Assura Regulatory News (AGR)

Assura plc

Another strong year

18 May 2016

Assura plc ("Assura"), the leading primary care property investor and developer, announces its preliminary results for the year ended 31 March 2016

Continued strong growth

· 78.0% increase in underlying profit before tax to £28.3 million (2015: £15.9 million)

· 19.9% growth in investment property, to over £1.1 billion (2015: £0.9 billion)

· 3.9% growth in diluted EPRA NAV per share to 45.8 pence (2015: 44.0 pence)

· 14.7% increase in rent roll to £63.8 million (2015: £55.6 million)

· £28.8 million profit before tax (2015: £36.6 million) after £34.1 million debt early repayment costs

Assura transformed

· £300 million equity raise in October 2015, net of expenses, to fund acquisitions and lower group gearing

· £134 million pipeline of further acquisitions and developments following significant conversion of the pipeline into completed acquisitions

· LTV of 30% emphasises balance sheet strength, providing scope to grow portfolio further within the Company's target gearing range

· £181 million repayment of Aviva loans

· £200 million new unsecured revolving credit facility agreed

Sector leader in a market that is in critical need of investment

· Growing consensus that primary care must play a bigger role in health provision

· Significant historic underinvestment in primary care space, many GP premises not currently fit for purpose

· The NHS's "General Practice Forward View", announced in April 2016, further emphasises need for appropriate primary care infrastructure and premises

Well positioned to help alleviate the pressures on primary care infrastructure

· Assura is an established brand and partner of choice to GPs

· Strong balance sheet and capacity to fund more investment

· Efficient, internally managed operating model, with in-house development capability

· Group operates in fragmented market: Portfolio of 321 medical centres compares to a total UK market of close to 9,000 buildings

Further increase in fully covered dividend

· 11% increase in dividend per share paid in the year

· Admitted to FTSE 250

Simon Laffin, Executive Chairman, said:

"The NHS is under great strain at the moment, but there is a growing consensus that more and better primary care is one of the answers to this. We need more GPs, to use them more effectively and with more diagnostic and specialist medical staff around them. We know that patients prefer being cared for by their local GPs and that this is much cheaper for the NHS than those patients going into A&E. Larger, better quality premises are crucial to house these enhanced services. Fortunately the UK has a unique and efficient funding model in the primary care property sector that can deliver substantial additional private capital investment to support this, whilst allowing the Government to control costs.

Assura has a strong balance sheet, the in-house expertise, and excellent relationships with both GPs and the wider health service. We stand ready to help the Government deliver a stronger vibrant primary care service."

For further information, please contact:

Presentation and webcast:

A presentation will be held for analysts and investors on 18 May 2016 at 11am London time, with a webcast available from our website or via the following link:

http://webcasting.brrmedia.co.uk/broadcast/570f990ac95e0de723381aaf

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

0208 703 5376

Chairman's statement

DEAR SHAREHOLDER

It has been another busy and successful year for Assura, and a year in which we have continued the Group's strong growth. We have significantly grown our property portfolio this year both through acquisitions and new developments. Thanks to the continued support of our shareholders, we were able to raise £300 million, net of expenses, in an equity raise this year to fund our investment programme. We are well advanced in implementing our plan to use these proceeds. Since the fund raise, we have made property additions of £79 million, reduced net debt by £193 million and we have a pipeline of further property acquisitions and developments of £134 million. Our gearing is now at 30%, well within our reduced target range. We are now the UK's largest developer and owner-manager of primary healthcare property, and entered the FTSE 250 in December last year and have a market cap of £950 million.

As we announced in March this year, Graham Roberts, our Chief Executive since 2012, is currently on a leave of absence, receiving treatment for cancer and so, for the time being, I have assumed the role of Executive Chairman. This will ensure that we continue to exercise our agreed strategy and drive superior risk adjusted returns for our shareholders.

A key part of this strategy is our unique proposition of offering all of the elements of the property service for GPs, which enables us to offer GPs a long-term partner approach throughout the lifecycle of a medical centre. Our ability to "develop, invest and manage" gives us a crucial advantage when securing new development opportunities and other asset management initiatives. Moreover, it provides a highly scalable model that means as we grow, the benefits of scale accrue to shareholders, and drive our progressive dividend policy.

The efficacy of this model has been illustrated in the year as we have increased our rent roll by 15% to £63.8 million, our underlying profit by 78% to £28.3 million and our dividends paid during the year by 89% to £27.2 million.

Market developments

We continued to engage widely with the NHS and the Government throughout the course of the year to make the case for further investment in primary care infrastructure, primarily through the British Property Federation's Healthcare Committee. The recognition of the importance of this investment by the NHS can be seen in its recent publication of the "General Practice Forward View", which announced increased funding for "staff, technology and premises".

Everyone accepts that the increasing health needs of a growing and ageing population are putting a strain on the public purse. There is a shortage of GPs, and secondary health (i.e. hospital) resources are both expensive and overstretched. According to a recent report from the think tank Reform, a GP appointment each costs £21. If that patient chooses instead to go to a hospital A&E department, that visit costs almost six times more, an average of £124. Patients prefer to access health treatment from their primary practitioner and the primary care treatment costs the NHS significantly less as well. The Government needs to take a long-term view of health service provision in the UK. This would require recruiting more GPs, and funding modern flexible properties for those GPs to work in. Scarce GP resources can be leveraged by providing additional co-located services across a wide range of health and social care professionals, such as diagnostics, self-help and outpatient services which improve the care pathway. This will help to reduce the pressures and financial burdens elsewhere in the NHS and improve the patient experience. The benefits of this model are explicitly recognised in the General Practice Forward View report. Replacing some expensive secondary care with enhanced primary care would save the NHS large sums of money, and improve the patient experience.

It is clear that excellent primary care requires modern buildings and fit-out. Doctors need hygienic, warm and sound-proof facilities, as demanded by the Care Quality Commission. About half of all GP surgeries cannot provide this in their current premises, and so require redevelopment. Such redevelopment gives Clinical Commissioning Groups the opportunity to bring a variety of community care services under one roof and so offer a more complete service. Property management is an essential part of the NHS provision for the future.

The UK has a unique model for primary care property. All new developments have to be approved by the NHS. Completed properties are then valued and rents agreed with the District Valuer, an HMRC employee. The Government therefore can ensure value for money from any private investment. In turn, the NHS commissioning body offers developers a long (typically 21 or 25 year) contract, which is set at a rent that takes account of both the lease length and the strength of the ultimate Government backstop.

The result is that GPs, and ultimately the NHS, pay a very competitive rent that is lower than it otherwise would be. The system enables the NHS to call on private money for new developments, avoiding any need for Government capital investment. It is a highly efficient and cost effective model for the private sector funding of state medical infrastructure.

Shareholders

We are committed to the highest standards of financial transparency and believe a significant investment in investor relations activity is a key responsibility for any public company. We have held 119 meetings with investors during the year and I am delighted to welcome a number of new shareholders onto our register. We are very grateful to our shareholders for the level of support demonstrated during the year which enabled us to increase our equity base by 60%. We successfully met the criteria for inclusion in the FTSE 250 index in December 2015 and this provides further exposure for the Company to an enlarged group of investors.

Dividends

We are committed to providing our shareholders with superior risk adjusted returns and a key component of this return is a growing, covered dividend. In January 2016 we increased our quarterly dividend payment by 10% to 0.55 pence per share or 2.2 pence per share on an annualised basis. We also took the opportunity in January to provide our shareholders with the flexibility of receiving their dividends in shares through a scrip alternative share scheme. This has been taken up by 13% of our shareholders, which underlines the value of the scheme.

Our people and the Board

We have 34 people in Assura and, on behalf of the Board, I would like to thank them all for their hard work, dedication and contribution to the success of the business over such a busy year for the Company.

The future

Over the past four years we have invested £500 million capital and £3.3 million in the maintenance of the UK's primary care estate. Thanks to the support of our shareholders, we have built the strongest balance sheet in the sector and we plan to continue deploying this capital in UK primary care. Our in-house management team intends to continue delivering excellent customer service and operational excellence for the nation's GPs, while maximising the value of our portfolio through asset management initiatives.

Rent review increases have been relatively low in the last few years, due to both low general inflation and the scarcity of comparative new developments. However, yields have strengthened somewhat over that period, reflecting the long-term attractiveness of the sector to investors. The Board believes that when the NHS steps up its approvals for new developments, as surely it must, rental growth will accelerate. The overwhelming need in this country for improved primary care premises underpins the future of Assura.

Simon Laffin

Executive Chairman17 May 2016

Strategic review

Building scale

Assura continues to grow profitably. In the year we completed £141 million of property additions, which was the largest contributor to the £184 million increase in investment property in the year. This has enabled our rent roll to grow by 15% to £63.8 million. In turn, this has been passed on to a 78% growth in underlying profit to £28.3 million and 89% growth in dividends paid in the year to £27.2 million.

The attractiveness of our sector is becoming more widely understood and as such Assura's portfolio expansion has been achieved against a backdrop of an increasingly competitive market. Our strong brand recognition, substantial experience in the sector and our reputation in the GP community have allowed us to successfully secure these opportunities. The primary care property market remains highly fragmented. Our portfolio of 321 medical centres compares with a total UK market of close to 9,000 buildings. A large number of these buildings would not meet our exacting investment criteria, although there remains a significant number of potential individual asset acquisition opportunities.

This year, our growth has been achieved predominantly through single asset purchases and without the benefit of large scale portfolio acquisitions as in prior years. This has been achieved through targeted marketing and promotional activities that focused on those medical centres that represent the key premises in their local health economy.

Driving investment in primary care property

The equity fund raise of £300 million, net of expenses, in October 2015 was key to delivering this substantial investment. We are grateful to our shareholders for their support and the level of investor demand enabled us to secure an increase in our equity base of 60%.

Since the fund raise we have been focused on the stated twin objectives of making further additions to our property portfolio and reducing our borrowings. Since October we have secured further property additions of £79 million at a yield on cost of 5.1% and a weighted average unexpired lease term of 20.3 years. In addition to the completed transactions we also have a further pipeline of individual development opportunities and acquisitions of more than £134 million.

Our second key objective was to reduce our borrowings and we revised our target loan to value range to between 40% and 50%. Since we closed the year at 30%, this provides us with the financial flexibility to take advantage of future acquisition and development opportunities. We plan to maintain this target range over the medium term.

In November 2015 we negotiated the redemption of £181 million of long-term, fixed rate loans with Aviva, with an average interest rate of 5.4%. This was achieved with associated break costs of £34 million, which were significantly below our initial estimated costs of £40 million. At the year end we had borrowings of £373 million with an average interest rate of 4.8% and a weighted maturity of 10.2 years.

One of our stated intentions from the fund raise was to enable improvements in both terms and pricing for future funding. The increased scale and balance sheet strength of the business makes us more attractive to capital markets and to a broader range of both bank and non-bank funders.

After the year end, we secured a new £200 million unsecured revolving credit facility with a club of four banks. This unsecured facility replaces our existing £120 million facility and will provide us with the maximum operational flexibility together with a significant saving on transaction costs in financing properties. This has been achieved at an initial margin of 150 basis points, at a rate of 2.09%, significantly below that of the Aviva debt that it partially replaces.

Delivering long-term outperformance in property returns

The enlarged property portfolio has delivered a Total Property Return of 8.9%. Assura is a constituent of the IPD All Healthcare Index and over the last five years we have delivered a return of 8.8% against the index of 6.9%. This level of consistent outperformance over a long period is a testament to the skills and dedication of our property team and to the specialist knowledge we have in our sector.

Our 321 medical centres have a rent roll of £63.8 million with a geographically diverse portfolio serving in excess of 3 million patients. Our investment approach is to identify those assets we believe are best in class in their local catchment areas. By acquiring those assets that provide a broad range of services to their local communities, we believe these will provide greater prospects for lease renewal on expiry and so drive greater property returns over the long-term.

A good example of this approach can be seen in our acquisition of Frome Medical Practice. This centre serves 30,000 patients and contains 61 consulting rooms, an education suite and fully furnished operating theatre. This infrastructure supports a broad range of services including pharmacy, opticians and mental health services in addition to the GP practices.

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

Rental income

The key driver of our property return is the income from our long-term leases, and in the year, rental growth was 1.2% from settled rent reviews, ahead of CPI inflation at 0.6%. Most of our rent reviews are on an open market basis, set by reference to rental awards agreed with the District Valuer on new schemes. This means that they are influenced by land and construction cost inflation over the medium-term. Over recent years there has been significant inflation in these costs, but this increased cost is not yet fully reflected in our passing rents as the slowdown in new schemes has reduced the evidence of that inflation.

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

Capital growth

The balance of the return is generated from capital growth, which has seen a like-for-like valuation growth of 4.8% in the past year. This increase has primarily come from a movement in yields with our net equivalent yield moving by 25 basis points in the past year. This relatively moderate repricing over the past year still leaves our yields maintaining a premium over fixed return gilts in excess of 330 basis points.

We also add value through developing properties ourselves rather than relying solely on third party developers and managers. We completed one development during the year at a total development cost of £3.8 million. This has added £0.3 million to our annual rent roll. Our in-house development capability gives us the opportunity to source new premises at levels significantly cheaper than we could achieve through purchasing completed properties from developers. On a typical scheme we are able to source a development at a 1% higher yield on cost than for an equivalent property acquired in the investment market. In addition, by being involved as a developer, long-term landlord and asset manager we are able to build effective long-term relationships with our GPs and this provides us with a unique positioning and market insight in our sector.

The level of development expenditure in the year is significantly below the levels we would normally expect. This reflects the reduced level of developments across the sector, although we have sourced three new developments under forward funding agreements bringing the value of completions during the year to £16.4 million. We remain positive that the substantial requirement for investment in primary care infrastructure will lead to an increase in developments in the future.

Maximising operational efficiency

The £141 million of property additions have been incorporated by our in-house property management team whilst maintaining our continued focus on tenant satisfaction. In our annual tenant satisfaction survey over 90% of our tenants said they would recommend us as potential landlords to other GPs. Our GPs remain our greatest source of referrals for new business. We remain focused on understanding their evolving needs and demands, so we can be at the forefront of the significant investment required in improving premises in the future.

Our team of portfolio and investment managers has responsibility for identifying value enhancing asset management opportunities, such as lease extensions and redevelopments within our existing estate, as well as new acquisition opportunities.

This structure enables us to ensure that we can maximise the efficiency with which we can translate increased rental income into underlying profit and hence dividends. In the year we have delivered 78% growth in underlying profit to £28.3 million. This has been achieved from 20% growth in our investment property value and a reduction in our EPRA Cost Ratio from 17.7% to 16.5%.

The overall impact of all of these factors has enabled us to increase our dividends paid by 89% from £14.4 million to £27.2 million.

Developing our people

One of our core strategic priorities is enhancing our business culture and we are committed to the development and training of our people. We have a small head office team of 34 people and crucial to our success is developing the skills of our team. We have eight people currently undergoing formal training. We have strengthened the team in the year through the recruitment of Orla Ball as Company Secretary and In-House Counsel.

Business review

Portfolio as at 31 March 2016: £1,088 million (2015: £908 million)

Our business is based on our investment portfolio of 321 properties. This has a passing rent roll of £63.8 million (2015: £55.6 million), 87% of which is underpinned by the NHS. The WAULT is 14 years and 87% of the rent roll will still be contracted in 2026.

At 31 March 2016 our portfolio of completed investment properties was valued at a total of £1,088 million (2015: £908 million), which produced a net initial yield ("NIY") of 5.29% (2015: 5.56%). Taking account of potential lettings of unoccupied space and any uplift to current market rents on review, our valuers assess the net equivalent yield to be 5.52% (2015: 5.77%). Adjusting this Royal Institution of Chartered Surveyors standard measure to reflect the advanced payment of rents, the true equivalent yield is 5.72% (2015: 5.98%).

Our EPRA NIY, based on our passing rent roll and latest annual direct property costs, was 5.23% (2015: 5.43%).

Expressed as a percentage of opening investment property plus additions, Total Property Return was 8.9% compared with 7.8% in 2015.

Our annualised Total Return over the last five years as calculated by the IPD was 8.8% compared with the IPD All Healthcare Benchmark of 6.9% over the same period.

The valuation gain in the year of £36.4 million represents a 4.8% uplift on a like-for-like basis and has arisen as a result of the downward pressure on yields with increased competition for acquiring assets in the sector. Despite the downward pressure, the NIY on our assets continues to represent a substantial premium over the 15-year gilt which traded at 1.96% at 31 March 2016.

Investment and development activity

Despite the recent hiatus in NHS development approvals we have invested substantially during the year, with this expenditure split between investments in completed properties, developments, forward funding projects, extensions and fit-out costs enabling vacant space to be let as follows:

The bulk of the growth in our investment portfolio has come from the acquisition of 52 properties, seeing us invest £124.5 million during the year. The two largest acquisitions were the Fleetwood Health & Wellbeing Centre for £16.7 million and the Frome Medical Practice for £15.5 million.

Despite the continued delay in NHS approval of new developments, we have completed four developments during the year (three under forward funding agreements) with a total development cost of £15.5 million. This has added £0.9 million to our annual rent roll and generated a 5.7% yield on cost.

We recorded an unrealised revaluation surplus of £0.7 million during the year in respect of investment property under construction (2015: deficit of £0.9 million).

As at 31 March 2016, we had two developments on site under forward funding agreements, with a total committed investment value of £13.5 million, and a further five which we would hope to be on site shortly (estimated cost of £17.1 million).

Live developments

Portfolio management

We have continued to deliver rental growth and have successfully concluded 133 rent reviews during the year to generate a weighted average annual rent increase of 1.20% (2015: 1.27%) on those properties. Our portfolio benefits from a 26% weighting in fixed and RPI uplifts which generated an average uplift of 1.93% during the year. The majority of our portfolio is subject to open market reviews and these have generated an average uplift of 0.69% during the year.

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

During the year we have successfully secured 13 new tenancies with an annual rent roll of £0.5 million covering 4,430 square metres. In addition we have significantly extended the lease on eight properties.

Our EPRA Vacancy Rate was 3.0% (2015: 3.2%) which has decreased during the year reflecting the team's success with letting initiatives during the year. Our vacancy rate is extremely low due to the long nature of our leases and only developing buildings that are substantially pre-let. All of our vacant space, where not reserved as potential expansion space for the GP tenants, relates to areas of buildings for complementary services and letting this space remains a key focus for the current year.

Administrative expenses

The Group measures its operating efficiency as the proportion of administrative costs to the average gross investment property value. This ratio during the year was 0.60% (2015: 0.72%) and administrative costs stood at £6.1 million (2015: £5.7 million).

We also analyse cost performance by reference to our EPRA Cost Ratios (including and excluding direct vacancy costs) which were 16.5% and 16.0% respectively (2015: 17.7% and 16.3%). This is now our key KPI.

Financing

From a financing perspective, the highlight of the year was the successful equity issuance in October 2015, which raised proceeds of £300 million, net of expenses.

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

In November 2015 we repaid £181 million of long-term debt held by Aviva Commercial Finance along with the associated early repayment costs of £34.1 million.

Further to this we announce today that the Group has signed a new £200 million revolving credit facility on an unsecured basis to replace the existing facility. The initial margin is 150 basis points and the facility increases operational flexibility and reduces transaction costs associated with financing properties.

We continue to hold discussions with lenders to broaden our base of lenders, who have maintained their appetite to lend into our sector, and to ensure facilities are in place to support future acquisitions. At 31 March 2016, we had undrawn facilities and cash of £118.7 million.

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

Our loan to value ratio currently stands at 30%, which is lower than our target range of 40%-50% and will increase as we invest in our pipeline in the short term. 88% of the debt facilities are fixed with a weighted average debt maturity of 10.2 years compared with a WAULT of 14.0 years, which highlights the security of the cash flows of the business.

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

Net finance costs in the year amounted to £24.0 million (2015: £26.6 million) before early repayment costs.

Underlying profit

The movement in underlying profit can be summarised as follows:

Underlying profit has grown 78% to £28.3 million in the year to 31 March 2016 following the property acquisitions completed during the year.

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

Earnings per share

The basic earnings per share ("EPS") on profit for the year was 2.2 pence (2015: 4.9 pence).

EPRA EPS, which excludes the net impact of valuation movements and gains on disposal, was 2.0 pence (2015: 2.1 pence).

Underlying profit per share omits accounting adjustments and certain exceptional items and has increased to 2.2 pence (2015: 2.1 pence). The key variable is the cost of the long-term incentive plan which vested in full during the year, which reflected the strong performance of the business over the past four years.

Based on calculations completed in accordance with IAS 33, share-based payment schemes are currently expected to be dilutive to EPS, with 11.2 million new shares expected to be issued based on the average share price for the three months to 31 March 2016. The following illustration is an extraction. Further details to the accounts are provided in Note 5.

Dividends

Total dividends paid in the year to 31 March 2016 were £27.2 million or 2.05 pence per share (2015: 1.85 pence per share). In January 2016 we introduced a scrip dividend alternative for shareholders, an option that was exercised by 9.9% of shareholders at the first opportunity and 13.3% for the April 2016 dividend.

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

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

The table below illustrates our cash flows over the period:

Net cash flow from operations differs from underlying profit due to movements in working capital balances.

Property additions during the year were £127.2 million, although the cash outflow was only £122.5 million after taking into account shares issued as consideration (£4.2 million), and net working capital assumed (£0.5 million).

Net assets

EPRA NAV movement

Our Total Accounting Return per share for the year ended 31 March 2016 is 7.2% of which 2.05 pence per share (4.6%) has been distributed to shareholders and 1.2 pence per share (2.7%) is the movement on EPRA NAV including an element of dilution associated with the equity issuance in October 2015.

The equity issuance saw the Company raise proceeds of £300 million, net of issuance expenses. In addition, the Company issued a total of 7,650,749 shares split between three corporate acquisitions over the course of the year. These shares issued as part consideration were priced based on the market value of the Company shares at the time of completion.

Portfolio analysis by capital value

Portfolio analysis by region

Portfolio analysis by tenant covenant

Consolidated income statement

For the year ended 31 March 2016

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

Consolidated balance sheet

As at 31 March 2016

The financial statements were approved at a meeting of the Board of Directors held on 17 May 2016 and signed on its behalf by:

simon laffin Jonathan MurphyChairman Finance Director

Consolidated statement of changes in equity

For the year ended 31 March 2016

Consolidated cash flow statement

For the year ended 31 March 2016

Notes to the accounts

For the year ended 31 March 2016

1. Significant accounting policies

Basis of preparation

The financial information set out in this preliminary announcement is derived from but does not constitute the Group's statutory accounts for the year ended 31 March 2016 and 31 March 2015, and as such, does not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards ("IFRSs"). The financial information has been extracted from the Group's audited consolidated statutory accounts upon which the auditor has issued has unqualified opinion.

The Annual Report will be posted to Shareholders on or before 31 July 2016.

The Preliminary Announcement was approved by the Board of Directors on 17 May 2016.

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

Standards affecting the financial statements

The following standards and amendments became effective for the Company in the year ended 31 March 2016. The pronouncements either had no material impact on the financial statements or resulted in changes in presentation and disclosure only:

- Annual improvements 2010-2012 cycle

- Annual improvements 2011-2013 cycle

Standards in issue not yet effective

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

- IFRS 9 Financial Instruments (not yet endorsed in the EU)

- IFRS 15 Revenue from Contracts with Customers (not yet endorsed in the EU)

- IFRS 16 Leases (not yet endorsed in the EU)- Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38 (1 January 2016)- Equity Method in Separate Financial Statements - Amendments to IAS 27 (1 January 2016)- Disclosure Initiative - Amendments to IAS 1 (1 January 2016)- Annual improvements 2012 - 2014 cycle

The financial statements are prepared on a going concern basis and are presented in sterling.

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

Significant judgements and key estimates

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

Property valuations

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

Accounting for acquisitions

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

Basis of consolidation

Subsidiaries

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

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

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

Property portfolio

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

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

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

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

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

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

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

Net rental income

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

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

Gains on sale of properties

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

Financial assets and liabilities

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

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

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

Financial instruments

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

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

Tax

Current tax is expected tax payable on any non-REIT taxable income for the period and is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are not taxable (or tax deductible).

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

Income statement definitions

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

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

Employee costs

Defined contribution pension plans

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

Share-based employee remuneration

Share-based employee remuneration is determined with reference to the fair value of the equity instruments at the date at which they are granted and charged to the income statement over the vesting period on a straight line basis.

The fair value of share options is calculated using the Black Scholes option pricing model or the Monte Carlo Model and is dependent on factors including the exercise price, expected volatility, option life and risk-free interest rate. IFRS 2 Share-based Payments has been applied to share options granted.

Segmental information

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

2. Revenue

3. Finance costs

Interest was capitalised on property developments at 5% (2015: 5%).

4. Taxation

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

The Group elected to be treated as a UK REIT with effect from 1 April 2013. The UK REIT rules exempt the profits of the Group's property rental business from corporation tax. Gains on properties are also exempt from tax, provided they are not held for trading or sold in the three years post completion of development. The Group will otherwise be subject to corporation tax at 20% (2016: 20%).

The Group tax charge/(credit) relates to its non-property income. As the Group has sufficient brought forward tax losses, no tax is due and so the amount represents the movement in deferred tax. The movement in part relates to brought forward losses that have been utilised during the year, with the remainder representing a change in the estimated losses that will be utilised in the future.

As a REIT, the Group is required to pay Property Income Distributions ("PIDs") equal to at least 90% of the Group's rental profit calculated by reference to tax rules rather than accounting standards. In the year to 31 March 2016 the taxable rental profit of the Group was £nil as a result of capital allowances available, and consequently no PID was required.

To remain as a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activities and the balance of business. The Group remains compliant at 31 March 2016.

Further reductions in the main rate of corporation tax have been substantively enacted; the rate will reduce to 19% from 1 April 2017 and 18% from 1 April 2020. These changes have been reflected in the calculation of deferred tax.

5. Earnings per Ordinary Share

Underlying profit per share of 2.2 pence (2015: 2.1 pence) has been calculated as underlying profit for the year as presented on the income statement of £28.3 million (2015: £15.9 million) divided by the weighted average number of shares in issue of 1,300,338,908 (2015: 763,163,756). Based on the diluted weighted average shares, underlying profit per share is 2.2 pence (2015: 2.0 pence).

The current estimated number of shares over which nil-cost options may be issued to participants is 12.5 million (2015: 24.6 million). After allowing for shares held by the Employee Benefit Trust, this would amount to a potential issuance of a further 11.2 million (2015: 20.7 million) shares over the course of the next three years.

6. Net asset value per Ordinary Share

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

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

7. Property assets

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

Properties are stated at fair value, which has been determined for the Group by Savills Commercial Limited and Jones Lang LaSalle as at 31 March 2016. The properties have been valued individually and on the basis of open market value in accordance with RICS valuation - Professional Standards 2014 ("the Red Book"). Valuers are paid on the basis of a fixed fee arrangement, subject to the number of properties valued.

Initial yields mainly range from 4.65% to 5.25% (2015: 5.25% to 5.50%) for prime units, increasing up to 6.15% (March 2015: 6.15%) for older units with shorter unexpired lease terms. For properties with weaker tenants and poorer units, the yields range from 6.15% to over 8.0% (March 2015: 6.25% and over 8.0%) and higher for those very close to lease expiry or those approaching obsolescence.

A 0.25% shift of valuation yield would have approximately a £54.2 million (2015: £42.8 million) impact on the investment property valuation.

Three land sites are held as available for sale (2015: three property investments and eight land sites).

Fair value hierarchy

The fair value measurement hierarchy for all investment property and IPUC as at 31 March 2016 was Level 3 - Significant unobservable inputs (2015: Level 3). There were no transfers between Levels 1, 2 or 3 during the year.

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

Valuation techniques: market comparable method

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

Unobservable inputs

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

8. Cash, cash equivalents and restricted cash

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

9. Trade and other receivables

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

The Group's principal customers are invoiced and pay quarterly in advance, usually on the English quarter days. Other debtors are generally on 30-60 days' terms. No bad debt provision was required during the year (2015: £nil).

As at 31 March 2016 and 31 March 2015, the analysis of trade debtors that were past due but not impaired is as follows:

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

10. Trade and other payables

Finance lease arrangements are amounts payable in respect of leasehold investment property held by the Group. The amounts due after more than one year, which total £3.0 million (2015: £3.0 million), have been disclosed in non-current liabilities on the consolidated balance sheet. The fair value of the Group's lease obligations is approximately equal to their carrying value.

11. Deferred revenue

12. Borrowings

The Group has the following bank facilities:

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

2. Loans from Aviva Commercial Finance with an aggregate balance of £217.8 million at 31 March 2016 (2015: £406.6 million). The Aviva loans are partially amortised by way of quarterly instalments and partially repaid by way of bullet repayments falling due between 2024 and 2044 with a weighted average term of 13.8 years to maturity; £4.0 million is due within a year. These loans are secured by way of charges over specific medical centre investment properties with cross-collateralisation between the loans and security. The loans are subject to fixed all-in interest rates ranging between 4.11% and 6.66% and a weighted average of 5.43%. The loans carry a debt service cover covenant of 1.05 times and a loan to value covenant of 70%, calculated across all loans and secured properties.

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

3. Five-year club revolving credit facility with RBS, HSBC and Barclays for £120 million at an initial margin of 1.70% above LIBOR, expiring in May 2020. The facility is subject to a historical interest cover requirement of at least 175% and a weighted average lease length of nine years. The facility attracts a non-utilisation fee equal to 40% of the applicable margin. As at 31 March 2016, £45.0 million of this facility was drawn (2015: undrawn). Subsequent to the year end, this facility has been replaced with a new unsecured revolving credit facility of £200 million.

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

13. Share capital

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

On 25 September 2015, 3,543,975 Ordinary Shares were issued following employees exercising nil-cost options awarded under the VCP.

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

On 20 January 2016, 1,611,873 Ordinary Shares were issued to shareholders who elected to receive Ordinary Shares in lieu of a cash dividend under the Company scrip dividend alternative. This represented 9.9% of shareholders.

On 28 January 2015, Assura plc replaced Assura Group Limited as the top company in the Group following a scheme of arrangement sanctioned by the Royal Court of Guernsey. This capital restructuring was accounted for under merger accounting principles meaning the consolidated accounts have been presented as though the Group had always been constructed this way. Movements in the above table prior to 28 January 2015 relate to Assura Group Limited, with all subsequent movements relating to Assura plc.

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

14. Dividends paid on Ordinary Shares

A scrip dividend alternative was introduced with effect from the January 2016 quarterly dividend. Details of shares issued in lieu of dividend payments can be found in Note 13.

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

15. Commitments

At the year end the Group had two (2015: five) developments on site with a contracted total expenditure of £13.5 million. 

(2015: £22.2 million) of which £8.5 million (2015: £6.1 million) had been expended. 

16. Post balance sheet events

Subsequent to the year end, a subsidiary of the Group has replaced the existing revolving credit facility with a new unsecured revolving credit facility of £200 million with the potential to extend further to £300 million.