns. Underlying profits were up 44% to £10.2 million, and EPRA net assets per share were up 6.3%, to 38.6 pence per share. We have also commenced quarterly dividends, already increasing them once and they are currently 1.21 pence per share on an annual basis. Investors have noticed this turnaround, with our share price finishing the year at 35.5 pence, up 16% on last year.
We have a strong Board, with Jenefer Greenwood now adding extra property expertise from 25 years in private practice, 10 years at Grosvenor and as a Non-Executive Director at The Crown Estate. Jonathan Murphy brings extensive financial control and financing experience. Graham Roberts has shown himself to be a dynamic and inspiring Chief Executive. Andrew Darke, who is our long-serving Property Director, has continued to ensure that we outperform the market in property returns as well as find new investments for the future.
We have only 26 employees in Assura, and I would like to thank each and every one for their hard work and contribution to this business.
In the year, we invested £22 million in new GP surgeries, as well as maintain a pipeline of £64 million in new planned developments. Developments have contributed £3.5 million development profits, equivalent to 15.3% profit on costs. £6.5 million of non-core assets held for sale at 30 September 2012 have been divested, amounting to 37% of the total identified with a further 34% under contract.
The company held 80 meetings with investors and attracted several large new institutions to the share register. We converted to REIT status allowing us to invest and divest without distortions caused by historical tax valuations.
We recognise the needs of investors to see sustainable long-term capital and dividend growth. Our principles are;
The Board looks forward to another year of progress, as the NHS reorganisation settles down and the overwhelming need for better quality primary care health facilities, funded by private sector capital, continues to reassert itself.
Simon Laffin Chairman
for the year ended 31 March 2013
I am pleased to be reporting to you on a year of excellent progress, where our focus has been on building the business for the future. We have achieved this whilst delivering an increase in underlying profits to £10.2 million, up 44%, and an increase in EPRA net assets of £12.2 million, up 6.3%, an increase of 2.3 pence per share to 38.6 pence per share. We commenced quarterly dividends. We will usually review once a year and did so recently with effect from the April payment with an increase of 6%. The current quarterly payment is equivalent to 1.21 pence per share on an annual basis.
The REIT conversion in April 2013 was an important milestone for the company. This is an important favourable government-backed tax regime that enables us to compete effectively with other tax efficient investors. It also confirms our commitment to remain property investors.
Our development pipeline continues to add value with a profit of £3.5 million in the year mainly from five completions. We have nine schemes now on site, with eleven new projects in the immediate future including four extensions. The flow of new projects in the market has slowed, as we forecast last year, so this pipeline is a positive reflection on the Assura brand and a credit to our team.
We made progress with selling non-core assets with two thirds of those assets identified for sale now either sold or under contract. The non-core portfolio has already become insignificant in size.
Our re-launched investor communication programme has attracted greater interest in our business from a wider audience.
There remains a considerable backlog of underinvestment in primary care infrastructure. We estimate in excess of £10 billion and the current NHS infrastructure is under severe pressure as acute hospitals and Accident and Emergency wards bear too much of the burden of ailments that are neither acute nor emergencies.
Our leadership position in providing state of the art primary care premises, adapted to each local community that it serves, means we are ideally placed to exploit this growing demand. The current market is however in somewhat of a hiatus due to the recent NHS reorganisation, which has led to a temporary slowing of the development pipeline over the short term. Market fundamentals nonetheless indicate this should continue to be one of the best performing sectors in the UK real estate market over the medium and long term.
Executing our strategy requires continuous improvement from our property team pursuing asset management and development opportunities. We will increase our marketing efforts to ensure we are best placed to capture new projects.
Going forward we will be engaging more fully with the new commissioning bodies giving our input into the strategic thinking about estates planning. This was not adequately dealt with in the Health and Social Care Act 2012 and we have a contribution to make to ensure it gets the priority it deserves. It is clear from recent ministerial and NHS comments that the fundamental structural shift of service provision from hospitals into the community has to become a reality soon. The process of getting there is challenging but the technical and financial wherewithal to provide the right premises exists. Low cost private sector capital is readily available for the NHS.
We are looking to expand even faster. Our internally managed business model is highly scalable, with only marginal additional costs as we add to our portfolio, leaving more for shareholders by way of a progressive dividend. In addition, by developing properties ourselves we consistently achieve 7% yields taking a profit on development, whereas our rivals who buy only developed premises achieve 1% lower yields.
We shall continue to set the standard for transparency. We began this last summer with new additional information on current rent review settlements from industry practice. We will also continue to target superior returns, paying progressive dividends from our secure cash flows.
Over the short term we consider that open market rental growth will remain subdued. In the meantime we benefit from our RPI linked and stepped leases. Capital growth will be modest although there remains a possibility of some favourable yield shift given the yield gap between property yields and the cost of finance.
There are encouraging signs that local area teams in NHS England are beginning to address the backlog of schemes, however this varies on a regional basis. We expect a pick up during the year although the long lead times from approvals to development starts, mean that competition for schemes in the current year will remain intense.
In the medium term, the dynamics of the sector are that healthcare, delivered by primary carers, is both preferred by patients and cheaper for the NHS. This however requires better GP premises, and we stand ready not only to provide the capital, but also the expertise and the ambition, to enable this. These strong market dynamics will, we believe, deliver healthy growth opportunities for Assura.
Chief Executive
Assura originally acquired both former surgery premises for St Hilary Brow Group Practice back in 2004, by way of a sale and leaseback arrangement. A plot of land adjacent to St Hilary's Church was later identified and acquired by Assura and planning permission gained for a new surgery development. In conjunction with development partner LSP Developments, proposals were developed and works started in 2011, with the centre being completed ahead of schedule in June 2012.
The development provides state of the art facilities for St Hilary Brow Group Practice, including a minor surgery suite and additional diagnostic services such as ultrasound and x ray, together with an on-site pharmacy operated by J. Cubbins & Son.
The building has been constructed with sustainability in mind and has a BREEAM rating of Very Good. It was officially opened in July 2012 by Sir David Nicholson, Chief Executive of the NHS.
Assura: Funder and long term landlord LSP Developments: Development Partner West Hart Partnership: Architect Pochins: Building Contractor
SENIOR PARTNER ST HILARY GROUP PRACTICE
"The practice has been completed to an extremely high standard. The extended services offered at the new centre will allow us to make speedier diagnoses, make more specific use of hospital resources and allows us to complete the cycle of care in one location."
Assura, together with development partner LSP developments, were appointed by the GP practices and Local Health Board to deliver this much needed new facility for Milford Haven. A former supermarket site was identified as the ideal location to relocate the Robert Street and Barlow House practices and was quickly secured for the development.
Completed in November 2012, the new primary care centre extends to just over 2,000m2 and provides state of the art facilities for the two practices and the Local Health Board, including modern treatment and minor operation suites. The building also boasts an integrated pharmacy and additional expansion space to support patient list and clinical service growth.
Assura: Funder and long term landlord LSP Developments: Development Partner West Hart Partnership: Architect Opco Construction: Building Contractor
"Our team is delighted with the new facilities – it's a major step forward for patients and the local community to have a large and up to date health centre with many trustees under one roof."
In a period of uncertainty in the wider property market the primary care property sector continues to provide investors with excellent risk adjusted returns.
The distinctive features of the sector provide the combination of long-term secure income, underpinned by the NHS, and continued rental growth. The attractiveness of the sector can clearly be seen in the stability of the returns it has delivered throughout the more challenging economic backdrop of the past few years:
The demand of the NHS on our primary care infrastructure is increasing as the broad trend for the migration of services away from acute hospitals into community based facilities continues. This is a policy that is supported by all of the major political parties. The combination of increasing demands (and costs) on the NHS and the national priority to reduce the budget deficit means that the more cost effective provision of medical care at the primary level is imperative. This underpins the demand for our properties.
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 14OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION The current primary care estate is in need of major investment in order to meet these increasing clinical demands. It is estimated that over 40% of the current 7,500 GP practices are not compliant with the requirements of the NHS. From 1 April 2013 all GPs premises are required to be registered and compliant with the requirements of the Care Quality Commission ("CQC"). The CQC is the regulatory body that monitors and regulates health organisations and health premises to ensure they meet certain minimum standards. We anticipate that there will be a significant number of GPs premises that will not be able to comply with the required standards from their current premises. We are already discussing these changes with GPs and we believe this will further increase the demand for modern purpose built premises across the sector.
Government policy is highly unlikely to support the required level of investment directly from the public purse. As a result, significant investment and involvement from the private sector is going to be required. It is likely that the majority of the investment will have to come from the GPs themselves or specialist sector investors such as Assura. We believe we are well placed to meet this demand.
The supply of premises has been suppressed as this is a sector where no speculative development occurs and premises are only ever built for an identified and agreed need by the health sector. In addition there is reduced residual risk as a purpose built medical centre providing services to a local community is unlikely to be relocated by the local GPs at the end of their lease. The level of disruption this would involve materially increases the likelihood of leases being renewed on expiry, which acts as a key differentiator in the sector to the office or retail property market.
On 1 April 2013 the changes enacted by the Health and Social Care Act (the "Act") came into force resulting in a fundamental reorganisation of the NHS and the way it commissions services. The key change is to place a large part of the NHS budget within the control of GPs under the auspices of the Clinical Commissioning Groups ("CCGs"). The CCGs replace the Primary Care Trusts ("PCTs"), which were abolished on the same day.
The changes have altered the way the NHS administers its property estate. NHS Property Services Limited ("NHS PropCo") a company wholly owned and funded by the Department of Health, was created in the year. NHS PropCo has taken on all of the premises previously leased to the PCTs and now represents 17% of our rent roll. The transfers have all now been completed and the risk profile of the business remains unchanged by the transfer of the estate from one Government entity to another. The majority of our premises are leased directly to GPs and the previous arrangements whereby GP's rent is reimbursed directly by the NHS remains unaffected.
The philosophy behind the changes is that the people closest to the patients and the ultimate service delivery are the ones best placed to make decisions on which services are to be provided and from which suppliers. This places GPs at the heart of commissioning services and can only accelerate the trend of a gradual increase in the range and volume of services provided at local primary care premises. In order to meet these needs the provision of purpose built specialist primary care premises will be essential.
The recent structural changes in the NHS have resulted in a slow-down in the commissioning of new premises as the bodies earmarked for abolition focused more on the proposed structural changes than commissioning new premises. The underlying requirement for investment in UK primary care health infrastructure remains unchanged. We remain well placed to support this essential investment and we anticipate sustained demand for this investment going forward.
In April 2013 NHS England published new guidelines covering the agreement of rent reviews subject to GP rent reimbursement. Previously the negotiation of the rent review settlement was between the landlord and the District Valuer, acting for the NHS. Under the new arrangement the GP must negotiate directly with the landlord and reach a settlement, which is then subject to the approval of the District Valuer. This increases the costs and the risks for the GP. Overall rent settlement levels should be unaffected, though this is likely to lead to increased delays in agreeing rent review settlement.
In addition to higher demand for new premises the required standard of specification for these premises continues to increase. One of the key objectives of Government policy is to ensure environmental responsibility throughout the NHS. Assura has long been involved in promoting the green building standards as measured by the Building Research Establishment Environmental Assessment Method ("BREEAM") and since the Department of Health introduced their guidelines in 2008 we continue to target a performance of "Excellent" for all of our new build schemes.
All of our current developments on-site are set to achieve an "Excellent" rating and incorporate a variety of sustainable technologies including passive design, ground/air source heat pumps and photovoltaic panels. In addition significant emphasis is given to high quality landscaping that adds to the ecological value of the site, with Sustainable Urban Drainage Systems ("SUDS"), biodiverse roofs and living walls, all features of current schemes.
To meet these standards and specifications there is an additional capital cost, which will lead to an upward pressure on market rents over time.
The primary care property sector has continued to enjoy rental growth in contrast to many other property sectors. In our sector rent reviews are agreed with the District Valuers, effectively acting for the NHS. However, the twin pressures of slower economic growth and government austerity measures have reduced the overall rate of rental growth.
A key driver of rental growth is the volume and increasing quality of new developments which "raises the bar" for rental settlements across the whole sector. As the number of new developments has been reduced as a result of the organisation changes in the NHS this has dampened this inflationary effect. We anticipate that once the new structures are bedded in and the development pipeline builds across the whole sector this inflationary pressure on rents should begin to build again. These impacts are unlikely to be in the current financial year.
The demand for primary care property remains strong and unaffected by any short term reduction in supply caused by NHS restructuring. The sector continues to deliver rental growth underpinned by excellent lease length and a strong covenant. The yield spread over long dated gilts has increased to some 355 bps on the core portfolio. This spread provides support for capital growth in the future and the prospects for the sector are strong.
Our vision is to be the UK's leading owner-manager and developer of primary care property. In order to be the leading player we need to demonstrate that we can consistently outperform over time. In order to measure ourselves against this objective we have a wide range of key performance indicators, but these can be distilled into three key areas.
Firstly Total Property Return, which measures our success in choosing the right investments and managing these over time. Secondly Total Accounting Return, which measures the returns we have delivered to our shareholders in the form of dividends paid and our growth in net asset value. Lastly, we consider Total Shareholder Return as measured by the stock market, which reflects the value of dividends paid and the relative movement in our share price over the period.
These measures are complementary and should build on each other although the share price movement is also affected by other external factors outside of our control. By managing the property and accounting
return over the medium term we should be able to deliver a superior Total Shareholder Return to our investors. This overriding objective is reflected in the long-term management incentive scheme, which was approved by shareholders this year. The Value Creation Plan ("VCP") provides incentives to management based on the Total Shareholder Return delivered to investors over a five-year time horizon. This is explained in more detail in the Remuneration Committee Report on pages 48 to 62.
In order to achieve these objectives we have established three strategic priorities and how we monitor ourselves against them is outlined below:
| Strategic priority | KPI and benchmarks | Explanation | Performance |
|---|---|---|---|
| Focused: Maintaining strategic focus on a highly attractive market |
Current and prior year |
All property KPIs are for the total portfolio including both Core and Non-Core |
|
| Assura has been a developer and owner-manager of primary care property for almost ten years. It is a sector where we have deep expertise and knowledge. |
Rental growth: 2013 – 2.4% 2012 – 3.4% |
Rental growth is the weighted average annualised uplift in rent reviews settled in the year. |
We have delivered strong rental growth of 2.4% against a backdrop of very slow growth in the property sector as a whole. The rate of growth is on a reducing trend though this represents a strong result. |
| The sector provides an attractive combination of long-term, secure income and by building on our strengths we believe we can generate superior Total Property Return from this sector. |
Total Property Return: 2013 – 7.2% 2012 – 6.2% |
Total Property Return measures the overall return generated by our properties on a debt free basis. It is calculated as the net rental income generated by the portfolio plus the change in our market values, divided by opening property assets plus additions. |
We have continued to deliver a Total Property Return in excess of our net initial yield as a result of a positive valuation result. |
| IPD 5 Year Total Return: Assura – 6.4% IPD – 4.0% |
We measure our performance against the All Healthcare Benchmark as calculated by IPD. |
Over the last 5 years, our Total Return of 6.4% compares to the All Healthcare Benchmark of 4.0%. |
|
| Lease length: 2013 – 14.8 yrs 2012 – 15.2 yrs |
The weighted average unexpired lease term ("WAULT") provides the average period until the first available break in our underlying property leases calculated on the basis of the weighted average of the underlying rent. |
Our lease length of 14.8 years provides an exceptional level of income certainty to underpin investor returns. |
|
| % of Tenant covenant NHS/GP: 2013 – 85.0% 2012 – 83.5% |
The proportion of our rent roll that is paid directly by GPs or NHS PropCo. |
An effective Government backing for 85% of our income provides exceptional security for our income at a healthy premium to the equivalent gilt rates. |
| Strategic priority | KPI and benchmarks | Explanation | Performance |
|---|---|---|---|
| Customer oriented: Adopting a broad and flexible approach to our customers |
Current and prior year |
||
| At the heart of our strategy is our customer and our willingness to work flexibly in delivering the property solutions to enable the delivery of a wider range of health services at primary care premises in the community. |
Number and value of developments completed: 2013 – 5 sites 2012 – 9 sites 2013 – £14.4m 2012 – £43.4m |
The number and valuation on completion of completed developments during the year. |
The NHS reorganisation has inevitably led to a slowdown in development activity and so the number of schemes we have been able to deliver has reduced. Despite this we have continued to work with the NHS on future developments and we currently have an indicative pipeline in excess of 40 schemes and £100 million. |
| We work with a range of suppliers to optimise the solution in each case. We also engage with our customer at the policy level both directly and indirectly through our trade bodies to ensure we are collaborating on the vision of the future of the health services provision in the primary care estate. |
Number and value of developments on site: 2013 – 9 sites 2012 – 6 sites 2013 – £34.9m 2012 – £18.0m |
The number and estimated valuation on completion of developments currently commenced at the year end. |
We believe the needs of the modern NHS require a significant increase in investment over the medium term and we remain confident of securing an increasing level of development opportunities as a result. |
| Investor aligned: Delivering transparent reporting and returns for investors |
Current and prior year |
||
| In addition to delivering excellent property level returns we must ensure that this is converted into returns for our shareholders as efficiently as possible. We work across a whole range of debt providers to ensure we source capital as efficiently as possible to enable us to fund our investments over the longer term at the optimal pricing point appropriate for the longevity of our income streams. |
Total Accounting Return: 2013 – 8.7% 2012 – (18.4%) |
Total Accounting Return is the overall return generated by the Group including the impact of debt. It is the combination of net income distributed to shareholders in the form of dividends and the growth in EPRA net asset value (EPRA NAV). It is calculated as the movement on EPRA NAV for the year plus the dividends paid, divided by the opening EPRA NAV for the year and is expressed as a percentage. Over time we would expect our Total Accounting Return to be a good proxy for our Total Shareholder Return. |
Our Total Accounting Return is in excess of our Total Property Return of 7.2%, which reflects the net positive impact of our borrowings and our efficient cost base. This level of return is a strong inflation-beating return for investors and is in line with our estimated cost of equity. |
| Our internally managed structure enables us to increase the scale of our operations with only a relatively modest increase in our cost base and enables us to retain all our development profits for shareholders. |
Admin costs as % of average portfolio value: 2013 – 0.89% 2012 – 0.87% |
This is measured as the total administrative costs for the year divided by the average investment property value for the year. It is expressed as a percentage. |
Our internally managed model enables us to ensure the maximum efficiency in converting our rental receipts into net returns for investors. This efficiency is magnified with a larger portfolio as our property management costs would increase only marginally despite a much higher rent roll. In the short-term we are intending to make further investments in our marketing efforts and so anticipate that this metric will decline slightly before rebounding strongly once the benefits of future growth are realised. |
| Strategic priority | KPI and benchmarks | Explanation | Performance |
|---|---|---|---|
| Investor aligned: Delivering transparent reporting and returns for investors |
Current and prior year |
||
| As well as delivering these efficiencies it is essential that we communicate our strategy and our performance transparently and consistently to our shareholders. |
Total Shareholder Return: 2013 – 18.6% 2012 – (25.6%) |
Total Shareholder Return 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 for the year expressed as a percentage. |
To further increase this efficiency we have converted to a REIT on 1 April 2013, which means we shall no longer suffer corporation tax on our property related business. Total Shareholder Return will differ to Total Accounting Return to the extent that there has also been a movement during the period of the ratio of the share price to the EPRA NAV. During the year we have successfully increased the average median daily volume of shares traded from an average of 45,000 in the first half of the year to an average of 145,000 in the second half of the year. The opening discount to EPRA NAV was some 15.6% and at 31 March 2013 was 8.1%. |
| Finally, the incentives for management are aligned with investors by the VCP being driven entirely by Total Shareholder Return over a five year period. |
Underlying profit per share: 2013 – 1.9p 2012 – 1.5p Dividend per share: 2013 – 0.855p 2012 – 1.25p |
The underlying profit per share is calculated as the underlying profit (see Income Statement definitions on page 72 for more detail on this definition) divided by the average number of shares in issue during the year. |
The prior year return was impacted by the realisation of a swap loss at £52.7 million and the Rights Issue. We have successfully increased underlying profits by 44% from £7.1 million to £10.2 million and on a per share basis by 26% from 1.5 pence per share to 1.9 pence per share. During the year the dividend policy was amended to be paid quarterly. We will usually review once a year and did so recently with effect from the April payment with an increase of 6%. The current quarterly payment is equivalent to 1.21 pence per share on an annual basis. |
For the period under review the refreshed management team has been focused on the core expertise and knowledge that has been built up over almost ten year's experience in the primary care sector.
We have established three strategic priorities:
Our business is built on our core investment portfolio of 162 medical centres. This has a passing rent roll of £34.1 million (2012: £32.2 million), which provides an excellent base for future shareholder returns with 89% of its income underpinned by the NHS and a weighted average unexpired lease term ("WAULT") of 15.1 years. The portfolio is diversified both geographically and by size.
4 Calculated as investment property (£523.6 million), plus investment property held for sale (£0.8 million)
We have continued to deliver rental growth despite the backdrop of the wider economic uncertainty and have successfully concluded on 118 rent reviews during the year to generate a weighted average annual rent increase of 2.4% (2012: 3.4%) on those properties.
Our portfolio benefits from a 20% weighting in fixed and RPI uplifts which generated an average uplift of 3.2% during the year. The majority of our portfolio is subject to open market reviews and these have generated an average uplift of 2% during the year. In common with the wider sector we have experienced a reduction in the rate of growth in open market reviews and we anticipate this trend will continue.
At 31 March 2013 our core portfolio was valued at a total of £524.4 million (2012: £505.7 million), which produced a net initial yield of 5.95% (2012: 5.89%) and a net equivalent yield of 6.15% (2012: 6.11%). Consistent with prior years our valuations have remained largely stable with an increase of 0.5% despite significant movements in the gilt markets.
Being customer oriented is one of our three strategic priorities and this is essential for sustaining and building our development pipeline. We work very hard at developing and maintaining customer relationships and this approach is carried across the range of services we provide both during development and on completion as an asset manager.
We have a dedicated team of asset managers that 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.
Our approach to development sourcing, which includes direct development, partnering with other developers and sale and leasebacks, means that we are able to meet a wide range of our potential customers' needs. In addition we offer potential customers a long-term commitment as development partner, landlord and asset manager. Our flexible approach, long track record and commitment as a long-term owner and asset manager of the sites we develop provides us with a distinctive position in the sector.
We have completed five developments during the year with a valuation at completion of £14.4 million. This has added £0.9 million to our annual rent roll and generated a 7.1% yield on cost and a 15.3% return on cost. We are currently on site with a further 9 developments with an estimated valuation on completion of £34.9 million.
Leading GPs recognise the operational improvements that can be achieved through investing in their premises' infrastructure enabling them to deliver more community-based services. This represents a clear alignment of GPs' interests and the policy developments of the NHS. In this context we are confident that renewed attention will be given to approvals for new primary care centre developments, reversing an observable decline over the last 18 months as the commissioning bodies within the NHS have been reorganised.
We have a strong track record in identifying opportunities and our focus on our customers will position us well to benefit from the pickup in development activity in due course.
Our asset management team is in constant contact with our GP tenants. This enables us to screen for value enhancing asset management opportunities such as lease extensions and redevelopment opportunities within our existing estate.
During the year we have successfully concluded on the renegotiation of five leases with an annual rent roll of £0.3 million. Negotiations are on-going with a further 12 tenants for new leases with an annual rent roll of some £1.2 million.
The core portfolio contributed to earnings before interest and exceptional items in the year as follows:
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Net rental income | 32.1 | 29.6 |
| Valuation movement | 5.4 | 8.5 |
| Total Property Return | 37.5 | 38.1 |
| MUCH OF THIS OUTPERFORMANCE DERIVES FROM THE PERFORMANCE OF THE NEW ADDITIONS AND OUR FOCUS ON RENT REVIEWS. |
||
|---|---|---|
| LIFT: £9.0 MILLION LOAN NOTES AND £2.2 MILLION EQUITY STAKES IN PUBLIC-PRIVATE CONSORTIA | ||
| We have investments in 7 LIFT companies, comprising loan notes and equity. | ||
| Local Improvement Finance Trusts ("LIFTs") are companies held by the public and private sector to develop and own medical centres predominantly let on long term inflation linked leases to NHS Commissioning Boards. The Group receives most of its current returns through its £9.0 million of loan stock. The carrying value of the LIFT investments at 31 March 2013 is £2.2 million, interest received was £1.0 million and our share of the profit in the consortia companies was £0.4 million contributing £1.4 million to underlying profit. |
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| Our strategy is to provide flexible solutions for our customer in addressing their property needs. Further evidence of our flexibility is in our on-going support for LIFT schemes. We invested £0.7 million this year in Merseycare Development Company to support the £28 million redevelopment of a mental health facility in Walton. Although not significant this is a further way we can support our customer base and assist the NHS as it continues to modernise its estate. LIFT companies have priority for funding developments in their local areas and offer us the opportunity for adding value through development funding. |
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| NON-CORE: £20.5 MILLION (2012: £26.3 MILLION) (COMPRISING £11.2 MILLION ASSETS HELD FOR SALE AND £9.3 MILLION OF INVESTMENT PROPERTY) |
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| We have prioritised the disposal of our surplus land and properties during the year and we have made excellent progress in selling 14 non-income producing properties, our former head office in Daresbury and surplus plots of land. These have resulted in proceeds of £8.4 million during the year and a further £1.7 million has been realised post year-end. |
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| 2013 | 2012 | |
| The valuation of our non-core portfolio produced a net initial yield of 13.6%. The non-core portfolio contributed to earnings in the year as follows: |
£m | £m |
| Net rental income Valuation movement |
1.6 0.6 |
1.3 (7.0) |
| Total Property Return | 2.2 | (5.7) |
| The non-core portfolio includes three retail malls (valued at £5.1 million) in hospitals which are held on short leases which expire on average in 16 years. These are challenging retail assets and have high direct property costs due to vacancies. Their valuation yields at 31 March 2013 were initial 16.11% (2012: 15.97%) and equivalent 12.44% (2012: 13.16%). |
||
| Other properties within non-core comprise surplus land of £9.7 million (2012: £9.1 million). Following the successful disposals in the year the largest asset available for sale is a plot of land in Scarborough, which is the subject of a conditional sale contract to a national supermarket chain. The land is valued at £6.25 million. |
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Net rental income | ||
| Core | 32.1 | 29.6 |
| Non-Core | 1.6 | 1.3 |
| 33.7 | 30.9 | |
| LIFT | ||
| Interest receivable | 1.0 | 0.9 |
| Share of profits | 0.4 | 0.6 |
| 1.4 | 1.5 | |
| Administration | (4.9) | (4.5) |
| Other finance revenue | 0.5 | 0.4 |
| Finance costs | (20.5) | (21.2) |
| Underlying profit | 10.2 | 7.1 |
The movement in underlying profit can be summarised as follows:
| £m | |
|---|---|
| Year ended 31 March 2012 | 7.1 |
| Net rental income | 2.8 |
| Administrative expenses | (0.4) |
| Share of profits of associates | (0.2) |
| Finance revenue | 0.2 |
| Finance costs | 0.7 |
| Year ended 31 March 2013 | 10.2 |
Underlying profit has grown 44% to £10.2 million in the year to 31 March 2013. The majority of this growth has been generated from underlying rental growth and the successful completion of developments. The result for 2013 includes £0.5 million of net underlying profit from rental income net of financing costs that relates to the former head office building in Daresbury, which was sold in December 2012 and therefore will not recur in 2014.
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 0.89% (2012: 0.87%) and administrative costs stood at £4.9 million (2012: £4.5 million). In order to maximise the opportunities in the sector the Group is considering further investment in the marketing area over the coming year.
The management structure of the Group means that it is able to manage increases in the number of properties under management with relatively modest increases in employee numbers. This should enable the Group to reduce the cost ratio as the portfolio expands, to the benefit of overall returns for shareholders.
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 26OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION On 1 April 2013 the Company elected to join the REIT regime. Following this date the Group will be free from taxes on rental income and capital gains from investment property disposals. Non-property related income will continue to be subject to corporation tax, though the Group currently has brought forward losses, which should minimise this liability from a cash perspective.
The charge for taxation recorded in the accounts relates to a movement on the deferred tax asset during the year. At the year-end the deferred tax asset was £1.1 million (2012: £1.3 million).
The adjusted (EPRA) basic and diluted earnings per share from continuing operations for the year was 3.1 pence (2012: 2.5 pence).
The Company has adopted a progressive dividend policy, payable on a quarterly payment cycle in line with the timing of its rental receipts.
Total dividends paid in the year to 31 March 2013 were £4.5 million or 0.855 pence per share (2012: 1.25 pence per share). The Board has announced an increase in the quarterly dividend for the year to 31 March 2014 of 6% to 0.3025 pence per share or 1.21 pence per share on an annual basis.
The increase in the quarterly dividend reflects the Board's confidence in the quality of the assets and in particular the underlying rental growth and the quality and longevity of the underlying tenant covenant. The level of dividend cover is consistent with the Group's policy of delivering sustained dividend growth over the medium term.
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Net cash from operations | 12.9 | 13.4 |
| Cash flows from investing activities: | ||
| Investment acquisitions | (3.6) | (5.1) |
| Development expenditure | (18.1) | (18.9) |
| Sale of properties | 8.4 | 2.6 |
| Sale of businesses | 3.6 | 22.3 |
| Other | (0.3) | (0.9) |
| Cash flows from financing activities: | ||
| Proceeds from share issues | - | 33.5 |
| Dividend paid | (4.5) | (5.1) |
| Net borrowings movement | 15.9 | (59.3) |
| Net increase/(decrease) in cash | 14.3 | (17.5) |
Net cash inflow from operating activities was £12.9 million (2012: £13.4 million), which represents a slight reduction from the prior year following the sale of the Pharmacy and LIFT consulting divisions in 2012. Development expenditure was £18.1 million (2012: £18.9 million) which was largely debt financed with facilities from both Aviva and Santander. Proceeds from the sale of properties were £8.4 million (2012: £2.6 million), which primarily represented the sale of the head office at Daresbury and were used to repay the associated loan with RBS at £4 million. Dividends paid were £4.5 million. Cash and cash equivalents increased by £14.3 million (2012: reduced by £17.5 million).
At 31 March 2013 the EPRA NAV per share was 38.6 pence per share, an increase of 6.3% compared with the prior year. The growth has predominantly been driven by the continued successful delivery of our development pipeline and the growth in rental values achieved in the year and interest savings. This has been achieved from the activities and expertise of our development and asset management teams rather than a general re-rating of the sector. The cost effective provision of these value-enhancing services ensures the maximum efficiency in the conversion of rental receipts into investor returns.
| £m | Pence per share |
|
|---|---|---|
| EPRA NAV at 31 March 2012 | 192.2 | 36.3 |
| Underlying profit | 10.2 | 1.9 |
| Capital (revaluations and capital gains) | 5.9 | 1.1 |
| Dividend | (4.5) | (0.9) |
| Other | 0.6 | 0.2 |
| EPRA NAV at 31 March 2013 | 204.4 | 38.6 |
| 192.2 10.2 5.9 (4.5) 0.6 204.4 2013 £359.5m 11.3 years 5.25% 99% 154% 62% |
£m | Pence per share |
|
|---|---|---|---|
| EPRA NAV at 31 March 2013 Our Total Accounting Return for the year ended 31 March 2013 of 8.7% comprises an income return of 0.855 pence per share (2.4%) that has been distributed to shareholders and a movement on EPRA NAV of 2.3 pence per share (6.3%). FINANCE Financing statistics Lending volumes to commercial property companies remains subdued. In these circumstances we are pleased that our existing lenders remain supportive including funding developments. We believe it is beneficial to broaden the base of lenders into the primary care sector and we are entering into discussions with a range of new possible lenders and investors. The security and longevity of our cash flows means that our assets can comfortably support the current level of borrowings. Over time we will seek to reduce the level of gearing. 5 Interest cover is the number of times net interest payable is covered by underlying profit before net interest. |
EPRA NAV at 31 March 2012 | 36.3 | |
| Underlying profit | 1.9 | ||
| Capital (revaluations and capital gains) | 1.1 | ||
| Dividend | (0.9) | ||
| Other | 0.2 | ||
| 38.6 | |||
| 2012 | |||
| Net debt | £357.3m | ||
| Weighted average debt maturity | 12.3 years | ||
| Weighted average interest rate | 5.26% | ||
| % of debt at fixed/capped rates | 99% | ||
| Interest cover 5 | 136% | ||
| Loan to value | 64% | ||
The weighted average debt maturity of 11.3 years compares to a weighted average lease length of 14.8 years, which highlights the security of the cash flows of the business. The maturity of the facilities is spread over a significant number of years, as is highlighted below:
Details of the facilities and their covenants are set out in note 22 to the accounts.
Net finance costs in the year amounted to £19.0 million (2012: £19.9 million) including £1.0 million receivable on LIFT loan notes (2012: £0.9 million). The reduction is attributable to the impact of the settlement of the swap in December 2011 and replacing it with lower fixed rate debt from the bond which carries an interest rate of 4.75% and runs to December 2021. These savings of £2.7 million have been affected by a drawdown of new facilities to fund the on-going development pipeline.
Risk management is integral to the way we operate. With a small head office team with a flat structure and detailed day to day engagement of Executive Directors, emerging risks are identified and existing risks monitored constantly. It is inherent in the nature of risk that it is not possible to eliminate all risk. In fact it is not desirable as assuming manageable risk is key to enhancing profits and returns to investors. The level and type of risk assumed is regularly monitored by the Board and key to this is having an appropriate internal controls and risk management process, which is subject to regular review by the Board.
Many of the key external risks are areas where we have limited control, such as government policy towards the NHS and the strength of the economy. Although these cannot be controlled we regularly review their potential impact on our business and consider how our strategy and its implementation can be adjusted to mitigate any potential impact.
A summary of the more critical risks identified through that review and identified by the Board as having potential to affect the Group's operating results, financial control and its reputation are summarised below:
| Risks and impacts Change from last year |
Key mitigating factors |
|---|---|
| Government policy |
|
| Changes in NHS procurement and funding could adversely affect the Group. Reduced funding for premises expenses in the primary care sector of the NHS could lead to a reduction in our development pipeline and growth prospects. A change to the reimbursement mechanism for GPs could lead to a change in the risk profile of our underlying tenants. |
The increased provision of health care services in the community is a stated policy objective of all three major political parties and so a reduction in funding to this sector is considered unlikely. The recent changes under the Health & Social Care Act have now been implemented and so the risk profile to the Group has been reduced slightly, though we are at an early stage in implementation. The covenant for property directly let to the former PCTs has improved as the leases have transferred to NHS PropCo with an indemnity from the Department of Health. The Group actively engages with the Government over policy that could impact the business, both directly and through the relevant trade bodies. The reimbursement mechanism is not currently under review. Any change would probably result in an increased cost in the future supply of primary care properties, which could reduce the opportunities to increase healthcare provision in the community. |
| Availability and cost of finance |
|
| Reduced availability of Real Estate financing could adversely affect the Group's ability to source new funding and refinance existing facilities. Reduced availability of new financing could delay or prevent the development of new premises. |
The Group predominantly has long-term facilities, which reduces the refinancing risk both in terms of availability and potential rate increases. The Group has a policy of active engagement in capital and banking markets and engages with a range of funders to ensure a breadth of financing options. The Group regularly monitors and manages its re-financing profile. |
| Increasing financing costs could increase the overall cost of debt to the Group and so reduce underlying profits. |
99% of current debt is fixed on a long-term basis. |
| Investor demand |
|
|---|---|
| Reduction in investor demand for UK primary care real estate may result in falls in asset valuations, which could reduce the Group's future profits and net asset values and could arise from: |
The overall economic position and its impact on the Group's operations is regularly assessed and is considered in reviewing the Group's strategy. The Group's focus on the primary care sector provides a strong covenant and long-term income, which reduces the impact of the wider economy. |
| • Changes in NHS policy • Health of the UK economy • Availability of finance • Relative attractiveness of other asset classes |
Future strategy is to remain focused on this attractive market segment. |
| Investor demand | |
|---|---|
| Reduction in investor demand for UK primary care real estate may result in falls in asset valuations, which could reduce the Group's future profits and net asset values and could arise from: • Changes in NHS policy • Health of the UK economy • Availability of finance • Relative attractiveness of other asset classes |
The overall economic position and its impact on the Group's operations is regularly assessed and is considered in reviewing the Group's strategy. The Group's focus on the primary care sector provides a strong covenant and long-term income, which reduces the impact of the wider economy. Future strategy is to remain focused on this attractive market segment. |
| INTERNAL RISKS | |
| Risks and impacts Change from last year |
Key mitigating factors |
| Development |
|
| Development risk could adversely impact the performance of the Group including: |
The Group has a dedicated and experienced development management team to manage this exposure. |
| • Cost overruns and delays on new projects • Delays in letting parts of premises |
The Group's policy is to engage in developments that are substantially pre-let with fixed price or capped price build contracts. |
| The Group has a long experience of developments in the sector and has strong relationships with suppliers. |
|
| Capital structure – gearing | |
| A fall in property values or income could adversely affect the covenants on facilities with lenders. |
All financial forecasting, including scenario analysis of prospective transactions, incorporates consideration of the impact on gearing and covenant headroom. |
| If covenants were breached this could lead to forced asset disposals which could reduce the Group's net assets and profitability. |
Covenant headroom and gearing is monitored with reference to possible valuation movements and future expenditure. |
| CORPORATE AND COMPLIANCE RISKS Risks and impacts Change from last year |
Key mitigating factors |
| Communication |
|
| Failure to adequately communicate the Company's strategy and explain performance in respect of this may result in an increased |
Strategic priorities in corporate communications, including the Annual Report, are clearly articulated and reiterated. |
| disconnect between investors' perceptions of value and actual performance. |
The Group reports performance transparently and communicates regulary with investors and analysts. |
| People |
|
| Failure to recruit, develop and retain staff and Directors with the right skills and experience may result in underperformance. |
Succession planning is regularly evaluated. Director and employee remuneration and incentives are aligned with an appropriate peer group and regularly benchmarked. The Group has a regular performance appraisal process with a focus on continuous personal development and an employee engagement programme, which promotes its corporate values and culture. |
| Risks and impacts Change from last year |
Key mitigating factors |
|---|---|
| Communication |
|
| Failure to adequately communicate the Company's strategy and explain performance in respect of this may result in an increased disconnect between investors' perceptions of value and actual performance. |
Strategic priorities in corporate communications, including the Annual Report, are clearly articulated and reiterated. The Group reports performance transparently and communicates regulary with investors and analysts. |
| People |
|
| Failure to recruit, develop and retain staff and Directors with the right skills and experience may result in underperformance. |
Succession planning is regularly evaluated. Director and employee remuneration and incentives are aligned with an appropriate peer group and regularly benchmarked. The Group has a regular performance appraisal process with a focus on continuous personal development and an employee engagement programme, which promotes its corporate values and culture. |
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 34OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Simon Laffin (aged 54 and appointed in August 2011) is a Non-Executive Director of Quintain Estates & Development plc and an advisor to CVC Capital Partners. Previously he has served as Chairman of Hozelock Group and Mitchells & Butlers plc and as a Director of Aegis Group plc and Northern Rock plc (as part of the rescue team). Between 1995 and 2004 he was Group CFO of UK grocery retailer Safeway plc, latterly also responsible for property, which he joined in 1990. Prior to that, Simon held a variety of finance and management roles in Mars Confectionery, Rank Xerox and BP. He is a qualified accountant.
Graham Roberts (aged 55 and appointed in March 2012) was Finance Director at The British Land Company PLC from 2002 to 2011, and before that was Senior Partner for Real Estate at Arthur Andersen, where he also headed up the public sector assurance practice, which included clients such as NHS Estates and a number of NHS trusts. His early career was at Binder Hamlyn. He is currently Non-Executive Director and Chairman of the Audit Committee at Balfour Beatty plc.
Jonathan Murphy (aged 41 and appointed in January 2013) was previously Finance Director of the fund management business of Brooks Macdonald Group plc, having joined through the acquisition of Braemar Group plc in 2010, where he was Finance Director for 4 years. Jonathan has extensive experience in the creation and management of property funds and was previously Managing Director for the property management business of Brooks Macdonald. His earlier career included commercial and strategic roles at Spirit Group and Vodafone. Jonathan qualified as a Chartered Accountant with PricewaterhouseCoopers, holding management roles in both the UK and Asia, and holds an MBA from IESE, the leading European Business School in Barcelona.
Jenefer Greenwood (aged 55 and appointed in May 2012) was appointed to the Board of The Crown Estate in 2004, and chairs its Remuneration Committee. Jenefer is a Chartered Surveyor and has spent a 35 year career in the commercial property sector starting at Hillier Parker and ultimately reaching the position of Executive Director, Head of Retail division following the merger with CBRE. She worked for Grosvenor from 2003 until 2012, having also been Chair of the National Skills Academy for Retail and President of the British Council of Shopping Centres.
David Richardson (aged 62 and appointed in January 2012) is currently, Chairman of Bilfinger Berger Global Infrastructure SICAV SA and a Board member of Worldhotels AG. 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, Tomkins plc, Dairy Crest plc and De Vere Group plc. He is a Chartered Accountant.
The Directors who served during the year and thereafter were:
Other than Mr Roberts and Mr Murphy, all of the Directors were Non-Executive Directors throughout their period of tenure.
To assist in the proper discharge of its corporate governance responsibilities, the Board has established standing committees. In the year under review the committees comprised the following members:
In relation to these committees non-executive members now serve on all committees. This is appropriate given the relatively small size of the Board.
| Name | Board (9 meetings) |
Renumeration Committee (4 meetings) |
Audit Committee (7 meetings) |
Nominations Committee (3 meetings) |
|---|---|---|---|---|
| Simon Laffin | 9/9 | 4/4 | 7/7 | 3/3 |
| Graham Roberts | 9/9 | n/a | n/a | 3/3 |
| Jonathan Murphy | 2/2 | n/a | n/a | n/a |
| David Richardson | 8/9 | 4/4 | 7/7 | 3/3 |
| Jenefer Greenwood | 7/7 | 4/4 | 7/7 | 2/2 |
| Clare Hollingsworth | 1/2 | 1/1 | 1/1 | 1/1 |
| to smaller companies. The Company has applied the main principles of the Code as follows: |
the Company has applied the principles and the provisions of the Code. The Company has completed a thorough review of the Code and can confirm that there are no areas of non-compliance which are required to be brought to the attention of the shareholders. The Board has taken account of the flexibility in the Code in its application |
|||
| Leadership | ||||
| Operation of the Board any important additional or urgent business. |
The Company has an effective Board which is collectively responsible for the long-term success of the Company. The Board meets six times per annum for scheduled Board meetings. The Board also meets as required to consider |
|||
| and amendments to delegated authorities. | 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, remuneration policy, annual budget approval |
|||
| Roles of the Chairman and Chief Executive | The roles of the Chairman and the Chief Executive are distinct. Mr Laffin is the Non-Executive Chairman, and Mr Roberts is the Chief Executive. Mr Laffin is responsible for setting the Board's agenda and ensuring that adequate time is available for discussion of all agenda items, in particular strategic issues. Mr Laffin promotes a culture of openness and debate by facilitating the effective contribution of Non-Executive Directors in particular and ensures constructive relations between the Executive and Non-Executive Directors. He is also responsible for ensuring that the Directors receive accurate, timely and clear information. |
|||
| Senior Independent Director independently of other Directors or management. |
Mr Richardson is the Senior Independent Director and, if requested, is available for discussions with shareholders | |||
| Non-Executive Directors | The Non-Executive Directors scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. They satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible. They are responsible for determining appropriate levels of remuneration of Executive Directors and have a prime role in appointing and, where necessary, removing Executive Directors, and in succession planning. |
|||
To facilitate efficient and where necessary, swift operational management decisions without the necessity of convening a meeting of the full Board, the Board has granted delegated authority (within clearly described parameters) to the Executive Board in relation to day to day operational matters.
All Directors have access to the advice and services of the Company Secretary who is responsible for ensuring Board procedures and internal authorisations are complied with and for the correct application of delegated authorities. In addition, and to ensure efficient and effective discharge of the administrative affairs of the Group, the Board has formally delegated authority to the Company Secretary in relation to a series of administrative matters.
The Executive Board comprises the Chief Executive, the Finance Director and the Managing Director of Property. The Executive Board considers a number of differing issues including the day to day operational matters for the running of the business. These include the performance of the Group's assets and development programme, financings, cost control and risk management. Scheduled meetings are held monthly with ad-hoc meetings as required.
Under the Articles of Incorporation of the Company, Directors may be appointed, either to fill a vacancy or as an additional Director, either by the Company by way of ordinary resolution, or by the Board, subject, in each case, to any maximum number of Directors. Any Director appointed by the Board shall retire and offer themselves for re-election at the next Annual General Meeting.
The Company's Articles of Incorporation include provisions whereby Directors are, to the extent permitted by Guernsey Company Law, indemnified against liabilities to third parties as a result of any act or omission in carrying out their duties or in any other way in connection with their duties, powers or posts.
The Company has made one appointment since the date of the last Annual Report being Mr Murphy as Finance Director.
On appointment, new Directors receive a full briefing on the role, duties and responsibilities of a Director of a listed company and on the Company and its Board and an induction pack with important information is provided. Training needs are reviewed annually as part of the Board evaluation.
The Board has recently been refreshed and its members have been working together for only a few months. It has reviewed its performance based on an internal evaluation and concluded that its access to relevant information is good, discussions are carried out in an appropriate manner, the strategy and goals of the Company have been clarified and the Board is appraised promptly and fully of investor views. There were no major changes adopted in the way the Board operates.
The Board has an agreed policy to permit Directors to take professional advice on any matter which relates to their position, role and responsibilities as a Director (but not on personal matters) at the cost of the Group.
The Group's business activities together with factors likely to affect its future performance are set out in the Business Review on pages 21 to 29. In addition, note 32 to the Financial Statements includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposure to credit risk and liquidity risk.
The Group has facilities from two financial institutions, neither of which is repayable before November 2016 other than modest annual amortisation and much of the debt is not repayable before 2021. In addition to surplus available cash of £15.6 million at 31 March 2013 (2012: £12.2 million), the Group has surplus security comprising un-mortgaged property assets totalling £3.3 million at that date (2012: £2.8 million).
The Group's medical centre property developments in progress are all substantially pre-let and in the main have funding in place.
The Group has benefitted from periodic sales of non-core assets which included the former head office building in the year under review. Non-core assets represent marketable properties which can be readily sold if cash constraints necessitate sales.
The Group has adequate headroom in its banking covenants. The Group has been in compliance with all financial covenants on its loans throughout the year.
The Group's properties are substantially let with rent paid or reimbursed by the NHS and they benefit from a weighted average lease length of 14.8 years. They are also 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 despite the current economic climate.
Accordingly, the Financial Statements have been prepared on a going concern basis.
The Board accepts and acknowledges that it is both accountable and responsible for ensuring that the Group has in place appropriate and effective systems, procedures, policies and processes for internal controls.
In relation to internal controls:
The Group requires all employees and other stakeholders to operate professionally and honestly in all their dealings with or on behalf of the Company and to report any concerns which they may feel should be brought to the attention of management.
The Group has adopted a whistle blowing policy and a fraud and theft reporting policy. These policies are reviewed on an annual basis. The Group's equal opportunities policy is described on page 39.
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 38OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION The whistle blowing policy and fraud and theft reporting policy are available within the Group's internal policies and procedures enabling any such matters to be raised through appropriate channels. In addition the Company Secretary is available to provide advice to any member of staff on any matter which may give rise to cause for concern. Responsibility for the implementation of the Group's internal controls and risk management policies has been delegated by the Board to the Executive Board.
The Executive Board consider risk management at each of its regular meetings according to an assurance framework which is summarised below.
Risks are mapped into key categories and given scores by reference to their impact and likelihood. Controls are identified to mitigate each risk, or the risk is identified as one which is outside of the control of the Group, and the sources of assurance are noted which can demonstrate the effectiveness of the controls that are in place. In this way any gaps in controls are identified with action plans agreed and monitored to reduce the risks.
This involves:
The Board regularly reviews all of the major risks, those newly identified risks, and the mitigation action for each major risk.
Throughout the period covered by this report and up to the date of this report the Board believes that there have been appropriate internal controls and risk management processes in place which have been reviewed and updated as outlined in this report.
This process ensures that the Company and the Group complies with the relevant corporate governance requirements and best practice on risk management including the Turnbull Guidance.
The Group plays an important role in the community. It takes seriously its corporate responsibilities and in particular the requirement to maintain high standards of governance and probity in all of its dealings with Government, the public, its workforce and its customers.
Assura is not a large employer of staff, but it relies heavily on the experience, skills and capabilities of its employees to operate its business successfully.
Staff are encouraged to maximise their individual contribution to the Group. In addition to competitive remuneration packages, they participate in an annual bonus scheme which links personal contribution to the goals of the business. Outperformance against the annual targets can result in a bonus of up to 20% for all staff below the Executive Board. Employees are provided with information regarding progress against the budget, financial and economic factors affecting the business's performance and other matters of concern to them regularly. In addition staff are eligible to participate in a defined contribution pension scheme and the Value Creation Plan. Both schemes have been introduced in the current period. The views of employees are taken into account when making decisions that might affect their interests. Assura encourages openness and transparency, with staff having regular access to the Chief Executive and being given the opportunity to express views and opinions.
The Group has a pro-active approach to the promotion of equal opportunities, supported by its equal opportunity and valuing diversity policy. The policy reflects both current legislation and best practice. It highlights the Group's obligations to race, gender and disability equality. Full and fair consideration is given to applications for employment from disabled persons and appropriate training and career development is provided.
The Group is committed to minimising the environmental impact of its activities and achieving continual improvement in its environmental performance by:
gaining certification to the ISO14001: 2004 management standard and carrying out regular internal and external audits to ensure good performance and identify opportunities for improvement;
working with partners, sub-contractors and suppliers to promote good environmental management and performance;
This policy is reviewed and updated annually by the Board and is available to the public.
The Group gained ISO14001: 2004 accreditation in February 2013.
The Group is committed to maintain safe working environments, and regularly undertakes programmes to identify, evaluate and eliminate risk in the work place and on-site. Risk reviews, supported by executive management reporting are presented to the Board on a regular basis.
Assura Group aspires to operate in a responsible, professional, ethical and reliable manner and is trusted as a provider of services and facilities. Reflecting the nature of the Group's customer base, Assura intends to align itself increasingly with the wider corporate and social responsibility interests of the NHS. Accordingly, the Group has a formal Environmental Management System and has gained accreditation of ISO14001: 2004 standard.
The Group's role in developing new medical facilities in the community, thereby bringing services closer to the patient, helps to improve quality of life.
In developing a new medical centre, the Group enters into consultation with local communities. Many of the Group's developments are part of regeneration schemes that enhance the facilities for local communities.
Responsibility for reporting to the Board on environmental, social and community matters sits with the Chief Executive, who has a responsibility to maintain attention on policy and ensure implementation. Current examples of work in this area include the soon to be completed developments at Leicester, Chapel House & Maidstone, which are all due to achieve BREEAM excellent rating.
A new health centre being developed in Leicester will incorporate a 'Biodiversity Roof' and wetlands Sustainable Urban Drainage System area, with the aim of creating a habitat which encourages local wildlife. Similarly in Maidstone the new health centre there will feature a combined heat and power plant, photovoltaic cells and a "green wall" to enhance biodiversity. Assura supports a charity close to its Head Office which is heavily involved with the local communities.
The Group is committed to maintaining the highest standards of integrity and corporate governance practices, and conducts its business in an honest and ethical manner. The Group has adopted policies on:
Key contractual relationships include those with the Group's principal developer partners, contractors and professional firms. As the Group works with several such firms, no particular relationship or contract is critical to the business.
Details of the remuneration policy and structure can be found in the Remuneration Committee Report on pages 48 to 62.
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 40OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION The Board welcomes open communication with its shareholders and works with its stockbrokers Espirito Santo Investment Bank and Oriel Securities to ensure an appropriate level of communication is maintained. The dialogue with shareholders is facilitated by a series of investor relations mechanisms including regular meetings between senior members of the Company's executive management with institutional investors and sales teams and industry/sector analysts. Feedback from these meetings is regularly relayed to the Board in order to ensure that all Board members and Non-Executive Directors in particular, develop an understanding of the views of major shareholders. This process augments the regular dissemination of annual and quarterly interim management statements. Copies of these announcements and any accompanying presentational materials are available on the Company's website at www.assuragroup.co.uk
The Board responds to ad-hoc requests for information from shareholders and all shareholders have access to the Board and senior management, with an opportunity to raise questions, at the Annual General Meeting and other shareholder meetings.
During the period under review both Executive and Non-Executive Directors, including the Chairman and the Chief Executive have held meetings with a number of the Company's institutional and private shareholders.
The Board is satisfied that Mr Richardson has the requisite recent and relevant financial experience to be Chairman of the Audit Committee and is an independent Non-Executive Director. Mr Laffin, who is company Chairman, sits on the Committee, under the smaller company rule, and brings a wealth of financial experience. Ms Greenwood is also a member of the Committee. The Board is satisfied that each Non-Executive Director has appropriate experience, understanding and knowledge of financial, risk and accounting matters to contribute effectively and appropriately to the work of the Committee.
On a regular basis, the Chief Executive and Finance Director are invited to attend the meetings of the Committee.
The Audit Committee is appointed by the Board from the Non-Executive Directors of the Company. The Audit Committee's terms of reference include all matters indicated by Disclosure and Transparency Rule 7.1 and the UK Corporate Governance Code. The terms of reference are considered annually by the Audit Committee and are then referred to the Board for approval.
The Audit Committee is responsible for:
The Audit Committee is required to report its findings to the Board, identifying any matters on which it considers that action or improvement is needed, and make recommendations on the steps to be taken.
Two members constitute a quorum.
The Terms of Reference require there to be at least four meetings of the Committee a year. During the year under review, the Committee met seven times.
At those meetings of the Committee at which the external auditor presents their findings, members of the Committee meet with the external auditor without management being present. The Committee uses these opportunities to discuss any issues that the auditor has identified that reflect on the conduct of the business or financial reporting by management. Any relevant issues are then reported to the full Board.
Since the beginning of the year the Audit Committee has:
reviewed the effectiveness of the Group's internal controls, processes and disclosures made in the Annual Report and Financial Statements on this matter;
reviewed and agreed the scope of the audit work to be undertaken by the auditor;
The Terms of Reference include all matters that an audit committee is recommended to address by the FRC's "Guidance for Audit Committees", dated September 2012.
Furthermore at the meeting which considers the Annual Report and Accounts the Company Secretary sets out for the Committee the way in which the terms of reference have been met over the course of the year.
The Committee does not consider that there are any trends or current factors relevant to the Group's activities, markets or other aspects of its external environment that have increased, or are expected to increase, the risks faced by the Group.
The Audit Committee is satisfied that the current level of control and risk management within the business adequately meets the Group's current needs and that therefore there is no economic case for having an internal audit department.
The Committee has developed and adopted a policy for the provision of non-audit services by its external auditor and approves, before any significant nonaudit services are commissioned from its external auditor, the fees payable for such services. This process is in accordance with the Committee's agreed policy of ensuring that the independence and objectivity of the external auditor is not impaired by such non-audit services or fees but recognises that, in certain circumstances, it is in the Group's interests to use the firm's particular skills or knowledge.
PARTNER OF CHOICE
In relation to non-audit work, the Group's auditor is not permitted to carry out certain types of work for the Group which could impair their objectivity and independence including:
All audit fees and any material non-audit services fees require approval from the Audit Committee. For this purpose, materiality is set at cost, before VAT and expenses, in excess of £25,000 or 20% of the audit fee, whichever is the lower. The threshold for large consultancy contracts to be considered for specific procurement review is set at cost in excess of £50,000 before VAT and expenses.
An analysis of the fees earned by the Group's external auditor (divided between audit and non-audit services) is disclosed in note 6(a) to the audited accounts on page 77.
During the year under review Deloitte LLP has undertaken two pieces of tax consultancy work. The first relates to a capital allowances review which commenced in November 2011 prior to Deloitte's appointment as external auditors. The fees paid in the year in relation to this piece of work totalled £0.1 million. The second engagement relates to the preparation for REIT conversion in April 2013. The fees paid to date for this piece of work total £0.1 million. The external auditor was engaged on an exceptional basis to provide these services since they are widely recognised as the market leader in this area. Both engagements were commissioned on an arm's length basis.
The Audit Committee carefully considered the level of total non-audit fees in the current year and satisfied itself that they were elevated due to the REIT conversion and would revert to normal levels from 2013. The Audit Committee was able to satisfy itself that Deloitte's independence was not prejudiced.
The Committee reviewed the arrangements for individuals to report matters confidentially to the Group and was satisfied that they were effective.
In considering the Financial Statements for the year ended 31 March 2013, the Committee paid particular attention to and discussed with both management and the auditors, Deloitte, the key judgment areas as follows:
We were satisfied that there are no matters that we wish to draw to the attention of the shareholders.
The Committee considers that Deloitte is independent and will review the quality of their audit annually. The Committee has recommended to the Board that Deloitte LLP is re-appointed as auditor.
The Committee is chaired by Mr Laffin. The other members of the Committee are Mr Richardson and Ms Greenwood.
The Committee's Terms of Reference are reviewed annually.
During the period there were two appointments to the Board being the Finance Director, Jonathan Murphy and the Non-Executive Director, Jenefer Greenwood.
The Terms of Reference require there to be at least one meeting of the Committee a year. During the year under review, the Committee met three times.
Two members constitute a quorum.
The principal roles of the Committee are to:
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 44OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION In accordance with the Code all Directors will submit themselves for re-election at the 2013 AGM. The Nomination Committee has confirmed that the Directors continue to perform effectively and demonstrate commitment to their respective roles.
The Directors present their Annual Report on the affairs of the Group, together with the Financial Statements and auditor's report, for the year ended 31 March 2013. The Corporate Governance Report set out on pages 35 to 46 forms part of this report.
Assura Group is the UK's leading primary care property investor and developer. It owns and procures good quality primary healthcare properties across the UK.
The subsidiary and associated undertakings principally affecting the profits or net assets of the Group in the year are listed in note 13 to the Financial Statements.
The Group is required to include a business review in this report. The information that fulfils the requirements of the business review can be found on pages 21 to 29, which are incorporated in this report by reference.
Details of the dividends can be found in note 25.
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 2013, the average number of days taken by the Group to pay its suppliers was 36 days (2012: 15 days).
There were no reportable events after the balance sheet date.
The Company has arranged insurance cover in respect of legal action against its Directors.
As at 1 July 2013 the Company had been notified of the following interests representing 5% or more of its issued Ordinary Share capital.
| Name of shareholder | 31 March 2013 | 1 July 2013 | ||
|---|---|---|---|---|
| Number of shares |
% of ordinary shares |
Number of shares |
% of ordinary shares |
|
| Somerston Investments Limited | 157,499,999 | 29.74 | 157,499,999 | 29.74 |
| INVESCO Asset Management | 96,783,097 | 18.28 | 96,783,097 | 18.28 |
| Aviva Investors | 45,239,606 | 8.54 | 44,396,994 | 8.38 |
| Artemis Investment Management | 44,915,063 | 8.48 | 45,259,184 | 8.55 |
The Assura Group Employee Benefit Trust holds 4,218,219 (0.8%) of the issued share capital of the Company on trust for the benefit of employees of the Group and their dependents. The voting rights in relation to these shares are exercised by the Trustees who will take into account any recommendation made to them by the Board of Assura Group Limited.
We recognise the importance and benefits of supporting charities and local communities. During the period the Company supported two charities. The first of these was St Rocco's Hospice, a Warrington based charity which provides specialist care for patients with cancer and other life threatening illnesses. The second charity was Medecins Sans Frontieres which is an independent international medical humanitarian organisation that delivers emergency aid in more than 60 countries to people affected by armed conflict, epidemics, natural or man-made disasters or exclusion from healthcare. In the year to 31 March 2013 we donated £23,451 to charities (2012: £10,000), all of which were UK registered charities, and no contributions were made for political purpose (2012: nil). More details of our chosen charities can be found on page 114.
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
The Directors, on recommendation from the Audit Committee, intend to place a resolution before the Annual General Meeting to re-appoint Deloitte LLP as auditor for the year ending 31 March 2014.
The Articles of Incorporation of the Company may be amended by special resolution of the Company.
The Annual General Meeting of the Company will be held at the offices of Addleshaw Goddard, 60 Chiswell Street, London EC1Y 4AG on 19 September 2013 at 10am.
By order of the Board
Jonathan Murphy Company Secretary 19 July 2013
The Chief Executive, Graham Roberts, joined the Company on 29 March 2012 replacing his predecessor who left shortly thereafter. His tasks, as the only Executive Director, were identified at the outset as improving the market perception of the Company, its operations and the team.
His appointment followed the Rights Issue in November 2011, supported by shareholders, which enabled the Company to settle a swap liability of some £69 million. In the course of 2012 the Board was entirely refreshed, led by Chairman Simon Laffin, who had joined the Board in August 2011.
This situation posed obvious challenges to the Remuneration Committee on day one, not least the understandable lack of knowledge at Board level about the business, its people, its portfolio, its customers and the absence of a business strategy.
The prime focus for the year for the Remuneration Committee was to put in place an appropriate long-term incentive plan for the Chief Executive and the team he would build. However this could not be decided ahead of establishing the right strategy for the business and the consultation process was planned for the second half year allowing a properly developed strategy to be formulated, for the Board to gain sufficient knowledge of the business to assess the strategy and its risks and for this to be fully debated by the Board.
Following this, we developed proposals for a long term incentive plan which rewards outstanding achievement but not excessive risk taking. Key principles include: a 5 year time horizon reflecting the long-term nature of the business; a Total Shareholder Return basis; alignment of shareholder and management interests; a cap; no early crystallisation until year 3 and potential for clawback on unvested rewards; inclusion of all staff.
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 48OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION We undertook an extensive consultation exercise with principal shareholders and the main shareholder representative bodies. We would like to thank shareholders for their constructive engagement during this process. The culmination of this exercise was the adoption of the remuneration policy set out in this report and the approval of a new long-term incentive plan, the Assura Group Value Creation Plan ("VCP"), by shareholders at a general meeting on 15 February 2013. Full details of the awards made under the new VCP were set out in the Circular issued to shareholders and the Circular is summarised in this report.
By the end of the financial year the Committee considered the Company had been repositioned substantially and this underlies the decision to award the maximum potential bonus to the Chief Executive of 100% and a proportionately full award of 12.5% to the Finance Director, who joined in January 2013.
At the end of the year:
The Remuneration Committee has made the following decisions in relation to the Executive Directors' remuneration for 2013/14:
| Salary | CEO +3%, FD + 2% | Inflation adjustment. |
|---|---|---|
| Benefits/Pension | No change. | |
| Bonus plan | No change in operation. Types of stretch targets have been modified to reflect new requirements. |
The Remuneration Committee feels that these types of performance condition remain appropriate for the Company for 2013/14 (see Policy section of the Report for details). |
| Assura Value Creation Plan | No change. | The Executive Directors were granted an award on the adoption of the Plan. |
In addition to the specific projects set out above the Committee's programme of work included:
I trust you find this report helpful and informative.
Non-Executive Director
This report has been prepared in accordance with the Listing Rules of the Financial Services Authority and describes how the Board has applied the principles of good governance relating to Directors' remuneration as set out in the UK Corporate Governance Code. A resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the Financial Statements will be approved. The report has been divided into separate sections for audited and unaudited information. This report has been prepared by the Committee having regard to the proposed regulations put forward by the UK Government Department of Business, Innovation and Skills (BIS) but does not fully adopt them, as the regulations are expected to apply to the Company's financial year ending March 2014.
The Company's remuneration policy continues to be based on 5 key principles:
The Committee has reviewed the policy for the year ahead and has concluded it remains appropriate. The policy considers the wider economic conditions and pay and reward packages elsewhere. No benchmarking against the real estate sector has been performed this year. The Terms of Reference for the Committee include the responsibility for setting the policy on incentive reward for senior employees, including those who could have a material impact on the risk profile of the Group.
| Purpose and how it supports the strategy |
Operation | Opportunity | Performance measures and period |
Changes for 2013/14 (if any) |
|---|---|---|---|---|
| Base Salary Policy: Lower Quartile – Median Base salaries are set at the lower quartile to median of an appropriate comparator group. The Committee wishes to ensure that fixed costs are minimised and that an above median level of total remuneration is only provided where the annual bonus and VCP pays out. The performance elements are directly linked to the achievement of the Company's strategy (see below). |
An Executive Director's basic salary is considered by the Committee on their appointment and then reviewed periodically or when an individual changes position or responsibility. When making a determination as to the appropriate remuneration, the Committee considers firstly remuneration practices within the Group as a whole and, where considered relevant, conducts objective research on companies within the Company's peers. It should be noted that, as is currently the case, the results of the benchmarking will only be one of many factors taken into account by the Remuneration Committee, other factors include: • the individual performance and experience of the Executive Director; • pay and conditions for employees across the Group; • the general performance of the Company; and • the economic environment. |
The Remuneration Committee policy in relation to salary is: • up to median salary on appointment depending on the experience and background of the new Executive Director; and • on promotion up to the lower quartile salary for the new role. The annual salaries for the Executive Directors for 2013/14 are: Graham Roberts: £309,000 Jonathan Murphy: £153,000 The Committee is satisfied that the salaries conform to its strategy. No comparison has been made against similar roles within the relevant peer group in the period. |
There are no performance conditions attached to the payment of salary although there are a number of performance based factors, both at the individual and Company level that influence the level of salaries provided to Executive Directors. |
CEO 3% increase. FD 2% increase. |
| Benefits Policy: Market Practice The Company provides a benefits package in line with standard market practice. |
Executive Directors receive a benefit package which includes: • health insurance; • death in service benefits; and • company car allowance. The payments are not included in salary for the purposes of calculating any benefit or level of participation in incentive arrangements. |
The following table sets out the annual cost of benefits provided to the Directors: Value of benefits Graham Roberts £13,856 Jonathan Murphy £11,908 |
None. | No change. |
| Purpose and how it supports the strategy |
Operation | Opportunity | Performance measures and period |
Changes for 2013/14 (if any) |
|---|---|---|---|---|
| Pension Policy: Median The Company provides a level of pension contribution in order to be competitive and to ensure it has the ability to recruit and retain Executive Directors. |
The Executive Directors receive payments in lieu of pension payments. The payments are not included in salary for the purposes of calculating any benefit or level of participation in incentive arrangements. |
The payments in lieu of pension payments for the Executive Directors are the following percentages of salary: • CEO: 20%; being £61,800 • FD: 12.5%; being £19,125 |
There are no performance conditions attached to the payment of pension contributions. |
No change. |
| Non-Executive Directors' Fees Policy: Median 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. Fees also reflect the time commitment and responsibilities of the roles. An additional fee is paid for Chairmanship of a Board Committee. |
Non-Executive Directors have specific terms of engagement provided in formal letters of appointment, and their remuneration is determined by the Board within the limits set by the Articles of Incorporation and based on equivalent roles in the same comparators as are used for the Executive Directors. The fees for Non-Executive Directors are considered periodically. The Non-Executive Directors are appointed for a three year term, subject to annual re-election by the shareholders, at the Company's Annual General Meeting. Non-Executive Directors do not receive any 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's policy in relation to fees is: • up to median level fees on appointment depending on the experience and background of the new Non-Executive Director. The Non-Executive Director fees for 2013/14 are: • basic fee £35,500 p.a. • Senior Independent Director fee £8,000 p.a. • Chairman of Board Committee fee of £8,000 p.a. The fees for the Non-Executive Directors for 2013/14 are: Simon Laffin: £126,000 David Richardson: £51,500 Jenefer Greenwood: £43,500 |
None. | Non-Executive Directors £1,500 increase. Chairman 5% increase. (First increase since appointment in August 2011) |
| Purpose and how it supports the strategy |
Operation | Opportunity | Performance measures and period |
Changes for 2013/14 (if any) |
|
|---|---|---|---|---|---|
| Bonus Plan Policy: Median Performance Conditions The targets for the Executive Directors are based on: • Delivering the budget • Delivering development surpluses • Growing the dividend capacity • Embedding a continuous improvement culture. Assura Value Creation Plan Policy: Upper Quartile The long-term incentive arrangements are structured so as to align |
The VCP operates by granting the Executive Directors, and other eligible employees, an award of units that have no value to the Executive |
The maximum annual bonus level for the CEO is 100% of salary and 50% of salary for the FD. Bonuses are paid in cash. The number of units granted to the Executive Directors is set out in the following table: |
The performance condition is based on the absolute total shareholder return |
No change. No changes. |
|
| the incentives of relevant participants with the long term performance of the business and to motivate and retain key members of staff. The Company obtained shareholder approval for a new plan, the Assura Value Creation Plan on 15 February 2013. The rationale behind the design of the Assura Value Creation Plan is set out in Note 1 to this table. |
Directors on grant, but which may convert into nil-cost options over shares with a value calculated to be a proportion of the total shareholder return created for shareholders. This will be measured on three separate dates over a five year performance period. The overall effect of the VCP is that the Executive Directors and other eligible employees will be able to earn shares equivalent to 10% of any total shareholder return created above an 8% p.a. compound threshold. In other words, until shareholders receive an 8% p.a. return, the VCP will not pay out. Beyond that, broadly participants may receive 10% of any further value created subject to a cap of 25 million shares. The base price is 30.25p. |
Role Graham Roberts Jonathan Murphy Other Participants and Unallocated Total Units |
Number of units granted 400,000 175,000 425,000 1,000,000 |
performance of the Company over a five year period. Participants will be able to earn shares equivalent to 10% of any total shareholder return created above an 8% p.a. threshold. |
|
| Funding of Share Plans | The Company can fund 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 requirements for shares. In accordance with the guidelines set out by the Association of British Insurers ("ABI") the Company can issue a maximum of 10 per cent of its issued share capital in a rolling ten year period to employees under all its share plans. |
The detailed conditions and calculations attached to the VCP awards are attached in the Circular to shareholders dated 28 January 2013, which is available on the Company's website www.assuragroup.co.uk.
Prior to the inception of the VCP an existing Long Term Incentive Plan was in operation. In respect of this scheme no awards were made and no awards vested in the year.
Following expiry of awards issued in February 2011 only 400,000 units in the existing scheme remain outstanding as at 31 March 2013. These relate to a grant on 29 July 2011 which has a performance period ending on 31 March 2014.
No Executive Director had an interest in these units as at 31 March 2013. Key management personnel had interests in 400,000 units at 31 March 2013. The vesting conditions require Total Shareholder Return over 3 years to exceed 25%.
Service contracts do not contain liquidated damages clauses. If a contract is to be terminated the Committee will determine such mitigation as it considers fair and reasonable in each case. In determining any compensation it will take into account the best practice provisions of the UK Corporate Governance Code and published guidance from recognised institutional investor bodies and will take legal advice on the Company's liability to pay compensation and the appropriate amount. The Committee periodically considers what compensation commitments the Executive Directors' contracts would entail in the event of early termination. There are no contractual arrangements that would guarantee a pension with limited or no abatement on severance or early retirement. There is no agreement between the Company and its Directors, or employees, providing for compensation for loss of office or employment that occurs because of a takeover bid.
| Remuneration element | Treatment on exit |
|---|---|
| Base Salary | Salary will be paid over the notice period. The Company has discretion to make a lump sum payment on termination of the salary payable during the notice period. In all cases the Company will seek to mitigate any payments due. |
| Benefits | Benefits will normally be provided over the notice period. The Company has discretion to make a lump sum payment on termination equal to the value of the benefits payable during the notice period. In all cases the Company will seek to mitigate any payments due. |
| Pension/Salary Supplement |
Company pension contributions/salary supplement will normally be provided over the notice period. The Company has discretion to make a lump sum payment on termination equal to the value of the Company pension contributions/salary supplement during the notice period. In all cases the Company will seek to mitigate any payments due. |
| Normal Cessation | Good Leaver | Change of Control |
|---|---|---|
| No entitlement for year of cessation. |
Pro-rated bonus to time and performance for year of cessation. |
The extent to which the performance requirements are satisfied will determine the bonus which is earned. |
| Cessation of employment where the Executive is not a good leaver. |
Cessation of employment for one or the following reasons: • death; • injury or disability, • retirement; • redundancy; and • at the discretion of the Committee (if exercised a full explanation will be provided to shareholders). |
Excludes a reorganisation or reconstruction where ownership does not materially change. |
| Remuneration element | Treatment on exit | ||||||
|---|---|---|---|---|---|---|---|
| Base Salary | Salary will be paid over the notice period. The Company has discretion to make a lump sum payment on termination of the salary payable during the notice period. In all cases the Company will seek to mitigate any payments due. |
||||||
| Benefits | Benefits will normally be provided over the notice period. The Company has discretion to make a lump sum payment on termination equal to the value of the benefits payable during the notice period. In all cases the Company will seek to mitigate any payments due. |
||||||
| Pension/Salary Supplement |
Company pension contributions/salary supplement will normally be provided over the notice period. The Company has discretion to make a lump sum payment on termination equal to the value of the Company pension contributions/salary supplement during the notice period. In all cases the Company will seek to mitigate any payments due. |
||||||
| Remuneration element | |||||||
| Bonus plan | |||||||
| Normal Cessation | Good Leaver | Change of Control | |||||
| No entitlement for year of cessation. |
Pro-rated bonus to time and performance for year of cessation. |
The extent to which the performance requirements are satisfied will determine the bonus which is earned. |
|||||
| Cessation of employment where the Executive is not a good leaver. |
Cessation of employment for one or the following reasons: • death; • injury or disability, • retirement; • redundancy; and • at the discretion of the Committee |
Excludes a reorganisation or reconstruction where ownership does not materially change. |
|||||
| (if exercised a full explanation will be provided to shareholders). |
|||||||
| Value Creation Plan Normal Cessation |
Good Leaver | Change of Control | |||||
| All awards lapse. | The Committee will have discretion, if it decides it is appropriate, to allow some or all of the awards to vest by deeming there to be: • a new Measurement Date at the date of cessation and the number of nil-cost options to be accrued will be calculated as at any other Measurement Date; or • the nearest normal Measurement Date to the date of cessation of employment can be used. |
On a change of control there will be a new Measurement Date deemed to be the date of the change of control. In determining the value created, the Measurement Price will be the offer price for the Company's shares. The calculation of the number of Company shares to be allocated to a participant will be as at any other Measurement Date. All accrued nil-cost options will vest on a change of control and be exercisable together with any other vested nil-cost options immediately for a set period of up to six months. |
Each of the Executive Directors has a service contract with the Company which is terminable by the Company on not more than six months' notice and by the Director on six months' notice. 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. Either the Company or the Non-Executive Director may terminate the appointment before the end of the current term on six months' notice. In the event that the Company terminated the Non-Executive Directors' appointment, the maximum compensation payable would be the fees due for the notice period.
In an appropriate case, the Company would have regard to the departing Director's duty to mitigate against costs to the Company. The following table summarises the main contractual terms of the Directors' service agreements:
| Maximum entitlement on termination | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Date of contract/ period in appointment months |
Notice | Salary/fees | Benefits | Pension | Annual bonus |
Value Creation Plan |
|||
| Graham Roberts |
29 March 2012 |
6 | £154,500 | £6,928 | £30,900 | See exit payments |
See exit payments |
||
| Jonathan Murphy |
2 January 2013 |
6 | £76,500 | £5,954 | £9,563 | See exit payments |
See exit payments |
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 it 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 2013/14 at minimum, on-target and maximum performance scenarios are set out in the charts below.
| Element | Minimum | On-Target | Maximum |
|---|---|---|---|
| Fixed element (salary) | Base Salary. | Base Salary. | Base Salary. |
| Fixed element (benefits) | Value of Benefits paid in the Year. |
Value of Benefits paid in the Year. |
Value of Benefits paid in the Year. |
| Annual Variable Element (Bonus Plan) |
0% | 75% of maximum entitlement. | 100% of maximum entitlement. |
| Multiple Reporting Period Elements (Value Creation Plan) |
0% | 50% of IFRS2 annual value of the award. |
100% of the IFRS2 annual value of the award. |
Non-Executive Directors do not receive performance related pay.
The Company has a small number of employees and applies the same policy in relation to incentive compensation throughout the organisation. All employees are eligible for annual bonuses and to participate in the Value Creation Plan. No formal consultation has been undertaken with employees as the views of the employees are openly and regularly communicated to the Board. The general rise in salaries was 3% for 2013/14 with the CEO receiving a 3% increase and the FD 2%.
The Committee extensively consulted with shareholders on its executive remuneration policy in 2012/13 and obtained broad support for its proposals which was demonstrated by the positive vote by shareholders on the approval of the Assura Value Creation Plan and associated remuneration policy.
This report has been prepared by the Committee having regard to the proposed regulations put forward by the UK Government Department of Business, Innovation and Skills (BIS) but does not fully adopt them, as the regulations are expected to apply to the Company's financial year ending March 2014.
In order that their interests are aligned with those of shareholders, Executive Directors are expected to build up and maintain a personal shareholding equal to 100% of their basic salary in the Company.
| Director | Unconditional holdings |
% Salary/fees |
Conditional holdings |
Total holdings |
|---|---|---|---|---|
| Number of shares | Number of shares | |||
| Executive | ||||
| Graham Roberts | 1,500,000 | 168 | - | 1,500,000 |
| Jonathan Murphy | - | - | 460,002 | 460,002 |
| Non-Executive | ||||
| Simon Laffin | 2,104,095 | N/A | - | 2,104,095 |
| David Richardson | 253,616 | N/A | - | 253,616 |
| Jenefer Greenwood | - | N/A | - | - |
The Committee believes that the current executive remuneration policy and the supporting reward structure provide clear alignment with the Company's performance. Following the sale of the Company's pharmacy business in 2011 and conversion to a REIT in April 2013, the Committee believe it is appropriate to monitor the Company's performance against the FTSE All Share Real Estate Investment Trusts index. The graph below sets out the TSR performance of the Company compared to the FTSE All Share Real Estate Investment Trusts index and for comparison the FTSE All Share index over a five year period.
It should be noted that over the past 18 months the entire Board has been replaced following a period of under-performance.
The graph below sets out the relative importance of pay; specifically setting out the percentage spend on:
The Remuneration Committee is responsible for determining the pay and benefits and contractual arrangements for the senior management team, which comprises the Chief Executive, the Finance Director and other senior Executives. The Committee's aims are to develop remuneration policy and recommend remuneration strategies that drive performance and reward it appropriately. The Committee operates under the delegated authority of the Board and its Terms of Reference are reviewed annually.
| For | For as a % of votes cast |
Against | Against as a % of votes cast |
Abstain | |
|---|---|---|---|---|---|
| AGM Votes | 287,379,666 | 98.27 % | 5,063,362 | 1. 73% | 4,165 |
| EGM Votes | 346,064,477 | 80.40% | 84,509,520 | 19.60% | 23,672,207 |
| IMPLEMENTATION REPORT (continued) | |||||
|---|---|---|---|---|---|
| Committee members The Committee members are Jenefer Greenwood (Chairman), Simon Laffin and David Richardson, all of whom were independent Non-Executive Directors within the definition of the Code on appointment and did not participate in discussions in respect of matters relating directly to their own remuneration. Representatives of PricewaterhouseCoopers LLP ("PwC") attend meetings of the Committee by invitation, as do the Executive Directors and members of the senior management team where this is pertinent to matters under consideration. |
|||||
| None of the members of the Committee has any personal financial interest (other than as shareholders), conflicts of interests arising from other directorships or day-to-day involvement in running the business of the Company. |
|||||
| Further information on meetings and attendance by the Committee members is disclosed in the Corporate Governance Report on pages 35 to 46. |
|||||
| External advice The Committee received external advice in 2012/13 from PwC, who were appointed by the Committee and are considered objective and independent. PwC's fees were agreed for the projects carried out during the year and were not contingent on any remuneration outcome or incurred on a time and disbursements basis. |
|||||
| Statement of Shareholder voting The table below shows the voting outcome at the September 2012 AGM for the approval of the 2011/12 Remuneration Report and for the approval of the VCP scheme in February 2013. |
|||||
| For | For as a % of votes cast |
Against | Against as a % of votes cast |
Abstain | |
| AGM Votes | 287,379,666 | 98.27 % | 5,063,362 | 1. 73% | 4,165 |
| EGM Votes | 346,064,477 | 80.40% | 84,509,520 | 19.60% | 23,672,207 |
| Name of Director | 31 March 2013 | 31 March 2012 | |||
| Graham Roberts | 1,500,000 | - | |||
| Jonathan Murphy | - | N/A | |||
| Simon Laffin | 2,104,095 | 986,096 | |||
| David Richardson Jenefer Greenwood |
253,616 | - | 167,805 N/A |
||
The table below sets out the single figure and breakdown for each Director for 2012/13. An explanation of how the figures are calculated follows the table.
| Name | Base salary/fees |
Benefits | Pension | Bonus | VCP | 2012/2013 total |
2011/2012 total |
|||
|---|---|---|---|---|---|---|---|---|---|---|
| Executive Directors' remuneration £'000s | ||||||||||
| Graham Roberts | 300 | 14 | 60 | 300 | - | 674 | 3 | |||
| Jonathan Murphy | 38 | 3 | 5 | 19 | - | 65 | - | |||
| Nigel Rawlings | - | - | - | - | - | - | 613 | |||
| 338 | 17 | 65 | 319 | - | 739 | 616 | ||||
| Non-Executive Directors' remuneration £'000s | ||||||||||
| Simon Laffin1 | 120 | - | - | - | - | 120 | 79 | |||
| David Richardson | 50 | - | - | - | - | 50 | 11 | |||
| Jenefer Greenwood | 34 | - | - | - | - | 34 | - | |||
| Clare Hollingsworth | 6 | - | - | - | - | 6 | 54 | |||
| Peter Pichler | - | - | - | - | - | - | 47 | |||
| Rodney Baker-Bates | - | - | - | - | - | - | 30 | |||
| 548 | 17 | 65 | 319 | - | 949 | 837 |
Mr Laffin's fees are paid to Simon Laffin Business Services Limited
In view of the achievements set out in the Chairman's Summary Report on page 48 bonuses were awarded as a proportion of salary of 100% for the Chief Executive and a proportionately full award of 12.5% for the Finance Director.
No Executives departed the business during the year and therefore no exit payments were made to Executives during the 2012/13 financial year. Nigel Rawlings left the business on 30 April 2012 though the costs relating to his departure were fully provided for in the prior year, given his resignation on 28 March 2012.
Graham Roberts and Jonathan Murphy were granted 400,000 and 175,000 units respectively under the Assura Value Creation Plan ("VCP") during the year. The Non-Executive Directors are not eligible to participate in the VCP.
| Executive Recruitment Plan ("ERP") | |||||||
|---|---|---|---|---|---|---|---|
| Name | ERP awards | Market | Date of | Date of | |||
| Held at 1 April 2012 |
Granted | Lapsed | Held at 31 March 2013 |
price at date of award |
award | vesting | |
| Jonathan Murphy | - | 460,002 | - | 460,002 | £0.34 | 29/01/2013 | 29/01/2014 29/01/2015 29/01/2016 |
| Notes to the ERP table During the year the Group recruited Jonathan Murphy as Finance Director. To facilitate his recruitment an award was made under the ERP at a proportion of the fair value of awards foregone from his previous employer. The awards are 460,002 nil cost options, have no performance criteria and vest in three equal instalments on the first, second and third anniversary of their award. Pension benefits |
|||||||
| No Director nor any member of staff is entitled to a defined benefit pension arrangement. | |||||||
| Graham Roberts was entitled to receive payments in lieu of pension contributions equivalent to 20% of his salary, and Jonathan Murphy was entitled to receive payments in lieu of pension contributions equivalent to 12.5% of his salary. |
|||||||
| All other employees are entitled to participate in the defined contribution Company pension scheme. | |||||||
| ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY |
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 64OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Guernsey company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the Parent Company Financial Statements under IFRSs as adopted by the European Union. Under company law the Directors must not approve the accounts 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, International Accounting Standard 1 requires that Directors:
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 (Guernsey) Law, 2008. 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 Guernsey and the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors in office at the date of approval of this report has confirmed that:
The Directors acknowledge their responsibilities for the accuracy of this Report. All sections of this Annual Report, including the Chairman's Statement, Chief Executive's Statement and Business and Financial Review, Corporate Governance Report and Remuneration Committee Report, are regarded as forming one and the same Directors' Report which is the Management Report for the purpose of DTR 4.1.8R.
By order of the Board
Company Secretary 19 July 2013
We have audited the Group Financial Statements of Assura Group Limited ("The Group") for the year ended 31 March 2013 which comprise the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement and the related Notes 1 to 34. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ("IFRSs") as adopted by the European Union.
This report is made solely to the Company's members, as a body, in accordance with section 262 of The Companies (Guernsey) Law, 2008. 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.
As explained more fully in the Statement of Directors' Responsibilities set out on page 64, the Directors are responsible for the preparation of the Group Financial Statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the Group Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
An audit involves obtaining evidence about the amounts and disclosures in the Group Financial Statements sufficient to give reasonable assurance that the Group Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the Financial Statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited Financial Statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
In our opinion the Group Financial Statements:
We have nothing to report in respect of the following matters where The Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:
Under the listing rules we are required to review:
• the part of the Corporate Govenance Statement relating to the Company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review.
We have also reviewed:
We have reported separately on the Parent Company Financial Statements of Assura Group Limited for the year ended 31 March 2013.
Senior Statutory Auditor
For and on behalf of Deloitte LLP, Chartered Accountants and Recognised Auditor Manchester 19 July 2013
for the year ended 31 March 2013
| Underlying | 2013 Capital and other |
Total | Underlying | 2012 Capital and other |
Total | ||
|---|---|---|---|---|---|---|---|
| Note | £m | £m | £m | £m | £m | £m | |
| Continuing operations | |||||||
| Gross rental and related income | 4 | 37.1 | - | 37.1 | 34.1 | - | 34. 1 |
| Property operating expenses | 5 | (3.4) | - | (3.4) | (3.2) | - | (3.2) |
| Net rental income | 33.7 | - | 33.7 | 30.9 | - | 30.9 | |
| Administrative expenses | |||||||
| Revaluation gains | 6 | (4.9) | - | (4.9) | (4.5) | - | (4.5) |
| 14 | - | 6.0 | 6.0 | - | 1.5 | 1.5 | |
| (Loss)/gain on sale of property Share of profits of associates and |
- | (0.1) | (0.1) | - | 0.1 | 0. 1 | |
| joint ventures | 15 | 0.4 | - | 0.4 | 0.6 | 3.0 | 3.6 |
| Share-based payment charge | 27 | - | (0.6) | (0.6) | - | - | - |
| Exceptional items | 9 | - | - | - | - | (20.3) | (20.3) |
| Finance revenue | 7 | 1.5 | - | 1.5 | 1.3 | - | 1.3 |
| Finance costs | 8 | (20.5) | - | (20.5) | (21.2) | - | (21.2) |
| Loss on derivative financial | |||||||
| instruments | 8 | - | (1.2) | (1.2) | - | (54.7) | (54.7) |
| Profit/(loss) before taxation | 10.2 | 4.1 | 14.3 | 7.1 | (70.4) | (63.3) | |
| Taxation | 10 | (0.2) | 1.0 | ||||
| Profit/(loss) for the year from continuing operations |
14.1 | (62.3) | |||||
| Discontinued operations Profit for the year from discontinued operations Profit/(loss) for the year |
31 | - | 1.6 | ||||
| 14.1 | (60.7) | ||||||
| attributable to equity holders of the parent Earnings/(loss) per share From underlying profit |
11 | 1.9p | 1.5p | ||||
| 11 | 2.7p | (13.5)p | |||||
| From continuing operations – basic and diluted From continuing operations – adjusted (EPRA) basic and diluted |
11 | 3.1p | 2.5p | ||||
| On profit/(loss) for year – basic and diluted On profit/(loss) for year – |
11 | 2.7p | (13.2)p |
as at 31 March 2013
| 2013 | 2012 | ||
|---|---|---|---|
| Note | £m | £m | |
| Non-current assets | |||
| Investment property | 14 | 557.3 | 537.8 |
| LIFT investments and associates | 15 | 11.2 | 10.5 |
| Property, plant and equipment | 16 | 0.1 | 0.2 |
| Deferred tax asset | 29 | 1.1 | 1.3 |
| 569.7 | 549.8 | ||
| Current assets | |||
| Cash, cash equivalents and restricted cash | 17 | 35.7 | 21.4 |
| Trade and other receivables | 18 | 9.6 | 13.8 |
| Property assets held for sale | 14 | 12.0 | 11.4 |
| 57.3 | 46.6 | ||
| Total assets | 627.0 | 596.4 | |
| Current liabilities | |||
| Trade and other payables | 19 | 14.3 | 13.0 |
| Borrowings | 22 | 3.9 | 6.9 |
| Derivative financial instruments at fair value | 23 | - | 0.2 |
| Deferred revenue | 20 | 8.2 | 7.8 |
| Provisions | 21 | 0.1 | 0.1 |
| 26.5 | 28.0 | ||
| Non-current liabilities | |||
| Borrowings | 22 | 388.2 | 368.7 |
| Obligations due under finance leases | 19 | 3.1 | 3.1 |
| Derivative financial instruments at fair value | 23 | 3.6 | 2.3 |
| Deferred revenue | 20 | 6.6 | 5.5 |
| Provisions | 21 | 0.9 | 0.9 |
| 402.4 | 380.5 | ||
| Total liabilities | 428.9 | 408.5 | |
| Net assets | 198.1 | 187.9 | |
| Capital and reserves | |||
| Share capital | 24 | 53.0 | 53.0 |
| Own shares held | 24 | (1.9) | (1.9) |
| Share premium | 77.1 | 77.1 | |
| Reserves | 69.9 | 59.7 | |
| Total equity | 198.1 | 187.9 | |
| Basic and diluted net asset value per Ordinary Share | 12 | 37.4p | 35.5p |
| Adjusted basic and diluted net asset value per Ordinary Share | 12 | 38.6p | 36.3p |
The Financial Statements were approved at a meeting of the Board of Directors held on 19 July 2013 and signed on its behalf by:
Graham Roberts Jonathan Murphy Chief Executive Finance Director
for the year ended 31 March 2013
| Share | Own capital shares held |
premium | Share Distributable Revaluation reserve |
reserve | earnings | Retained Reserves | Total equity |
|
|---|---|---|---|---|---|---|---|---|
| £m | £m | £m | £m | £m | £m | £m | £m | |
| 1 April 2011 | 41.2 | (2.0) | 55.4 | 210.6 | 3.9 | (89.0) | 125.5 | 220.1 |
| Loss attributable to equity holders |
- | - | - | - | - | (60.7) | (60.7) | (60.7) |
| Total comprehensive income |
- | - | - | - | - | (60.7) | (60.7) | (60.7) |
| Dividend (note 25) | - | - | - | (5.1) | - | - | (5.1) | (5.1) |
| Issue of Ordinary Shares |
11.8 | - | 23.5 | - | - | - | - | 35.3 |
| Issue costs | - | - | (1.8) | - | - | - | - | (1.8) |
| Sale of own shares held |
- | 0.1 | - | - | - | - | - | 0.1 |
| 31 March 2012 | 53.0 | (1.9) | 77.1 | 205.5 | 3.9 | (149.7) | 59.7 | 187.9 |
| Profit attributable to equity holders |
- | - | - | - | - | 14.1 | 14.1 | 14.1 |
| Total comprehensive income |
- | - | - | - | - | 14.1 | 14.1 | 14.1 |
| Transfer/realisation | ||||||||
| of reserves (note 26) Dividend (note 25) |
- - |
- - |
- - |
(205.5) - |
(3.9) - |
209.4 (4.5) |
- (4.5) |
- (4.5) |
| Cost of employee | ||||||||
| share-based incentives 31 March 2013 |
- 53.0 |
- (1.9) |
- 77.1 |
- - |
- - |
0.6 69.9 |
0.6 69.9 |
0.6 198.1 |
| ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY |
for the year ended 31 March 2013
| 2013 | 2012 | ||
|---|---|---|---|
| Note | £m | £m | |
| Operating activities | |||
| Rent received | 37.7 | 36.8 | |
| Interest paid and similar charges | (20.6) | (20.0) | |
| Fees received | 0.8 | 0.8 | |
| LIFT and bank interest received | 1.5 | 1.6 | |
| Cash paid to suppliers and employees | (6.5) | (10.8) | |
| Acquisition costs | - | (0.3) | |
| LIFT fees received | - | 2.0 | |
| Revenue from pharmacies | - | 10.2 | |
| Purchases by pharmacies | - | (6.9) | |
| Net cash inflow from operating activities | 28 | 12.9 | 13.4 |
| Investing activities | |||
| Purchase of investment property | (3.6) | (5.1) | |
| Development spend | (18.1) | (18.9) | |
| Proceeds from sale of property | 8.4 | 2.6 | |
| Proceeds from sale of businesses | 3.6 | 22.3 | |
| Investment in property, plant and equipment | - | (0.3) | |
| Proceeds from sale of other fixed assets | - | 0.5 | |
| Net loans advanced to associated companies | (0.3) | (0.5) | |
| Loans advanced to joint ventures | - | (0.1) | |
| Subsidiaries acquired | 30 | - | (0.5) |
| Net cash outflow from investing activities | (10.0) | - | |
| Financing activities | |||
| Issue of Ordinary Shares | - | 35.3 | |
| Issue costs paid on issuance of Ordinary Shares | - | (1.8) | |
| Own shares sold | - | 0.1 | |
| Dividends paid | (4.5) | (5.1) | |
| Repayment of loan | (7.0) | (146.1) | |
| Long-term loans and bond drawdown | 23.2 | 159.0 | |
| Swap cash settlement Loan issue costs |
(0.1) | (69.5) | |
| (0.2) | (2.8) | ||
| Net cash inflow/(outflow) from financing activities | 11.4 | (30.9) | |
| Increase/(decrease) in cash and cash equivalents | 14.3 | (17.5) | |
| Opening cash and cash equivalents | 21.4 | 38.9 | |
| Closing cash and cash equivalents | 17 | 35.7 | 21.4 |
for the year ended 31 March 2013
Assura Group Limited ("Assura") was incorporated in Guernsey as a closed-ended investment company with its investment objective to achieve capital growth and rising rental income from the ownership and development of a diversified portfolio of primary care properties.
The Company's Ordinary Shares are traded on the London Stock Exchange. The Company is domiciled in England & Wales for taxation purposes. As of 1 April 2013, the Company has elected to be treated as a UK REIT. See note 10 for further details.
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 70OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION The consolidated Financial Statements have been prepared on a historical cost basis, except for investment properties, including investment properties under construction and land, and derivative financial instruments. The Financial Statements have also been prepared in accordance with IFRS and interpretations adopted by the European Union and in accordance with The Companies (Guernsey) Law, 2008.
The following standards and amendments became effective for the Company in the year ended 31 March 2013. The pronouncements either had no material impact on the Financial Statements or resulted in changes in presentation and disclosure only:
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.
The Financial Statements are prepared on a going concern basis as explained in the Directors' Report on page 37 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.
for the year ended 31 March 2013 (continued)
The preparation of the Financial Statements requires management to make judgments, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
The key source of estimation and uncertainty relates to the valuation of the property portfolio, where a valuation is obtained twice a year by professionally qualified external valuers. The evidence to support these valuations is primarily based 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.
Accounting for LIFT investments and associates requires an assessment of the degree of management influence and control that is exercised over the entities. Investments in the LIFT companies are governed by complex shareholder agreements that effectively prevent the Group from exercising control irrespective of the level of shareholding. As a result these are accounted for on the equity basis, which incorporates the Group's share of the net assets of the entities.
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.
LIFT investments and associates are accounted for under the equity method, whereby the consolidated balance sheet incorporates the Group's share of the net assets of the entities. The income statement incorporates the Group's share of LIFT investment and associates profits after tax.
Interests in LIFT investments and associates include long term loans receivable, which are held at amortised cost less provision for any impairment.
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.
for the year ended 31 March 2013 (continued)
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 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.
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.
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.
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.
Underlying profit represents adjusted EPRA earnings, with further company adjustments to exclude items such as property revaluations 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.
Obligations for contributions to defined contribution pension plans are charged to the income statement as incurred.
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 72OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 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.
for the year ended 31 March 2013 (continued)
The Group's operating segments are Core, LIFT and Non-Core, and are all located in the UK.
The Core segment invests in, manages and develops primary care premises.
LIFT companies develop and invest in medical centres in partnership between the public and private sectors. The Group's investments in LIFT companies are held through associated companies which have financial investments in the underlying LIFT companies. In addition to equity accounted profits, interest is receivable on loans made to the LIFT companies.
The Non-Core segment actively manages the assets to realise maximum value through both income and capital receipts from sales.
The discontinued segment in 2012 includes the results of the Pharmacy and LIFT consultancy divisions and the formerly equity accounted interest in Virgin Healthcare Holdings Limited.
The following table presents revenue, profit and certain assets and liability information regarding the Group's business segments:
| Core | LIFT | Non-Core | Total continuing | |
|---|---|---|---|---|
| £m | £m | £m | £m | |
| Gross rental income | 34.0 | - | 2.3 | 36.3 |
| Other related income | 0.8 | - | - | 0.8 |
| Property operating expenses | (2.7) | - | (0.7) | (3.4) |
| Net rental income | 32.1 | - | 1.6 | 33.7 |
| Administration costs | (4.9) | - | - | (4.9) |
| Share of profits of associates and joint ventures | - | 0.4 | - | 0.4 |
| Underlying operating profit | 27.2 | 0.4 | 1.6 | 29.2 |
| Net finance (cost)/revenue | (19.1) | 1.0 | (0.9) | (19.0) |
| Underlying profit | 8.1 | 1.4 | 0.7 | 10.2 |
| Revaluation gains | 5.4 | - | 0.6 | 6.0 |
| Loss on sale of property | - | - | (0.1) | (0.1) |
| Share based payment charge | (0.6) | - | - | (0.6) |
| Segment result | 12.9 | 1.4 | 1.2 | 15.5 |
| Revaluation of derivative financial instruments | (1.2) | |||
| Taxation | (0.2) | |||
| Profit for the year | 14.1 | |||
for the year ended 31 March 2013 (continued)
| Core | LIFT | Non-Core | Continuing | Discontinued | Total | |
|---|---|---|---|---|---|---|
| £m | £m | £m | £m | £m | £m | |
| Gross rental income | 30.9 | - | 2.5 | 33.4 | - | 33.4 |
| Other related income | 0.7 | - | - | 0.7 | 12.1 | 12.8 |
| Property operating expenses | (2.0) | - | (1.2) | (3.2) | - | (3.2) |
| Other cost of sales | - | - | - | - | (7.4) | (7.4) |
| Net rental income | 29.6 | - | 1.3 | 30.9 | 4.7 | 35.6 |
| Administration costs | (4.5) | - | - | (4.5) | (3.5) | (8.0) |
| Share of profits/(losses) | ||||||
| of associates and joint ventures | - | 0.7 | (0.1) | 0.6 | (3.1) | (2.5) |
| Underlying operating profit | 25.1 | 0.7 | 1.2 | 27.0 | (1.9) | 25.1 |
| Net finance (cost)/revenue | (19.8) | 0.9 | (1.0) | (19.9) | - | (19.9) |
| Underlying profit | 5.3 | 1.6 | 0.2 | 7.1 | (1.9) | 5.2 |
| Revaluation gains/(losses) | 8.5 | - | (7.0) | 1.5 | - | 1.5 |
| Gain on sale of property | - | - | 0.1 | 0.1 | - | 0.1 |
| Release of provision against associates |
- | 3.1 | - | 3.1 | - | 3.1 |
| Revaluation of derivative | ||||||
| in associates | - | (0.1) | - | (0.1) | - | (0.1) |
| Exceptional items (note 9) | (20.3) | - | - | (20.3) | 3.1 | (17.2) |
| Segmental result | (6.5) | 4.6 | (6.7) | (8.6) | 1.2 | (7.4) |
| Revaluation of derivative financial instruments |
(54.7) | - | (54.7) | |||
| Taxation | 1.0 | 0.4 | 1.4 | |||
| (Loss)/profit for the year | (62.3) | 1.6 | (60.7) | |||
for the year ended 31 March 2013 (continued)
| Core | LIFT | Non-Core | Total | |
|---|---|---|---|---|
| £m | £m | £m | £m | |
| Segment assets | ||||
| Property assets | 546.7 | - | 22.6 | 569.3 |
| LIFT investments and associates | - | 11.2 | - | 11.2 |
| Current assets | 45.1 | - | 0.3 | 45.4 |
| Segment assets | 591.8 | 11.2 | 22.9 | 625.9 |
| Deferred tax asset | 1.1 | |||
| Total assets | 627.0 | |||
| Segment liabilities | ||||
| Current liabilities | (26.3) | - | (0.2) | (26.5) |
| Derivative financial instruments | (3.6) | |||
| Non-current liabilities | (398.8) | |||
| Total liabilities | (428.9) | |||
| Other segmental information | ||||
| Capital expenditure: | ||||
| Property, plant and equipment | 0.1 | - | - | 0.1 |
| Depreciation | 0.1 | - | - | 0.1 |
| Core | LIFT | Non-Core | Total | |
|---|---|---|---|---|
| £m | £m | £m | £m | |
| Segment assets | ||||
| Property assets | 520.8 | - | 28.4 | 549.2 |
| LIFT investments and associates | - | 10.5 | - | 10.5 |
| Current assets | 34.4 | - | 1.0 | 35.4 |
| Segment assets | 555.2 | 10.5 | 29.4 | 595.1 |
| Deferred tax asset | 1.3 | |||
| Total assets | 596.4 | |||
| Segment liabilities | ||||
| Current liabilities | (29.0) | - | (4.3) | (33.3) |
| Derivative financial instruments | (2.5) | |||
| Non-current liabilities | (372.7) | |||
| Total liabilities | (408.5) | |||
| Other segmental information | ||||
| Depreciation | 0.1 | - | - | 0.1 |
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |||
|---|---|---|---|---|
| Total | Continuing operations |
Discontinued operations |
Total | |
| £m | £m | £m | £m | |
| Rental revenue – core | 34.0 | 30.9 | - | 30.9 |
| Rental revenue – non-core | 2.3 | 2.5 | - | 2.5 |
| Pharmacy sales | - | - | 10.0 | 10.0 |
| LIFT consultancy fees | - | - | 2.1 | 2.1 |
| Other related income | 0.8 | 0.7 | - | 0.7 |
| Gross rental and related income | 37.1 | 34.1 | 12.1 | 46.2 |
| LIFT interest | 1.0 | 0.9 | - | 0.9 |
| Bank and other interest | 0.5 | 0.4 | - | 0.4 |
| 1.5 | 1.3 | - | 1.3 | |
| Total revenue | 38.6 | 35.4 | 12.1 | 47.5 |
| 5. PROPERTY OPERATING EXPENSES | ||||
| 2013 | 2012 | |||
| Total | Continuing operations |
Discontinued operations |
Total | |
| £m | £m | £m | £m | |
| Property expenses arising | ||||
| • from core portfolio | 2.7 | 2.0 | - | 2.0 |
| • from non-core portfolio | 0.7 | 1.2 | - | 1.2 |
| Purchases by pharmacies | - | - | 6.9 | 6.9 |
| LIFT consultancy costs | - | - | 0.5 | 0.5 |
| 3.4 | 3.2 | 7.4 | 10.6 | |
| 2013 Total |
Continuing operations |
2012 Discontinued operations |
Total | |
|---|---|---|---|---|
| £m | £m | £m | £m | |
| Property expenses arising | ||||
| • from core portfolio | 2.7 | 2.0 | - | 2.0 |
| • from non-core portfolio | 0.7 | 1.2 | - | 1.2 |
| Purchases by pharmacies | - | - | 6.9 | 6.9 |
| LIFT consultancy costs | - | - | 0.5 | 0.5 |
| 3.4 | 3.2 | 7.4 | 10.6 | |
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |||
|---|---|---|---|---|
| Total | Continuing operations |
Discontinued operations |
Total | |
| £m | £m | £m | £m | |
| Wages and salaries | 1.5 | 1.0 | 2.3 | 3.3 |
| Social security costs | 0.3 | 0.2 | 0.2 | 0.4 |
| 1.8 | 1.2 | 2.5 | 3.7 | |
| Auditor's remuneration (note 6(a)) | 0.4 | 0.3 | - | 0.3 |
| Directors' fees (see page 61) | 0.9 | 0.8 | - | 0.8 |
| Other admin expenses | 1.7 | 2.1 | 0.9 | 3.0 |
| Depreciation | 0.1 | 0.1 | 0.1 | 0.2 |
| 4.9 | 4.5 | 3.5 | 8.0 | |
| a) Auditor's remuneration | ||||
| Group audit including interim | 0.1 | 0.1 | - | 0.1 |
| Statutory audit | 0.1 | 0.1 | - | 0.1 |
| Total audit fees | 0.2 | 0.2 | - | 0.2 |
| Tax services – advisory | 0.2 | 0.1 | - | 0.1 |
| 0.4 | 0.3 | - | 0.3 |
The Group's policy on non-audit fees is discussed in detail in the Audit Committee Report on pages 41 to 43.
The average monthly number of employees during the year was made up as follows:
| Number | Number | Number | Number | |
|---|---|---|---|---|
| Property | 28 | 28 | - | 28 |
| Pharmacy | - | - | 77 | 77 |
| LIFT consultancy | - | - | 16 | 16 |
| 28 | 28 | 93 | 121 |
Key management are the Executive Directors and other key management personnel.
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Key management staff | ||
| Salaries, pension, holiday pay, payments in lieu of notice and bonus |
1.4 | 0.9 |
| Post-employment benefits | - | 0.1 |
| Cost of employee share-based incentives | 0.6 | - |
| Social security costs | 0.2 | 0.1 |
| 2.2 | 1.1 |
In the prior year, there was also an additional £0.2 million of salaries, pension, holiday pay, payments in lieu of notice and bonus related to discontinued operations.
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| LIFT interest | 1.0 | 0.9 |
| Bank and other interest | 0.5 | 0.4 |
| 1.5 | 1.3 |
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Interest payable | 20.4 | 21.9 |
| Interest capitalised on developments | (0.4) | (1.0) |
| Amortisation of loan issue costs | 0.5 | 0.3 |
| 20.5 | 21.2 | |
| Change in fair value of interest rate swaps | 1.2 | 54.7 |
| 21.7 | 75.9 | |
| 2013 £m LIFT interest 1.0 Bank and other interest 0.5 1.5 2013 £m 20.4 (0.4) 0.5 |
2012 £m 0.9 0.4 1.3 2012 £m |
|---|---|
| 8. FINANCE COSTS | |
| Interest payable Interest capitalised on developments Amortisation of loan issue costs |
|
| 21.9 | |
| (1.0) | |
| 0.3 | |
| 20.5 | 21.2 |
| Change in fair value of interest rate swaps 1.2 |
54.7 |
| 21.7 | 75.9 |
| 2012 | |
| Continuing Discontinued operations operations |
Total |
| Note £m £m |
£m |
| (20.0) - |
(20.0) |
| Goodwill impairment Surplus on disposal of pharmacy business 31 - 3.4 |
3.4 |
| Loss on disposal of LIFT | |
| consultancy business 31 - (0.3) Acquisition costs (0.3) - |
(0.3) (0.3) |
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Current tax | ||
| Current income tax charge | - | - |
| Deferred tax | ||
| Relating to origination and reversal of temporary differences | 0.2 | (1.0) |
| Income tax charge/(credit) reported in consolidated income statement | 0.2 | (1.0) |
The differences from the standard rate of tax applied to the profit/(loss) before tax may be analysed as follows:
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Profit/(loss) from continuing operations before taxation | 14.3 | (63.3) |
| Profit from discontinued operations before taxation | - | 1.2 |
| Net profit/(loss) before taxation | 14.3 | (62.1) |
| UK income tax at rate of 24% (2012: 26%) Effects of: |
3.4 | (16.1) |
| Capital losses | - | (26.8) |
| Non-taxable income | (0.9) | (1.4) |
| Expenses not deductible for tax purposes | - | 5.7 |
| Utilisation of losses brought forward | (1.3) | (0.7) |
| Gain on disposal of investments/assets | - | (0.9) |
| Movement in unrecognised deferred tax | (1.0) | 38.9 |
| Adjustment in respect of prior years | - | 0.3 |
| 0.2 | (1.0) |
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 23% (2013:24%).
As a REIT, the Group is required to pay Property Income Distributions equal to at least 90% of the Group's exempted net income. 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.
In his Budget of 20 March 2013, the Chancellor of the Exchequer announced a reduction of the corporation tax rate to 23% from 1 April 2013. Further changes, which are expected to be enacted separately each year, propose to reduce the tax rate to 21% on 1 April 2014 and 20% on 1 April 2015. Neither the 21% rate nor the 20% rate were substantively enacted at the year end and are therefore not reflected in the Financial Statements.
Based on a closing deferred tax asset of £1.1 million at the balance sheet date, the proposed reduction to 20% would reduce the deferred tax asset by £0.1 million.
for the year ended 31 March 2013 (continued)
| Basic & Adjusted (EPRA) Basic & diluted EPS per basic & diluted diluted EPS per basic & diluted ordinary share EPS per ordinary ordinary share EPS per ordinary from continuing share from from continuing share from operations continuing operations continuing operations operations £m £m £m £m 14.1 14.1 (62.3) (62.3) - 20.0 Parent 1.2 54.7 Associates 0.7 0.1 0.2 (1.0) 16.2 11.5 529,548,924 529,548,924 462,801,601 462,801,601 2.7p 3.1p (13.5)p - - 0.3p 2.7p 3.1p (13.2)p |
2013 | 2012 | |
|---|---|---|---|
| Adjusted (EPRA) | |||
| financial instrument of: | |||
| Earnings/(loss) per Earnings/(loss) per ordinary share Underlying profit per share of 1.9 pence (2012: 1.5 pence) has been calculated as underlying profit for the year as presented on the income statement of £10.2 million (2012: £7.1 million) divided by the weighted average number of shares in issue of 529,548,924 (2012: 462,801,601). Share options schemes in operation were not considered dilutive as at the balance sheet date based on calculations completed in accordance with IAS 33 Earnings per share. ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY |
Profit/(loss) attributable to equity holders of the parent Goodwill impairment Revaluation of derivative |
||
| Deferred tax | |||
| Adjusted (EPRA) earnings | |||
| Weighted average number of shares in issue – basic and diluted |
|||
| ordinary share from continuing operations |
2.5p | ||
| Earnings per ordinary share from discontinued operations |
0.3p | ||
| 2.8p | |||
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |||||||
|---|---|---|---|---|---|---|---|---|
| Basic & diluted Adjusted basic & NAV per diluted NAV per ordinary share ordinary share |
Basic & NAV per ordinary share |
Adjusted basic & diluted NAV per ordinary share |
||||||
| £m | £m | £m | £m | |||||
| Net assets | 198.1 | 198.1 | 187.9 | 187.9 | ||||
| Own shares held | 1.9 | 1.9 | ||||||
| Derivative financial instruments of: |
||||||||
| Parent | 3.6 | 2.5 | ||||||
| Associates | 1.9 | 1.2 | ||||||
| Deferred tax | (1.1) | (1.3) | ||||||
| NAV in accordance with EPRA | 204.4 | 192.2 | ||||||
| Number of shares in issue | 529,548,924 | 529,548,924 | 529,548,924 | 529,548,924 | ||||
| Net asset value per share | 37.4p | 38.6p | 35.5p | 36.3p |
| 2013 | 2012 | |
|---|---|---|
| Adjusted basic & diluted NAV per ordinary share |
Adjusted basic & diluted NAV per ordinary share |
|
| £m | £m | |
| EPRA NAV | 204.4 | 192.2 |
| Mark to market of derivative financial instrument |
(5.5) | (3.7) |
| Mark to market of fixed rate debt |
(48.2) | (29.6) |
| EPRA NNNAV | 150.7 | 158.9 |
| EPRA NNNAV per share | 28.5p | 30.0p |
The EPRA measures set out above are in accordance with the guidance of the European Property Real Estate Association dated August 2011.
A table listing all the principal subsidiaries of Assura Group Limited is below:
| Name of subsidiary | Place of incorporation | Share-holding | Business activity |
|---|---|---|---|
| Assura Properties plc | England | 100% | Property Investment |
| Assura Properties UK Limited | England | 100% | Property Investment |
| Assura Medical Centres Limited | England | 100% | Property Investment |
| Assura Health Investments Limited | England | 100% | Property Investment |
| Medical Properties Limited | England | 100% | Property Investment |
for the year ended 31 March 2013 (continued)
| Jones Lang LaSalle as at 31 March 2013. The properties have been valued individually and on the basis of open market value in accordance with RICS valuation – Professional Standards 2012 (the "Red Book"). |
||||||
|---|---|---|---|---|---|---|
| Initial yields mainly range from 5.70% to 6.00% (2012: 5.75% and 6.25%) for prime units. For properties with weaker tenants and poorer units, the yields range between 6.50% and 17.00% (2012: 6.25% and 16.00%). The higher yields are in the non-core portfolio. |
||||||
| A 0.25% shift of valuation yield would have approximately a £21.2 million (2012: £20.5 million) impact on the investment property valuation. |
||||||
| 2013 | 2012 | |||||
| Investment | IPUC | Total | Investment | IPUC | Total | |
| £m | £m | £m | £m | £m | £m | |
| Opening fair value Additions: |
526.3 | 8.4 | 534.7 | 463.8 | 35.0 | 498.8 |
| • directly acquired | 2.8 | - | 2.8 | 4.6 | - | 4.6 |
| • business combination | - | - | - | 4.5 | - | 4.5 |
| • improvements | 0.8 | - | 0.8 | 0.5 | - | 0.5 |
| 3.6 | - | 3.6 | 9.6 | - | 9.6 | |
| Development costs | - | 18.6 | 18.6 | - | 18.8 | 18.8 |
| Transfers | 15.6 | (15.6) | - | 45.9 | (45.9) | - |
| Transfer from land & buildings (note 16) Transfer (to)/from assets held |
- | - | - | 9.2 | - | 9.2 |
| for sale | - | (0.6) | (0.6) | 0.6 | (2.2) | (1.6) |
| Capitalised interest | - | 0.4 | 0.4 | - | 1.0 | 1.0 |
| Disposals | (8.1) | (0.4) | (8.5) | (2.1) | (0.5) | (2.6) |
| Unrealised surplus/(deficit) | ||||||
| on revaluation | 2.5 | 3.5 | 6.0 | (0.7) | 2.2 | 1.5 |
| Closing market value | 539.9 | 14.3 | 554.2 | 526.3 | 8.4 | 534.7 |
| Add finance lease obligations recognised separately |
3.1 | - | 3.1 | 3.1 | - | 3.1 |
| Closing fair value of | ||||||
| investment property Investment property occupied by the Pharmacy business prior to disposal in July 2011 were classified as land and buildings. |
543.0 | 14.3 | 557.3 | 529.4 | 8.4 | 537.8 |
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |||||
|---|---|---|---|---|---|---|
| Core | Non-Core | Total | Core | Non-Core | Total | |
| £m | £m | £m | £m | £m | £m | |
| Market value of investment property as estimated by valuer |
523.6 | 9.3 | 532.9 | 505.7 | 14.9 | 520.6 |
| Add IPUC | 14.3 | - | 14.3 | 8.4 | - | 8.4 |
| Add pharmacy lease premiums | 7.0 | - | 7.0 | 5.7 | - | 5.7 |
| Add finance lease obligations recognised separately |
1.0 | 2.1 | 3.1 | 1.0 | 2.1 | 3.1 |
| Fair value for financial reporting purposes |
545.9 | 11.4 | 557.3 | 520.8 | 17.0 | 537.8 |
| Investment property held for sale | 0.8 | 1.3 | 2.1 | - | - | - |
| Vacant property held for sale | - | 0.2 | 0.2 | - | 2.3 | 2.3 |
| Land held for sale | - | 9.7 | 9.7 | - | 9.1 | 9.1 |
| Total property assets held for sale | 0.8 | 11.2 | 12.0 | - | 11.4 | 11.4 |
| Total property assets | 546.7 | 22.6 | 569.3 | 520.8 | 28.4 | 549.2 |
1 core and 3 non-core property investments and 10 land sites are held as available for sale (2012: 13 non-core property investments and 10 land sites).
The Group has the following investments in associated entities under the LIFT initiative:
| Name of Associate | % held | Investment |
|---|---|---|
| GBConsortium 1 Limited | 35% | Holds 60% of the share capital in the Barnet, Enfield and Haringey, and Liverpool and Sefton LIFT companies |
| GBConsortium 2 Limited | 39% | Holds 60% of the share capital in the Coventry LIFT Company |
| GB Primary Care Limited | 67% | Holds 60% of the share capital in the South East Essex LIFT Company |
| GB Primary Care (SWH) Limited | 71% | Holds 60% of the share capital in the South West Hampshire LIFT Company |
| Infracare (Midlands) Limited | 43% | Holds 60% of the share capital in the Dudley South LIFT Company |
| Merseycare Development Company 1 Limited |
39% | Holds 49% of the share capital in the Merseyside LIFT Company |
Infracare (Midlands) Limited has a financial year ended 30 September, all others are 31 March. All of these companies are incorporated in England. Despite in some cases owning levels exceeding 50% these companies are treated as associate entities rather than subsidiaries due to certain restrictions on exercising control in the shareholder agreement. All transfers of funds and distributions from the associated LIFT companies, including non-scheduled loan repayments and dividends, require approval by all shareholders.
In addition, the Group holds an investment in Virgin Healthcare Holdings Limited made up of a 6% equity holding (book value £nil) and a £4 million loan note receivable (book value £nil).
for the year ended 31 March 2013 (continued)
| 2013 Group share |
2012 Group share |
|
|---|---|---|
| £m | £m | |
| Equity in LIFT companies: | ||
| Financial investments in medical centres | 84.1 | 79.4 |
| Current assets | 7.9 | 7.2 |
| Share of gross assets | 92.0 | 86.6 |
| Current liabilities | (5.4) | (5.6) |
| Non-current liabilities | (84.4) | (79.2) |
| Share of gross liabilities | (89.8) | (84.8) |
| Share of net assets of LIFT companies | 2.2 | 1.8 |
| LIFT loan stock | 9.0 | 8.7 |
| Total LIFT interests | 11.2 | 10.5 |
| Loan receivable from Virgin Healthcare Holdings Limited | - | - |
| Carrying amount of associates | 11.2 | 10.5 |
| 2013 Group share |
2012 Group share |
|||
|---|---|---|---|---|
| £m | £m | |||
| Equity in LIFT companies: | ||||
| Financial investments in medical centres | 84.1 | 79.4 | ||
| Current assets | 7.9 | 7.2 | ||
| Share of gross assets | 92.0 | 86.6 | ||
| Current liabilities | (5.4) | (5.6) | ||
| Non-current liabilities | (84.4) | (79.2) | ||
| Share of gross liabilities | (89.8) | (84.8) | ||
| Share of net assets of LIFT companies | 2.2 | 1.8 | ||
| LIFT loan stock | 9.0 | 8.7 | ||
| Total LIFT interests | 11.2 | 10.5 | ||
| Loan receivable from Virgin Healthcare Holdings Limited | - | - | ||
| Carrying amount of associates | 11.2 | 10.5 | ||
| 2013 | 2012 | |||
| Total | Continuing operations |
Discontinued operations |
Total | |
| £m | £m | £m £m |
||
| 1.1 | 0.7 | - | 0.7 | |
| The Group's share of the gross revenue of associates was £13.3 million (2012: £18.1 million). Associates: Share of profits of associated LIFT companies Release of provision against associates Unrealised loss on revaluation of derivative |
- | 3.1 | - | 3.1 |
| financial instrument of associated LIFT companies Virgin Healthcare Holdings Limited |
(0.7) - |
(0.1) - |
- (3.1) |
(0.1) (3.1) |
| Share of post-tax profits/(losses) of associates |
0.4 | 3.7 | (3.1) | 0.6 |
| Joint ventures: | ||||
| - | (0.1) | - | (0.1) | |
| AH Scarborough Health Park Limited Share of post-tax losses/of joint ventures |
- | (0.1) | - | (0.1) |
for the year ended 31 March 2013 (continued)
The movement on investments in associates during the year was as follows:
| 2013 Group |
2012 Group |
|
|---|---|---|
| £m | £m | |
| Opening balance | 10.5 | 9.9 |
| Investments disposed of in year | - | (0.5) |
| Net loans advanced | 0.3 | 0.5 |
| Share of profits of continuing associates (before derivative movements) | 1.1 | 0.7 |
| Share of losses of discontinued activities | - | (3.1) |
| Release of provision against associates | - | 3.1 |
| Share of derivative movements in continuing associates | (0.7) | (0.1) |
| Closing balance | 11.2 | 10.5 |
The Group had a 50% interest in a joint venture during the year, AH Scarborough Health Park Limited ("AHSHPL"), a property investment company incorporated in England, which it sold in April 2012 for £1. The joint venture was carried in the balance sheet at nil value and no profit or loss arose on the disposal.
for the year ended 31 March 2013 (continued)
| 2013 | |||||
|---|---|---|---|---|---|
| Land and buildings |
Computer and other equipment |
Fixtures, fittings and furniture |
Total | ||
| £m | £m | £m | £m | ||
| Cost or valuation: | |||||
| At 1 April | - | 0.4 | 0.1 | 0.5 | |
| Additions at cost | - | 0.1 | - | 0.1 | |
| Disposal | - | (0.1) | - | (0.1) | |
| At 31 March | - | 0.4 | 0.1 | 0.5 | |
| Depreciation: | |||||
| At 1 April | - | 0.3 | - | 0.3 | |
| Depreciation for the year | - | - | 0.1 | 0.1 | |
| At 31 March | - | 0.3 | 0.1 | 0.4 | |
| Net book value at 31 March 2013 | - | 0.1 | - | 0.1 |
| Land and buildings |
2013 | ||
|---|---|---|---|
| Computer and other equipment |
Fixtures, fittings and furniture |
Total | |
| £m | £m | £m | £m |
| - | 0.4 | 0.1 | 0.5 |
| - | 0.1 | - | 0.1 |
| - | (0.1) | - | (0.1) |
| - | 0.4 | 0.1 | 0.5 |
| 0.3 | |||
| 0.1 | |||
| - | 0.3 | 0.1 | 0.4 |
| 0.1 | |||
| Total | |||
| buildings | other equipment | and furniture | |
| £m | £m | £m | £m |
| 9.8 | 1.0 | 3.9 | 14.7 |
| (9.2) | - | - | (9.2) |
| - | 0.1 | 0.3 | 0.4 |
| (0.6) | (0.7) | (4.1) | (5.4) |
| - | 0.4 | 0.1 | 0.5 |
| 1.5 | |||
| 0.2 | |||
| (1.4) | |||
| - | 0.3 | - | 0.3 |
| 0.2 | |||
| - - - Land and - - - - |
0.3 - 0.1 Computer and 0.8 0.1 (0.6) 0.1 business disposal in July 2011. They are now included as investment properties. |
- 0.1 - 2012 Fixtures, fittings 0.7 0.1 (0.8) 0.1 Land and buildings comprised interests in pharmacy premises used by group companies until the pharmacy |
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Cash held in current account | 15.6 | 12.2 |
| Restricted cash | 20.1 | 9.2 |
| 35.7 | 21.4 |
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.
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Trade receivables | 2.3 | 2.2 |
| Prepayments and accrued income | 1.1 | 1.2 |
| Deferred consideration | - | 2.6 |
| Loan note | 3.0 | 1.0 |
| Other debtors | 0.2 | 0.8 |
| 6.6 | 7.8 | |
| Loan note due after more than 1 year | 3.0 | 6.0 |
| 9.6 | 13.8 |
Trade and other receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.
The loan note is an interest bearing loan of £6.0 million granted to the purchaser of the pharmacy business upon completion of the sale. Interest is charged on the loan at a rate of 6.5% and is payable quarterly. The loan is repayable in two stage payments. £3.0 million is due by 30 June 2013 with the balance to be settled on 30 June 2014.
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 (2012: £nil).
As at 31 March 2013 and 31 March 2012, the analysis of trade debtors that were past due but not impaired is as follows:
| Total | Neither past | Past due but not impaired | ||||
|---|---|---|---|---|---|---|
| due nor impaired |
> 30 days | > 60 days | > 90 days | > 120 days | ||
| £m | £m | £m | £m | £m | £m | |
| 2013 | 2.3 | 1.9 | 0.2 | 0.1 | - | 0.1 |
| 2012 | 2.2 | 1.9 | 0.1 | 0.1 | - | 0.1 |
The bulk of the Group's income derives from the NHS or is reimbursed by the NHS, hence the risk of default is minimal.
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Trade creditors | 2.4 | 1.8 |
| Other creditors and accruals | 11.1 | 10.2 |
| VAT creditor | 0.8 | 0.9 |
| Payments due under finance leases | - | 0.1 |
| 14.3 | 13.0 |
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Arising from rental received in advance | 7.8 | 7.5 |
| Arising from pharmacy lease premiums received in advance | 7.0 | 5.8 |
| 14.8 | 13.3 | |
| Current | 8.2 | 7.8 |
| Non-current | 6.6 | 5.5 |
| 14.8 | 13.3 |
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Trade creditors | 2.4 | 1.8 |
| Other creditors and accruals | 11.1 | 10.2 |
| VAT creditor | 0.8 | 0.9 |
| Payments due under finance leases | - | 0.1 |
| 14.3 | 13.0 | |
| 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 £3.1 million (2012: £3.1 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 is disclosed in note 32. The fair value of the Group's lease obligations is approximately equal to their carrying value. |
||
| 20. DEFERRED REVENUE | ||
| 2013 | 2012 | |
| £m | £m | |
| Arising from rental received in advance | 7.8 | 7.5 |
| Arising from pharmacy lease premiums received in advance | 7.0 14.8 |
5.8 13.3 |
| 8.2 | 7.8 | |
| 6.6 | 5.5 | |
| 14.8 | 13.3 | |
| Current Non-current 21. PROVISIONS |
||
| 2013 | 2012 | |
| £m | £m | |
| At 1 April | 1.0 | 1.3 |
| Utilisation of provision | - | (0.3) |
| 1.0 | 1.0 | |
| At 31 March Analysed as: |
||
| 0.1 | 0.1 | |
| Current Non-current |
0.9 | 0.9 |
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Secured bank loans | ||
| At 1 April | 375.6 | 361.8 |
| Amount issued or drawn down in year | 23.2 | 159.0 |
| Amount repaid in year | (7.0) | (146.1) |
| Acquired with acquisition of subsidiaries | - | 3.4 |
| Loan issue costs | (0.2) | (2.8) |
| Amortisation of loan issue costs | 0.5 | 0.3 |
| At 31 March | 392.1 | 375.6 |
| Due within one year | 3.9 | 6.9 |
| Due after more than one year | 388.2 | 368.7 |
| At 31 March | 392.1 | 375.6 |
The Group has the following bank facilities:
The NAB loan of £120 million was repaid in full in December 2011 along with the associated SWAP.
The Group has been in compliance with all financial covenants on all of the above loans as applicable throughout the year.
for the year ended 31 March 2013 (continued)
| Interest rate swap (RBS) |
Interest rate swaps (Santander) |
Total derivative financial instruments of the Group |
||
|---|---|---|---|---|
| £m | £m | £m | ||
| Liability at 1 April 2012 | 0.2 | 2.3 | 2.5 | |
| Movement in year | (0.1) | 1.3 | 1.2 | |
| Cash settlement | (0.1) | - | (0.1) | |
| Liability at 31 March 2013 | - | 3.6 | 3.6 | |
| The table above includes the net position of derivative financial instruments at the balance sheet date. These are presented under the following captions on the Consolidated Balance Sheet: |
||||
| 2013 | 2012 | |||
| £m | £m | |||
| Current liabilities | - | 0.2 | ||
| Non-current liabilities | 3.6 | 2.3 | ||
| 3.6 | 2.5 | |||
| At 31 March 2013 and 31 March 2012 and throughout the two year period the financial liabilities measured have been determined and valued as level 2. During the reporting years ending 31 March 2013 and 31 March 2012, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of the Level 3 fair value measurements. |
||||
| ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY |
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Current liabilities | - | 0.2 |
| Non-current liabilities | 3.6 | 2.3 |
| 3.6 | 2.5 |
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |||
|---|---|---|---|---|
| Number of shares | £m | Number of shares | £m | |
| Authorised | ||||
| Ordinary Shares of 10p each | 3,000,000,000 | 300.0 | 3,000,000,000 | 300.0 |
| Preference Shares of 10p each | 20,000,000 | 2.0 | 20,000,000 | 2.0 |
| 302.0 | 302.0 | |||
| Ordinary Shares issued and fully paid |
||||
| At 1 April | 529,548,924 | 53.0 | 411,871,386 | 41.2 |
| Issued during the year | - | - | 117,677,538 | 11.8 |
| At 31 March | 529,548,924 | 53.0 | 529,548,924 | 53.0 |
| Own shares held | (4,218,219) | (1.9) | (4,218,219) | (1.9) |
| Total Share Capital | 525,330,705 | 51.1 | 525,330,705 | 51.1 |
Own shares held comprise shares held by the Employee Benefit Trust ("EBT").
In the year to 31 March 2012, £33.5 million (net of expenses) was raised through a 2 for 7 Rights Issue of 117,677,538 new shares at 30.0 pence per share.
| 2013 | 2012 | |||
|---|---|---|---|---|
| Payment date | Pence per share | Number of ordinary shares | £m | £m |
| 23/01/2013 | 0.285 | 529,548,924 | 1.5 | - |
| 24/10/2012 | 0.285 | 529,548,924 | 1.5 | - |
| 25/07/2012 | 0.285 | 529,548,924 | 1.5 | - |
| 26/07/2011 | 1.25 | 411,871,386 | - | 5.1 |
| 4.5 | 5.1 |
A dividend of 0.3025 pence per share was paid to shareholders on 24 April 2013.
An approved quarterly dividend for 2013/14 of 0.3025 pence per share is to be paid on 24 July 2013 to shareholders on the share register at 12 July 2013. This equates to a total cash payment of £1.6 million.
Under Guernsey Law, companies can pay dividends in excess of accounting profit provided they satisfy the solvency test prescribed under Companies (Guernsey) Law 2008. The solvency test considers whether a company is able to pay its debts when they fall due; and whether the value of a company's assets is greater than its liabilities. As a consequence, the Group has deemed it appropriate to merge the distribution reserve and retained earnings as separate reserves are no longer required. Refer to the Consolidated Statement of Changes in Equity for the current period.
for the year ended 31 March 2013 (continued)
| 27. SHARE-BASED PAYMENTS | ||
|---|---|---|
| As at 31 March 2013, the Group had three long-term incentive schemes in place – the Value Creation Plan ("VCP"), the Executive Recruitment Plan ("ERP") and the Long Term Incentive Plan ("LTIP"). |
||
| 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 who review award levels on a case by case basis. |
||
| As at 31 March 2013 the Employee Benefit Trust ("EBT") held a total of 4,218,219 (2012: 4,218,219) Ordinary Shares of 10p each in Assura Group Limited. Previous long-term incentive plans have lapsed without vesting. |
||
| Value Creation Plan As at 31 March 2013, a total of 791,700 performance units had been granted to employees (including 575,000 units granted to Executive Directors as detailed in the Remuneration Committee Report). No payment has been made for the grant of these awards and the performance units have no value at grant. |
||
| Participants have the opportunity to receive 10% of the total value created for shareholders above a threshold price determined at three measurement dates in a five year measurement period. Before any awards vest, which are granted as nil-cost options on conversion of any value created, a minimum level of Total Shareholder Return of 8% per annum compound growth from the base price at each measurement date must be achieved. |
||
| Further details in respect of the VCP are provided in the Remuneration Committee Report on pages 52 to 53. | ||
| Long Term Incentive Plan The units (equivalent to one ordinary share) outstanding in respect of the LTIP are as follows: |
2013 | 2012 |
| Units | Units | |
| Outstanding as at the start of the year Granted during the year |
725,000 | 1,580,000 |
| Exercised during the year | - - |
750,000 (155,000) |
| Expired during the year | (325,000) | - |
| Forfeited during the year in respect of leavers | - | (1,450,000) |
| Outstanding as at the end of the year | 400,000 | 725,000 |
| Units exercisable at the end of the year | - | - |
| No Executive Directors hold shares under the scheme and key management personnel had 400,000 units at 31 March 2013 (2012: 725,000 units). These relate to grants on 29 July 2011 which have a performance period ending on 31 March 2014. |
for the year ended 31 March 2013 (continued)
Three distinct performance conditions apply to the units outstanding. 50% of an award will be subject to a performance condition measuring the Group's annual earnings per share growth (excluding revaluation surpluses or deficits arising on investment property) over a three year period ending on 31 March 2014. The remaining 50% of an award will be subject to a performance condition measuring (over the same three year period) the cumulative growth in the Group's annual percentage total primary care property return as calculated by IPD measured against the IPD Primary Healthcare Index. In addition, the vesting conditions further require Total Shareholder Return ("TSR") over the 3 years ending 31 March 2014 to exceed 25%.
The fair value of equity settled units granted during 2013 is estimated as at the date of grant using a Monte-Carlo model (2012: Black-Scholes), taking into account the terms and conditions upon which units were granted. The following table lists the inputs to the models used for the year ended 31 March 2013 and the year ended 31 March 2012.
| 2013 | 2012 | |
|---|---|---|
| Dividend yield (%) | 3.5 | - |
| Expected share price volatility (%) | 20.7 | n/a |
| Risk-free interest rate (%) | 0.74 | 0.78 |
| Expected life of units (years) | 4.5 | 2.7 |
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.
The fair value of the units granted in the period, is £2,475,000 (2012: £160,400) 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 £575,000 (2012: charge of £16,000).
For share options outstanding as at 31 March 2013, the weighted average remaining contractual life is 1.98 years (2012: 1.55 years). The weighted average fair value of share options granted during the period was £0.34 (2012: £0.21).
for the year ended 31 March 2013 (continued)
| Reconciliation of net profit/(loss) before taxation to net cash inflow from operating activities: Net profit/(loss) before taxation Profit/(loss) from continuing activities Profit from discontinued activities Adjustment for non-cash items: Depreciation |
2013 £m 14.3 - |
2012 £m |
|---|---|---|
| (63.3) | ||
| 1.2 | ||
| 14.3 | (62.1) | |
| 0.1 | 0.2 | |
| Decrease in debtors | 0.1 | 4.2 |
| Increase in creditors | 2.8 | 3.1 |
| Decrease in provisions | - | (0.3) |
| Increase in pharmacy inventories | - | (0.1) |
| Revaluation gain | (6.0) | (1.5) |
| Interest capitalised on developments | (0.4) | (1.0) |
| Loss on revaluation of financial instrument | 1.2 | 54.7 |
| Loss on disposal of properties | 0.1 | - |
| Profit on disposal of pharmacy business | - | (3.4) |
| Loss on disposal of LIFT business | - | 0.3 |
| Profit on disposal of assets | - | (0.5) |
| Goodwill impairment | - | 20.0 |
| Share of (profits) of associates and joint ventures | (0.4) | (3.6) |
| Impairment of investments - discontinued | - | 3.1 |
| Employee share-based incentive costs | 0.6 | - |
| Amortisation of loan issue costs | 0.5 | 0.3 |
| Net cash inflow from operating activities | 12.9 | 13.4 |
for the year ended 31 March 2013 (continued)
| Deferred tax consists of the following: | ||
|---|---|---|
| 2013 | 2012 | |
| £m | £m | |
| At 1 April | 1.3 | 1.8 |
| Capital allowances in excess of depreciation | - | (0.3) |
| Trading losses carried forward | (0.2) | 1.3 |
| Disposals | - | (1.5) |
| At 31 March | 1.1 | 1.3 |
The amount of deductible temporary differences and unused tax losses are as follows:
| 2013 | 2012 |
|---|---|
| £m | £m |
| 227.4 | 250.7 |
| 35.2 | (11.9) |
| 35.9 | 57.7 |
| 298.5 | 296.5 |
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:
The tax effect of these unrecognised assets is as follows:
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Tax losses | 52.3 | 60.2 |
| Other timing differences | 8.1 | (2.9) |
| Deficit on revaluation of investment properties in the UK | 8.3 | 13.9 |
| 68.7 | 71.2 |
for the year ended 31 March 2013 (continued)
| 30. BUSINESS COMBINATIONS – YEAR TO 31 MARCH 2012 On 18 August 2011, the Group acquired 100% of the Ordinary Share Capital of PH Investments (No. 1) Limited and its subsidiary company Riddings Pharmco Limited, private companies based in England. The companies are involved in property investment and development and the acquisition has enlarged the existing investment portfolio of the group. The consideration of £522,000 was satisfied by cash as shown below. |
|
|---|---|
| The fair values of identifiable assets and liabilities of PH Investments (No. 1) Limited & its subsidiary as at the date of acquisition were: |
|
| Fair value | |
| £m | |
| Investment properties | 4.5 |
| Current liabilities | (0.5) |
| Long term loans | (3.4) |
| Total identifiable net assets at fair value | 0.6 |
| Negative goodwill arising on acquisition | (0.1) |
| Total purchase consideration transferred | 0.5 |
| Purchase consideration: | |
| Cash | 0.5 |
| Total purchase consideration | 0.5 |
| Analysis of cash flows on acquisition: | |
| Cash paid as consideration (included within cash flows from investing activities) | (0.5) |
| Net cash flow on acquisition | (0.5) |
| Total transaction costs of £46,000 have been expensed and are included within exceptional items. Negative goodwill of £58,000 has been taken to the Consolidated Income Statement and is shown within exceptional items. |
|
| The fair value of assets acquired is considered to be final. | |
| ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY |
| Cash | 0.5 |
|---|---|
| Total purchase consideration | 0.5 |
| Cash paid as consideration (included within cash flows from investing activities) | (0.5) |
|---|---|
| Net cash flow on acquisition | (0.5) |
for the year ended 31 March 2013 (continued)
During the prior year the Group discontinued operating its Pharmacy division, LIFT consultancy business and its effective interest in Virgin Healthcare Holdings Limited.
| Period to 12 July 2011 | |
|---|---|
| £m | |
| Pharmacy division | 4.4 |
| LIFT consultancy division | - |
| Losses in connection with Virgin Healthcare Holdings Limited (note 15) | (3.1) |
| Deferred tax | 0.3 |
| Profit for the year from discontinued operations | 1.6 |
On 12 July 2011 the Group completed the sale of the Pharmacy division to Gorgemead Limited, part of the Cohens Group.
The accounting policies applicable to the Pharmacy division are as follows:
Pharmacy sales – revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, on the date of sale.
Pharmacy inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Cost is defined as average purchase price.
The results of the Pharmacy division which have been included in the consolidated income statement are presented below:
| £m | |
|---|---|
| Revenue | 10.0 |
| Cost of sales | (6.9) |
| Administrative expenses | (2.1) |
| Operating profit | 1.0 |
| Profit on disposal of discontinued operations | 3.4 |
| Profit for the period from discontinued operations | 4.4 |
for the year ended 31 March 2013 (continued)
| Period to 12 July 2011 | |
|---|---|
| £m | |
| Operating activities | 0.5 |
| Investing activities | 21.7 |
| Net cash inflow | 22.2 |
| The net cash flows attributable to the Pharmacy division were as follows: | |
|---|---|
| Period to 12 July 2011 £m |
|
| Operating activities | 0.5 |
| Investing activities | 21.7 |
| Net cash inflow | 22.2 |
| The total disposal consideration and major classes of assets and liabilities sold are analysed as follows: | |
| As at 12 July 2011 | |
| £m | |
| Assets and liabilities disposed of other than cash | |
| Pharmacy licences and goodwill | 23.7 |
| Property, plant and equipment | 4.0 |
| Deferred tax asset | 1.5 |
| Inventories | 2.3 |
| Debtors | 5.0 |
| Cash and cash equivalents | 3.3 |
| Creditors | (7.6) |
| Net assets | 32.2 |
| Net assets sold – 100% | 32.2 |
| Fair value of proceeds | 36.8 |
| Costs | (1.2) |
| Net proceeds | 35.6 |
| Profit on disposal | 3.4 |
| Fair value of proceeds | |
| Cash | 24.5 |
| Deferred consideration (received on completion) | 1.4 |
| Loan notes (note 18) | 7.0 |
| Deferred consideration – pipeline | 3.5 |
| Deferred consideration – net assets adjustment | 0.4 |
| 36.8 | |
| As at 31 March 2013, all deferred consideration has been received in full. | |
| LIFT disposal On 26 October 2011 the Group completed the sale of the LIFT consultancy business to GB Partnerships Investments Limited. At the same time the Group made a 15% investment in GB Partnerships Limited and loaned that company £0.2 million via a loan note which pays interest at 5%. |
|
| Cash | 24.5 |
|---|---|
| Deferred consideration (received on completion) | 1.4 |
| Loan notes (note 18) | 7.0 |
| Deferred consideration – pipeline | 3.5 |
| Deferred consideration – net assets adjustment | 0.4 |
| 36.8 |
for the year ended 31 March 2013 (continued)
The results of the LIFT consultancy business for the period to its date of sale are presented below:
At the date of disposal the net assets of the LIFT consultancy business were £1.0 million. The net cash flows attributable to the LIFT consultancy business were as follows:
| Period to 26 October 2011 | |
|---|---|
| £m | |
| Operating activities | 0.3 |
| Net cash inflow | 0.3 |
The total disposal consideration and major classes of assets and liabilities sold are analysed as follows:
| As at 26 October 2011 | |
|---|---|
| £m | |
| Assets and liabilities disposed of other than cash | |
| Goodwill | 0.8 |
| Debtors | 0.6 |
| Cash and cash equivalents | 0.3 |
| Creditors | (1.1) |
| Net assets | 0.6 |
| Net assets sold – 85% | 0.5 |
| LIFT investments sold | 0.5 |
| 1.0 | |
| Fair value of proceeds - cash | 0.8 |
| Costs | (0.1) |
| Net proceeds | 0.7 |
| Loss on disposal | (0.3) |
for the year ended 31 March 2013 (continued)
The Group holds cash and liquid resources as well as having debtors and creditors that arise directly from its operations.
The main risks arising from the Group's financial instruments and properties are credit risk, liquidity risk, interest rate risk and equity price risk. The Board regularly reviews and agrees policies for managing each of these risks and these are summarised below.
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.
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 100OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 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 £9 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 350 tenants at any one time. Furthermore the bulk of the Group's property income derives from the NHS or is reimbursed by the NHS, who have an obligation to ensure that patients can be seen and treated and step in when GPs are unable to practice, 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.
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 well let to GPs and PCTs. 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 it has a spread of sources and maturities.
The Group has entered into commercial property leases on its core investment property portfolio. These non-cancellable leases have remaining terms of up to 28 years and have a weighted average lease length of 15.1 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:
| On demand |
Less than 3 months |
3 to 12 months |
1 to 5 years |
> 5 years | Total | |
|---|---|---|---|---|---|---|
| £m | £m | £m | £m | £m | £m | |
| Non-cancellable leases | - | 8.9 | 26.9 | 149.1 | 426.9 | 611.8 |
| Trade and other receivables | - | 6.6 | - | 3.0 | - | 9.6 |
| - | 15.5 | 26.9 | 152.1 | 426.9 | 621.4 |
| On demand |
Less than 3 months |
3 to 12 months |
1 to 5 years |
> 5 years | Total | |
|---|---|---|---|---|---|---|
| £m | £m | £m | £m | £m | £m | |
| Non-cancellable leases | - | 8.7 | 26.2 | 137.1 | 398.4 | 570.4 |
| Trade and other receivables | - | 3.6 | 1.6 | 9.2 | - | 14.4 |
| - | 12.3 | 27.8 | 146.3 | 398.4 | 584.8 |
for the year ended 31 March 2013 (continued)
The table below summarises the maturity profile of the Group's financial liabilities, including interest, at 31 March 2013 and 31 March 2012 based on contractual undiscounted payments at the earliest date which the Group can be required to pay.
The total contracted discounted payments is 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.
| On demand |
Less than 3 months |
3 to 12 months |
1 to 5 years |
> 5 years | Total | |
|---|---|---|---|---|---|---|
| £m | £m | £m | £m | £m | £m | |
| Non-derivative financial liabilities: | ||||||
| Interest bearing loans and borrowings | - | 5.0 | 9.9 | 121.0 | 531.4 | 667.3 |
| Trade and other payables | - | 11.3 | 3.0 | 0.1 | 3.0 | 17.4 |
| - | 16.3 | 12.9 | 121.1 | 534.4 | 684.7 | |
| Derivative financial liabilities: | ||||||
| Interest rate swap | - | 0.2 | 0.7 | 6.0 | - | 6.9 |
| - | 0.2 | 0.7 | 6.0 | - | 6.9 | |
| Total financial liabilities | - | 16.5 | 13.6 | 127.1 | 534.4 | 691.6 |
| On demand |
Less than 3 months |
3 to 12 months |
1 to 5 years |
> 5 years | Total | |
|---|---|---|---|---|---|---|
| £m | £m | £m | £m | £m | £m | |
| Non-derivative financial liabilities: | ||||||
| Interest bearing loans and borrowings | - | 7.1 | 19.3 | 142.5 | 449.4 | 618.3 |
| Trade and other payables | - | 12.9 | 0.1 | 0.1 | 2.9 | 16.0 |
| - | 20.0 | 19.4 | 142.6 | 452.3 | 634.3 | |
| Derivative financial liabilities: | ||||||
| Interest rate swap | - | 0.3 | 0.9 | 5.2 | - | 6.4 |
| - | 0.3 | 0.9 | 5.2 | - | 6.4 | |
| Total financial liabilities | - | 20.3 | 20.3 | 147.8 | 452.3 | 640.7 |
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 (see below). The swaps are revalued to their market value by reference to market interest rates at each balance sheet date.
for the year ended 31 March 2013 (continued)
| Within 1 to 5 |
> 5 years | Total | ||
|---|---|---|---|---|
| 1 year | years | |||
| £m | £m | £m | £m | |
| Floating rate asset/(liability) | ||||
| Cash | 35.7 | - | - | 35.7 |
| Santander - investment facility | - | (50.0) | - | (50.0) |
| Santander - development facility | - | (5.2) | - | (5.2) |
| Interest rate swap | - | (3.6) | - | (3.6) |
| Fixed rate (all liabilities) | ||||
| Long-term loans: | ||||
| Bond | - | - | (110.0) | (110.0) |
| Aviva | (3.9) | (20.5) | (206.1) | (230.5) |
| Payments due under finance leases | - | (0.1) | (3.0) | (3.1) |
| Floating rate asset/(liability) Cash Santander - investment facility Santander - development facility Interest rate swap Fixed rate (all liabilities) Long-term loans: Bond Aviva |
1 year £m 35.7 - - - |
years £m - (50.0) (5.2) (3.6) |
£m - - - - |
£m 35.7 |
|---|---|---|---|---|
| (50.0) (5.2) (3.6) |
||||
| - | - | (110.0) | (110.0) | |
| (3.9) | (20.5) | (206.1) | (230.5) | |
| Payments due under finance leases | - | (0.1) | (3.0) | (3.1) |
| fixed all in interest rates ranging between 4.11% and 6.66%. In November 2011 the Group entered into an interest rate swap with Santander for a principal of £50.0 million at 2.575% plus 1.95% margin for five years. This replaced the previous swap held with Santander. The ageing analysis of the financial assets and liabilities excluding trade receivables and payables of the Group at 31 March 2012 was as follows: |
Within 1 year £m |
1 to 5 years £m |
> 5 years £m |
Total £m |
| Floating rate asset/(liability) | ||||
| Cash | 21.4 | - | - | 21.4 |
| Santander – investment facility | - | (50.0) | - | (50.0) |
| Santander – development facility | - | (2.4) | - | (2.4) |
| (4.0) | - | - | (4.0) | |
| (2.3) | - | (2.5) | ||
| (0.2) | ||||
| RBS Interest rate swap Fixed rate (all liabilities) |
||||
| Long-term loans: Bond |
||||
| Aviva | - | - | (110.0) | (110.0) |
| Payments due under finance leases | (2.9) (0.1) |
(14.9) (0.1) |
(195.3) (2.9) |
(213.1) (3.1) |
for the year ended 31 March 2013 (continued)
The Group has largely eliminated its exposure to interest rate movements affecting income by the use of fixed rate debt and interest rate swaps. The Group is 99% fixed such that a 0.25% movement in interest rate has a negligible impact on underlying profits.
| 2013 Book value |
2012 Book value |
2013 Fair value |
2012 Fair value |
|
|---|---|---|---|---|
| £m | £m | £m | £m | |
| Cash | 35.7 | 21.4 | 35.7 | 21.4 |
| Interest rate swap | (3.6) | (2.5) | (3.6) | (2.5) |
| Long term loan | (392.1) | (375.6) | (440.3) | (405.2) |
| Payments due under finance leases | (3.1) | (3.1) | (3.1) | (3.1) |
The Group is exposed to the valuation impact on investor sentiment of long term interest rate expectations, which can impact transactions in the market and increase or decrease valuations accordingly.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may make disposals, adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
The Group monitors capital structure with reference to loan to value (LTV), which is calculated as net debt divided by total property and LIFT value. The LTV percentage on this basis is 62% at 31 March 2013 (64% at 31 March 2012).
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Investment property | 543.0 | 529.4 |
| Investment property under construction | 14.3 | 8.4 |
| Held for sale - Investment property | 2.3 | 2.3 |
| Held for sale - Land | 9.7 | 9.1 |
| LIFT | 11.2 | 10.5 |
| Total property and LIFT | 580.5 | 559.7 |
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Loans | 392.1 | 375.6 |
| Finance lease | 3.1 | 3.1 |
| Cash | (35.7) | (21.4) |
| Net debt | 359.5 | 357.3 |
| LTV | 62% | 64% |
for the year ended 31 March 2013 (continued)
ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY 104OVERVIEW BUSINESS & FINANCIAL REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION At the year end the Group had 9 (2012: 6) developments on-site with a contracted total expenditure of £33.1 million (2012: £16.2 million) of which £13.9 million (2012: £7.7 million) had been expended.
Details of transactions during the year and outstanding balances at 31 March 2013 in respect of associates and joint ventures are detailed in note 15.
Details of payments to key management personnel are provided in note 6.
for the year ended 31 March 2013
We have audited the Parent Company Financial Statements of Assura Group Limited for the year ended 31 March 2013 which comprise the Company Income Statement, the Company Balance Sheet, the Company Statement of Changes in Equity, the Company Cash Flow Statement and the related notes A to K. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company's members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. 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.
As explained more fully in the Statement of Directors' Responsibilities set out on page 64, the Directors are responsible for the preparation of the Company Financial Statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the Company Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
An audit involves obtaining evidence about the amounts and disclosures in the Company Financial Statements sufficient to give reasonable assurance that the Company Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the Financial Statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited Financial Statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
In our opinion the Company Financial Statements:
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires to report to you if, in our opinion:
We have reported separately on the Group Financial Statements of Assura Group Limited for the year ended 31 March 2013.
Senior Statutory Auditor
For and on behalf of Deloitte LLP, Chartered Accountants and Recognised Auditor Manchester 19 July 2013
for the year ended 31 March 2013
| 2013 | 2012 | |
|---|---|---|
| Note | £m | £m |
| Revenue | ||
| Dividends received from subsidiary companies | 3.7 | - |
| Interest receivable from subsidiary companies | - | 4.0 |
| Bank and other interest receivable | 0.1 | 0.1 |
| Total revenue | 3.8 | 4.1 |
| Administration costs | 0.8 | 2.0 |
| Share-based payment charge | 0.6 | - |
| Loss on sale of businesses | - | 8.6 |
| Total operating expenses | 1.4 | 10.6 |
| Operating profit/(loss) | 2.4 | (6.5) |
| Provision for diminution in value of investments in subsidiaries B |
(16.2) | (21.1) |
| Reversal of provision/(provision) against subsidiary loan balances F |
27.9 | (30.8) |
| Profit/(loss) before taxation | 14.1 | (58.4) |
| Taxation | - | - |
| Profit/(loss) attributable to equity holders | 14.1 | (58.4) |
| 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. |
||
as at 31 March 2013
| 2013 | 2012 | ||
|---|---|---|---|
| Note | £m | £m | |
| Non-current assets | |||
| Investments in subsidiary companies | B | 154.1 | 87.3 |
| Loans to subsidiary companies | C | 68.1 | - |
| 222.2 | 87.3 | ||
| Current assets | |||
| Cash and cash equivalents | D | 3.4 | 2.2 |
| Other receivables | E | - | 0.4 |
| Loans to subsidiary companies | F | 0.4 | 111.2 |
| 3.8 | 113.8 | ||
| Total assets | 226.0 | 201.1 | |
| Current liabilities | |||
| Other payables | G | 1.0 | 0.7 |
| Loans from subsidiary companies | H | 26.9 | 12.5 |
| Total liabilities | 27.9 | 13.2 | |
| Net assets | 198.1 | 187.9 | |
| Capital and reserves | |||
| Share capital | 24 | 53.0 | 53.0 |
| Own shares held | (1.9) | (1.9) | |
| Share premium | 77.1 | 77.1 | |
| Reserves | 69.9 | 59.7 | |
| Total equity | 198.1 | 187.9 |
The Financial Statements were approved at a meeting of the Board of Directors held on 19 July 2013 and signed on its behalf by:
Graham Roberts Jonathan Murphy Chief Executive Finance Director
for the year ended 31 March 2013
| Share capital |
Own shares held |
Share premium |
Distributable reserve |
Retained earnings |
Reserves | Total | |
|---|---|---|---|---|---|---|---|
| £m | £m | £m | £m | £m | £m | £m | |
| 1 April 2011 | 41.2 | (2.0) | 55.4 | 210.6 | (87.4) | 123.2 | 217.8 |
| Loss attributable to equity holders |
- | - | - | - | (58.4) | (58.4) | (58.4) |
| Total comprehensive income |
- | - | - | - | (58.4) | (58.4) | (58.4) |
| Issue of ordinary shares | 11.8 | - | 23.5 | - | - | - | 35.3 |
| Issue costs | - | - | (1.8) | - | - | - | (1.8) |
| Sale of own shares held | - | 0.1 | - | - | - | - | 0.1 |
| Dividends paid | - | - | - | (5.1) | - | (5.1) | (5.1) |
| 31 March 2012 | 53.0 | (1.9) | 77.1 | 205.5 | (145.8) | 59.7 | 187.9 |
| Profit attributable to | |||||||
| equity holders | - | - | - | - | 14.1 | 14.1 | 14.1 |
| Total comprehensive income |
- | - | - | - | 14.1 | 14.1 | 14.1 |
| Transfer of reserves (note 26 to the Group accounts) |
- | - | - | (205.5) | 205.5 | - | - |
| Dividends paid (note 25 to the Group accounts) |
- | - | - | - | (4.5) | (4.5) | (4.5) |
| Cost of employee share base incentives |
- | - | - | - | 0.6 | 0.6 | 0.6 |
| 31 March 2013 | 53.0 | (1.9) | 77.1 | - | 69.9 | 69.9 | 198.1 |
| ASSURA GROUP INVESTING IN THE FUTURE OF PRIMARY CARE PROPERTY |
for the year ended 31 March 2013
| 2013 | 2012 | ||
|---|---|---|---|
| Note | £m | £m | |
| Operating activities | |||
| Net cash inflow from operating activities | I | 3.7 | 2.0 |
| Investing activities | |||
| Increase in share capital of subsidiaries | (83.0) | (55.7) | |
| Proceeds from disposal of subsidiary | - | 0.5 | |
| Net loans received from subsidiaries | 85.0 | 20.8 | |
| Net cash inflow/(outflow) from investing activities | 2.0 | (34.4) | |
| Financing activities | |||
| Issue of Ordinary Shares for cash | - | 35.3 | |
| Issue costs paid on issuance of Ordinary Shares | - | (1.8) | |
| Dividends paid | (4.5) | (5.1) | |
| Net cash (outflow)/inflow from financing activities | (4.5) | 28.4 | |
| Increase/(decrease) in cash and cash equivalents | 1.2 | (4.0) | |
| Opening cash and cash equivalents | 2.2 | 6.2 | |
| Closing cash and cash equivalents | D | 3.4 | 2.2 |
for the year ended 31 March 2013
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Cost | 290.5 | 207.5 |
| Provision for diminution in value | (136.4) | (120.2) |
| 154.1 | 87.3 |
| The accounting policies of the Company are consistent with those of the Group which can be found in note 2. 2013 £m 290.5 (136.4) 154.1 During the year to 31 March 2013, the Company has increased its investment in certain subsidiaries. The investment carrying values are reviewed annually by reference to the net assets of the subsidiary companies and any required provision for impairment is provided for as a diminution in value. An additional provision of £16.2 million has been recognised in the year (2012: additional provision of £21.1 million). Details of principal subsidiaries as at 31 March 2013 are shown in note 13 to the Group accounts. |
2012 £m 207.5 87.3 |
|---|---|
| (120.2) | |
| 2013 | 2012 |
| £m | £m |
| 15.0 | - |
| - - |
|
| Interest bearing loans comprise unsecured subordinated loans with interest charged at 5%. | |
| 2012 | |
| £m | |
| 2.2 | |
| 53.1 68.1 2013 £m 3.4 |
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Cash held in current account | 3.4 | 2.2 |
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Prepayments and other debtors | - | 0.4 |
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Amounts owed by group undertakings | 3.3 | 142.0 |
| Provisions | (2.9) | (30.8) |
| 0.4 | 111.2 |
The above loans are unsecured, non-interest bearing and repayable upon demand.
The recoverable amount of loans receivable from subsidiaries is reviewed annually by reference to the subsidiary balance sheet and expected future activities, with a provision recorded to the extent the loan is not considered recoverable. In the year to 31 March 2013, a reversal of the provision of £27.9 million has been recorded (2012: provision of £30.8 million).
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Trade creditors | 0.2 | 0.2 |
| Other creditors & accruals | 0.8 | 0.5 |
| 1.0 | 0.7 |
| 2013 | 2012 | |
|---|---|---|
| £m | £m | |
| Amounts owed to group undertakings | 26.9 | 12.5 |
The above loans are unsecured, non-interest bearing and repayable upon demand.
for the year ended 31 March 2013 (continued)
| 2013 | 2012 | |||
|---|---|---|---|---|
| £m | £m | |||
| Reconciliation of net profit/(loss) before taxation to net cash | ||||
| inflow from operating activities: | ||||
| Net profit/(loss) before taxation | 14.1 | (58.4) | ||
| Adjustment for non-cash items: | ||||
| Decrease in receivables | 0.4 | 0.2 | ||
| Increase/(decrease) in payables | 0.3 | (0.1) | ||
| (Release of)/provision for impairment of investments and loan from a subsidiary |
(11.7) | 51.7 | ||
| Loss on sale of subsidiary | - | 8.6 | ||
| Employee share-based incentives cost | 0.6 | - | ||
| Net cash inflow from operating activities | 3.7 | 2.0 | ||
| J. RELATED PARTY TRANSACTIONS | ||||
| Interest | Dividends | Amounts | Amounts | |
| receivable | received | owed by | owed to | |
| £m | £m | £m | £m | |
| Group undertakings | ||||
| 2013 | - | 3.7 | 68.5 | 26.9 |
| 2012 | 4.0 | - | 111.2 | 12.5 |
| K. 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 a subsidiary companies the risk of default is considered minimal. |
||||
| The maximum credit risk exposure relating to financial assets is represented by the carrying value as at the balance sheet date. |
||||
| The company balance sheet largely comprises illiquid assets in the form of investments in subsidiaries and loans to subsidiaries, which have been used to finance property investment and development activities. Accordingly the realisation of these assets may take time and may not achieve the values at which they are carried in the balance sheet. |
||||
| The company's other assets are cash of £3.4 million (2012: £2.2 million). Its trade and other payables amount to £1.0 million at 31 March 2013 (2012: £0.7 million) all of which are due within 3 months. |
||||
| There are no differences between the book value of cash and trade payables, nor is there any meaningful interest rate sensitivity. |
||||
| Interest receivable |
Dividends received |
Amounts owed by |
Amounts owed to |
|
|---|---|---|---|---|
| £m | £m | £m | £m | |
| Group undertakings | ||||
| 2013 | - | 3.7 | 68.5 | 26.9 |
| 2012 | 4.0 | - | 111.2 | 12.5 |
| Head Office and Principal Place of Business: |
The Brew House Greenalls Avenue Warrington Cheshire WA4 6HL |
|---|---|
| Company Secretary: | Jonathan Murphy |
| Registered Office: | Old Bank Chambers La Grande Rue St Martin's Guernsey GY4 6RT |
| Auditor: | Deloitte LLP 2 Hardman Street Manchester M3 3HF |
| Legal Advisers: | Addleshaw Goddard LLP 100 Barbirolli Square Manchester M2 3AB |
| Stockbrokers: | Oriel Securities Limited 150 Cheapside London EC2V 6ET Liberum Capital Limited |
| Ropemaker Place, Level 12 25 Ropemaker Street London EC2Y 9AR |
|
| Bankers: | Aviva Group plc |
| Santander Global Banking | |
| Royal Bank of Scotland plc |
Assura Group is proud to support two charities, St Rocco's Hospice and Medecins Sans Frontieres, by working with them as our nominated charities for the forthcoming year.
St Rocco's Hospice has been established in Warrington for over 25 years and provides specialist care for patients with cancer and other life threatening illnesses. Their aim is to help everyone have the best quality of life by providing care and support in a friendly, relaxed environment.
The hospice helps hundreds of patients and their families each year, providing clinical treatment, emotional and spiritual support, symptom control, nursing care and complementary therapies all in a purpose-built environment. St Rocco's relies on the much valued support of the local community and organisations for funding to continue providing its vital care for patients and their families. Assura is delighted to be both sponsoring and participating in a local Corporate Challenge event in support of St Rocco's Hospice.
Each of the 40+ companies involved has been given £50, donated by Assura, to kick-start their fundraising efforts. The challenge is to see how much money for St Rocco's each company can turn their £50 into over the course of a year, running from 1 February 2013 to 31 January 2014. Assura will also be taking part in the St Rocco's Dragon Boat Race; taking place on the River Mersey on Sunday 4 August 2013.
For further information, please go to www.stroccos.org.uk
Medecins Sans Frontieres/Doctors Without Borders (MSF) is an independent international medical humanitarian organisation that delivers emergency aid in more than 60 countries to people affected by armed conflict, epidemics, natural or man-made disasters or exclusion from healthcare.
In emergencies and their aftermath, MSF rehabilitates and runs hospitals and clinics, performs surgery, battles epidemics, carries out vaccination campaigns, operates feeding centres for malnourished children and offers mental healthcare. Through longer term programmes, MSF treats patients with infectious diseases such as tuberculosis, sleeping sickness and HIV/AIDS and provides medical and psychological care to marginalised groups, such as street children.
Founded by doctors and journalists in 1971, MSF is now a worldwide movement with offices in 19 countries and an international coordination office in Geneva, Switzerland. Assura is proud to support the Urumuri Centre in Burundi. The Centre was built to offer free treatment to women suffering from obstetric fistulas; this disease continues to devastate lives in sub-Saharan Africa.
For further information, please go to www.msf.org.uk
Assura Group The Brew House Greenalls Avenue Warrington WA4 6HL
T: 01925 420660 F: 01925 234503 E: [email protected]
www.assuragroup.co.uk
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