Impact Healthcare REIT plc
(“Impact” or the “Company” or, together with its subsidiaries, the “Group”)
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024
Strong financial and operational performance
The Board of Directors of Impact Healthcare REIT plc (ticker: IHR), the real estate investment trust which gives investors exposure to a diversified portfolio of UK healthcare real estate assets, in particular care homes, today announces the Company’s half year results for the six months ended 30 June 2024.
Summary
The business continues to perform in line with our expectations. In the first half of the year, inflation-linked rent increases and stable yields drove a 2.9% increase in like-for-like investment property value. As a result, Net Asset Value grew by 2.5% to £490.2 million. Total accounting return for the period was 5.5%. This performance is underpinned by a strong balance sheet, with a loan-to-value of 27.8%. Drawn debt was £189.8 million from £250 million of committed debt facilities, of which the weighted average term is 5.8 years¹. No debt falls due until 2026.
Simon Laffin, Chair, commented:
“We very much welcome the independent inquiry into the National Health Service, led by Lord Darzi, and welcome any opportunity to participate. Care homes for the elderly are a critical and growing part of our health infrastructure, particularly with an ageing population. Care homes provide a better environment than hospital wards for frail, elderly people, not needing intensive medical care. Moreover, care homes can play a key role in helping to free up hospital beds by taking patients awaiting discharge. This would reduce NHS waiting lists and support more efficiency in hospitals. At present it is estimated that 13,0002 patients are still in hospital only because they are not being offered care in the community such as step-down, nursing or residential care beds.
We aim to provide residential care homes which are both high-quality and affordable, in order to deliver long-term sustainable returns to our shareholders. All our lease rentals are inflation-linked, and the vast majority are capped at 4%, with a minimum of 2%, per annum. The spike in inflation to double digits in 2023 therefore did not flow fully into rent increases, but strengthened the financial viability of our tenants. Strong performances from our tenants are a key factor in reducing risk to our income stream and improving our risk-adjusted returns and valuations. We were able to increase our fully covered dividend this year, whilst keeping rents affordable for our tenants. The latest tenants’ average annual rent cover is 2.19×3 which is the highest it has been since the Company’s inception. The affordability of our rent to tenants, and consequently the affordability of care home fees to residents, are moreover crucial to the continued successful provision of residential and nursing care.”
Financial highlights
- 2.7% increase in second quarter dividend of 1.7375p, in line with the 2.7% increase targeted for the whole year of 6.95 pence per share4. Dividends for the first half of the year are 122% covered by our EPRA EPS and 106% by adjusted EPS.
- 3.8% increase in rent for 102 homes following rent reviews in the first half of 2024. 4.7% increase to £51.1 million in annual contracted rent roll5 (at 31 December 2023: £48.8 million).
- At 30 June 2024, 2.6% increase in EPRA NTA to £488.9 million (117.98 pence per share) and 2.9% increase in property investments independently valued at £670.1 million. 5.5% total accounting return for the six month period to 30 June 2024 (not annualised).
- At 30 June 2024, 27.8% EPRA (net) LTV (31 December 2023: 27.8%), £250.0 million committed bank facilities of which £189.8 million was drawn; weighted average term of debt facilities (excluding options to extend) was 5.8 years1. 92% of our drawn debt facilities are fixed or hedged against interest rate rises for the remainder of this financial year, with an average cost of drawn debt of 4.63%. At 30 June 2024, the Group had £60.2 million of undrawn debt facilities and £9.6 million cash.
- Post period end exchange or disposal of five non-core assets at book value of £8.8 million.
Operational highlights
- 2.19 times average annual rent cover3, the highest it has been since the Company’s inception.
- 100% collection of the rent due in the period with no voids. There was no rent due in the period on the ex-Silverline homes, three of these seven homes were recently transferred to a new long-term tenant, We Care. The ex-Silverline homes continue to recover in line with our expectations.
- 88.9% underlying resident occupancy at the end of June 2024, up from 88.2% at the start of the period6.
- £11.6 million of asset management projects committed to in the first half of 2024 with an expected effective yield of 8%. 16 projects in the pipeline, with anticipated capital funding of £26.8 million over the next two to three years.
Developing plans to improve the social impact and environmental sustainability of our portfolio
- We set a target that at least 50% of our homes would be rated EPC B by 2025 and 100% by 2030. We have achieved the interim target with 57% at EPC B or better based on English equivalent ratings as at 30 June 2024. Our longer term target is net zero status by 2045 with interim targets to reduce like-for-like carbon emissions by 15% by 2025 and 50% by 2030. We have committed to £11.6 million in capital projects in the half year of which £1.2 million is on sustainability improvements, all of which is being rentalised, growing the income of the Company.
- We are improving our access to underlying tenant energy performance data through regular direct data capture, enabling us to more accurately identify homes where sustainability improvements are most needed.
Name change
- In May 2024, the Financial Conduct Authority updated its Sustainability Disclosure Requirements (“SDR”). The new regulations will restrict the use of certain sustainable terms in products available to retail investors from December 2024. The word “Impact” is specifically proscribed unless the primary aim of the business is social impact, as measured by a high threshold of reporting requirements. To avoid confusion and to comply with these new requirements, the Company will change its name in the coming months and will provide further details in due course.
Post period end disposal at latest book value of five non-core cares for £8.8 million
- As previously announced, we exchanged on the sale of three care homes in East Yorkshire for a total consideration of £4.3 million, and also exchanged and simultaneously completed on the sale of two care homes for a total consideration of £4.5 million, which is in line with latest valuation of these homes. This is part of our ongoing active portfolio management programme.
HALF YEAR RESULTS PRESENTATION
The Company presentation for investors and analysts will take place at 9.00am (BST) today via a live webcast and conference call.
To access the live webcast, please register in advance here:
https://stream.brrmedia.co.uk/broadcast/6695223836704318d5bcf290
The live conference call dial-in is available using the below details:
Dial in numbers
UK Toll Free:
0808 109 0700
UK & International:
+44 (0) 33 0551 0200
Password to quote: Impact Healthcare REIT Half Year Results
Participants can type questions into the webcast question box or ask questions verbally via the conference call.
The recording of the results presentation will be available later in the day via the Company’s website:
https://www.impactreit.uk/investors/reporting-centre/presentations/
FOR THE FULL RESULTS, PLEASE SEE THE ATTACHED PDF
FOR FURTHER INFORMATION, PLEASE CONTACT:
Impact Health Partners LLP via Maitland/AMO
Andrew Cowley
Mahesh Patel
David Yaldron
Jefferies International Limited
Tom Yeadon, tyeadon@jefferies.com
Neil Winward, nwinward@jefferies.com
Ollie Nott, onott@jefferies.com
Tel: +4420 7029 8000
Winterflood Securities Limited
Neil Langford, neil.langford@winterflood.com
Joe Winkley, joe.winkley@winterflood.com
Tel: +4420 3100 0000
H/Advisors Maitland (Communications Adviser)
James Benjamin, 07747 113 930
Rachel Cohen, 020 7379 5151
impacthealth-maitland@h-advisors.global
The Company’s LEI is 213800AX3FHPMJL4IJ53.
Further information on Impact Healthcare REIT plc is available at www.impactreit.uk.
NOTES
Impact Healthcare REIT plc acquires, renovates, extends and redevelops high quality healthcare real estate assets in the UK and lets these assets on long-term full repairing and insuring leases to high-quality established healthcare operators which offer good quality care, under leases which provide the Company with attractive levels of rent cover.
The Company aims to provide shareholders with an attractive sustainable return, principally in the form of quarterly income distributions and with the potential for capital and income growth, through exposure to a diversified and resilient portfolio of UK healthcare real estate assets, in particular care homes for the elderly.
The Company’s dividend policy is to seek to maintain a progressive dividend that is covered by adjusted earnings.
On this basis, the target total dividend for the year ending 31 December 2024 is 6.95 pence per share3, a 0.18 pence increase over the 6.77 pence in dividends paid per ordinary share for the year ended 31 December 2023.
The Group’s Ordinary Shares were admitted to trading on the main market of the London Stock Exchange, premium segment, on 8 February 2019. The Company is a constituent of the FTSE EPRA/NAREIT index.
Notes
1. This assumes the extensions of the NatWest facility have not been exercised, including these the weighted average term of debt facilities would be 6.2 years.
2. Estimated figure from NHS England article: https://commonslibrary.parliament.uk/delayed-hospital-discharges-and-adult-social-care/.
3. Average annual rent cover is a defined term in the Glossary.
4. This is a target only and not a profit forecast. There can be no assurance that the target will be met and it should not be taken as an indicator of the Company’s expected or actual results.
5. Contracted rent is a defined term in the Glossary.
6. Excludes three turn-around assets transferred to We Care that are part of an operational turnaround plan.
7. Including Croftwood and Minster, which are both part of the Minster Care Group, and Melrose Holdings Limited which is an affiliate.
