TIDMIHR
RNS Number : 7161T
Impact Healthcare REIT PLC
29 March 2021
29 March 2021
Impact Healthcare REIT plc
("Impact" or the "Company" or, together with its subsidiaries,
the "Group")
ANNUAL RESULTS FOR THE 12 MONTHSED 31 DECEMBER 2020
Resilient performance from our crucial social care
infrastructure for vulnerable elderly people, aligned to favourable
long-term market growth drivers
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, announces its annual results for the 12 months ended 31
December 2020.
Rupert Barclay, Chairman of Impact Healthcare REIT PLC,
commented:
" The human cost of the pandemic has been foremost in our minds
and we have looked to do everything we can to help protect the
health and wellbeing of our tenants' residents and their healthcare
professionals. Despite these difficult conditions, the Group's
business model has proved resilient, as we have benefited from our
deliberate approach to implementing our strategy since IPO.
Our portfolio provides crucial infrastructure supporting
vulnerable elderly people across the UK and our tenants use our
assets to provide an essential care service, demand for which is
not directly correlated with economic conditions. This enabled
them, despite the pandemic but with the benefit of grant income to
offset incremental costs, to maintain robust rent cover throughout
2020. This in turn has allowed us to collect 100% of the rent due
for the year, without putting undue stress on our tenants, and we
were therefore able to meet our dividend target.
We remain well-capitalised and are confident that the
fundamental drivers of our industry and business remain strong,
even if the recovery from COVID-19 is slower than we would all
like. We are positioned to deliver further portfolio
diversification and sustainable growth that will generate
attractive returns for shareholders. At the same time, we will
continue to responsibly deliver value to our tenants, their
residents and healthcare professionals, over the long term."
Financial highlights
The resilience of the business against the backdrop of COVID-19
enabled us to meet our dividend target for the year ended 31
December 2020 of 6.29 pence per share, contributing to a robust
total return performance.
Year ended Year ended Change
31 December 31 December
2020 2019
Dividends declared per share 6.29p 6.17p +1.9%
------------- ------------- -------
Profit before tax GBP28.8m GBP26.3m +9.3%
------------- ------------- -------
Earnings per share ("EPS") 9.02p 10.37p -13.0%
------------- ------------- -------
EPRA EPS 7.25p 6.95p +4.4%
------------- ------------- -------
Adjusted EPS (1) 5.93p 5.26p(3) +12.7%
------------- ------------- -------
Contracted rent roll GBP30.9m GBP23.1m +33.7%
------------- ------------- -------
Portfolio valuation GBP418.8m GBP318.8m +31.4%
------------- ------------- -------
Net asset value ("NAV")
per share 109.58p 106.81p +2.6%
------------- ------------- -------
Share price(2) 109.00p 108.00p +0.9%
------------- ------------- -------
Loan to value ratio 17.77% 6.81% -
------------- ------------- -------
NAV total return 8.46% 9.46% -
------------- ------------- -------
Operational highlights
-- While responsibly supporting our tenants and their residents
through the COVID-19 pandemic dominated much of the year ended 31
December 2020, we continued to make further progress with
implementing our sustainable growth strategy.
-- 1.77x rent cover: the Group demonstrated its resilience
during 2020, reflecting the strength of our partnerships with a
diverse group of tenants, strong rent cover, robust lease
structures and our healthy balance sheet.
-- This resilience enabled us to collect 100% of rent due for
the year, with no changes to any lease terms or payment
schedules.
-- 22 properties acquired with 1,513 beds for a total net consideration of GBP84.7 million.
-- Committed to forward fund a further property with 94 beds. On
completion, this will bring our total properties to 108 with 5,924
beds.
-- Added three new tenants, giving us 12 tenants (4) at the year
end. All leases continue to be inflation-linked with upwards only
rent reviews.
-- Weighted average unexpired lease term ("WAULT") of 20.0 years
at 31 December 2020 (31 December 2019: 19.7 years).
-- Rent reviews in the year added GBP0.54 million to contracted
rent, representing a 2.3% increase on the associated portfolio.
-- Grew the contracted rent roll by 33.7% to GBP30.9 million (31
December 2019: GBP23.1 million).
-- Secured a GBP50 million revolving credit facility with HSBC
on 6 April 2020, giving the Group total facilities of GBP125
million.
Supporting our stakeholders through COVID-19
-- Throughout the COVID-19 pandemic, our top priority has been
to help protect the wellbeing of the Group's tenants, their
residents and their healthcare professionals, as well as wider
stakeholders.
-- The need remains strong for good quality care from well
maintained, fit for purpose care homes with strong infection
controls in place. The Group's tenants continue to provide an
essential service to the communities in which they operate and are
playing a critical role in helping to provide high-quality care to
vulnerable elderly people during this pandemic.
Sustainability
Effectively managing sustainability issues is fundamental to
long-term value creation and we made good progress this year. This
included:
-- publishing our environmental, social and governance ("ESG") policy;
-- publishing our EPRA sustainability report and achieving EPRA sBPR gold level compliance;
-- evaluating Energy Performance Certificate ("EPC") ratings and
the underlying data across the portfolio;
-- identifying opportunities to improve energy efficiency and EPC ratings; and
-- enhancing the green credentials of our standard lease terms.
Post balance sheet highlights
-- Acquired one further property with an existing tenant, taking
our total properties owned to 109 and 5,975 beds. Contracted rent
has grown to GBP31.4 million(5) .
Notes
1 Adjusted earnings per share reflects underlying cash earnings
per share in the period. The adjustments made to EPS in arriving at
EPRA and Adjusted EPS are set out in note 10 to the financial
statements.
2 As at 31 December 2020.
3 The removal of amortisation of loan arrangement fees is a
change made in the current year and the prior year adjusted
earnings figure has been restated to include an adjustment for the
amortisation of loan arrangement fees.
4 Minster and Croftwood (both subsidiaries of Minster Care
Group), Careport, Prestige, Renaissance, Welford, Maria Mallaband
Countrywide Group, NHS Cumbria, Optima, Holmes Care, Silverline and
Electus Healthcare.
5 Includes forward-funded developments.
Alternative performance measures have been calculated in line
with EPRA best practices recommendation.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Impact Health Partners LLP via Maitland/AMO
Mahesh Patel
Andrew Cowley
Winterflood Securities Limited
Joe Winkley
Neil Langford 020 3100 0000
RBC Capital Markets
Rupert Walford
Matthew Coakes 020 7653 4000
Maitland/AMO (Communications Adviser) 07747 113 930
James Benjamin impacthealth-maitland@maitland.co.uk
The Company's LEI is 213800AX3FHPMJL4IJ53.
Further information on Impact Healthcare REIT is available at
www.impactreit.uk .
NOTES:
Impact Healthcare REIT plc is a real estate investment trust
("REIT") which aims to provide shareholders with an attractive
return, principally in the form of quarterly income distributions
and with the potential for capital and income growth, through
exposure to a diversified portfolio of UK healthcare real estate
opportunities, in particular care homes for the elderly. The
Group's investment policy is to acquire, renovate, extend and
redevelop high quality healthcare real estate assets in the UK and
lease those assets primarily to healthcare operators providing
residential healthcare services under full repairing and insuring
leases.
The Company has a progressive dividend policy with a target to
grow its annual aggregate dividend in line with the
inflation-linked rental uplifts received by the Group under the
terms of the rent review provisions contained in the Group's leases
in the prior financial year.
On this basis, t he target total dividend for the year ending 31
December 2021 is 6.41 pence per share*, a 1.91% increase over the
6.29 pence in dividends paid or declared per ordinary share for FY
2020.
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.
* 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.
The Company will hold a presentation today at 9.00am for
investors and analysts via a webcast and conference call .
For those who wish to access the live webcast, please register
here:
https://www.investis-live.com/impact-reit/6051c96e9a1388100054587d/fwle
For those who wish to access the live conference call, please
contact Maitland/AMO at
impacthealth-maitland@maitland.co.uk or by telephone on +44 (0) 20 7379 5151.
The recording of the presentation will also be made available
later in the day via the Company website:
https://www.impactreit.uk/investors/reporting-centre/presentations/
The following represents an extract from the annual report and
page references relate to the published annual report and not to
this RNS
Our purpose
To form long-term partnerships with our tenants, through which
we own and invest in the buildings they lease from us in return for
a predictable and sustainable rent, enabling our tenants to
concentrate on providing excellent care to their residents.
Our values
Our core values are to:
-- focus on the long-term sustainability of our business;
-- always act openly and transparently with all of our stakeholders;
-- be practical, combining entrepreneurial nimbleness with the
strength of a listed company; and
-- be efficient.
Our business model
Successfully implementing each element of our business model
ensures we maintain a high-quality business, with a rigorous focus
on:
-- the quality of the buildings we own;
-- the quality of care our tenants deliver;
-- the quality of the cash flows we generate; and
-- maintaining a healthy balance sheet.
Our Investment Manager
Impact Health Partners LLP is our Investment Manager. It sources
investments, carries out approved transactions, monitors the
progress of our homes and provides portfolio management services to
the Group. It also develops and recommends the asset management
strategy for approval and then implements it.
Our tenants
Our tenants are established providers, offering good-quality
care and earning fees from a broad spectrum of public sector
customers and private-pay residents.
Supporting our stakeholders through COVID-19
Throughout the COVID-19 pandemic, our top priority has been to
help protect the wellbeing of the Group's tenants, their residents
and their healthcare professionals, as well as wider
stakeholders.
The need remains strong for good quality care from well
maintained, fit for purpose care homes with strong infection
controls in place. The Group's tenants continue to provide an
essential service to the communities in which they operate and are
playing a critical role in helping to provide high-quality care to
vulnerable elderly people during this pandemic.
COVID-19 and its impact on care homes
The World Health Organization declared COVID-19 to be a global
pandemic on 11 March 2020. We now know that the first deaths from
COVID-19 in an English care home had already occurred five days
before, on 6 March 2020.
In the first wave of the pandemic, weekly care home deaths in
England peaked at 2,769 in the week-ending 24 April 2020. Deaths in
care homes from all causes in April 2020 were three times higher
than the average for that month over the previous five years.
Weekly deaths related to COVID-19 in care homes fell during the
summer months, to a low of 17 in late August. Unfortunately, death
rates began to pick up again in the autumn, as the second wave
spread across the UK. 661 deaths in care homes were attributed to
COVID-19 in the final week of 2020. The second wave peaked in care
homes in the week ending 29 January 2021, when 1,808 deaths were
attributed to COVID-19, and then started to fall rapidly.
The availability of testing, and better access to personal
protective equipment ("PPE"), has made an important difference to
infection control in care homes. Testing became widely available
towards the end of May 2020 and, since the end of Q3 2020, most
homes have tested staff weekly and residents monthly, with a more
frequent regime if any cases are detected. Improved infection
control was one factor which helped to reduce the proportion of
COVID-19 related deaths occurring in care homes from 30% of total
deaths in the country in the first wave, to 19% in the second
wave.
COVID-19's impact on the Group's care homes has not been even,
with some homes more significantly affected while a larger number
have been unaffected. Overall, they have broadly followed the
national pattern, with tenant occupancy reduced by an average of
10% during the first wave and then stable since the end of the
second quarter. The COVID-19 testing outlined above has enabled our
tenants and the Investment Manager to build a clear picture of how
homes have been affected, so they can respond quickly to any
identified cases.
Supporting our tenants and their residents
To protect residents, all the Group's homes were closed to
visitors from early March 2020, and in many cases they were also
closed to new admissions. From that point, the Investment Manager
was in very regular contact with all of our tenants. In addition to
the detailed operating and financial data the Investment Manager
receives from all tenants each quarter, we asked our tenants to
provide weekly occupancy data throughout the most severe phases of
the pandemic, along with a situation report on how the pandemic was
affecting their operations. This enabled the Investment Manager to
keep the board regularly informed about the impact on tenants and
their residents.
Where appropriate, the Investment Manager has shared information
among tenants, along with ideas on how best to manage the
challenges. The Investment Manager also provided practical support
where possible. For example, in April 2020, as pressures on PPE
supplies mounted and wholesalers were only responding to
substantial orders focused on the NHS, the Investment Manager
placed a large order for masks and then allocated them to tenants
as required.
In June, the Investment Manager consulted with tenants about how
it could support the careful reopening of homes to new admissions
and to visitors. Tenants requested help with improving infection
control, through the installation of thermal scanners that enable
the body temperature of everyone entering the building to be read
remotely. The board agreed that the Group should fund the purchase
and installation of thermal scanners at all of our homes. Feedback
from tenants on the initiative was highly positive.
Protecting the interests of shareholders and lenders
During this period, the board has been required to make
important decisions with stakeholders' interests at their heart.
These decisions illustrate the board's approach to fulfilling its
duties under s172(1) of the Companies Act. More information on
these decisions can be found below.
In addition to tenants and their residents, shareholders and
lenders are included within the Group's key stakeholders. During
the pandemic, both the Investment Manager's work with tenants and
the board's key decisions have simultaneously looked after tenants
and residents and protected the interests of shareholders and
lenders. For example, while the board's decision to purchase
thermal scanners was clearly in the best interests of tenants,
residents and staff, it was also good for shareholders and lenders,
who benefited from the support to rent cover provided by the
enhanced opportunity for new admissions this provided.
The board decided in early March 2020 not to proceed with a
planned acquisition and to put all further acquisitions on hold
until the uncertainty caused by COVID-19 had reduced sufficiently.
While the board is aware that shareholders want to see the Group
grow, the board's view was that the uncertainty at the time meant
that the business plan expected for these acquisitions could not be
guaranteed. We also shared our tenants' desire, for these target
homes, to focus on protecting the welfare of existing residents and
care providers, rather than the potential disruption and
distraction that a change of operator could create.
The board also decided in March to delay the announcement of the
2019 full year results by two weeks, in line with FCA guidance.
This enabled the Investment Manager to complete a significant
amount of extra work, to overlay the incremental risk scenarios
presented by the pandemic into our going concern and viability
assessment and reassure the board, the auditor and our wider
stakeholders on the Group's resilience under all scenarios.
In May, the board discussed the payment of the first quarterly
dividend for 2020. Given the Group's financial headroom, the sound
level of rent cover and our tenants' overall performance, the board
concluded it was appropriate to pay the dividend. The continued
receipt of 100% of rent payments during 2020 supported subsequent
interim dividend payments and resulted in a total payout that met
our 6.29 pence per share target for the year.
In September, the board agreed that it was appropriate to resume
acquisitions on a very selective basis and approved the purchase of
St Peter's House. This followed additional due diligence to
understand occupancy and any COVID-19 impact on the home,
discussions with Welford as the potential tenant about its appetite
to proceed and an appraisal of Welford's performance during
COVID-19 and its resilience to a downturn. Having determined the
home was trading well, had no confirmed cases of COVID-19 and that
Welford's performance during the first wave of the pandemic had
been positive, the board was comfortable to proceed.
After carrying out similar enhanced due diligence, we completed
two further acquisitions in December. These were Blackwell Vale
with Careport and three homes with a new tenant, Electus Care,
marking our entry into Northern Ireland. Since the end of the
financial year, the Group has completed one further
acquisition.
Looking forward
The most positive development in reducing the impact of the
pandemic has been the successful roll out of the vaccination
programme since the end of last year, across the UK. By
mid-February 2021, residents at 100% of the homes owned by the
Group had been offered a vaccination. The quantity and quality of
data on how effective the vaccines will be in protecting the most
vulnerable in the population in real world conditions is growing
rapidly, with encouraging early indications.
Effective vaccines, combined with continued testing programmes
and thorough infection control measures, will enable the Group's
tenants gradually and safely to reopen the homes to visitors. This
reopening will be transformative for the quality of residents'
lives and will also, over time, help the Group's tenants return
their occupancy to more normal levels.
CHAIRMAN'S STATEMENT
During 2020, our tenants responded well to the challenges
created by the pandemic and have been ably and responsibly
supported by the Investment Manager. The human cost of the pandemic
has been foremost in our minds and we have looked to do everything
we can to help protect the health and wellbeing of our tenants'
residents and their healthcare professionals.
Despite these difficult conditions, the Group's business model
has proved resilient, as we have benefited from our deliberate
approach to implementing our strategy since IPO. More information
on the factors underlying this resilience, from our careful
selection of tenants and assets to our conservative use of debt,
can be found in the Investment Manager's report.
Our tenants use our assets to provide an essential care service,
demand for which is not directly correlated with economic
conditions. This enabled them, despite the pandemic but with the
benefit of grant income to offset incremental costs, to maintain
rent cover in 2020. This in turn has allowed us to collect 100% of
the rent due for the year, without putting undue stress on our
tenants, and we were therefore able to meet our dividend
target.
Operational performance
While the uncertainty arising from the pandemic caused us to
suspend acquisitions for several months during 2020, we still made
progress with our strategy. Before the pandemic struck, we
exchanged contracts on a number of acquisitions, and we completed
two further purchases in December following the improved conditions
in the second half of the year. In total, we added three new
tenants and 22 homes with 1,513 beds to the portfolio and sold one
non-core asset with 36 beds. This gave us 12 tenants (1) , 108
assets and 5,924 beds at the year end.(2)
Asset management is one of our key value creation tools. While
the pandemic restricted our ability to invest in new projects in
2020, we did complete two units to provide high-quality care for
people suffering from dementia, adding 76 beds in total, and
committed to forward fund a new 94-bed care home in Hartlepool. We
have also begun agreeing capital investments up front with tenants
when acquiring new assets, with GBP2.8 million committed to the
three most recent purchases.
Effectively managing the long-term sustainability of the
business for all our stakeholders is fundamental to long-term value
creation and we made good progress this year. This included
publishing our environmental, social and governance ("ESG") policy,
evaluating Energy Performance Certificate ("EPC") ratings and the
underlying data across the portfolio, identifying opportunities to
improve energy efficiency and EPC ratings, and enhancing the green
credentials of our standard lease terms.
Our investment portfolio was independently valued at GBP418.8
million as at 31 December 2020 (31 December 2019: GBP318.8
million), a 31.4% increase. The contracted rent roll was GBP30.9
million at the year end, up 33.7% over the year.
Our tenants
We have further diversified the Group's tenant base, adding
Silverline, Holmes and Electus in 2020. This is an important part
of our growth strategy, enabling us to expand the business while
spreading risk. We choose financially resilient tenants who
prioritise a positive and safe environment for their residents,
provide good-quality care and share our vision of continued asset
improvement. The board prioritises maintaining the Group's assets
to a high standard and pays close attention to our tenants'
programmes of repair and maintenance and ensuring sustainable rent
cover.
Financial performance
The NAV at 31 December 2020 was GBP349.5 million or 109.58 pence
per share (31 December 2019: GBP340.7 million or 106.81 pence per
share).
Our earnings benefited from the growth in the portfolio and
further reductions in our cost ratios, as a result of economies of
scale. Earnings per share ("EPS") for the year was 9.02 pence
(basic and diluted) (2019: 10.37 pence) a 1.35 pence per share
reduction on last year as a result of reduced growth in valuation
uplifts and the full effect of 2019 share issues. Our EPS metrics,
which exclude movement in valuations, reflect this underlying
growth. EPRA EPS was 7.25 pence (2019: 6.95 pence) and Adjusted EPS
was 5.93 pence (2019: 5.26 pence(3) ).
More information on our financial performance can be found in
the Investment Manager's report.
Dividends and total return
The Company has a progressive dividend policy and seeks to grow
its target dividend in line with the inflation-linked rental
uplifts received in the previous year, under the terms of its
leases. The board set a target total dividend for 2020 of 6.29
pence per share, a 1.94% increase over 2019. Subsequently the board
has declared four interim dividends of 1.5725 pence each, meeting
our target. The total dividend is 115% covered by our EPRA EPS and
94% covered by adjusted EPS, our cash cover metric.
The dividend contributed to a robust NAV total return for the
year of 8.46%, close to our target of 9.0% per annum. This is a
resilient result in the context of COVID-19.
During 2020, the Group achieved average RPI rent uplifts of 2.6%
and received GBP483,826 in the year. This has allowed the board to
set a target total dividend for the year ending 31 December 2021 of
6.41 pence per share, a 1.91% increase on 2020.
Financing
In April 2020, the Group agreed a new revolving credit facility
with HSBC. This represented a vote of confidence during a key stage
of the pandemic and further secured our financial position. The new
facility increased our total facilities by GBP50 million to GBP125
million and reduced our average cost of debt.
The Group remains prudently financed, with drawn debt at 31
December 2020 of GBP76.4 million, giving us an LTV of 17.8%. At the
year end, we had cash on the balance sheet of GBP8.0 million and
headroom in our facilities of GBP48.6 million. We intend to
continue to maintain a conservative balance sheet.
Corporate governance
The Company has a strong and independent board, which at the
year end comprised me as Chairman and four other non-executive
directors. We conducted our first externally facilitated evaluation
during the year, which showed that the board and its committees are
working well, as well as highlighting areas for further
development.
Our work on succession planning reaffirmed our desire to appoint
an additional non-executive director and the recruitment process is
now well advanced and we expect to announce an appointment in due
course.
Investment Manager
Our Investment Manager has worked hard this year on advancing
our strategy, while supporting tenants through the pandemic. The
strength of the Investment Manager's relationships with our tenants
came to the fore during this time. The flow of detailed and current
information these relationships produced gave us comfort that we
knew where we stood during the darkest period and was a vital input
to the board's decision making.
Post balance sheet events
Since the end of the year, the Group has acquired one asset, the
51-bed Mavern House Nursing Home, for a net consideration of GBP5.1
million. The home is now run by Welford, which is an existing Group
tenant. We have committed GBP0.6 million of capital expenditure to
expand the home over the next 18 months.
Outlook and summary
As demonstrated in 2020, our business is resilient and our
portfolio provides crucial infrastructure supporting vulnerable
elderly people across the UK. We remain well-capitalised and are
confident that the fundamental drivers of our industry and business
remain strong, even if the recovery from COVID-19 is slower than we
would like. We are positioned to deliver further portfolio
diversification and growth that will generate attractive returns
for shareholders. At the same time, we will continue to responsibly
deliver value to our tenants, their residents and healthcare
professionals, over the long term.
Notes
1 Including Croftwood and Minster, which are both part of the
Minster Care Group.
2 Including forward-funded developments.
3 The removal of amortisation of loan arrangement fees is a
change made in the current year and the prior year adjusted
earnings figure has been restated to include an adjustment for the
amortisation of loan arrangement fees.
Rupert Barclay Chairman
26 March 2021
INVESTMENT MANAGER'S Q&A
1. The business proved to be highly resilient in 2020. Are there
things you can do to build on that?
When Mahesh and I founded the business four years ago, we gave a
great deal of thought to how to make it resilient. We wanted to
make sure we had a conservative balance sheet, strong lease
structures, careful tenant selection and that, as Mahesh always put
it, our tenants had "room to breathe". Our aim was to build a
business for the long term, and we knew there would be bumps on the
road.
Neither of us foresaw an event as major as the pandemic in 2020
and the lockdowns which followed. This challenging environment
demonstrated how resilient the business is in reality. Perhaps this
is best shown by two key facts: in 2020 we collected 100% of the
rent due, while our portfolio rent cover in 2020 was the same as
2019 at 1.8 times.
Rather than be complacent about this, we have spent time with
the board at the beginning of 2021 looking at what we could do to
become more resilient. The first conclusion from that discussion
was, do not change things that have worked. Another was to be even
more rigorous about future tenant selection and to ensure they
continue to have plenty of room to breathe.
2. What are the key lessons from the pandemic and has it changed
the long-term drivers of your market?
It is still too early to answer this question definitively as,
while there is now strong light at the end of the tunnel, created
largely by the success of the vaccination programme, the pandemic
is sadly not yet over.
We think the key drivers are intact. People over 85 are the
fastest-growing age group in the UK population and a minority will
continue to require a level of care which can be best provided for
in a care home.
In terms of care home design, we expect to see a greater
emphasis on function over lifestyle, with more focus on measures
which can enable better infection control. We have revised the
plans at homes where we have asset management projects underway to
improve infection control, so that the building can be operated as
separate sub-units if required.
Two trends which we expect to see accelerated by the pandemic
are:
First, the greater use of digital technology to manage care,
much of which is still paper based. More effective use of
technology should help care operators to improve quality and
openness, which will benefit all stakeholders including
landlords.
Second, as the government also looks at lessons learned from the
pandemic, we would expect to see much greater emphasis on better
integration between health and social care, which - if delivered -
would also be a positive development for all stakeholders.
3. Is the pandemic likely to result in care home owners exiting
the market? Will this create opportunities for you?
We have a strong pipeline of acquisition opportunities which we
think are attractive. However, what we are not seeing is a step
change of the terms on which quality assets can be acquired caused
by sellers who have been distressed by the pandemic.
While we do not have a crystal ball to see exactly how
government policy will evolve, we are pretty certain it will evolve
following the pandemic. We expect this evolution to involve more
rather than less government funding for adult social care, which
could lead to higher pricing for healthcare assets. We are
continuing to pursue acquisitions on a selective basis, rather than
waiting for clarity on this issue.
4. Is your preference to continue to add new tenants or to
increase the number of homes your current tenants lease from
you?
The short answer is: both.
Since 2018, we have added ten new tenants. To diversify more and
reduce our risk, we want to continue to add new tenants, while
being very careful about their selection.
However, we think the pandemic also illustrated the benefits of
having a relatively compact tenant group, as it made two-way
communication during a very stressful period easier, enabling us to
stay on top of what was happening and wherever practicable to help
our tenants.
What we really like is when an experienced and ambitious
operator in the middle market, often the second generation taking
over a family business, comes to us and says they want to grow
their business from 15 homes to 30 homes, so they can make more
investments in quality, compliance and technology and they need a
capital partner. We see our relationship with our tenants as a
long-term partnership in which both sides can help the other to
develop their businesses.
5. Is ESG important to you?
We set out the Group's ESG policy at the beginning of 2020, but
we understand that is just one step in our ESG journey. Our aim is
to show two things: first, that ESG is not a standalone policy, but
is embedded into everything we do, in particular as a management
tool to help us think more clearly about how to enhance the
long-term sustainability - and hence resilience - of our business.
Second, that we are being practical and have realistic plans to
make deliverable improvements to our portfolio over time.
Much of our focus in 2020 was on the environment, where we
developed plans to improve the EPC ratings of our homes and began
to think about how they can become net-zero carbon over time. In
2021, one of our plans is to develop ways we can measure better the
social impacts of what happens inside the buildings we own, where
thousands of people are employed by our tenants to deliver
essential care services to some of the most vulnerable people in
society.
6. Has the experience of the last year permanently changed your
view of the appropriate level of debt?
Again, I could give a short answer: no.
We have always been conservative about the way in which we
manage our balance sheet and that will continue. At the end of
2019, we had drawn debt of GBP25 million and GBP48 million of cash
on our balance sheet, which turned out to be a great position from
which to go into a pandemic. By the end of 2020, once we had
financed a number of acquisitions, our LTV was 18%. At that level,
the investment value of our property portfolio would have to fall
by over 50% and our rental receipts by in excess of 70% before we
triggered any banking covenants.
7. Will annual rent rises linked to inflation put stress on your
tenants over time?
This is a question we often get asked, as it goes to the heart
of the long-term sustainability of our business. 100% of our leases
are inflation linked, with annual rises linked to either RPI or
CPI.
As the chart on page 12 of this report shows, since 1998 the
average weekly fees charged by care providers have gone up by 3.8%
per annum for nursing care and 3.7% for residential care. RPI has
averaged 2.8% per annum over the same period. That gives us comfort
that our universe of potential tenants can grow their revenues
faster than inflation.
In case inflation does something surprising, we have put floors
and caps into most of our leases to give our tenants (and us) some
level of protection. In 98 of our leases the floor is 2% and the
cap 4%; in nine it is 1% and 5%; and two leases have no floor or
cap.
Finally, our emphasis is on buying standing assets with a
trading history. We do careful analysis of what their sustainable
performance is, which then lets us form a view on the right level
of rent and hence rent cover for each asset. While we need to be
careful about putting too much of our tenants' data into the public
domain, we are committed to being open and transparent. Our regular
publication of rent cover numbers for our portfolio will enable you
to see if, over time, inflation increases are putting pressure on
our tenants. So far, that is not the case.
ALIGNED TO FAVOURABLE LONG-TERM MARKET GROWTH DRIVERS
In the UK, we see sustainable growth in demand for elderly care,
constrained supply of beds and a highly fragmented market, coupled
with rising fees and the prospect of further government funding.
This creates an attractive long-term opportunity for
well-capitalised asset owners to achieve scale by acquiring
high-quality resilient homes, while working in partnership with
well-managed operators who are committed to providing high
standards of care.
1. An ageing population
People aged over 85 are the fastest-growing part of the UK
population and make up the core client group for care homes.
According to the Office for National Statistics, the proportion of
the population over 85 years old in the UK is forecast to more than
double over the next three decades, from 2.5% in 2021 to 5.2% in
2051.
The COVID-19 pandemic has reduced occupancy in care homes in the
short term. However, over the medium and longer term, demand for
elderly care is forecast to grow. Research by LaingBuisson, a
leading consultancy in social care, forecasts that up to an
additional 93,000 beds will be required to satisfy this increased
demand over the next ten years, an increase of over 20% on demand
today.
2. Capacity has not been rising in line with an ageing
population
Since 2013, the number of new beds built has equalled beds being
withdrawn from the market. Underlying this stability there have
been a number of changes in the structure of the market.
Independent operators, both for profit and not-for-profit, have
continued to take market share from homes owned and operated by the
public sector. At the same time, the number of care homes has
shrunk by 9% between 2010 and 2020 as older, obsolete buildings are
withdrawn from the market to be replaced by more modern, larger
homes. The average size of care homes has grown from 36 beds to 42
beds in that period. The average size of homes in Impact's
portfolio is 50 beds.
3. Potential pent-up demand
In the UK, 10% of people over 80 have long-term care needs,
which can best be delivered in a care home. In other north European
countries, the percentage of people receiving care in care homes is
substantially higher.
There is no evidence older people in the UK are healthier than
in neighbouring countries. The lower proportion of older people in
care homes might instead show that current UK government policy is
effective in rationing access to care homes only to those who
absolutely need that care.
The UK care home market is less susceptible to competition from
other forms of care provision and as overall demand increases, so
should the demand for care home beds.
4. A fragmented market
Over recent years the market has seen deconsolidation at its top
end. The market share of the ten largest independent operators has
declined from a peak of 27% in 2006, to 20% in 2020. This reflects
diseconomies of scale in the care business. For the largest
operators, the potential benefits of access to capital at lower
cost and purchasing power for consumables such as utilities and
food tend to be more than cancelled out by higher group overheads
and the lack of economies of scale in pay rates for care staff,
which are operators' largest expenditure.
Over the same time period from 2006 to 2020, the market share of
sole traders with between one and two homes also shrank. Mid-sized
groups, which operate between 100 and 4,000 beds as local or
regional clusters, have been more vibrant, growing their market
share from 24% to 47%. Most of Impact's tenants are active in this
part of the middle market.
5. Dementia
The Alzheimer's Society estimates that in 2020 there were
850,000 people in the UK with some form of dementia, "with the
number set to rise to over one million by 2025 and two million by
2051".
An estimated 69% of the residents in care homes in 2020 had some
form of dementia and 96,000 residents had acute dementia, which
required a specialised level of care. As our understanding grows on
how to provide good care for people with dementia, there has been
more emphasis on building dedicated units to provide this care.
That has been a particular focus of our asset management
activities.
6. Fees rising faster than inflation
As a result of increasing demand, limited new capacity and a
shift from government provision to independent providers, the
independent sector has seen sustained and above-inflation growth of
the fees it charges for care. Between 1998 and 2020, weekly fees
charged by operators have grown on average by 3.8% per annum for
nursing care and 3.7% for residential care. Over the same time
period, RPI has averaged 2.8% per annum. This gives us confidence
that the RPI linkage in our leases is sustainable.
INVESTMENT CASE
The strengths and resilience of our business and the growth
potential in our market will help us to deliver attractive and
sustainable returns for our shareholders and positive social impact
on our wider stakeholders over the longer term.
1. A large and growing market
Each year, GBP17.3 billion pounds is spent on providing
residential care for elderly people in the UK, which is
approximately 0.8% of UK GDP. It is critical social care
infrastructure and the value of the market is expected to grow as
the population ages. Demand for care is non-cyclical and hence more
predictable, enabling us to plan for the longer term.
2. Risk-adjusted returns
We consider risk at different levels: ensuring balance sheet
strength with modest debt; carefully selecting tenants and
monitoring their performance; maintaining rent cover as we add
tenants; managing assets and the overall portfolio to add value;
and focusing on our long-term sustainability, both environmental
and economic. This allows us to generate returns with lower
risk.
3. Experienced and strategic management team
We benefit from the knowledge, expertise and relationships of
our Investment Manager. They allow us to source and negotiate deals
off market, which offer shareholders good value and give vendors
the certain execution they are looking for. One of the priorities
of our Investment Manager is to establish and develop long-term
partnerships with our tenants.
4. Strong cash generation and dividend growth
Our portfolio generates a high-quality, sustainable and growing
income stream. This allows us to target a progressive dividend
policy. We aim to grow shareholder returns through dividend
increases and capital appreciation. Our strong lease structures
offer us 100% inflation-linked income with low volatility
5. Adding value through asset management
Our portfolio is carefully constructed to combine core
high-quality and resilient assets which generate predictable income
and assets where there is potential to add value through asset
management initiatives. Asset management benefits our shareholders,
our tenants and the residents in our homes
6. Positioned for further accretive growth
At the end of 2020 we owned just over 1% of the operational beds
in the highly-fragmented UK elderly care market. Since early 2018,
we have been growing our portfolio, adding ten new tenants and
acquiring homes which are accretive to our portfolio, while
exercising strong capital discipline.
OUR BUSINESS MODEL
Our business model is designed to achieve our purpose, which is
to form long-term partnerships with our tenants, through which we
own and invest in the buildings they require in return for a
predictable rent, enabling our tenants to concentrate on providing
excellent care to their residents.
Our activities
To implement our business model, we have a clear, six-stage
process:
-- Build relationships
We build strong relationships with high-quality care providers,
who we can work with long term.
-- Identify assets
We identify attractive assets to acquire, in partnership with
those operators.
-- Appraise purchases
We perform rigorous due diligence before we selectively purchase
care assets.
-- Agree leases
Our lease terms ensure strong rent cover on day one and require
our tenants to maintain our assets to the right standard, with
minimum spend requirements
-- Engage tenants
We work closely with our tenants to create sustainable value
through mutually beneficial asset management projects
-- Optimise portfolio
We optimise our portfolio through selective asset sales, where
we can reinvest in higher value opportunities
Our competitive advantages
Our business has several important strengths that help us to
create value.
The Investment Manager is our key source of competitive
advantage. In particular:
-- its deep knowledge of care homes and how to run them is a
critical advantage in assessing assets to acquire, selecting
operators for those assets and identifying opportunities to add
value through asset and portfolio management;
-- its vendor relationships and strong partnership mentality
with existing and future tenants, mean we can buy some homes
off-market, so we face less competition to acquire them;
-- the Investment Manager's knowledge means we can carefully and
swiftly assess an opportunity, giving vendors the speed and
certainty of execution they are looking for; and
-- the Investment Manager's understanding of our tenants'
operations enables it to form strong and supportive partnerships
with them, which are crucial for long-term sustainable value
creation. Its sector knowledge also allows it to engage effectively
with tenants about their quality of care.
In addition, we benefit from having a well-diversified base of
high-quality tenants. This reduces risk for us, increases our
resilience and gives us multiple opportunities to responsibly grow
our business alongside theirs.
The output from our business model
The quality of our business is underpinned by three pillars that
we use to monitor performance.
Quality of buildings
We own a diversified portfolio of care homes, which provide a
welcoming physical environment for their residents. We categorise
each of our assets as core, value-add or non-core, which in turn
informs our asset management strategy. Our asset management
programme looks to enhance the quality of our homes and their
sustainability over time, including ensuring their environmental
performance and EPC ratings meet evolving regulatory
requirements
Quality of care
The security of our rental streams depends on our tenants
providing good-quality care to their residents, so the homes
consistently remain in demand and sustain their profits. The
Investment Manager reviews CQC or relevant regulator ratings and
the outcomes of inspections, visits homes and receives quarterly
reports from tenants, to ensure they are maintaining their quality
of care and complying with their covenants. If appropriate, where a
home is rated poorly, the Investment Manager may seek an
independent assessment of the home to help us and the tenant
understand any performance issues, or its resolution of these
issues, in preparation for re-inspection
Quality of cash flows
We carefully monitor our tenants' financial performance,
particularly their ability to grow revenues at least in line with
inflation, to maintain a stable EBITDA margin and hence maintain or
grow our rent cover.
Disciplined capital allocation has led to attractive net initial
yields on acquisitions and our conservative approach to debt
maximises cash we can distribute to shareholders. We tightly
control our costs and exploit economies of scale as we grow, as
many of our costs are fixed and some variable costs step down as
our asset value rises.
Our high-quality business delivers sustainable value to our
shareholders and other stakeholders
Tenants
Tenants can grow their business alongside us, in a mutually
beneficial relationship.
Tenants' customers
The residents in our care homes benefit from security and
stability, with an operator providing high-quality care and a
landlord willing to invest in the quality of the environment they
live in.
Lenders
Our lenders can provide finance to us on attractive terms, in
the knowledge that we have a secure and resilient business, with
strong cash flows.
Shareholders
Shareholders benefit from growing dividends, underpinned by the
highly predictable and rising revenue streams from index-linked
leases. Alongside the potential for capital growth, this supports
an attractive total return.
OBJECTIVES AND STRATEGY
Our objectives
We aim to provide shareholders with attractive and sustainable
returns, primarily in the form of quarterly dividends, while also
generating growth in net asset values over the medium term.
Our targets are to deliver:
1. a progressive dividend policy, with a total target dividend
of 6.41 pence per share in respect of 2021(*) ; and
2. an average NAV total return of 9.0% per annum(*) .
The capital growth element of the total return will be delivered
largely from annual, inflation-linked rent increases and active
asset management, rather than relying on yield compression.
* 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.
Our strategy
To achieve our value-creation objectives, we:
-- buy the right assets on the right terms, by implementing our investment strategy;
-- effectively manage the portfolio as a whole as well as
individual assets, by implementing our portfolio management and
asset management strategies; and
-- optimise our balance sheet, by implementing our financing strategy.
Investment strategy
Our investment policy allows us to invest in a broad range of
healthcare real estate assets. The market dynamics described on
pages 10-12 underline that the care home sector currently offers
the most attractive opportunities for the Group. Our investment
strategy is, therefore, to primarily acquire care homes, while
continuing to broaden the range of tenants we work with, thus
reducing our exposure to any one tenant.
We mainly look to acquire portfolios, which helps us to maximise
value. These portfolios may include healthcare real estate assets
in addition to care homes. We will acquire these where they have a
future strategic opportunity to deliver care home services or where
we are confident we can deliver value in the short term for our
shareholders, as part of our portfolio management.
Portfolio management strategy
We categorise each of our assets into one of three categories -
core, value-add and non-core. This enables us to manage the balance
between these categories, so we deliver our target returns, and to
identify the assets which can benefit from asset management (see
below).
Asset management strategy
A hands-on asset management strategy helps to enhance
shareholder returns over the longer term while mitigating risk. To
deliver our target long-term shareholder returns, our asset
management strategy prioritises investment in our value-add
portfolio and in projects that enhance the sustainability of our
assets, including those that improve the quality of the environment
for residents and the sustainability of the home, while extending
the useful economic life of the property.
Financing strategy
We fund our business through equity and debt. In doing so we
look to minimise the effects of "cash drag" on our earnings per
share, which is the effect of issuing equity or drawing down debt
funding and holding the cash raised on the balance sheet, ahead of
investing it in income-producing assets.
Our gearing policy is to have a maximum Group loan-to-value
ratio of 35% at the time of drawdown, although we look to maintain
debt at a prudent level, with average gearing not expected to be
higher than 25%. Our approach to hedging and debt is designed to
prudently optimise the return to shareholders while mitigating the
long-term risk from interest-rate fluctuations.
INVESTMENT MANAGER'S REPORT
2020 was a year that tested the resilience of many business
models. The Group has consistently taken a prudent and long-term
approach since its IPO in 2017 and this has stood it in good stead
during the COVID-19 pandemic.
The Group's resilience is based on several factors. These
include careful selection of tenants and our approach to working in
partnership with them, for mutual benefit. We have looked to
acquire assets for the Group that are well respected in their
markets and to lease them on sustainable terms that ensure strong
rent cover from day one. At the same time, we have been cautious in
the use of debt, resulting in a robust balance sheet with a loan to
value ratio well beneath the maximum allowed by the Investment
Policy. This resilience has contributed to our ability to collect
100% of the rent due in respect of 2020, without putting undue
stress on our tenants. This level of rent collection in turn has
underpinned the continued payment of dividends that delivered the
total dividend target for the year.
Investment activity
The Group began the year with a strong pipeline of attractive
potential investments and the funding to continue its growth
strategy. During January and February 2020, the Group committed
GBP68.5 million to the acquisition of 17 homes. However, in
response to the uncertain environment created by COVID-19, the
Group put acquisitions on hold for six months from mid-March. In
September 2020, the Group exchanged contracts on its first
acquisition since the start of the pandemic. In total, the Group
completed the acquisition of five further homes towards the end of
the year, for aggregate consideration of GBP16.2 million. We have
purchased one further asset for the Group since the year end (see
Post balance sheet events below).
Notwithstanding the pause in mid-year, during 2020 the Group
acquired 22 properties with 1,513 beds, a 35.4% increase on the
4,274 beds it owned at 31 December 2019. These acquisitions further
diversified the portfolio geographically and added Silverline,
Holmes and Electus as tenants, taking the Group's total number of
tenants from nine at the end of 2019, to 12. The average yield on
these transactions was 7.65%. All the assets purchased comply with
the Group's strict investment criteria and have risk/return
profiles which are consistent with the Group's existing
portfolio.
The combination of these investments and rent increases received
during the year helped to grow the contracted rent roll from
GBP23.1 million at 31 December 2019 to GBP30.9 million at the year
end, a 33.7% increase.
Asset management
The projects in our asset management programme add beds and
improve existing homes. As the Group already owns the land and the
tenants have central services such as kitchens, laundry and offices
on site, the marginal cost of adding beds is lower than for a new
build and the risks are easier to assess and mitigate and enhance
the value we deliver to our shareholders.
COVID-19 meant that we were not able to invest as much as
originally intended in asset management during 2020, as we instead
worked with the Group's tenants to respond to the pandemic.
Nevertheless, in the first half of the year we completed two large
new units attached to existing homes, which will deliver
high-quality care for people with dementia. A 30-bed unit at
Diamond House in Leicester opened in February 2020 and a 46-bed
unit at Freeland House near Oxford has been completed.
One project identified for 2020 was at Fairview Court and House,
which the Group had acquired as two adjacent homes, with an
imperfect planning consent to link them and reconfigure the older
accommodation. While we were keen to progress, we decided to review
how best to affect the link and incorporate sustainability in the
design and specification. A revised planning consent has now been
obtained and the development has been put out to tender, with the
works due to start shortly. The development will create 16 bedrooms
in the new link building, and add a net ten bedrooms to the home as
a whole, once we have reduced the number of bedrooms in Fairview
House from 20 to 14 larger rooms, with high-quality bathrooms. The
enhanced environmental works include lighting, insulation, heat
recovery and 20kw Solar PV panels and are expected to improve the
EPC rating from C to A.
We have continued to evolve the Group's approach to capital
expenditure, with our pre-acquisition due diligence now including
an increased focus on capital improvements, including those which
improve the assets' sustainability. This enables us to agree asset
management initiatives with tenants from day one, as illustrated by
the acquisitions that completed in December 2020 and since the year
end (see below), where we have committed GBP2.8 million to capital
expenditure on acquisition.
In the first half of 2020, we committed to forward fund a new,
94-bed care home in Hartlepool at a total cost of GBP6.1 million,
by December 2020 GBP1.1 million of this had been spent. The home
will be operated by Prestige, one of the Group's existing tenants,
and will deliver a yield of 7.8% on completion. Construction work
is progressing and is expected to complete in the third quarter of
2021.
Repairs and maintenance
Under the terms of the leases our tenants are fully responsible
for keeping the Group's buildings in good repair through regular
maintenance programmes. We monitor these programmes carefully to
ensure they are being effectively implemented. COVID-19 restricted
the number of homes we and our valuers have been able to visit over
the past year. We have plans in place for an extensive programme of
home visits to assess the level of repairs and maintenance at the
homes and will discuss with tenants any maintenance programmes that
need to be put in place, given the challenge they have been under
to restrict visits and reduce exposure to infection.
Portfolio management
We have divided the Group's portfolio into core, value-add and
non-core assets, to help us determine our asset management and
portfolio management plans. During the year we sold one non-core
asset, the Shrubbery in Worcester. This followed the January 2020
acquisition of Red Hill, a 90-bed home in Worcester, which the
Group purchased with the aim of moving the residents and staff from
the Shrubbery to Red Hill. Once our tenant, Minster, accomplished
this, we sold the Shrubbery in August for a 24% uplift to its most
recent investment valuation and a 29% increase on its purchase
price. We expect to make further disposals of non-core assets in
the coming year.
Implementing the Group's ESG policy which was introduced in
during 2020, has been a particular focus of the Investment
Manager's work during the year.
The portfolio
As a result of the acquisitions and asset management activity
described above, at 31 December 2020 the portfolio comprised 108
properties, with over 5,900 beds, including one forward-funded
development. This represents approximately 1.2% of the elderly care
beds available in the UK.
Of these properties, 106 are care homes let to 11 tenants(1) ,
on leases of 20-25 years, with no break clauses. Rents are subject
to annual upward-only rent reviews linked to the Retail Price
Index, with a floor and cap of 1% and 5% or 2% and 4% respectively.
In addition, the Group owns two healthcare facilities leased to the
NHS. In total, the Group has 12 tenants(1) across the
portfolio.
Note
1 Including Croftwood and Minster, which are both part of the
Minster Care Group.
Occupancy and rent cover
Our tenants' rent cover is directly linked to the level of
occupancy in the homes they run and the costs they are incurring,
both of which have been affected by the pandemic. Nevertheless,
rent cover across our portfolio has remained robust during
2020.
Occupancy levels during the year fell from a pre-COVID-19
average of just under 90% across the Group's portfolio, to around
80% at the end of the second quarter, as the effect of the first
wave of the pandemic subsided. In the second half of the year,
occupancy stabilised. This level of decline is in line with that
reported across the industry. At the same time, during the first
wave tenants saw increased costs to meet the demand for PPE and to
cover salary costs for agency staff, as a large number of permanent
staff had to self-isolate.
Despite these pressures, portfolio rent cover (defined as our
tenants' home-level pre-tax and pre-rent profitability divided by
the amount of rent due on the home) remained stable during the
year. It fell from 1.70 in the first quarter to 1.68 in the second
quarter, but then grew to 1.89 in the third quarter. For the year
to 31 December 2020 it was 1.77, down only slightly on 1.82 in the
previous year.
Three factors drove this performance. First, the Group's tenants
delivered strong, like-for-like fee growth during the year. The
average weekly fee they charged for the care they provide grew from
GBP725 in the fourth quarter of 2019, to GBP827 in the fourth
quarter of 2020, a 14% increase. Second, they benefited from a
range of support measures introduced by the government to mitigate
the pandemic including grant support funding. Third, prudent
implementation of the Group's business plan, which is to identify
assets and agree leases that can deliver strong rent cover from the
outset; to plan with our tenant partners to grow that rent cover
over time; and to ensure new acquisitions do not dilute rent
cover.
Reflecting the sustainability of these arrangements, we did not
need to agree any changes to lease terms or rent payment
arrangements with the Group's tenants during 2020. Across the
portfolio, 79% of rent is payable quarterly in advance and 21%
monthly in advance. We have a robust process of reviewing our
tenant's performance and compliance with the lease terms. We engage
with our tenants where any concerns are identified.
Valuation
The portfolio is independently valued by Cushman & Wakefield
each quarter, in accordance with the RICS Valuation - Professional
Standard (the "Red Book").
As at 31 December 2020, the portfolio was valued at GBP418.8
million, an increase of GBP100.0 million from the valuation of
GBP318.8 million at 31 December 2019. The components of this
valuation increase were as follows:
-- acquisitions: GBP85.9 million;
-- acquisition costs capitalised: GBP2.7 million;
-- capital improvements: GBP1.6 million; and
-- valuation uplift: GBP10.5 million; less
-- disposals: GBP0.7 million.
The valuation uplift was largely driven by rent increases
received during the year.
Financial results
Total net rental income recognised for the year was GBP30.8
million (2019: GBP24.0 million), with the increase primarily driven
by growth in the portfolio, as well as the rental uplifts inherent
in the Group's leases.
Under IFRS, the Group must recognise some rent in advance of
receipt on a straight-line basis, reflecting the minimum uplift in
rents over the term of the leases. Cash rental income received in
2020 was GBP25.9 million (2019: GBP19.1 million).
The Group's cost base is primarily made up of the Investment
Manager's fee, Administrator fees, other professional fees
including valuations and audit, and the directors' fees.
Administrative and other expenses totalled GBP5.3 million (2019:
GBP4.6 million).
The Group's cost ratios continued to improve in the year,
reflecting economies of scale as the portfolio grows and the
benefits of efficiencies. The total expense ratio, which is the
Group's recurring administrative and operating costs as a
percentage of average net assets, was 1.53% (2019: 1.60%). The EPRA
cost ratio, which is administrative and operating costs as a
percentage of gross rental income, was 17.1% (2019: 19.2%).
Net finance costs are primarily interest costs and amortised
arrangement fees on the Group's debt facilities and totalled GBP2.6
million (2019: GBP2.2 million) in the year. The increase was the
result of higher drawn debt, with the average cost of the Group's
debt having declined in the year as a result of the new facility
with HSBC (see Financing and liquidity below).
The Group recorded a profit on disposal of GBP0.2 million in
2020 (2019: GBPnil) following the disposal of the Shrubbery care
home.
The change in fair value of investment properties was GBP5.6
million (2019: GBP9.1 million). This includes the GBP10.5 million
of valuation uplifts already mentioned, offset by rent smoothing
adjustments from the accounting recognition of rental uplifts over
the life of the lease. These combined elements contributed to
profit before tax of GBP28.8 million (2019: GBP26.3 million).
EPRA EPS was 7.25 pence (2019: 6.95 pence). Adjusted earnings
per share, which better reflect underlying cash earnings in the
year, were 5.93 pence (2019: 5.26 pence)(1) . EPS for the year was
9.02 pence (2019: 10.37 pence), a 1.35 pence per share reduction on
last year as a result of reduced growth in valuation uplifts and
the full effect of 2019 share issues.
All the EPS figures listed above are on both a basic and diluted
basis. More information on the calculation of EPS can be found in
note 10 to the financial statements.
Note
1 The removal of amortisation of loan arrangement fees is a
change made in the current year and the prior year adjusted
earnings figure has been restated to include an adjustment for the
amortisation of loan arrangement fees.
Dividends
To ensure the Company benefits from the full exemption from tax
on rental income afforded by the UK REIT regime, it must distribute
at least 90% of the qualifying profits each year from the Group's
qualifying rental business.
Details of dividends paid in respect of 2020 are shown
below:
Quarter to Declared Paid Pence/share Cash cost
GBPm
31 Mar 2020 7 May 2020 12 Jun 2020 1.5725 5.015
------------- ------------- ------------ ---------------
30 Jun 2020 12 Aug 2020 4 Sep 2020 1.5725 5.015
------------- ------------- ------------ ---------------
30 Sep 2020 28 Oct 2020 27 Nov 2020 1.5725 5.015
------------- ------------- ------------ ---------------
31 Dec 2020 29 Jan 2021 26 Feb 2021 1.5725 5.015
------------- ------------- ------------ ---------------
Total 6.29 20.06
------------ ---------------
The first, second and fourth interim dividends were paid in full
as Property Income Dividends ("PID"). The third interim dividend
was paid 0.7863 pence as a PID and 0.7862 pence as an ordinary UK
dividend.
The total dividend was 115% covered by EPRA earnings per share,
and 94% by adjusted earnings per share.
Financing and liquidity
We have continued to put in place the building blocks to support
the Group's continued development, with the addition of a new
revolving credit facility ("RCF") in April 2020. This GBP50 million
facility is with HSBC and brings the Group's total facilities to
GBP125 million. The margin on the RCF is 195 basis points over
three-month LIBOR, bringing the weighted average margin on the
Group's debt down to 229 basis points when fully drawn. The
facility runs for an initial three years with an option to extend
for up to two further years, subject to lender approval. Both the
Clydesdale and HSBC facilities have been negotiated on the basis of
LIBOR and we are in discussions with both banks on the transition
of these to appropriate risk-free rates before the termination of
LIBOR at the end of 2021. None of the Group's debt is due for
refinancing until 2023, as shown in the table below.
Debt financing
Lender and Expiry Facility Drawn at
facility size GBPm 31 Dec 2020
type GBPm
Metro Bank
Term loan Jun 2023 25.0 25.0
Revolving
credit facility Jun 2023 25.0 20.4
------------------- ------------------ ----------- -------------
Clydesdale Bank
Revolving
credit facility March 2024 25.0 10.0
------------------- ------------------ ----------- -------------
HSBC
Revolving
credit facility Apr 2023(1) 50.0 21.0
------------------- ------------------ ----------- -------------
Total 125.0 76.4
--------------------------------------- ----------- -------------
1 With the option to extend for two years to April 2025, subject
to HSBC's agreement.
We continue to take a conservative approach to managing the
Group's balance sheet. At 31 December 2020, drawn debt was GBP76.4
million, giving an LTV of 17.8% (31 December 2019: drawn debt of
GBP25.1 million and LTV of 6.8%). The Group remained well within
its debt covenants throughout the year.
We also take a prudent approach to liquidity, ensuring we have
sufficient cash and unused facilities available to meet all of the
Group's committed expenditure and enable us to pay our suppliers on
time. At the year end, the Group had cash on the balance sheet of
GBP8.0 million (31 December 2019: GBP47.8 million), with headroom
of GBP48.6 million in the Group's facilities. Additional funds were
drawn down from these facilities in the first week of January, in
order to maintain the cash balance held at Group level at over
GBP20 million, and the current cash balance is GBP23.1 million as
at 22 March 2021. The Group has total headroom of GBP38.4 million
across its cash reserves and facilities, once all commitments for
completion of deferred payments and capital expenditure have been
financed.
Post balance sheet events
In January 2021, the Group completed the acquisition of Mavern
House Nursing Home, for a net consideration of GBP5.1 million. The
home provides 51 registered beds and the Group has committed to
spend circa GBP0.6 million to extend it by a further six beds over
the next 18 months. The tenant is Welford, which now operates seven
homes for the Group, with 355 beds and rent cover above two
times.
Acquisition pipeline
We continue to progress a strong identified pipeline of
investment opportunities and, while we remain cautious, given the
ongoing effects of the pandemic, we are confident in the long-term
outlook for the sector and the Group's investment and
diversification strategy.
Impact Health Partners LLP
Investment Manager
26 March 2021
PORTFOLIO MANAGEMENT
Our aim is to continue carefully building a portfolio of
attractive UK healthcare assets, principally care homes for the
elderly. We look for an appropriate balance of high-quality core
assets that generate attractive, secure and long-term income, and
value-add assets with potential to create further value for
shareholders and our wider stakeholders. We regularly assess the
balance of our portfolio to identify asset management and capital
recycling opportunities.
We categorise each asset as follows:
Core:
These assets are the primary contributors to our long-term,
stable income
-- Good quality buildings with a useful life greater than the duration of the lease
-- Invested to an appropriate standard
-- Stable trading, underpinning a sustainable level of rent cover
Value-add
Value-add assets are candidates for asset management
initiatives
1. Present opportunities to deploy capital to enhance the asset and its performance
2. May be a smaller home, have a low level of en suite
bathrooms, other elements of functional obsolescence or
environmental performance improvements.
3. Value uplift through enabling the tenant to offer a new
service, such as dementia and/or targeting private residents
Non-core
Non-core assets may be candidates for sale and are likely to
have been acquired as part of larger portfolios
1. Limited lifespan homes with a high degree of functional obsolescence
2. Higher alternative use value
3. Could be geographically isolated
A strong core portfolio underpinning value:
% of portfolio by market value
Core 67.9%
Value-add 30.3%
Non-core 1.8%
Homes of scale, delivering an efficient service to
residents:
Average number of beds per property
Core 60.3
Value-add 47.8
Non-core 41.4
Average 54.5
A core portfolio delivering an en suite facility service:
% of rooms with en suite facilities
Core 91.6%
Value-add 44.6%
Non-core 48.3%
A proportional rent per bed with strong rent cover across the
portfolio:
Average rent per bed
Core GBP5,251
Value-add GBP4,695
Non-core GBP3,509
Significant opportunity to enhance value from the value-add
portfolio:
% of portfolio by number of
homes
Core 56.1%
Value-add 39.2%
Non-core 4.7%
SUSTAINABILITY
We believe that a robust approach to ESG issues is intrinsic to
developing a strong and sustainable business. ESG is therefore a
fundamental part of our business model and activities. We look to
ensure we have the right checks and balances, decision-making
frameworks and management processes in place, to promote long-term
thinking.
Our approach to managing ESG issues
As the day-to-day running of our assets is the responsibility of
our tenants, we do not have direct control over important ESG
issues such as energy use or relationships with local communities.
However, our value creation model gives us a number of touchpoints
that help us to maximise the opportunities and minimise the risks
associated with ESG issues in our homes. These touchpoints range
from our asset selection criteria and due diligence procedures, to
choosing operators who demonstrate a good quality of care to
residents, to working with tenants to identify asset management
opportunities that enhance environmental performance. This means
that ESG considerations are integral to our investment and asset
management strategies.
Our ESG policy
During 2020, the board approved the Group's ESG policy, which is
available from the sustainability section of our website:
https://www.impactreit.uk/about/sustainability/ . The policy
governs our environmental conduct, our social conduct and the way
we manage our business. These three areas are captured by our seven
core principles of sustainability set out in the policy, which are
shown in the table below. By following these guiding principles, we
aim:
-- to be transparent in our conduct and reporting;
-- to create homes which are better prepared for the future -
more efficient, more climate resilient, more comfortable for our
tenants' residents and staff, and respectful of the
environment;
-- to foster co-operative and successful relationships with
tenants, residents, shareholders and lenders, to create long-term
shared value for all; and
-- acknowledging the importance of and utilising our
relationships with our tenants, we also aim to create and support a
healthy, safe and positive living environment, which the residents
are proud to call home.
Our core principles of sustainability:
-- Conduct our business with integrity and in an open and
ethical manner and require the same standards from our stakeholder
relationships
-- Operate in an environmentally sustainable manner and minimise
the environmental impact of our operations including on climate
change
-- Climate resilience - protecting the business from the future
effects of climate change and anticipated low carbon transition
policies.
-- Extend the economically useful lives of our buildings through
monitoring our tenants' obligations and investing in refurbishment
and reconfiguration
-- Disseminate the Group's policies to advisers, suppliers,
occupiers and our key stakeholders
-- Comply with all legal and regulatory requirements and, where
feasible, exceed minimum compliance
-- Promote diversity and inclusion throughout our activities.
Our priorities for 2020
In our 2019 annual report, we set out three key sustainability
related actions for 2020. Our progress with these actions is set
out below:
Action Progress
===================================== ==============================================
Put in place policies which address The board approved our ABC policy
anti-bribery and corruption ("ABC"), and our supplier code of conduct
whistleblowing and a supplier during 2020. We have concluded we
code of conduct. will monitor whistleblowing through
our suppliers.
===================================== ==============================================
Develop a sustainability strategy During 2020, we introduced our sustainability
and plan, including policies, policy, undertook a detailed review
material issues, targets, and of EPC ratings (see below) and established
risks and opportunities, to ensure short- and long-term goals to deliver
ongoing relevance and effectiveness. improvements across our portfolio.
===================================== ==============================================
Recognise the urgency of addressing We have done significant work this
climate change and explore taking year understanding the energy performance
baseline measurements against of our assets, including the factors
which to establish targets. underlying their EPC ratings and
the carbon emissions of the large
majority of our homes.
------------------------------------- ----------------------------------------------
Our environmental conduct
Through our relationships with our stakeholders, primarily our
tenants, we look to:
- manage our business in an environmentally sustainable manner
and endeavour to minimise the environmental impact of our
operations; and
- protect the business from the future impacts of climate change
and anticipated low-carbon transition policies.
Reviewing our EPC ratings
The Minimum Energy Efficiency Standards ("MEES") came into force
in 2018. Unless a commercial property qualifies for one of a
limited number of exemptions, MEES means that:
- since 1 April 2018, a new lease cannot be granted on a
commercial property with an EPC rating below E; and
- from 1 April 2023, an existing lease on a commercial property
cannot continue where the property is rated below E.
We also expect that regulations in this area will continue to
tighten and it is likely that an EPC rating of B will be required
by 2030. It is therefore an important part of our sustainability
journey for us to have a clear understanding of EPC ratings across
the portfolio and the short- to medium-term actions that will
improve ratings where necessary.
The average rating across the portfolio is C and the report
identifies measures that can improve the average to B, as well as
properties that need addressing as a priority. The measure with the
greatest impact in terms of rating improvement and carbon saving is
the installation of LED lighting, which also has a payback period
of just six months. Other potential measures include boiler
replacements, improvements to building fabric such as glazing and
insulation, and installing solar electricity generation.
As part of our work to understand the portfolio's energy
performance, we used data specialists to gather information from
our tenants on their energy usage in each home, which we intend to
publish as part of our sustainability reporting available on our
website.
Enhancing our due diligence and lease requirements
Thorough due diligence on potential acquisitions has always been
vital to us and we continue to look for ways to enhance our
approach. During the year, we added a new element to our process,
by commissioning environmental acquisition reports alongside our
structural, valuation and legal due diligence. These enable us to
understand the asset's environmental performance, including the
factors underpinning its EPC rating, and identify potential
sustainability improvements before acquisition. This in turn allows
us to agree those improvements up front with the proposed tenant
and commit the capital required to carry them out.
We also enhanced our new leases during 2020, strengthening their
existing environmental requirements. New leases contain
requirements for energy monitoring systems, an obligation on the
tenant to report on its plans to meet statutory sustainability
targets and a minimum spend on ESG-related items, as part of the
tenant's repairs and maintenance obligations.
Our social conduct
We recognise the importance of our relationships with all our
stakeholders and engage in an open and constructive manner, to
maintain and improve our business operations and the environment
for our tenant's residents.
We believe in being transparent with stakeholders and seek to
ensure we report comprehensively and fairly in our annual reports
and publish all of our policies on our website During the year, we
were therefore pleased to retain our EPRA Gold Award for reporting
against its Best Practice Recommendations and to win our first Gold
Award from EPRA for sustainability reporting.
Conduct of our business
We believe that good governance practices are essential to a
successful and sustainable business, and we therefore ensure that
they are integral to us. Our corporate governance framework and the
board's activities during the year are described in detail in the
corporate governance section of this report.
The board has clear expectations about how the Group should act.
In short, we conduct our business with integrity and seek to ensure
that our Investment Manager, Administrator and other businesses
engaged by us, including advisers, contractors and agents, do the
same.
To support our approach to ethical business, during 2020 the
board approved the following:
-- Anti-bribery and corruption policy. The policy requires us to
conduct all of our business in an honest and ethical manner. The
Company takes a zero-tolerance approach to bribery and corruption
and is committed to acting professionally, fairly and with
integrity in all its business dealings and relationships. The board
has overall responsibility for ensuring that this policy complies
with the Company's legal and ethical obligations. The company
secretary has primary and day-to-day responsibility for
implementing this policy, monitoring its use by all those to whom
it applies and its effectiveness, and dealing with any queries.
-- Supplier code of conduct. The code has been issued to our
suppliers and is available on our website. It sets out expected
standards and obligations applicable to the Group's suppliers. It
supports corporate sustainability, promotes safe and fair working
conditions and responsible management of issues relating to health
and safety, people, ethics, legal compliance, CSR and the
environment.
As the Company has no employees, the Company relies on reporting
from the whistleblowing policies of its key service providers, JTC
and IHP.
Our sustainability priorities for 2021
In the coming year, we aim to:
1. develop our sustainability strategy and plan;
2. share the EPC evaluations with tenants, understand any work
already done to improve them, engage with tenants on further work
to enhance EPC ratings and update EPCs where beneficial;
3. install smart meters in all homes;
4. investigate the potential for Group-wide utility purchasing,
including transferring tenants to a green electricity supply;
and
5. establish work streams to prepare for Taskforce on
Climate-Related Financial Disclosures compliance.
ESG
In 2020, we defined our environmental and social conduct
policies, as part of our overall ESG policy. Here we describe our
work in 2020 to ensure we are an environmentally and socially
responsible landlord.
An environmentally responsible landlord
During the year, we have taken time to understand all aspects of
the environmental challenge we collectively face. In the shorter
term, our aim is to improve the energy and carbon performance of
our portfolio. Longer term, we are considering how we could reach
net-zero carbon.
As a first step, we have harvested detailed underlying data
behind each home's EPC. Using sophisticated modelling, we have then
established home-level improvement strategies, modelled with
anticipated costs and pay back periods.
We have analysed energy consumption and provided detailed
feedback to our tenants on usage patterns and efficiency within
each home. This analysis highlighted that an investment of GBP2.8
million could deliver operational cost savings of around GBP950,000
per annum and a reduction of over 3,000 tonnes of carbon emissions.
We are now engaging with tenants to see what measures they have
already delivered since the last EPC assessment, and the
feasibility of implementing some of the outlined proposals in the
short- to medium-term through investment.
Our targets are now to:
-- Achieve a minimum B rating for Energy Performance Certificates (EPC) by 2030;
-- Explore the options for achieving a net-zero carbon target for the portfolio.
Expenditure of GBP2.8 million would give rise to energy cost
savings of around GBP950,000 and a reduction of over 3,000 tonnes
of CO(2) emissions.
A socially responsible landlord
During COVID-19, we have worked hard and compassionately with
our tenants, to find the best way to support them throughout this
pandemic. During the early weeks of the outbreak, we focused on
understanding the effects of the pandemic on our tenants' staff and
residents, and shared areas of best practice performance amongst
our tenant group.
We listened to tenants' concerns on the availability of PPE and
sourced a bulk order of PPE that was distributed among these
tenants that needed the support.
As the pandemic environment stabilised, we began discussing ways
to support them with occupancy recovery plans, where required. A
key theme was the benefit of thermal imaging cameras to help
monitor the health of those entering the home. We agreed a funding
and roll out programme across all of our homes.
Throughout this process, our Investment Manager ensured the
board were fully informed on the performance of our homes and the
wider data sets, analysing the trends of the pandemic. We also
ensured our investors and lenders were kept updated with regular
communications throughout.
Rigorous governance
We continue to conduct our business with integrity and seek to
ensure that our non-executive directors, Investment Manager,
Administrator and other businesses engaged by us, including
advisers, contractors and agents, do the same as reflected in our
Supplier Code of Conduct.
STAKEHOLDERS
The board has identified our key stakeholders as our tenants,
their residents, our shareholders and our lenders. The ways we
typically engage with our key stakeholders in a normal year is set
out in the table opposite. During the COVID-19 pandemic we have
adapted our engagement, in particular by materially stepping up our
communication with and support for our tenants.
Given the nature of its services, the Investment Manager is an
integral point of contact between the Group and its stakeholders.
The Investment Manager is one of our two main service providers,
along with the Administrator. They and our other service providers
are fundamental to our operations and to ensuring we meet the high
standards of conduct that we set ourselves. The Management
Engagement Committee ("MEC") meets at least annually to review the
performance of the key service providers and the board has regular
interactions with the Investment Manager and the Administrator. See
pages 69-70 for more information on the MEC's work.
The Group has a number of other stakeholders, in addition to the
key stakeholders discussed in this section. These include the
government and regulators, who set and oversee the policies and
regulations that govern the care home sector. We do not have direct
relationships with the government or regulators in this regard, as
these relationships are managed by our tenants as the operators of
the care homes.
Employees and directors
As an externally managed business, the Group has no employees
and therefore does not require any employee related policies or
disclosures.
At the year end, the board comprised five non-executive
directors including the Chairman, of which three were male and two
were female.
Key Stakeholder How we engage Stakeholder Engagement
stakeholder interests in practice
Tenants We engage There was active engagement
The Group has * ability to support their business plans through through with tenants throughout
a steadily acquisitions and asset management; a variety of the Pandemic as highlighted
growing formal in the Covid109 section
tenant base, and informal of this report.
comprising * financial strength; and mechanisms, Key decisions influenced
strong including site by this engagement
national and visits and included:
local * knowledge and understanding of their operations. meetings. * Sourcing additional PPE
operators. We also
Working in receive
long-term quarterly * Suspending acquisitions between April 2020 and
partnership reports
with our from tenants
tenants setting September 2020
is central to out their * The provision of thermal imaging cameras at our care
our ability performance
to grow our and work with
business while tenants homes
managing risk. to identify * Continuation of the quarterly dividend payments
and
implement
asset throughout the year.
management
opportunities.
See our
business
model for more
information.
The board
looks
to meet new
tenants
when they are
appointed,
or within six
months
of
appointment.
A number of
tenants
have presented
to the board
on
aspects of
their
business, and
the
directors also
keep abreast
of
their views
through
quarterly
reporting,
site visits
and
ad hoc
meetings.
Tenants' Our tenants Tenant's residents
residents * the quality of care provided by our tenants; are and staff safety was
The quality responsible the priority during
of care our for the pandemic.
tenants * the quality of their home and the investment in the By listening to our
provide regular repairs and maintenance; relationship tenant's we were able
to their with residents to understand their
residents and we do not priorities in relation
is of prime * the security and stability of their home; and directly to both residents and
importance to engage with staff.
us. The them, Key decisions influenced
quality * our ability to improve their home through asset except for by this engagement
of care is management. residents included:
central we may meet * Sourcing additional PPE
to residents' during
quality of site visits.
life We regularly * The provision of thermal imaging cameras at our care
and also monitor homes.
directly the CQC rating
influences for each home
demand and * We took the decision on one of our homes to
for our the outcomes commission an independent assessment of the home's
tenants' of performance. This was undertaken with the support of
services, inspections, the tenant to ensure best practice measures were
which and being implemented and issues identified were resolved
in turn engage with or being resolved.
affects tenants
their ability where
to pay rent necessary
to us. on the
findings.
The board also
carefully
monitors
CQC ratings,
to
ensure tenants
are managing
their
homes properly
and therefore
providing
an appropriate
resident
experience.
Shareholders The Investment Canvassing the views
To continue * the security and growth of our dividend; Manager of our shareholders
to grow our conducts was undertaken through
business, we a regular direct engagement by
need a * our ability to source accretive investments and add programme the Investment Manager
well-informed value through asset management; of meetings and the Chairman.
and supportive with Key decisions influenced
shareholder institutional by this engagement
base. We * developments in the care home market; investors, included:
therefore as well as * Continuation of the quarterly dividend payments
look to ensure opinion throughout the year
regular and * our approach to environmental, social and governance formers such
open issues; and as
communications analysts and * The restarting of acquisitions in September 2020.
and high the
quality * our financial and operational performance. financial
corporate press.
reporting. We also look
to
provide
regular
and timely
news
flow. Other
important
communication
channels
include our
interim
and annual
reports
and the annual
general
meeting.
The Chairman
and
Senior
Independent
Director offer
meetings to
shareholders.
Shareholders
are
also invited
to
speak to the
Chairman
and other
directors
when the
Company
is raising
funds
through share
placings.
The board
receives
regular
investor
relations
reports,
containing
information
about changes
to
the Company's
shareholder
base and
feedback
from investor
meetings.
See relations
with
shareholders
for
more
information.
Lenders The Investment The Investment manager
An appropriate * the quality of the security we provide for our loans; Manager is has actively engaged
amount of responsible with Lenders throughout
gearing for engaging the year.
is important * our ability to meet our interest payments; and with Key decisions influenced
for generating our lenders. by this engagement
higher It included:
returns. * the diversification and strength of our income does this * Continuation of the quarterly dividend payments
We therefore streams. through throughout the year.
look to build quarterly
strong reporting.
relationships Information
with lenders, about
who will debt funding
provide is
the debt provided as
facilities appropriate
needed to to the board,
support as
our business part of its
growth. regular
papers ahead
of
board
meetings.
KEY PERFORMANCE INDICATORS
The Group uses the following measures to assess its strategic
progress.
1. Net Asset Total 2. Dividends 3. EPRA earnings 4. EPRA 'topped-up'
Return ("NATR") per share Net Initial Yield
("NIY")
8.46% 6.29p per share 7.25p per share 6.72%
for the year to 31 for the year to for the year to at 31 December
December 2020 31 December 2020 31 December 2020 2020
(-10.6% on 2019) (+1.9% on 2019) (+4.3% on 2019) (+0.9% on 2019)
------------------------- --------------------------- ----------------------------
2020: 8.46% 2020: 6.29p 2020: 7.25p 2020: 6.72%
2019: 9.46% 2019: 6.17p 2019: 6.95p 2019: 6.66%
2018: 8.47% 2018: 6.00p 2018: 6.47p 2018: 6.97%
------------------------- --------------------------- ----------------------------
Definition Definition Definition Definition
The change in the Dividends declared Earnings from operational Annualised rental
net asset value ("NAV") in relation to activities. The income based
over the period, the period. EPRA calculation on the cash rents
plus dividends paid, removes revaluation passing on the
as a percentage of movements in the balance sheet
NAV at the start investment portfolio date, less non-recoverable
of the period. and interest rate property operating
derivatives, but expenses, divided
includes rent smoothing. by the market
value of the
property portfolio,
increased by
6.3% to reflect
a buyer's costs
and adjusted
for the expiration
of rent-free
periods or other
unexpired lease
incentives.
------------------------- --------------------------- ----------------------------
Relevance to strategy Relevance to strategy Relevance to strategy Relevance to
Demonstrates our Reflects our ability A key measure of strategy
ability to add value to generate a a property company's This measure
for our shareholders, secure and growing underlying operating should make it
by distributing earnings income stream results and an easier for investors
and growing our portfolio from our portfolio. indication of the to judge for
value. extent to which themselves how
current dividend the valuations
payments are supported of one portfolio
by earnings. compares with
another portfolio.
------------------------- --------------------------- ----------------------------
Commentary Commentary Commentary Commentary
The net asset total We met our dividend EPRA EPS increased The average NIY
return comprised target for the by 4.3%, giving of the acquisitions
dividends paid in year. Our dividend 115.3% dividend made in 2020
the year of 6.26p target for 2021 cover. was 7.65%.
per share and NAV is 6.41p1, representing
growth of 2.77p per 1.91% growth.
share. Our target
is a net asset total
return of 9.0% per
annum.
------------------------- --------------------------- ----------------------------
5. NAV per share 6. Gross Loan 7. Weighted Average 8. Total Expense
to Value ("LTV") Unexpired Lease Ratio ("TER")
Term ("WAULT")
109.58p per share 17.77% 20.0 years 1.53%
at 31 December 2020 as at 31 December as at 31 December as at 31 December
2020 2020 2020
(+2.6% on 2019) (+261% on 2019) (+1.5% on 2019) (-4.4% on 2019)
---------------------------- ------------------------- ------------------------
2020: 109.58p 2020: 17.77% 2020: 20.0yrs 2020: 1.53%
2019: 106.81p 2019: 6.81% 2019: 19.7yrs 2019: 1.60%
2018: 103.18p 2018: 11.62% 2018: 19.5yrs 2018: 1.80%
---------------------------- ------------------------- ------------------------
Definition Definition Definition Definition
Net asset value based The proportion The average unexpired Total recurring
on the properties of our gross asset lease term of administration
and other investment value that is the property portfolio, costs as a percentage
interests at fair funded by borrowings. weighted by annual of average net
value. passing rents. asset value throughout
the period.
---------------------------- ------------------------- ------------------------
Relevance to strategy Relevance to strategy Relevance to strategy Relevance to
Provides shareholders We have a conservative The WAULT is a strategy
with the most relevant gearing policy, key measure of The TER is a
information on the with borrowings the secure nature key measure of
fair value of the as a percentage of our portfolio. our operational
assets and liabilities of Group assets Long lease terms efficiency.
within a property limited to 35% underpin the quality
investment company at the time of of our income
with a long-term drawdown with stream and hence
strategy. average gearing our dividends.
not expected to
be higher than
25%.
---------------------------- ------------------------- ------------------------
Commentary Commentary Commentary Commentary
NAV growth during The Group has The leases entered TER has reduced
the year was driven total debt facilities into during 2020 due to the Group
primarily by rent of GBP125 million, had minimum fixed benefitting from
increases and the of which GBP76.4 terms of 25 years. economies of
benefits of active million had been The Group's policy scale as the
asset management. drawn at the year is to only grant portfolio grows.
end. If the facilities leases of at least The EPRA cost
were fully drawn, 20 years, without ratio, calculated
with any tenant break by dividing our
no changes to clauses. administrative
the Group's current and operating
equity base, the costs by gross
LTV would be approximately rental income,
26.1%. was 17.09% for
the year (2019:
19.15%).
---------------------------- ------------------------- ------------------------
1 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
PRINCIPAL RISKS AND UNCERTAINTIES
Our risk assessment
The table below shows the Group's post-mitigation principal
risks and uncertainties. Information on our risk management
framework can be found on pages 61-64.
1. Changes to government social care policy (including the effects of Brexit)
2. Infectious diseases
3. General economic conditions
4. Weakening care market
5. Default of one or more tenants
6. Underinvestment in care homes
7. Environmental regulation and impact of climate change
8. Ability to meet our debt financing obligations
9. Reliance on the Investment Manager
POLITICAL
1. Changes to government social care policy (including the
effects of Brexit)
Probability Medium
Impact Moderate
Care for older people is at the heart of our business. The
government may change policy or introduce legislation that affects
the sector. The heightened focus on adult social care, and in
particular care homes, as a result of COVID-19, has increased the
probability of changes to future government policy and a demand for
increased funding, however, it remains too early to assess the
incremental risk and opportunity that this may bring.
Of particular note is the UK care sector's partial reliance on
workers from EU countries. There is a risk that the UK's withdrawal
from the EU will result in a fall in the availability of
appropriately skilled workforce, restricting our tenants' ability
to hire sufficient staff, especially nurses. This may result in
higher staff costs and reduced service levels, with an adverse
effect on our tenants' profitability. It remains too early in the
post-Brexit environment to properly assess this risk, which is
compounded by the effect of COVID-19 limiting cross border movement
and raising demand for skilled care staff globally.
Mitigation
The Investment Manager closely monitors developments around
funding for adult social care. A report by The Health Foundation in
October 2020 estimated a funding gap of GBP2.1 billion in adult
social care and at the same time the Commons Health and Social Care
Committee set out their expectations of a GBP7.0 billion increase
across social care by 2023-24.
There is normally a lead time of at least a year before new
legislation comes into effect, and we expect this to be longer
given the current focus on COVID-19, giving us time to adapt to any
changes.
Different policies will apply in England, Wales, Scotland and
Northern Ireland, enabling us to focus future investment in the
countries with favourable regulatory regimes.
In relation to Brexit, the Investment Manager actively engages
with tenants and regularly reviews their ability to recruit and
retain different categories of staff. A number of tenants are
putting in place measures to recruit nurses internationally to help
manage the expectations of any shortfall. We continue to monitor
staff costs and agency use, as an indicator of potential
issues.
Opportunity
Increased focus by the government on elderly care may provide
increased revenue opportunities with focused investment aligned
with demand and availability of funding.
MARKET CONDITIONS
2. Infectious diseases
Probability High
Impact Moderate
Significant outbreaks of infectious diseases, in particular
pandemics such as COVID-19, can have long-lasting and far-reaching
effects across all businesses. Care for older people is a
particular area of heightened concern.
The risks of an outbreak are: reduced occupancy at care homes
and the lack of availability of key workers at the care homes as a
result of infection or a requirement to self-isolate.
Should a pandemic take hold and not be capable of being
contained, it could compound and enhance a number of principal
risks, including general economic conditions, default of one or
more tenants and the ability to meet our financing obligations.
Restoring occupancy to normal levels could take time to achieve
with increased availability of beds across the sector and increased
price competition, adding to the long-term challenge of financial
stability for tenants.
The effects of COVID-19 over the past 12 months saw occupancy
decline, with the majority of this decline taking place in the
first three months of the outbreak, before testing and full levels
of PPE were available to care homes.
Mitigation
The healthcare sector, including care home operators and staff,
are experienced in preparing for and implementing procedures to
deal with infections.
Grant funding from central government and local authorities may
help support tenants to deal with the immediate effects of an
outbreak, giving tenants support with the increased cost of PPE,
staff sick pay and the immediate effects of a potential reduction
in occupancy.
Tenants can also explore all options to reduce the impact of
staff shortages including recruitment from the hospitality sector
and the overseas recruitment of nurses.
The implementation of national testing capability can help
identify and control the spread of any infectious disease and the
roll out of vaccinations will help with protecting residents and
staff.
It remains too early to properly assess the effectiveness of the
current vaccination programme and the risk of variants on the
immunity levels provided, however, the controls in place from
testing and PPE and the beginning of vaccinations is a significant
advance on the position from a year ago, reflecting the reduction
in risk attributed to infectious diseases.
Opportunity
The importance of providing a safe and supportive environment
for older people is more widely acknowledged during an outbreak of
an infectious disease such as COVID-19. The allocation of
government funding to support this provision, can ensure the
business model is resilient during an outbreak.
3. General economic conditions
Probability High
Impact Moderate
Adverse general economic conditions are expected to heighten as
unemployment levels rise and the government implements measures to
reduce the unprecedented level of debt that has been required to
manage the immediate economic implications of the pandemic.
This could result in falling fees for our underlying tenants
alongside potential increased costs through direct and indirect
taxes.
Weakening financial performance of our tenants could result in a
decline in real estate valuations, lower market rents and
suboptimal occupancy, including weaker tenancy terms. It may also
give rise to a greater risk of tenant default or covenant
breaches.
Mitigation
Our homes are let on leases of at least 20 years, with annual
rental increases linked to the Retail Price Index. We regularly
assess and monitor the financial robustness of our tenants. The
majority of our homes were also acquired with a proven track record
and established trade, enabling us to set an affordable rent that
is cash flow positive for our tenants from acquisition.
Demand for care home places is relatively uncorrelated to
economic conditions. Local authority funding may be put under
greater pressure in an economic downturn but the underlying need to
provide and fund elderly care remains unchanged. A decline in the
economy would therefore take time to have an effect on our
business.
Our year end LTV was 18% and our investment and growth strategy
ensures Group leverage does not exceed 35%, limiting our overall
reliance on debt finance.
The Company's strategy is to deliver growth through both
acquisition and asset management. If the investment market is
restricted, the Company can continue to progress asset management
opportunities, to continue to deliver growth.
Opportunity
We undertake a measured approach to raising equity and securing
debt to ensure it aligns with our investment pipeline.
4. Weakening care market
Probability Medium
Impact Moderate
Several factors may affect the market for care for older people,
including:
-- changing service user requirements in the healthcare sector,
including domiciliary care or enhanced infection control in
building design;
-- local authority funding partners amending their payment
terms, affecting our tenants' revenues; and
-- increased regulatory responsibility and associated costs for
our tenants which is not offset by an increase in fees.
These could all materially affect our tenants' covenant strength
and their ability to pay rent, resulting in a reduction in the
value of the care home and a higher risk of default.
Mitigation
We work closely with our tenants to understand the underlying
performance of the individual homes, so we identify any concerns
early and can explore mitigating actions such as additional
investment, or discussing with our tenants staffing levels and the
public/private resident mix.
Opportunity
Our investment criteria seeks to identify assets which can be
acquired at or below their replacement cost with strong rent cover
to ensure our tenants have resilient operating cash flows. This
provides us and our tenants the headroom to invest in our assets
and their services to ensure our tenants are the providers of
choice in a changing market.
UNDERPERFORMANCE OF ASSETS
5. Default of one or more tenants
Probability High
Impact Major
The default of one or more tenants, or failing to act quickly
and decisively when confronted with a failing tenant, would affect
the value of our homes and both our ability to pay dividends to our
shareholders and to meet our financing obligations.
The effect of COVID-19 has resulted in reduced occupancy across
the care sector and as a result the recovery of occupancy to
pre-pandemic levels is expected to take time, placing pressure on
our tenants' financial resilience. While there are signs of
optimism for a recovery, with the ongoing distribution of vaccines,
the risk of further outbreaks remains.
Mitigation
Our tenants have shown themselves to be resilient in their
ability to operate in the challenging environment this year. Their
rent cover was set at a level to help them sustain fluctuations in
income and maintain their own business operations. Access to
testing and PPE increased their ability to identify and protect
their residents and contain any outbreaks as they arise.
The Investment Manager actively engages with all of our tenants,
with regular reviews of performance, repairs and maintenance spend,
and strategic planning.
The tenants have controls in place to identify issues early and
resolve them alongside clear objectives to enhance the homes and
their rent cover.
During COVID-19 our tenants were supported with some grant
funding to cover the incremental costs of PPE and staff isolation
which helped with their financial robustness alongside their own
mitigating actions to reduce costs, in line with reduced occupancy
where this has occurred. As a result we have continued to receive
100% of rent receipts with no lease variations up to the time of
publication of this report.
Our investment policy is also focused on diversifying our tenant
base, to reduce the effect of a single tenant default on portfolio
valuation and underlying income.
Opportunity
We have strong mutually rewarding relationships with our tenants
and a diversified tenant base with a range of strengths. We have
the opportunity to explore our tenants' different service
provisions at our homes to ensure they are successful and meeting
the demands of the current market opportunities and the asset
management capability to support this.
6. Underinvestment in care homes
Probability Medium
Impact Low/Moderate
The attractiveness of our portfolio is based on the quality of
the tenant operators, measured by their regulatory and financial
performance, and our properties' ability to provide effective space
in which our tenants can operate. This does not require our homes
to be new but it does require them to be well maintained and fit
for purpose.
There is a heightened risk that repair and maintenance
programmes fall behind as our tenants are closely managing their
cash flow and avoiding non-essential contractors on site during the
current pandemic.
There is also a risk that value-add investment activities are
not progressed and more homes become non-core within our portfolio
categorisation.
The above risks have corresponding implications to value and
long-term income generation.
With the focus on COVID-19 and restricted access, to help with
infection control, only emergency repair and maintenance spend has
been undertaken at some of our homes. If infection control
restrictions are prolonged this could result in longer-term issues
for the maintenance or refurbishment of the homes.
Mitigation
All of our leases with tenants have full repair and maintenance
obligations, with the additional clarity of a minimum spend per
annum per bed (based on a three-year average spend), which tenants
are required to report against and we actively monitor.
Failure to comply with the terms of the lease will result in a
default enabling us to replace the tenant in an extreme
circumstance.
Our EPC review has identified a number of improvements which
will have good payback and improve environmental
sustainability.
As part of our acquisition due diligence, we are undertaking
further assessment of home improvements that can enhance the
quality of service and environmental sustainability of the homes.
Where appropriate we jointly commit with our tenants to ensure
appropriate works are undertaken within the first 12-18 months of
the home's operation under the lease.
The value-add opportunities we have identified are intended to
be accretive to both our tenants and us and reduced occupancy may
present abilities to accelerate these plans.
We have a programme of increased inspections planned, which will
be implemented when it is safe to do so, and we will work with our
tenants where we identify concerns.
Opportunity
We work very closely with our tenants to identify opportunities
to maintain and enhance the portfolio and where appropriate agree
to fund these improvements, in return for an increase in rent. The
benefit of operating a portfolio reduces our exposure to changes in
individual properties.
As also mentioned, reduced occupancy also presents opportunities
to undertake more disruptive maintenance and improvement works that
would otherwise be delayed or avoided.
7. Environmental regulation and impact of climate change
Probability Medium/Low
Impact Low
Tightening environmental regulations may increase the need for
investment or redevelopment of our portfolio and restrict our
tenants' ability to provide care and earn revenue.
Failure to consider the effects of climate change could
accelerate the obsolescence of our care homes (both physical and
low carbon transition risks) with corresponding implications to
value and long-term income generation.
Mitigation
Our leases require that our tenants maintain our buildings in
line with regulation requirements.
We are developing a sustainability strategy and plan, in
addition we are undertaking a review of our portfolio, analysing
their carbon footprint and their current and potential EPC ratings
to ensure our investment strategy supports carbon reduction and
improved EPC ratings across our portfolio and preparedness for
future legislation.
As part of our acquisition due diligence we also undertake an
environmental assessment of the homes to ensure they are currently
EPC compliant and we identify improvements that can be made to the
home and if appropriate commit to these with our tenants from the
outset.
In line with the Task Force on Climate-related Financial
Disclosures (TCFD) we are working towards understanding and if
required mitigating the longer-term physical effects and transition
risks of climate change on our portfolio.
The increase in our understanding of the portfolio's compliance
and improvement opportunities has resulted in an overall reduction
in the post-mitigated risk to the Group.
Opportunity
Corresponding to the implications of risks on downward
valuations, there is an opportunity for us to invest in our homes
to ensure they remain fit for purpose with the potential for this
investment to be value-enhancing.
FINANCING
8. Ability to meet our debt financing obligations
Probability Medium
Impact Moderate
If we are unable to operate within our debt covenants, this
could lead to a default and our debt funding being recalled.
Interest on our variable rate debt facilities is payable based
on a margin over LIBOR and bank base rates. Any adverse movements
in these rates could significantly impair our profitability and
ability to pay dividends to shareholders.
COVID-19 has resulted in reduced occupancy across the sector
including within our homes. The initial strong rent cover within
our tenant groups has resulted in all of our tenants maintaining
their rental payments and stable valuations of our portfolio;
however, the risk remains of an enduring pandemic environment that
has further impact on occupancy.
Mitigation
We continually monitor our debt covenant compliance, to ensure
we have sufficient headroom and to give us early warning of any
issues that may arise. Our LTV is low (limited to 35% on a
Group-wide basis) and we selectively enter into interest rate caps
to mitigate the risk of interest rate rises on term debt.
Furthermore, we invest in homes with long WAULTs, reducing the
volatility in our property values.
Assets are held outside of the security groups currently secured
by the existing debt and can be transferred into the security pool
if LTV breaches are anticipated.
Opportunity
Our investment policy limits our gearing and exposure to
movements in interest rates. This improves our opportunity to
secure financing at attractive rates while remaining resilient to
interest rate rises, which may in turn present additional
investment opportunities.
CORPORATE RISK
9. Reliance on the Investment Manager
Probability Low
Impact Major
As an externally managed company, we rely on the Investment
Manager's services and reputation to execute our strategy and
support our day-to-day relationships.
As a result, our performance will depend to some extent on the
Investment Manager's ability, the retention of its key staff and
its ability to deliver business continuity.
There is an ongoing risk of potential conflicts with the
Investment Manager and its initial tenant for the Seed
Portfolio.
Mitigation
We have an Investment Management Agreement with the Investment
Manager, which sets out the basis on which the Investment Manager
provides services to us, the restrictions it must operate within
and certain additional rights we have, such as a right of
pre-emption for investment opportunities. The Agreement may be
terminated by 12 months' notice, except in certain circumstances
such as a material breach, when it can be terminated
immediately.
The Management Engagement Committee's role and responsibilities
include reviewing the Investment Manager's performance. The board
as a whole remains actively engaged with the Investment Manager to
ensure a positive and collaborative working relationship.
The board has put in a number of controls and procedures to
mitigate the risk of conflicts.
Opportunity
The Company has secured an experienced team that is delivering
on the investment objectives for our shareholders.
OTHER RISKS THAT WE MONITOR CLOSELY
Adverse change in investment opportunities**
A change in the market conditions and availability of
investments to generate acceptable returns
Taxation risk**
We are a UK REIT and have a tax-efficient corporate structure.
Any change to our tax status or in UK tax legislation could affect
our ability to achieve our investment objectives and our ability to
provide favourable returns to shareholders.
Cyber security
Inappropriate access to customer or Company data may lead to
loss of sensitive information and result in a material adverse
effect on the Company's financial condition, reputation and
investor confidence.
Conflicts of interest
Risk that a transaction with a related party may not be at arm's
length. We maintain independence of the board and management to
scrutinise any conflicts and a conflicts of interest policy is in
place to help manage potential conflicts.
Financial management
Budgets and plans may be inaccurate, based on unrealistic
assumptions or inappropriately applied leading to adverse material
financial conditions, performance, results and investor
concerns.
Development activity
Development contracts have inherent risks in relation to cost
and quality management that can result in cost overruns and delays.
2020 presented a challenge to developments due to slowing in
construction activity in the wake of the COVID-19 outbreak; we
continue to monitor this risk as the situation evolves.
The Company has a robust risk management framework in place to
monitor and control the above risks.
**These risks have been removed from the post-mitigation
principal risks table as the board is satisfied that the
mitigations in place support a lower risk assessment; however, this
will remain under periodic review.
GOING CONCERN AND VIABILITY
Going Concern Statement
At 22 March 2021, the Group had cash of GBP23.1 million and a
further GBP28.6 million in headroom on the Group's committed debt
facilities. GBP19.5 million of this cash is held in the parent
company current and deposit accounts. The Group continued to
collect 100% of rent due up to the date of signing of this annual
report.
At 22 March 2021, GBP8.9 million is committed to asset
management and forward-funded development, and a further GBP5.0
million to financial performance-based deferred payments, all of
which are expected to deliver incremental rental returns. The Group
is continuing to explore further acquisitions and asset management
opportunities, on a selective basis ensuring that the Group has
adequate liquidity to fund its future commitments
The COVID-19 pandemic remains a risk. At a tenant level; a fall
in occupancy, reduced availability of staff, and increased
operational costs, could result in a tenant default. As part of our
going concern assessment, we have modelled downside scenarios
including single and multiple tenant defaults or rent payment
holidays for periods of up to 12 months. Analysis of the impact of
tenants not paying rent on banking covenants indicates potential
breaches of interest cover covenants. We have an ongoing and
transparent relationship with our debt providers and expect to have
constructive and collaborative engagement in the event of a default
with supportive conditional waivers, however, we have also
considered the scenario where banks do not provide these waivers.
Mitigating actions which could be taken at the Group's discretion
include use of central funds to reduce debt, in particular charging
pools, to avoid covenant breaches and reduction or suspension of
dividends.
The Group and the Company have adequate cash resources to
continue to operate in all of these scenarios.
The directors believe that there are currently no material
uncertainties in relation to the Company's and Group's ability to
continue for a period of at least 12 months from the date of
approval of the Company and Group financial statements. The board
is, therefore, of the opinion that the going concern basis adopted
in the preparation of the annual report is appropriate.
Assessment of viability
The period over which the directors consider it feasible and
appropriate to report on the Group's viability is the five-year
period to 31 March 2026. This period has been selected because it
is the period that is used for the Group's medium-term business
plans.
The principal risks table summarises those matters that could
prevent the Group from delivering on its strategy and is derived
from our robust assessment of the principal risks to our business
model, future performance, liquidity and solvency, as described in
the Audit, risk and internal controls section on pages 61-64. A
number of these principal risks, because of their nature or
potential impact, could also threaten the Group's ability to
continue in business in its current form if they were to occur.
The assumptions underpinning these cash flow forecasts and
covenant compliance forecasts have been tested to explore the
resilience of the Group to the current COVID-19 pandemic and the
potential impact of the Group's other significant risks, or a
combination of those risks.
Considerations applied to Going concern and viability
COVID-19 pandemic and associated risks
The effects of the COVID-19 pandemic as outlined in the going
concern statement above, have been applied to our assessment of
viability.
Other significant risks
A tenant with reduced occupancy and rising operational and
finance costs is at greater risk of defaulting, and remains a risk
in the current operating environment. This is considered fully in
the section above.
All of the sensitivity scenarios modelled include no further
acquisitions and asset management opportunities beyond those
already committed and do not rely on further deployment of capital
to support the underlying costs of the business. In all scenarios
modelled it has been assumed that there are no significant changes
to regulatory policies or levels of funding by local
authorities.
The remaining principal risks, while having an impact on the
Group's business model, are not considered by the directors to have
a reasonable likelihood of impacting the Group's viability over the
next five years to 31 March 2026.
Sensitivities and mitigating actions
The sensitivities performed were designed to be severe but
plausible, and to take full account of the availability of
mitigating actions that could be taken to avoid, or reduce, the
impact or occurrence of the underlying risks. Mitigating actions
that could be taken at the Group's discretion include use of
central funds to reduce debt, in particular charging pools, to
avoid covenant breaches and the reduction or suspension of dividend
payments.
Stress tests
We have considered the fall in property values that could be
sustained without an impact on banking covenants including
acquisitions that have exchanged but not completed, the Group is
expecting to have drawn debt of GBP96 million and assets with a
value of c.GBP418 million. Values could fall by 35% from this
valuation before loan to value covenant breaches would arise. As
part of this, the Group can utilise its unsecured assets and
undrawn debt facilities to manage the leverage and level of drawn
debt within each security pool. Each security pool is individual
and there is no cross-collateralization between them.
We have further considered the effect of a reduction in rent on
interest cover covenants. The Group could sustain a fall of over
50% and remain compliant with its interest cover covenants.
Extreme scenario
We have also considered an extreme scenario where trading
performance of our tenants has been significantly reduced and the
banks exercise their security rights over the relevant properties.
In this remote scenario, the remaining assets within the Group
would be reduced by an estimated 50%, but would be more than
sufficient to cover any costs and liabilities of the business and
would allow the directors to consider whether to continue in a
reduced form or begin an orderly winding up.
Availability of finance
The Group does not have a refinancing event occurring until
April 2023. However, financing is arranged in advance of expected
requirements and the directors have reasonable confidence that
additional replacement debt facilities will be put in place.
Furthermore, the Group has the ability to make disposals of
investment properties to meet its future financing
requirements.
Viability statement
Having considered the forecast cash flows and the impact of the
sensitivities in combination, the directors confirm that they have
a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
five-year period ending 31 March 2026.
SECTION 172(1) STATEMENT
The directors have had regard for the matters set out in section
172(1)(a)-(f) of the Companies Act 2006 when performing their duty
under section 172. They consider that they have acted in good faith
in the way that would be most likely to promote the success of the
Company for the benefit of its members as a whole, while also
considering the broad range of stakeholders who interact with and
are impacted by our business, especially with regard to major
decisions.
Taking account of our stakeholder views
Information on our stakeholder engagement, including how the
board keeps itself informed about stakeholder views and how we take
their views into account in decision making, can be found on pages
25-27, pages 30-31 and page 52 of the Company's Annual Report
2020.
Key board decisions
The board's principal decisions each year typically include
approving acquisitions, capital expenditure and capital raises
(equity and debt), and paying dividends.
In addition, during 2020 the board was required to make a number
of key decisions in relation to the COVID-19 pandemic. These
included decisions to:
-- delay the announcement of the 2019 full year results for two
weeks, to enable the risks presented by the pandemic to be
reflected in the viability and going concern statement and reassure
the board, the auditor and our stakeholders about the Group's
resilience under all scenarios;
-- approve the purchase of thermal scanners for all of the
Group's care homes, benefiting tenants and their residents, while
also protecting the interests of shareholders and lenders by
supporting new admissions to the homes;
-- cease further acquisitions between March and September 2020,
until the uncertainty created by the pandemic had receded
sufficiently, thus enabling the Group and its tenants to focus on
the interests of residents during this period;
-- continue paying dividends to shareholders, reflecting the
resilience of the business and its tenants; and
-- restart acquisitions on a very selective basis, once the
first wave of the pandemic had passed, supporting growth for
shareholders and for tenants.
Set out below are the matters the board is required to take into
account under s172(1):
Matter Response
======================= ===========================================================
a) The likely The nature of the Group's business means that the
consequence of directors must consider the long-term impact of
any decision in their decisions, given that the Group expects its
the long term. relationships with tenants to last for a minimum
of 20 years. For example, the board's long-term
focus was reflected in 2020 in its decision to temporarily
halt asset acquisitions. This resulted from the
uncertainty surrounding the pandemic's impact on
the business plans underpinning potential purchases,
and the need to focus on supporting tenants with
their plans to protect residents. While this affected
portfolio growth in the short term, the decision
reduced the risk to the Group's long-term returns.
======================= ===========================================================
b) The interests As an externally managed property investment company,
of the Company's we do not have any employees, so this matter is
employees. not applicable.
======================= ===========================================================
c) The need to The Group's customers are its tenants. Developing
foster the Company's long-term relationships with tenants is central
business relationships to our business model. The Group's work with its
with suppliers, tenants during 2020 in relation to the pandemic
customers and has further strengthened its overall tenant relationships
others. and demonstrated the importance of partnership working
and careful tenant selection.
Our primary suppliers are our service providers,
principally the Investment Manager and Administrator.
The board engages regularly with both the Investment
Manager and the Administrator, including at its
regular board meetings. Through the Management Engagement
Committee, the board also formally reviews the work
of all the key service providers. The Committee
once again completed a thorough review process during
2020 and further information on this can be found
in the Management Engagement Committee report.
======================= ===========================================================
d) The impact As our tenants operate our care homes, they have
of the Company's responsibility for relationships with communities
operations on surrounding the homes and for the environmental
the community impact of operating them. However, we work closely
and environment. with our tenants to identify ways to improve the
sustainability performance of our assets, as described
on pages 25-29. During 2020, the board approved
the Group's ESG policy, including its social and
environmental commitments.
======================= ===========================================================
e) The desirability The directors are aware that potential tenants will
of the Company only sign leases of 20 years or more with landlords
maintaining a they can trust and want to work in partnership with
reputation for over the long term. The Group therefore relies on
high standards a reputation for high standards of business conduct
of business conduct. and this is reflected in one of our core values,
which is to always act openly and transparently
with all of our stakeholders, as well as our ESG
policy. We monitor our tenants' CQC ratings and
engage and support our tenants where improvements
are identified to ensure high standards of business
conduct are preserved.
The Group's actions to support tenants and their
residents during the pandemic have helped to protect
its reputation as a responsible landlord. In addition,
during 2020 the board approved an anti-bribery and
corruption policy and a supplier code of conduct,
to promote an ethical approach to business at all
times.
======================= ===========================================================
f) The need to Our largest shareholder, Quilter Investors, is represented
act fairly between on the board by Paul Craig. Paul brings an institutional
members of the investor's viewpoint to board discussions, which
Company. helps the board to make effective decisions, and
Quilter's interests are aligned with those of other
shareholders. The large majority of the directors
are independent and the board committees only comprise
the independent directors. This ensures that all
decisions taken reflect the interests of shareholders
as a whole.
Board approval of the Strategic report
The Strategic report was approved on behalf of the board by
Rupert Barclay Chairman
26 March 2021
STATEMENTS OF RESPONSIBILITIES
Directors' statement of responsibilities
The directors are responsible for preparing the annual report
and the Group and parent company financial statements in accordance
with applicable law and regulations. Company law requires the
directors to prepare the Group and Company financial statements for
each financial year. The Group financial statements have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and
prepared in accordance with International Financial Reporting
Standards ("IFRS") adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union. The Company financial
statements have been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law, the directors
must not approve the financial statements unless they are satisfied
they give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss for the Group and Company for
that year.
In preparing the financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable and
prudent;
-- for the Group financial statements, state whether they have
been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and
prepared in accordance with IFRS adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union, subject to
any material departures disclosed and explained in the Group
financial statements;
-- for the Company financial statements, state whether they have
been prepared in accordance with Financial Reporting Standard 102
("FRS 102"), subject to any material departures disclosed and
explained in the Company financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that its financial statements comply with the
Companies Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a directors' report, a strategic report,
a directors' remuneration report and a corporate governance
statement that comply with that law and those regulations. These
can be found on pages 75-77, 1-45, 71-74 and 46-70, respectively,
of the Company's Annual Report 2020.
Website publication
The directors are responsible for ensuring the annual report,
including the financial statements, is made available on a website.
Financial statements are published on the Company's website in
accordance with legislation in the United Kingdom governing the
preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and
integrity of the Company's website (at http://www.impactreit.uk) is
the responsibility of the directors. The directors' responsibility
also extends to the ongoing integrity of the financial statements
contained therein.
Directors' responsibility statement, pursuant to DTR4
We confirm that to the best of our knowledge:
-- the financial statements have been prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and prepared in accordance
with IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union and Article 4 of the IAS Regulation
and give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the undertakings
included in the consolidation as a whole; and
-- the Management Report includes a fair review of the
development and performance of the business and the financial
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
Signed on behalf of the board by:
Rupert Barclay Chairman
26 March 2021
Consolidated statement of comprehensive income
For the year ended 31 December 2020
31 December 31 December
2020 2019
Total Total
Notes GBP'000 GBP'000
---------------------------------- ------ ------------ ------------
Gross rental income 5 30,818 23,980
Insurance/service charge
income 5 374 252
Insurance/service charge
expense 5 (376) (254)
Net rental income 30,816 23,978
Administrative and other
expenses 6 (5,264) (4,589)
Profit on disposal of investment
properties 12 153 -
---------------------------------- ------ ------------ ------------
Operating profit before
changes in fair value of
investment properties 25,705 19,389
Changes in fair value of
investment properties 12 5,585 9,070
---------------------------------- ------ ------------ ------------
Operating profit 31,290 28,459
Finance income 49 110
Finance expense 8 (2,556) (2,237)
---------------------------------- ------ ------------ ------------
Profit before tax 28,783 26,332
Tax charge on profit for
the year 9 - -
---------------------------------- ------ ------------ ------------
Profit and total comprehensive
income (attributable to
shareholders) 28,783 26,332
Earnings per share - basic
and diluted (pence) 10 9.02p 10.37p
The results are derived from continuing operations during the
year, the Group had no other comprehensive income in the current or
prior year.
The accompanying notes to the Consolidated statement of
comprehensive income can be found below.
Consolidated statement of financial position
As at 31 December 2020
31 December 31 December
2020 2019
Notes GBP'000 GBP'000
----------------------------- ------ -------------- --------------
Non-current assets
Investment property 12 405,657 310,542
17,
Interest rate derivatives 24 7 94
Trade and other receivables 13 15,915 10,017
----------------------------- ------ -------------- --------------
Total non-current
assets 421,579 320,653
Current assets
Trade and other receivables 13 89 554
Cash and cash equivalents 14 7,979 47,790
Total current assets 8,068 48,344
Total assets 429,647 368,997
----------------------------- ------ -------------- --------------
Current liabilities
Trade and other payables 15 (3,129) (3,086)
Total current liabilities (3,129) (3,086)
Non-current liabilities
16,
Bank borrowings 24 (74,213) (23,461)
Trade and other payables 15 (2,784) (1,768)
----------------------------- ------ -------------- --------------
Total non-current
liabilities (76,997) (25,229)
Total liabilities (80,126) (28,315)
----------------------------- ------ -------------- --------------
Total net assets 349,521 340,682
----------------------------- ------ -------------- --------------
Equity
Share capital 20 3,189 3,189
Share premium reserve 20 271,362 271,341
Capital reduction
reserve 20 24,077 24,077
Retained earnings 50,893 42,075
----------------------------- ------ -------------- --------------
Total equity 349,521 340,682
----------------------------- ------ -------------- --------------
Net Asset Value per
ordinary share (pence) 22 109.58p 106.81p
The accompanying notes to the Consolidated statement of
financial position can be found below.
The consolidated financial statements for Impact Healthcare REIT
plc (registered number: 10464966) were approved and authorised for
issue by the board of directors on 26 March 2021 and are signed on
its behalf by:
Rupert Barclay Chairman
Consolidated statement of cash flows
For the year ended 31 December 2020
31 December 31 December
2020 2019
Notes GBP'000 GBP'000
----------------------------------- ------ ------------ ------------
Cash flows from operating
activities
Profit for the year (attributable
to equity shareholders) 28,783 26,332
Finance income (49) (110)
Finance expense 8 2,556 2,237
Profit on disposal of investment
properties 12 (153) -
Changes in fair value of
investment properties 12 (5,585) (9,070)
----------------------------------- ------ ------------ ------------
Net cash flow before working
capital changes 25,552 19,389
Working capital changes
Increase in trade and other
receivables 13 (5,433) (4,736)
Increase in trade and other
payables 15 904 288
----------------------------------- ------ ------------ ------------
Net cash flow generated
from operating activities 21,023 14,941
----------------------------------- ------ ------------ ------------
Investing activities
Purchase of investment properties 12 (85,978) (69,969)
Proceeds on sale of investment
property 12 886 -
Acquisition costs capitalised (2,533) (3,447)
Capital improvements (1,723) (8,226)
Interest received 49 110
----------------------------------- ------ ------------ ------------
Net cash flow used in investing
activities (89,299) (81,532)
----------------------------------- ------ ------------ ------------
Financing activities
Proceeds from issue of ordinary
share capital 20 - 135,000
Issue costs of ordinary
share capital 20 21 (2,844)
16,
Bank borrowings drawn 24 51,243 35,971
16,
Bank borrowings repaid 24 - (36,844)
16,
Loan arrangement fees paid 24 (1,156) (791)
Loan commitment fees paid (417) (395)
Interest paid on bank borrowings (1,261) (1,043)
Dividends paid to equity
holders 11 (19,965) (16,143)
----------------------------------- ------ ------------ ------------
Net cash flow generated
from financing activities 28,465 112,911
----------------------------------- ------ ------------ ------------
Net (decrease)/increase
in cash and cash equivalents
for the year (39,811) 46,320
Cash and cash equivalents
at the start of the year 47,790 1,470
----------------------------------- ------ ------------ ------------
Cash and cash equivalents
at the end of the year 7,979 47,790
----------------------------------- ------ ------------ ------------
The accompanying notes to the Consolidated statement of cash
flows can be found below.
Consolidated statement of changes in equity
For the year ended 31 December 2020
Capital
Share Share reduction Retained
Notes capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ --------- --------- ----------- ---------- ---------
1 January 2020 3,189 271,341 24,077 42,075 340,682
--------------------- ------ --------- --------- ----------- ---------- ---------
Total comprehensive
income - - - 28,783 28,783
--------------------- ------ --------- --------- ----------- ---------- ---------
Transactions
with owners
Dividends paid 11 - - - (19,965) (19,965)
Share issue
costs 20 - 21 - - 21
31 December
2020 3,189 271,362 24,077 50,893 349,521
--------------------- ------ --------- --------- ----------- ---------- ---------
For the year ended 31 December 2019
Capital
Share Share reduction Retained
Notes capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ --------- --------- ----------- ---------- ---------
1 January 2019 1,922 140,452 35,800 20,163 198,337
--------------------- ------ --------- --------- ----------- ---------- ---------
Total comprehensive
income - - - 26,332 26,332
--------------------- ------ --------- --------- ----------- ---------- ---------
Transactions
with owners
Dividends paid 11 - - (11,723) (4,420) (16,143)
Shares issued 20 1,267 133,733 - - 135,000
Share issue
costs 20 - (2,844) - - (2,844)
--------------------- ------ --------- --------- ----------- ---------- ---------
31 December
2019 3,189 271,341 24,077 42,075 340,682
--------------------- ------ --------- --------- ----------- ---------- ---------
The accompanying notes to the Consolidated statement of changes
in equity can be found below.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
1. Basis of preparation
General information
The consolidated financial statements for the year ended 31
December 2020 are prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and prepared in accordance with International
Financial Reporting Standards ("IFRS") adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European
Union.
The financial information does not constitute the Group and
Parent Company's statutory accounts for the year ended 31 December
2020 or the year ended 31 December 2019 but is derived from those
accounts. The Group and Parent Company's statutory accounts for the
year ended 31 December 2019 have been delivered to the Registrar of
Companies. The Group and Parent Company's statutory accounts for
the year ended 31 December 2020 will be delivered to the Registrar
of Companies in due course. The Auditor has reported on both the
December 2020 and December 2019 accounts; the reports were
unqualified, did not include a reference to any matters to which
the Auditor drew attention by way of emphasis without qualifying
their report and did not contain any statement under Section 498 of
the Companies Act 2006.
The principal accounting policies adopted in the preparation of
this financial information are set out below. The policies have
been consistently applied to both years.
The consolidated financial statements have been prepared on a
historical cost basis, except for investment properties and the
interest rate derivative which have been measured at fair
value.
The Group has chosen to adopt EPRA best practices
recommendations guidelines for calculating key metrics such as
earnings per share.
The Company is a public listed company incorporated and
domiciled in England and Wales. The Company's ordinary shares are
listed on the Premium Listing Segment of the Official List and
trade on the premium segment of the main market of the London Stock
Exchange. The registered address of the Company is disclosed in the
corporate information .
Convention
The consolidated financial statements are presented in Sterling,
which is also the Group's functional currency, and all values are
rounded to the nearest thousand (GBP'000), except when otherwise
indicated.
Going concern
The Strategic report describes the Group's financial position,
cash flows and liquidity position. The principal risks are set out
on pages 34-39 and note 18 to the financial statements also provide
details of the Group's financial instruments and its exposure to
liquidity and credit risk.
The effect of the COVID-19 pandemic has been considered by the
directors. The directors have reviewed the forecasts for the Group
taking into account the impact of COVID-19 on trading over the 12
months from the date of signing this annual report. The forecasts
have been assessed against a range of possible downside outcomes
incorporating significantly lower levels of income in line with the
possible ongoing effects of the pandemic, see Going concern and
viability on pages 42-43 for further detail.
The directors believe that there are currently no material
uncertainties in relation to the Group's ability to continue for a
period of at least 12 months from the date of approval of the
Group's financial statements. The board is, therefore, of the
opinion that the going concern basis adopted in the preparation of
the annual report is appropriate.
2. Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements
and disclosures. However, uncertainty about these assumptions and
estimates could result in outcomes that could require material
adjustment to the carrying amount of the assets or liabilities in
future periods.
Information about significant areas of estimation, uncertainty
and critical judgements in applying accounting policies that have
the most significant effect on the amount recognised in the
financial statements are disclosed below:
2.1 Judgements
Operating lease contracts - the Group as lessor
The Group has acquired investment properties that are subject to
commercial property leases with tenants. The Group has determined,
based on an evaluation of the terms and conditions of the
arrangements, particularly the duration of the lease terms and
minimum lease payments, that it retains all the significant risks
and rewards of ownership of these properties and so accounts for
the leases as operating leases.
The leases when signed, are for between 20 and 25 years with a
tenant-only option to extend for one or two periods of ten years.
At the inception of the lease, management do not judge any
extension of the leases to be reasonably certain and, as such, do
not factor any lease extensions into their considerations of lease
incentives and their treatment.
2.2 Estimates
Fair valuation of investment property
The valuations have been prepared in accordance with the RICS
Valuation - current edition of the global and UK standards as at
the valuation date, or the RICS "Red Book" as it has become widely
known.
The basis of value adopted is that of fair value being "the
price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date" in accordance with IFRS 13. The concept of
fair value is considered to be consistent with that of market
value.
The significant methods and assumptions used by the valuers in
estimating the fair value of the investment properties are set out
in note 12.
Gains or losses arising from changes in the fair values are
included in the Consolidated statement of comprehensive income in
the period in which they arise. In order to avoid double counting,
the assessed fair value may be increased or reduced by the carrying
amount of any accrued income resulting from the spreading of lease
incentives and/or guaranteed minimum rent uplifts at the inception
of the lease.
The nature of uncertainty regarding the estimation of fair value
as well as sensitivity analysis has been considered as set out in
note 12.
3. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and all of its subsidiaries drawn up to
31 December 2020. Subsidiaries are those entities, including
special purpose entities, controlled by the Company. Control exists
when the Company is exposed, or has rights, to variable returns
from its investment with the investee and has the ability to affect
those returns through its power over the investee. In assessing
control, potential voting rights that presently are exercisable are
taken into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date that control ceases.
Segmental information
The board is of the opinion that the Group is engaged in a
single segment business, being the investment in the United Kingdom
in healthcare assets. The board consider that these properties have
similar economic characteristics and as a result these individual
properties have been aggregated into a single reportable operating
element. Reporting on customers with greater than 10% of revenue is
included in note 5.
Rental income
Rental income arising on investment properties is included in
gross rental income in the Consolidated statement of comprehensive
income and is accounted for on a straight-line basis over the lease
term. The change in the RPI is reviewed annually, with the minimum
uplifts being taken into consideration when accounting for the
rental income on a straight-line basis upon inception of the lease.
The resulting asset or liability is reflecting as a receivable or
payable in the Consolidated statement of financial position.
When a contract includes both lease and non-lease components,
the Group applies IFRS 15 to allocate the
consideration under the contract to each component.
The valuation of investment properties is increased or reduced
by the total of the unamortised lease incentive and straight-line
receivable or payable balances. Any remaining balances in respect
of properties disposed of are included in the calculation of the
profit or loss arising at disposal.
The initial lease rental payments and guaranteed rental uplifts
are spread evenly over the lease term, even if payments are not
made on such a basis. The lease term is the non-cancellable period
of the lease together with any further term for which the tenant
has the option to continue the lease, except for where, at the
inception of the lease, the directors have no certainty that the
tenant will exercise that option.
Increased rental payments arising from the variation of the
lease on capital improvement licences are spread evenly over the
remaining lease term from the date of signing the licence
agreement.
At each rent review, the uplift in rent is calculated in
accordance with the terms of the lease. If greater than the minimum
uplift then the uplift above and beyond the minimum recognised is
calculated and recognised in the period in which it arises, with
there being no rebasing of the amounts to recognise over the
remaining lease.
Service charges, insurance and other expenses recoverable from
tenants
Income arising from expenses recharged to tenants is recognised
in the year which the compensation becomes receivable. Service,
insurance and other similar charges which are recoverable are
included in gross rental income as the directors consider that the
Group acts as principal in this respect.
Finance expense
Finance expenses consist principally of interest payable,
amortisation of loan arrangement fees and fair value movements on
interest rate derivatives.
Loan arrangement fees are expensed over the term of the relevant
loan. Interest payable and other finance costs which the Group
incurs on bank facilities, are expensed in the period to which they
relate.
Taxation
The Group is a REIT in relation to its property investments and
is therefore exempt from tax, subject to the Group maintaining its
REIT status.
Current tax is the expected tax payable on any non-REIT taxable
income for the year, using tax rates enacted or substantively
enacted at the balance sheet date.
Investment properties
Investment properties consist of land and buildings (principally
care homes) which are held to earn rental income and for capital
growth potential.
Investment properties are initially recognised at cost, being
the fair value of consideration given, including transaction costs
associated with the investment property. Investment properties are
recognised when the risk and rewards on the acquired properties
passes to the Group on completion of the purchase. Any subsequent
capital expenditure incurred in improving investment properties is
capitalised in the period incurred and included within the book
cost of the property.
After initial recognition, investment properties are measured at
fair value, with gains and losses recognised in the Consolidated
statement of comprehensive income in the period which they arise.
Fair value measurement takes into consideration the improvements to
the investment property during the year taking into account the
future cash flows from increases in rent that have been contracted
in relation to the improvement and discounting them at an
appropriate rate to reflect the percentage of completion of the
works being undertaken and the risk to completion that remains.
Gains and losses on disposals of investment properties are
determined as the difference between net disposal proceeds and the
carrying value of the asset. These are recognised in the
Consolidated statement of comprehensive income in the period in
which they arise.
Business combinations
The Group acquires subsidiaries that own property and other
property interests. At the time of acquisition, the Group considers
whether each acquisition represents the acquisition of a business
or the acquisition of an asset. The Group accounts for an
acquisition as a business combination where an integrated set of
activities is acquired in addition to the property that are capable
of being conducted and managed for the purpose of providing a
return in the form of dividends, lower costs or other economic
benefits directly to investors or other owners, members or
participants. Where such acquisitions are not judged to be the
acquisition of a business, they are not treated as business
combinations. Rather, the cost to acquire the corporate entity is
allocated between the identifiable assets and liabilities of the
entity based upon their relative fair values at the acquisition
date. Accordingly, no goodwill or deferred tax arises. The fair
value of assets and liabilities are established using
industry-leading third-party professionals, instructed by the
Company.
During the year ended 31 December 2019, the Group completed the
acquisition of a number of assets and SPV's. The assets held by the
SPV's have been incorporated into the existing subsidiaries of the
Group without maintaining any of the underlying activities of the
purchased SPV. The directors have reviewed the terms of the
acquisition and determined that a business, as defined by IFRS 3,
was not acquired. In the context of the acquisitions during the
year, the principal consideration was whether an integrated set of
activities were acquired. As part of the acquisition, new
agreements were entered into between the Group and the operators of
the assets, with the management of the assets going forward being
independent of the SPV's purchased and their previous activities.
No significant functions were acquired as part of the purchases
and, as such the acquisitions are not determined by directors to be
business combinations under IFRS 3.
For acquisitions occurring from 1 January 2020 onwards we have
considered the IFRS 3 amendments to the definition of a business to
determine if a business combination has occurred. A business is
defined as an integrated set of activities and assets that is
capable of being conducted and managed for the purpose of providing
outputs to customers, generating investment income (such as
dividends or interest) or generating other income from ordinary
activities. For the purpose of identifying what constitutes a
business combination, the director's apply the concentration test
as detailed within IFRS 3. All acquisitions in the current year
were concluded as asset acquisitions as none included acquisition
of an integrated set of activities that combine an input and a
substantive process to produce outputs.
Trade and other receivables
Trade receivables comprise mainly lease income receivable.
Trade and other receivables are initially recognised at fair
value plus transaction costs and subsequently measured at amortised
cost less impairment.
The Group applies the amortised cost basis as trade and other
receivables are normally held with an objective to collect
contractual cash flows, i.e. "held to collect"; which comprises
payment of principal and interest on the principal amount
outstanding.
The Group applies the IFRS 9 simplified approach to measuring
the expected credit losses ("ECLs") for trade receivables whereby
the allowance or provision for all trade receivables are based on
the lifetime ECLs.
The Group applies the general approach for initial recognition
and subsequent measurement of ECL provisions for the loan
receivable and other receivables which have maturities of 12 months
or more and have a significant finance component.
This approach comprises of a three-stage approach to evaluating
ECLs. These stages are classified as follows:
Stage one
Twelve-month ECLs are recognised in profit or loss at initial
recognition and a loss allowance is established. For financial
instruments that have not deteriorated significantly in credit
quality since initial recognition or that have low credit risk at
the reporting date, the loss allowance for 12-month ECLs is
maintained and updated for changes in amount. Interest revenue is
calculated on the gross carrying amount of the asset (i.e. without
reduction for ECLs).
Stage two
If the credit risk increases significantly and the resulting
credit quality is not considered to be low credit risk, full
lifetime ECLs are recognised and includes those financial
instruments that do not have objective evidence of a credit loss
event. Interest revenue is still calculated on the gross carrying
amount of the asset.
Stage three
If the credit risk of a financial asset increases to the point
that it is considered credit impaired (there is objective evidence
of impairment at the reporting date), lifetime ECLs continue to be
recognised. For financial assets in this stage, lifetime ECLs will
generally be individually assessed. Interest revenue is calculated
on the amortised cost net carrying amount (amortised cost less
impairment).
The key estimation techniques including key inputs and
assumptions regarding the Group's ECL provision for trade and other
receivables are included as part of the Group's assessment of
credit risk as set out in note 18.
Rent smoothing adjustments are not considered to be financial
assets as the amounts are not yet contractually due. As such, the
requirements of IFRS 9 (including the expected credit loss method)
are not applied to those balances, although the credit risk is
considered in the determination of the fair value of the related
property.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and deposits with
maturities of three months, or less, held at call with banks.
Dividends
Dividends are recognised when they become legally payable.
Share capital
The share capital relates to amounts subscribed for share
capital at its par value.
Share premium
The surplus of net proceeds received from the issuance of new
shares over their par value is credited to this account and the
related issue costs are deducted from this account. The reserve is
non-distributable.
Capital reduction reserve
On 12 April 2017, an application to the High Court was
successfully made for the reduction of GBP0.30 per share of the
share premium account plus GBP3,000,000 which allowed the transfer
of GBP46,851,708 to the capital reduction reserve (refer to note
20). This is a distributable reserve.
Trade payables
Trade payables are initially recognised at their fair value and
are subsequently measured at amortised cost.
Borrowings
All bank borrowings are initially recognised at fair value net
of attributable transaction costs. After initial recognition, all
bank borrowings are measured at amortised cost, using the effective
interest method. The effective interest rate is calculated to
include all associated transaction costs.
Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. The fee is
capitalised as a prepayment for liquidity services and amortised
over the period of the facility to which it relates within finance
costs in the Consolidated statement of comprehensive income.
Interest rate derivatives
Derivative financial instruments, comprising interest rate caps
for hedging purposes, are initially recognised at fair value and
are subsequently measured at fair value, being the estimated amount
that the Group would receive or pay to terminate the agreement at
the year-end date, taking into account current interest rate
expectations and the current credit rating of the Group and its
counterparties. Premiums payable under such arrangements are
initially capitalised into the Consolidated statement of financial
position.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs significant to the fair
value measurement as a whole. Changes in fair value of interest
rate derivatives are recognised within the Consolidated statement
of comprehensive income in the period in which they occur.
The Group does not apply hedge accounting in accordance with
IFRS 9.
4. New standards issued
4.1 New standards issued with effect from 1 January 2020
The following new accounting amendments have been applied in
preparing the Consolidated financial statements:
IAS 1 "Presentation of financial statements" and IAS 8
"Accounting policies, changes in accounting estimates and error" on
definition of material
These amendments to IAS 1, IAS 8 and consequential amendments to
other IFRSs:
- use a consistent definition of materiality throughout IFRSs
and the Conceptual Framework for Financial Reporting;
- clarify the explanation of the definition of material; and
- incorporate some of the guidance in IAS 1 about immateriality information.
IFRS 3 "Business Combinations"
On 22 October 2018, the IASB issued 'Definition of a Business
(Amendments to IFRS 3)' aimed at resolving the difficulties that
arise when an entity determines whether it has acquired a business
or a group of assets.
The amendments are effective for business combinations for which
the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after 1 January 2020. As a
result of this amendment business combinations is no longer
believed to be a significant judgment for the acquisitions made in
the year.
4.2 New standards issued but not yet effective
At the date of authorisation of these financial statements, the
Group has not applied the following new and revised IFRSs that have
been issued but are not yet effective:
- Amendments to IAS 1 - Classification of liabilities as current
or non-current
- Annual improvements to IFRS standards 2018-2020
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning on or
after 1 January 2021, but are not yet applicable to the Group and
have not been applied in preparing these consolidated financial
statements. None of these are expected to have a significant effect
on the consolidated financial statements of the Group.
5. Property income
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
--------------------------------------- ----------------- -----------------
Rental income cash received
in the year 25,936 19,113
Rent received in advance
of recognition(1) (1,016) 98
Rent recognised in advance
of receipt(2) 5,898 4,769
------------------------------------------ ----------------- -----------------
Gross rental income 30,818 23,980
------------------------------------------ ----------------- -----------------
Insurance/service charge
income 374 252
Insurance/service charge
expense (376) (254)
------------------------------------------ ----------------- -----------------
Net rental income 30,816 23,978
1 Rent premiums received in prior periods as well as any rent
premiums received during the year, deemed to be a premium over
the term of the leases.
2 Relates to both rent-free periods being recognised on a straight-line
basis over the term of the lease and rent recognised in the
period to reflect the minimum uplift in rents over the term
of the lease on a straight-line basis.
For accounting purposes, premiums received are reflected on a
straight-line basis over the term of the lease. In addition, the
Group benefits from a minimum annual rental uplift of 1% or 2% on
all care home leases. For accounting purposes these uplifts are
also incorporated to recognise income on a straight-line basis.
Insurance/service charge relates to property insurance that is
paid by the Group and recharged to tenants.
Minster Care Management Ltd and Croftwood Care UK Ltd are both
part of the Minster Care Group and represent more than 10% of the
gross rental income:
2020 2019
Minster Care Management Ltd 35.1% 43.3%
Croftwood Care UK Ltd 19.5% 25.4%
Others 45.4% 31.3%
----------------------------- ------ ------
6. Administrative and other expenses
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------------- ------------ ------------
Investment Manager fees (note 21) 3,548 2,756
Directors' remuneration (see note 7) 209 193
Auditor's fees
- Statutory audit of the Company and
Group (including subsidiaries) 174 166
- Additional fees payable to the auditor
in respect of the prior year audit 32 22
- Agreed upon procedures for the Company's
interim report 14 13
- Other advisory services - 15
-------------------------------------------- ------------ ------------
Total auditor's fees 220 216
Administration fees 450 345
Regulatory fees 42 38
Legal and professional 448 419
Other administrative costs 347 451
One-off costs(1) - 171
-------------------------------------------- ------------ ------------
5,264 4,589
-------------------------------------------- ------------ ------------
1 One-off costs relate to premium listing costs incurred during
the prior year.
The amounts shown above include irrecoverable VAT as
appropriate.
7. Directors' remuneration
The Group had no employees in the current or prior period. The
directors, who are key management personnel of the Company, are
appointed under letters of appointment for services. Directors'
remuneration, all of which represents their fees for services
provided during the year, are as follows:
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Rupert Barclay (Chairman) 46 46
Rosemary Boot 33 35
Philip Hall(1) 33 33
Paul Craig 33 33
Amanda Aldridge 38 31
------------------------------------------- ------------ ------------
Employer's National Insurance 20 15
Recruitment fees - non-executive director 6 -
------------------------------------------- ------------ ------------
209 193
------------------------------------------- ------------ ------------
1 An additional GBP3,399 in expenses was paid to Philip Hall
during the 2019 year.
Directors' remuneration payable at 31 December 2020 amounted to
GBP7,000 (2019: GBP8,000).
8. Finance expenses
Year ended Year ended
31 December 31 December
2020 2019
Note GBP'000 GBP'000
------------------------------------- ----- ------------ ------------
Interest payable on bank borrowings 1,362 1,043
Commitment fee payable on bank
borrowings 442 395
Amortisation of loan arrangement
fee 665 416
Changes in fair value of interest
rate derivatives 17 87 383
------------------------------------- ----- ------------ ------------
2,556 2,237
------------------------------------- ----- ------------ ------------
The total interest payable on financial liabilities carried at
amortised cost comprises interest payable on bank borrowings which
was GBP76.4 million at 31 December 2020 (2019: GBP25.1 million).
Amortisation on loan arrangement fees relates to capitalised fees
being amortised over the term of the facility, in the year ended 31
December 2020 GBP1,156,000 was capitalised (2019: GBP791,000).
9. Taxation
As a REIT, the Group is exempt from corporation tax on the
profits and gains from its property investment business, provided
it continues to meet certain conditions as per REIT regulations.
For the year ended 31 December 2020 and the year ended 31 December
2019, the Group did not have any non-qualifying profits except
interest income on bank deposits.
Tax charge in the Consolidated statement of comprehensive
income:
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------- ------------ ------------
UK corporation tax - -
------------------- ------------ ------------
Reconciliation of the corporation tax charge:
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
--------------------------------------- ------------ ------------
Profit before tax 28,783 26,332
Theoretical tax at UK corporation tax
rate (19%) 5,469 5,003
Effects of:
REIT exempt income (4,424) (3,352)
Non-taxable items (1,045) (1,651)
Total tax charge - -
--------------------------------------- ------------ ------------
Under the UK REIT rules within which the Group operates, capital
gains on the Group's UK properties are generally exempt from UK
corporation tax, provided they are not held for trading.
10. Earnings per share
Earnings per share (EPS) amounts are calculated by dividing
profit for the period attributable to Ordinary equity holders of
the Company by the time-weighted average number of ordinary shares
outstanding during the period. As there are no dilutive instruments
outstanding, basic and diluted earnings per share are
identical.
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------ ------------- -------------
Total comprehensive income (attributable
to shareholders) 28,783 26,332
Adjusted for:
- Revaluation movement (10,467) (13,937)
- Rental income arising from
recognising rental premiums and
future guaranteed rent uplifts 4,882 4,867
--------------------------------------------- ------------- -------------
Change in fair value of investment
properties (5,585) (9,070)
Profit on disposal of investment
property (153) -
Change in fair value of interest
rate derivative 87 383
--------------------------------------------- ------------- -------------
EPRA earnings 23,132 17,645
Adjusted for:
Rental income arising from recognising
rental premiums and future guaranteed
rent uplifts (4,882) (4,867)
Amortisation of loan arrangement
fees(2) 665 416
Non-recurring costs - 171
--------------------------------------------- ------------- -------------
Adjusted earnings 18,915 13,365
--------------------------------------------- ------------- -------------
Average number of ordinary shares 318,953,861 253,954,592
--------------------------------------------- ------------- -------------
Earnings per share (pence)(1) 9.02p 10.37p
EPRA basic and diluted earnings
per share (pence)(1) 7.25p 6.95p
Adjusted basic and diluted earnings
per share (pence)(1) 5.93p 5.26p
--------------------------------------------- ------------- -------------
The European Public Real Estate Association ("EPRA") publishes
guidelines for calculating adjusted earnings designed to represent
core operational activities.
The EPRA earnings are arrived at by adjusting for the changes in
fair value of on investment properties and interest rate
derivatives, and removal of profit or loss on disposal of
investment properties.
Adjusted earnings:
Adjusted earnings is used by the board to help assess the group
' s ability to deliver a cash covered dividend from recurring net
income. The metric reduces EPRA earnings by other non-cash items
credited or charged to the group statement of comprehensive income
including the effect of straight-lining of rental income from fixed
rental uplift adjustments and amortisation of loan arrangement
fees(2) . The metric also adjusts for any one-off costs that are
not expected to be recurring.
Fixed rental uplift adjustments relate to adjustments to net
rental income on leases with minimum uplifts embedded within their
review profiles. The total minimum income recognised over the lease
term is recognised on a straight-line basis and therefore not
supported by cash flows during the early term of the lease, but
this reverses towards the end of the lease.
No one-off costs were incurred in the current year. In the prior
year, non-recurring costs included listing fees from the transition
to the premium segment of the main market.
The board uses the adjusted earnings alongside the available
distributable reserves in its consideration and approval of
dividends.
1 There is no difference between basic and diluted earnings per
share.
2 The removal of amortisation of loan arrangement fees is a
change made in the current year and the prior year adjusted
earnings figure has been restated to include an adjustment for the
amortisation of loan arrangement fees.
11. Dividends
Year ended Year ended
Dividend 31 December 31 December
rate 2020 2019
(pence per
share) GBP'000 GBP'000
--------------------------------- ----------- ------------- -------------
Fourth interim dividend for
the period ended 31 December
2018 (ex-dividend - 7 February
2019) 1.5p - 2,883
First interim dividend for
the period ended 31 December
2019 (ex-dividend - 16 May
2019) 1.5425p - 4,420
Second interim dividend for
the period ended 31 December
2019 (ex-dividend - 8 August
2019) 1.5425p - 4,420
Third interim dividend for
the period ended 31 December
2019 (ex-dividend - 31 October
2019) 1.5425p - 4,420
Forth interim dividend for
the period ended 31 December
2019 (ex-dividend - 6 February
2020) 1.5425p 4,920 -
First interim dividend for
the period ended 31 December
2020 (ex-dividend - 21 May
2020) 1.5725p 5,015 -
Second interim dividend for
the period ended 31 December
2020 (ex-dividend - 20 August
2020) 1.5725p 5,015 -
Third interim dividend for
the period ended 31 December
2020 (ex-dividend - 5 November
2020) 1.5725p 5,015 -
--------------------------------- ----------- ------------- -------------
Total dividends paid 19,965 16,143
--------------------------------- ----------- ------------- -------------
Total dividends paid in respect
of the year 4.7175p 4.6275p
Total dividends unpaid but
declared in respect of the
year 1.5725p 1.5425p
--------------------------------- ----------- ------------- -------------
Total dividends declared in
respect of the year - per
share 6.29p 6.17p
--------------------------------- ----------- ------------- -------------
On 30 January 2020, the Company declared an interim dividend of
1.5425 pence per ordinary share for the period from 1 October 2019
to 31 December 2019 and was paid in February 2020.
On 7 May 2020, the Company declared an interim dividend of
1.5725 pence per ordinary share for the period from 1 January 2020
to 31 March 2020 and was paid in June 2020.
On 12 August 2020, the Company declared an interim dividend of
1.5725 pence per share for the period from 1 April 2020 to 30 June
2020 and was paid in September 2020.
On 28 October 2020, the Company declared an interim dividend of
1.5725 pence per share for the period from 1 July 2020 to 30
September 2020 and was paid in November 2020.
On 29 January 2021, the Company declared an interim dividend of
1.5725 pence per share for the period from 1 October 2020 to 31
December 2020 and was paid on 26 February 2021 .
12. Investment property
In accordance with the RICS "Red Book" the properties have been
independently valued on the basis of fair value by Cushman &
Wakefield, an accredited independent valuer with a recognised
professional qualification. They have recent and relevant
experience in the locations and categories of investment property
being valued and skills and understanding to undertake the
valuations competently. The properties have been valued on an
individual basis and their values aggregated rather than the
portfolio valued as a single entity. The valuers have used
recognised valuation techniques in accordance with those
recommended by the International Valuation Standards Committee and
are compliant with IFRS 13. Factors reflected include current
market conditions, annual rentals, lease lengths, property
condition including improvements affected during the year, rent
coverage, location and comparable evidence.
The valuations are the ultimate responsibility of the directors.
Accordingly, the critical assumptions used in establishing the
independent valuation are reviewed by the board.
All corporate acquisitions during the year have been treated as
asset purchases rather than business combinations because they are
considered to be acquisitions of properties rather than
businesses.
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Opening value 318,791 223,845
Property additions 85,978 69,969
Property disposals(1) (733) -
Acquisition costs capitalised 2,677 3,857
Capital improvements 1,608 7,183
Revaluation movement 10,467 13,937
----------------------------------------- ------------- -------------
Closing value per independent
valuation report 418,788 318,791
Guaranteed rent reviews
and initial lease rental
payment net (debtor)/creditor (13,131) (8,249)
----------------------------------------- ------------- -------------
Closing fair value per Consolidation
statement of financial position 405,657 310,542
----------------------------------------- ------------- -------------
1 In 2020 the carrying value of disposals was GBP733,000 (2019:
GBPnil), this combined with the profit on disposal of GBP153,000
(2019: GBPnil) makes up the total net proceeds shown in the
Consolidated statement of cash flows.
During the year, the Group acquired an additional 22 properties
and one forward-funded development. During the year the Group
disposed of one property.
The majority of the properties owned are freehold except for ten
properties which are long leasehold, seven of these are under a
minimum of 999 year leases at a peppercorn rent and the remaining
three are under 125 year leases at a peppercorn rent.
Change in fair value of investment properties
The following elements are included in the change in fair value
of investment properties reported in the consolidated financial
statements:
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------ ------------- -------------
Revaluation movement 10,467 13,937
Rental income arising from
recognising rental premiums
and guaranteed rent uplifts (4,882) (4,867)
--------------------------------- ------------- -------------
Change in fair value of
investment properties 5,585 9,070
--------------------------------- ------------- -------------
Rental income arising from recognising guaranteed rent uplifts
and initial lease rental payment includes the adjustments to rental
receipts for the period to reflect the total minimum income
recognised over the expected lease terms on a straight-line basis.
Rent premiums received are being reflected on a straight-line basis
over the term of the lease. In addition, the Group benefits from a
minimum annual rental uplift of 1% or 2% on all leases. These
uplifts are also incorporated to recognise income on a
straight-line basis. The elements are reported in the table below.
Capital improvements funded by the Group are undertaken under Deeds
of Variation to the leases. The period between signing the Deed of
Variation and rent commencing is a rent-free period and rent is
recognised on a straight-line basis from the signing of the Deed of
Variation.
Year ended Year ended
31 December 31 December
Note 2020 2019
GBP'000 GBP'000
------------------------------------ -------- --------------- --------------
Rent received in advance
of recognition(1) 5 (1,016) 98
Rent recognised in advance
of receipt(2) 5 5,898 4,769
------------------------------------ -------- --------------- --------------
Rental income arising
from recognising rental
premium and future guaranteed
rent uplifts 4,882 4,867
------------------------------------ -------- --------------- --------------
1 Rent premiums received in prior periods as well as any rent
premiums received during the year, deemed to be a premium over
the term of the lease.
2 Relates to both rent-free periods being recognised on a straight-line
basis over the term of the lease and rent recognised in the
period to reflect the minimum 1% or 2% uplift in rents over
the term of the care home lease on a straight-line basis.
Descriptions and definitions relating to valuation techniques
and key unobservable inputs made in determining fair values are as
follows:
Valuation techniques used to derive fair values
The valuations have been prepared on the basis of fair value
which is defined in the RICS "Red Book" as the "price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date" in accordance with IFRS 13. The concept of fair value is
considered to be consistent with that of market value. The
valuation takes into consideration the current market conditions
including improvements effected during the year, annual rentals,
lease lengths, property condition, rent coverage and location.
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. A decrease in the ERV would decrease fair value. A decrease
in the equivalent yield would increase the fair value. An increase
in the remaining lease term would increase the fair value.
Sensitivity of measurement of significant unobservable
inputs
Initial yields range from 3.15% to 12.00% across the
portfolio.
A 0.25% movement of the valuation yield would have approximately
a GBP15.1 million impact on the investment property valuation. A 1%
movement in the rental income would have approximately a GBP4.2
million impact on the investment property valuation.
Fair value hierarchy
The Group is required to classify fair value measurements of its
investment properties using a fair value hierarchy, in accordance
with IFRS 13 "Fair Value Measurement". This hierarchy reflects the
subjectivity of the inputs used, and has the following levels:
- Level 1 - unadjusted quoted prices in active markets;
- Level 2 - observable inputs other than quoted prices included
within level 1; and
- Level 3 - unobservable inputs.
The following table provides the fair value measurement
hierarchy for investment property:
Level Level Level
Date of Total 1 2 3
valuation GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------------- -------- -------- -------- --------
Assets measured
at fair value:
31 December
Investment properties 2020 405,657 - - 405,657
31 December
Investment properties 2019 310,542 - - 310,542
------------------------ -------------- -------- -------- -------- --------
There have been no transfers between any of the levels during
the year.
13. Trade and other receivables
As at 31 As at
December 31 December
2020 2019
GBP'000 GBP'000
--------------------------------------- ---------- -------------
Non --current
Rent recognised in advance of receipt 15,915 10,017
Current
Loan receivable(1) - 69
Prepayments 89 485
16,004 10,571
--------------------------------------- ---------- -------------
1 During the year ended 31 December 2019, the Group entered into
a revolving loan agreement with Careport which included a facility
of up to GBP250,000 and was fully repaid in 2020. The loan facility
bore interest at 7.5%.
No impairment losses have been recognised during the year (refer
to note 18).
14. Cash and cash equivalents
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
--------------------------- ------------- -------------
Cash and cash equivalents 7,979 47,790
---------------------------- ------------- -------------
Included as part of cash and cash equivalents are funds held on
overnight deposit of GBP nil (2019: GBP 39,090,000 ) .
None of the Group's cash balances are held in restricted
accounts.
15. Trade and other payables
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------- ------------- -------------
Non-current
Rent received in advance of recognition 2,784 1,768
Current
Trade and other payables 1,338 1,158
Interest payable 377 250
Withholding tax payable - (PID Dividends) 226 -
Rental received in advance 139 659
Capital improvements payable 1,049 1,019
------------- -------------
3,129 3,086
5,913 4,854
------------------------------------------- ------------- -------------
To reconcile Working capital changes, per the Consolidated
statement of cash flows, the Interest payable and Capital
improvements payable movements are excluded as these are allocated
to Financing activities and Investing activities respectively.
16. Bank borrowings
A summary of the bank borrowings drawn in the period are shown
below:
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------- ------------- -------------
At the beginning of the
year 25,127 26,000
Bank borrowings drawn in
the yea r 51,243 35,971
Bank borrowings repaid in
the yea r - (36,844)
----------------------------------- ------------- -------------
Total bank borrowings drawn(1) 76,370 25,127
----------------------------------- ------------- -------------
Total bank borrowings undrawn 48,630 49,873
----------------------------------- ------------- -------------
(1) Total bank borrowings drawn are equal to its fair value
The Group signed a GBP50 million five-year loan facility with
Metro Bank PLC (the "Metro Facility") on 15 June 2018; this
facility terminates on 15 June 2023. The Metro Facility has two
elements: an interest only term loan of GBP25 million (the "Term
Loan") which was fully drawn at 31 December 2020 and 31 December
2019, and a revolving credit facility of GBP25 million (the "RCF"),
GBP20.4 million of which was drawn at 31 December 2020 (2019:
GBP127,000). The Group drew down GBP20.2 million under the Metro
Facility and no repayments were made during the year ended 31
December 2020.
The Metro Facility has a margin of 265 basis points over Metro
Bank PLC's published Base Lending Rate. The five-year Term Loan is
repayable without penalty after two years, and with a 1% penalty if
prepaid within the first two years. Amounts drawn under the RCF can
be repaid at any time without penalty. The loan is secured over a
portfolio of 53 care homes held in wholly owned Group companies
(Impact Property 1 Limited (IP1) and Impact Property 2 Limited
(IP2)). These assets had a closing value per the independent
valuation report of GBP178.2 million as at 31 December 2020 (2019:
GBP176.2 million). The lender also holds charges over the shares of
the subsidiaries and intermediate holding companies.
On 6 March 2019, the Group agreed a five-year revolving credit
facility of GBP25 million (the "Clydesdale Facility") with
Clydesdale Bank PLC ("Clydesdale"); this facility terminates on 6
March 2024. The Group drew down GBP10 million (2019: GBP12.3
million) from the Clydesdale Facility and no repayments (2019:
GBP12.3 million) were made during the year ended 31 December
2020.
The Clydesdale Facility has a margin of 225 or 250 basis points
over three-month LIBOR, depending on the loan to value ratio of the
15 properties over which the Group has granted security to
Clydesdale as security for the loan held in a wholly owned Group
company (Impact Property 3 Limited (IP3)). These assets had a
closing value per the independent valuation report of GBP67.7
million as at 31 December 2020 (2019: GBP64.4 million).
On 6 April 2020, the Group agreed a new three-year revolving
credit facility of GBP50 million (the "HSBC Facility") with HSBC UK
Bank Plc ("HSBC") with the option of two one-year extensions
subject to HSBC approval. The Group drew down GBP21 million from
the HSBC Facility during the year ended 31 December 2020.
The HSBC Facility has a margin of 195 or 205 basis points over
one-month LIBOR, depending on the loan to value ratio of the 22
properties over which the Group has granted security to HSBC as
security for the loan held in a wholly owned Group company (Impact
Property 4 Limited (IP4)). These assets had a closing value per the
independent valuation report of GBP111.8 million as at 31 December
2020.
Under the bank covenants related to the loans the Group is
required to ensure that the:
-- Loan to value of IP1 and IP2 combined does not exceed 35%;
-- Loan to value of IP3 does not exceed 55%;
-- Loan to value of IP4 does not exceed 55%;
-- Interest cover of IP1 and IP2 combined based on passing rent
from the ring-fenced properties must exceed 200%;
-- Interest cover of IP3 based on passing rent from the
ring-fenced properties must exceed 325%; and
-- Interest cover of IP4 based on passing rent from the
ring-fenced properties must exceed 250%.
The Group has been in compliance with all of the financial
covenants of the loan facilities as applicable throughout the year
covered by these financial statements.
Any fees associated with arranging the bank borrowings
unamortised as at the year end are offset against amounts drawn on
the facilities as shown in the table below:
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------- ------------- -------------
Bank borrowings drawn: due
after more than one year 76,370 25,127
------------------------------------- ------------- -------------
Arrangement fees - brought
forward (1,666) (1,291)
Arrangement fees paid during
the year (1,156) (791)
Amortisation of loan arrangement
fees 665 416
------------------------------------- ------------- -------------
Non-current liabilities:
bank borrowings 74,213 23,461
------------------------------------- ------------- -------------
Maturity analysis of borrowings:
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------ ------------- -------------
Repayable between one and
two years - -
Repayable between two and
five years 76,370 25,127
Repayable in over five years - -
Total 76,370 25,127
--------------------------------- ------------- -------------
The weighted average term of the Group's debt as at the year end
is 2.5 years (2019: 3.5 years ).
17. Interest rate derivatives
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------- ------------- -------------
At the beginning of the
year 94 477
Change in fair value of
interest rate derivatives (87) (383)
------------------------------- ------------- -------------
7 94
---------------------------- ------------- -------------
To mitigate the interest rate risk that arises as a result of
entering into variable rate linked loans, the Group entered into an
interest rate cap with the notional value of GBP25 million and a
strike rate of 1% effective from 21 June 2018 with a termination
date of 15 June 2023. The fair value of the interest rate cap is
based on a floating reference of 1 month LIBOR.
The interest rate cap was acquired at a premium of GBP570,000,
plus associated costs of GBP12,000.
The fair value of the derivative interest rate cap contract is
estimated by discounting expected future cash flows using market
interest rates. A sensitivity analysis performed to assess the
impact of an increase of 0.25% in the interest rate would result in
an increase of GBP11,145 in the fair value of the interest rate
derivative. A decrease of 0.25% in the interest rate would result
in a decrease of GBP5,126 in the fair value of the interest rate
derivative.
At 31 December 2020, the Group has loans of GBP76.4 million
(2019: GBP25.1 million) which are exposed to interest rate
risk.
18. Financial instruments and financial risk management
The Group's principal financial assets and liabilities are those
that arise directly from its operations: trade and other
receivables, trade and other payables and cash held at bank. The
Group's other principal financial assets and liabilities are bank
borrowings and interest rate derivatives, the main purpose of which
is to finance the acquisition and development of the Group's
investment property portfolio and hedge against the interest rate
risk arising.
Set out below is a comparison by class of the carrying amounts
of the Group's financial instruments:
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------- ------------- -------------
Financial assets
at amortised
cost:
Loan receivable - 69
Cash and cash
equivalents 7,979 47,790
Financial assets
at fair value:
Interest rate
derivative 7 94
Financial liabilities
at amortised
cost:
Bank borrowings 74,213 23,461
Trade and other
payables 2,764 2,427
---------------------------- ------------- -------------
The interest rate derivative is the only financial instrument
that is measured at fair value through the Group's Consolidated
statement of comprehensive income.
The following table provides the fair value measurement
hierarchy for the interest rate derivative:
Level Level Level
Date of Total 1* 2* 3*
Valuation GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------ -------- -------- -------- --------
Assets measured
at fair value:
Interest rate 31 December
derivative 2020 - - 7 -
Interest rate 31 December
derivative 2019 - - 94 -
*The fair value categories are defined in note 12.
Risk management
The Group is exposed to market risk (including interest rate
risk), credit risk and liquidity risk. The board oversees the
management of these risks. The board reviews and agrees policies
for managing each of these risks that are summarised below.
Market risk (including interest rate risk)
Market risk is the risk that the fair values or future cash
flows of financial instruments will fluctuate because of changes in
market prices. The financial assets held by the Group that are
affected by interest rate risk are principally the Group's cash
balances and the interest rate derivative.
The Group monitors its interest rate exposure on a regular
basis. A sensitivity analysis performed to ascertain the impact on
profit or loss and net assets of a 50 basis point shift in interest
rates on the Group's cash balances would result in an increase of
GBP39,895 (2019: GBP238,950) or a decrease of GBP39,895 (2019:
GBP238,950).
The financial liabilities held by the Group that are affected by
interest rate risk are principally the Group's borrowings. The
Group has entered into an interest rate derivative to reduce its
exposure to interest rate risk on its term debt (refer to note 17).
A sensitivity analysis is performed to ascertain the impact on
profit or loss and net assets of a 50 basis point shift in interest
rates on the Group's unhedged borrowings would result in an
increase of GBP256,850 (2019: GBP635) or a decrease of GBP256,850
(2019: GBP635).
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss.
The Group is exposed to credit risks from its leasing
activities. Credit risk is reduced by requiring tenants to pay
rentals in advance under their lease obligations. The credit
quality of the tenant is also assessed based at the time of
entering into a lease agreement thereby reducing credit risk.
Outstanding trade receivables are regularly monitored. There are no
outstanding trade receivables at 31 December 2020.
Credit risk also arises with the cash balances held with banks
and financial institutions. The board believes that the credit risk
on current account cash balances is limited because the
counterparties are reputable banks with high credit ratings
assigned by international credit-rating agencies. The impairment
loss identified on cash balances was considered immaterial.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due, as the majority
of the Group's assets are property investments and are therefore
not readily realisable. The Group's objective is to ensure it has
sufficient available funds for its operations and to fund its
capital expenditure. This is achieved by regular monitoring of
forecast and actual cash flows by the AIFM ensuring the Group has
appropriate levels of cash and available drawings to meet
liabilities as they fall due.
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted
payments:
3-12 1-2 2-5
< 3 months months years years >5 years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ----------- -------- -------- -------- --------- -----------------
31 December
2020:
Bank borrowings - - - 76,370 - 76,370
Interest
and commitment
fees on borrowings 405 1,248 1,658 796 - 4,107
Trade and
other payables 2,764 - - - - 2,764
---------------------- ----------- -------- -------- -------- --------- -----------------
31 December
2019:
Bank borrowings - - - 25,127 - 25,127
Interest
and commitment
fees on borrowings 286 870 1,159 1,827 - 4,142
Trade and
other payables 2,427 - - - - 2,427
---------------------- ------ ---- ------ ------- -------
19. Capital management
The objective of the Group is to acquire, own, lease, renovate,
extend and redevelop high-quality, healthcare real estate assets in
the UK and lease those assets, under full repairing and insuring
leases, primarily to healthcare operators providing residential
healthcare services. This provides ordinary shareholders with an
attractive level of income together with the potential for income
and capital growth from investing in a diversified portfolio of
freehold and long leasehold care homes.
The board has responsibility for ensuring the Group's ability to
continue as a going concern and continues to qualify for UK REIT
status. This involves the ability to borrow monies in the short and
long term; and pay dividends out of reserves, all of which are
considered and approved by the board on a regular basis.
The Company achieved its increased targeted aggregate dividend
to 6.29 pence per share for the year ended 31 December 2020 and its
target aggregate dividend of 6.17 pence per share for the year
ended 31 December 2019.
As at 31 December 2020, the Group remains within its maximum
loan to value ("LTV") covenant which is 35% of gross asset value of
the Group as a whole. The Group has a further GBP48.6 million RCF
facilities available from which it can draw.
To maintain or adjust the capital structure, the Company may
adjust the dividend payment to shareholders, return capital to
shareholders, issue new shares or buyback shares for cancellation
or for holding in treasury. Capital consists of ordinary share
capital, other capital reserves and retained earnings.
20. Share capital, share premium and capital reduction reserve
Capital
Shares Share Share reduction
in issue capital premium reserve Total
Number GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------ --------- --------- ----------- ---------
As at 31 December
2018 192,206,831 1,922 140,452 35,800 178,174
Shares issued
15 May 2019 94,339,623 943 99,057 - 100,000
Shares issued
9 December
2019 32,407,407 324 34,676 - 35,000
Share issue
costs - - (2,844) - (2,844)
Dividends declared
(note 11) - - - (11,723) (11,723)
--------------------- ------------ --------- --------- ----------- ---------
As at 31 December
2019 318,953,861 3,189 271,341 24,077 298,607
Adjustment
to share issue
costs - - 21 - 21
As at 31 December
2020 318,953,861 3,189 271,362 24,077 298,628
--------------------- ------------ --------- --------- ----------- ---------
The Company had 318,953,861 shares of nominal value of 1 pence
each in issue at the end of the year (31 December 2019:
318,953,861).
On 15 May 2019, the Company issued a further 94,339,623 ordinary
shares at a price of 106 pence per ordinary share raising gross
proceeds of GBP100.0 million.
On 9 December 2019, the Company issued a further 32,407,407
ordinary shares at a price of 108 pence per ordinary share raising
gross proceeds of GBP35.0 million.
There were no shares issued during the year ended 31 December
2020.
21. Transactions with related parties
Investment Manager
The fees calculated and paid for the year to the Investment
Manager were as follows:
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Amounts payable to Impact Health Partners
LLP
Net fee 3,548 2,674
VAT - 82
------------------------------------------- ------------ ------------
Gross fee 3,548 2,756
------------------------------------------- ------------ ------------
For the year ended 31 December 2020 the principals and Finance
Director of Impact Health Partners LLP, the Investment Manager, are
considered key management personnel. Mr Patel and Mr Cowley are the
principals and Mr Yaldron is the Finance Director of Impact Health
Partners LLP and they own 3.41%, 0.27% and 0.03% respectively
(either directly, with related parties or through a wholly owned
company) of the total issued ordinary share capital of Impact
Healthcare REIT plc. Mr Patel also (directly and/or indirectly)
holds a majority 72.5% stake in Minster Care Group Limited "MCGL".
Mr Cowley also holds a 20% interest in MCGL. 55% of the Group's
rental income was received from MCGL or its subsidiaries. A trade
receivable of GBPnil was outstanding at the year end (2019:
GBP349,490).
During the year the key management of Impact Health Partners LLP
received the following dividends from Impact Healthcare REIT plc:
Mahesh Patel GBP680,990 (2019: GBP666,915); Andrew Cowley GBP55,385
(2019: GBP51,190) and David Yaldron GBP4,359 (2019: GBP3,378).
Directors' interests
Paul Craig is a director of the Company. He is also the
portfolio manager at Quilter Investors, which has an interest in
54,073,678 ordinary shares of the Company through funds under
management. The remaining directors who are shareholders in the
Company do not hold significant interest in the ordinary share
capital of the Company.
During the year the directors, who are considered key management
personnel, received the following dividends from the Company:
Rupert Barclay GBP11,474 (2019: GBP9,982); Rosemary Boot GBP1,878
(2019: GBP1,838) and Philip Hall GBP1,878 (2019: GBP1,838). In
addition, funds managed by Paul Craig received dividends from the
Company of GBP3,385,012 (2019: GBP3,136,080).
Directors' remuneration for the year is disclosed in note 7 as
well as in the Directors' remuneration report.
Minster Care Group Limited ("MCGL")
MCGL is considered a related party, as a tenant, which is
majority owned by the principal of the Investment Manager. The
Group has undertaken the following transactions with MCGL:
-- On 5 May 2017, the Company entered into a sale and leaseback
of 56 homes and a further home was transferred under the sale and
leaseback in June 2017. The net purchase price of this portfolio
was GBP156.2 million. The group entered into new leases for two
more properties on 22 May 2018 and one property on 6 January 2020
with a performance related deferred payment of up to GBP2.0 million
to be paid to MCGL in return for an increase in rent of up to
GBP160,000. The Group also agreed the disposal of one property on
11 August 2020 for net proceeds of GBP886,000 including the
cancellation of the lease with MCGL.
-- The Group entered into lease variation to align rent review
dates on 7 March for all MCGL properties and undertook rent review
uplift on 7 March 2020 in relation to portfolio acquired on 5 May
2017, June 2017 and 22 May 2018:
o Out of approved capital improvement expenditure of GBP5.2
million (on three homes in 2018) and GBP7.9 million (on eight homes
in 2017) in the MCGL portfolio, GBP12.4 million has been delivered
and GBP0.7 million is remaining at 31 December 2020 (on two
homes).
These transactions were fully compliant with the Company's
related party policy.
22. Net Asset Value (NAV) per share
Basic NAV per share is calculated by dividing net assets in the
Consolidated statement of financial position attributable to
ordinary equity holders of the Company by the number of ordinary
shares outstanding at the end of the year. As there are no dilutive
instruments outstanding, basic and diluted NAV per share are
identical.
EPRA updated their guidance on NAV measures in October 2019,
giving three new NAV measures to report, effective for periods
commencing on or after 1 January 2020, see pages 120-125 for
further detail. The Group has chosen to adopt EPRA net tangible
assets ("NTA") as its primary EPRA NAV measure as it most closely
aligns with the business practices of the Group. The adjustments
between NAV and NTA are reflected in the following table:
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------- ------------- -------------
Net assets per Consolidated
statement of financial position 349,521 340,682
Fair value of derivatives (7) (95)
NTA 349,514 340,587
------------------------------------- ------------- -------------
Issued share capital (number) 318,953,861 318,953,861
------------------------------------- ------------- -------------
Basic NAV per share 109.58p 106.81p
------------------------------------- ------------- -------------
NTA per share 109.58p 106.78p
------------------------------------- ------------- -------------
23. Operating leases
The following table sets out the maturity analysis of leases
receivables, showing the undiscounted lease payments under
non-cancellable operating leases receivable by the Group:
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
------------ ------------- -------------
Year one 29,183 22,713
Year two 30,746 23,685
Year three 31,457 24,152
Year four 32,148 24,584
Year five 32,570 25,160
Onwards 571,176 462,013
--------------- ------------- -------------
Total 727,280 582,307
--------------- ------------- -------------
The Group's investment properties are leased to tenants under
the terms of property leases that include upward only rent reviews
that are performed annually. These are annual inflation uplifts
linked to either CPI or RPI. RPI linked leases have a floor and cap
at either 2% and 4% or 1% and 5%.
24. Reconciliation of liabilities to cash flows from financing activities
Interest
Notes Bank borrowings rate derivative Total
GBP'000 GBP'000 GBP'000
--------------------------- ------ ---------------- ----------------- ---------
As at 1 January 2019 24,709 (477) 24,232
Cash flows from financing
activities:
Bank borrowings drawn 16 35,971 - 35,971
Bank borrowings repaid 16 (36,844) - (36,844)
Loan arrangement fees
paid 17 (791) - (791)
Non-cash movements:
Amortisation of loan
arrangement fees 16 416 - 416
Fair value movement 17 - 383 383
As at 31 December 2019 23,461 (94) 23,367
--------------------------- ------ ---------------- ----------------- ---------
Cash flows from financing
activities:
Bank borrowings drawn 16 51,243 - 51,243
Loan arrangement fees
paid 16 (1,156) - (1,156)
Non-cash movements:
Amortisation of loan
arrangement fees 16 665 - 665
Fair value movement 17 - 87 87
As at 31 December 2020 74,213 (7) 74,206
--------------------------- ------ ---------------- ----------------- ---------
25. Capital commitments
The Group has entered into Licences for Alterations and Deeds of
Variation for four of its properties in 2020 (2019: one) and
completed its capital commitments on two of its properties during
2020. At 31 December 2020 the Group had Capex outstanding on seven
properties (2019: five), of these four are for newly acquired
properties in December 2020 all of these are due for completion in
2021. The Group has outstanding capital commitments of GBP3.2
million (2019: GBP2.1 million) in relation to the cost of
improvements on these properties and a further GBP5.1 million on a
forward-funding agreement.
The Group has deferred commitments estimated at GBP5.0 million
(2019: GBP2.1million) related to two new acquisitions in 2020.
26. Contingent liabilities
Full relief for Stamp Duty Land Tax (SDLT) has been granted in
relation to the transfer of properties between companies which are
members of the Group. Should there be a change in control of the
Company within three years of completion, or a single shareholder
acquires a substantial stake in the Company, a liability in the
subsidiary companies could arise. This is equal to approximately 5%
of the aggregate value of the properties and is estimated at GBP5.0
million (2019: GBP9.4 million) on the net purchase price of assets
acquired in corporate acquisitions in the past three years. GBP7.0
million of the prior year contingent liability related to the SDLT
on the seed portfolio; in the 2020 year these properties have been
owned for three years and hence this portion of the contingent
liability is no longer recognised.
27. Controlling parties
The Company is not aware of any person who, directly or
indirectly, owns or controls the Company. The Company is not aware
of any arrangements the operations of which may give rise to a
change in control of the Company.
28. Subsequent events
-- On 6 January 2020, the Group completed the acquisition of
Mavern House Nursing Home in Melksham, Wiltshire and leased it to
an existing tenant, Welford. This added 51 registered beds to the
Group's portfolio for a net consideration of GBP5.1 million. The
initial consideration was funded from the Group's cash. The group
has committed to GBP0.6 million of capital expenditure to expand
the home over the next 18 months.
Rent reviews took place in the period between year end and the
date of this report as follows:
-- On 3 March 2021, in relation to the portfolio of three assets let to Silverline.
-- On 7 March 2021, in relation to the portfolio of 56 assets
acquired in May 2017, an additional asset acquired in June 2017 and
two further assets acquired in May 2019 let to Minster and
Croftwood.
-- On 10 March 2021, portfolio of four assets let to MMCG.
-- On 21 January 2021 and 16 March 2020, in relation to two assets let to Prestige.
-- On 18 March 2020, in relation to two assets let to the NHS.
Rent reviews were linked to the annual RPI over the 12 months up
to the rent review date with a floor of 2% and a cap of 4% for
Minster, Croftwood, Prestige, Silverline and MMCG. The two
properties let to the NHS had an annual CPI linked rent review.
As a result of these reviews and transactions occurring post
year end, the annual contracted rent increased from GBP30.9 million
to GBP31.7 million, of which GBP0.3 million is from rent
reviews.
No other significant events have occurred between the statement
of financial position date and the date when the financial
statements have been authorised by the directors, which would
require adjustments to, or disclosure in, the financial
statements.
Company statement of financial position
As at 31 December 2020
Company Registration Number: 10464966
31 December 31 December
2020 2019
Notes GBP'000 GBP'000
----------------------------- ------ ------------ ------------
Non-current assets
Investment in subsidiaries 6 369,371 242,990
----------------------------- ------ ------------ ------------
Total non-current assets 369,371 242,990
Current assets
Trade and other receivables 7 7,587 44,829
Cash and cash equivalents 8 6,806 46,702
----------------------------- ------ ------------ ------------
Total current assets 14,393 91,531
Total assets 383,764 334,521
----------------------------- ------ ------------ ------------
Current liabilities
Trade and other payables 9 (47,863) (27,215)
Total liabilities (47,863) (27,215)
----------------------------- ------ ------------ ------------
Total net assets 335,901 307,306
----------------------------- ------ ------------ ------------
Equity
Share capital 10 3,189 3,189
Share premium reserve 10 271,362 271,341
Capital reduction reserve 10 24,077 24,077
Retained earnings 37,273 8,699
----------------------------- ------ ------------ ------------
Total equity 335,901 307,306
----------------------------- ------ ------------ ------------
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and has not presented its own
statement of comprehensive income in these financial statements.
The profit attributable to the parent company for the year ended 31
December 2020 amounted to GBP48,539,000 (2019: profit of
GBP470,000).
The financial statements were approved and authorised for issue
by the board of directors on 26 March 2021 and are signed on its
behalf by:
Rupert Barclay Chairman
The accompanying notes form an integral part of these financial
statements.
Company statement of changes in equity
For the year ended 31 December 2020
Capital
Share Share reduction Retained
Notes capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
1 January 2020 3,189 271,341 24,077 8,699 307,306
--------------------- ------ --------- --------- ----------- ---------- ---------
Total comprehensive
income - - - 48,539 48,539
--------------------- ------ --------- --------- ----------- ---------- ---------
Transactions
with owners
Dividends paid 5 - - - (19,965) (19,965)
Share issue
costs 10 - 21 - - 21
31 December
2020 3,189 271,362 24,077 37,273 335,901
--------------------- ------ --------- --------- ----------- ---------- ---------
For the year ended 31 December 2019
Capital
Share Share reduction Retained
Notes capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ --------- --------- ----------- ---------- ---------
1 January 2019 1,922 140,452 35,800 12,649 190,823
--------------------- ------ --------- --------- ----------- ---------- ---------
Total comprehensive
income - - - 470 470
--------------------- ------ --------- --------- ----------- ---------- ---------
Transactions
with owners
Dividends paid 5 - - (11,723) (4,420) (16,143)
Shares issued 10 1,267 133,733 - - 135,000
Share issue
costs 10 - (2,844) - - (2,844)
--------------------- ------ --------- --------- ----------- ---------- ---------
31 December
2019 3,189 271,341 24,077 8,699 307,306
--------------------- ------ --------- --------- ----------- ---------- ---------
The accompanying notes form an integral part of these financial
statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2020
1. Basis of Preparation
General information
The financial statements for the year ended 31 December 2020,
are prepared in accordance with Financial Reporting Standard 102,
the Financial Reporting Standard applicable in the United Kingdom
and the Republic of Ireland ("FRS 102") and in accordance with the
Companies Act 2006, with comparatives presented for the year ended
31 December 2019.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken
advantage of all disclosure exemptions conferred by FRS 102.
In preparing the separate financial statements of the Company,
advantage has been taken of the following disclosure exemptions
available in FRS 102:
-- A reconciliation of the number of shares outstanding at the
beginning and end of the period has not been presented as the
reconciliations of the Group and the parent company would be
identical;
-- No statement of cash flows has been presented for the parent company;
-- Disclosures in respect of the parent company's financial
instruments have not been presented as equivalent disclosures have
been provided in respect of the Group as a whole;
-- The requirement to present related party disclosures between
the Company and fellow subsidiaries where ownership is all 100%;
and
-- No disclosures have been given for the aggregate remuneration
of the key management personnel of the Company as their
remuneration is included in the totals for the Group as a
whole.
Convention
The financial statements are presented in Sterling, which is
also the Company's functional currency, and all values are rounded
to the nearest thousand (GBP'000), except when otherwise
indicated.
Going concern
After making enquiries and bearing in mind the nature of the
Company's business and assets, the directors consider that the
Company has adequate resources to continue in operational existence
for the next 12 months from the date of approval of these financial
statements. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
The effect of the COVID-19 pandemic has been considered by the
directors. The directors have reviewed the forecasts for the Group
taking into account the impact of COVID-19 on trading over the 12
months from the date of signing this annual report. The forecasts
have been assessed against a range of possible downside outcomes
incorporating significantly lower levels of income in line with the
possible effects of the pandemic, see Going concern and viability
report on pages 42-43 for further detail.
2. Significant accounting judgements, estimates and assumptions
The preparation of the Company's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements
and disclosures. However, uncertainty about these assumptions and
estimates could result in outcomes that could require material
adjustment to the carrying amount of the assets or liabilities in
future periods. There were no significant accounting judgements,
estimates or assumptions in preparing these financial
statements.
3. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below.
Trade and other receivables
Trade and other receivables are recognised and carried at the
lower of their original invoiced value and recoverable amount.
Where the time value of money is material, receivables are
initially recognised at fair value and subsequently measured at
amortised cost. A provision for impairment is made when there is
objective evidence that the Company will not be able to recover
balances in full.
Balances are written off when the probability of recovery is
assessed as being remote.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and short-term
deposits.
Dividends
Dividends are recognised when they become legally payable.
Share premium
The surplus of net proceeds received from the issuance of new
shares over their par value is credited to this account and the
related issue costs are deducted from this account. The reserve is
non-distributable.
Capital reduction reserve
On 12 April 2017, an application to the High Court was
successfully made for the reduction of GBP0.30 per share of the
share premium account plus GBP3,000,000 which allowed the transfer
of GBP46,851,708 to the capital reduction reserve. This is a
distributable reserve.
Trade and other payables
Trade payables are initially recognised at their fair value and
are subsequently measured at cost.
Investments in subsidiaries
The investments in subsidiary companies are included in the
Company's statement of financial position at cost less provision
for impairment.
4. Taxation
The Company is exempt from corporation tax on the profits and
gains from its property investment business, provided it continues
to meet certain conditions as per REIT regulations. Any
non-qualifying profits and gains however, will continue to be
subject to corporation tax.
Tax charge included in total comprehensive income:
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------- ------------ ------------
UK corporation tax - -
------------------- ------------ ------------
5. Dividends
Details of dividends paid by the Company are included in note 11
to the consolidated financial statements.
6. Investment in subsidiaries
31 December 31 December
2020 2019
GBP'000 GBP'000
At the beginning of the year 242,990 188,223
Cost of investments acquired
through share purchases 126,381 54,767
At the end of the year 369,371 242,990
-------------------------------- ------------ ------------
The Company has the following subsidiaries:
Country of Ownership
Principal activity incorporation %
------------------------------ -------------------- ---------------- ----------
Impact Property 1 Limited Real Estate England and
("Propco 1")* Investment Wales 100
Impact Property 2 Limited Real Estate England and
("Propco 2")* Investment Wales 100
Impact Property 3 Limited Real Estate England and
("Propco 3")* Investment Wales 100
Impact Property 4 Limited Real Estate England and
("Propco 4")* Investment Wales 100
Impact Property 5 Limited Real Estate England and
("Propco 5") Investment Wales 100
Impact Property 6 Limited Real Estate England and
("Propco 6") Investment Wales 100
Impact Finance 1 Limited England and
("Finance 1")* Financing company Wales 100
Impact Finance 2 Limited England and
("Finance 2")* Financing company Wales 100
Impact Finance 3 Limited England and
("Finance 3")* Financing company Wales 100
Impact Holdco 1 Limited Investment holding England and
("Holdco 1") company Wales 100
Impact Holdco 2 Limited Investment holding England and
("Holdco 2") company Wales 100
Impact Holdco 3 Limited Investment holding England and
("Holdco 3") company Wales 100
Property holding England and
Roseville Property Limited* company Wales 100
Sandbanks Property Redcar Property holding England and
Limited* company Wales 100
Cardinal Healthcare (UK) Property holding England and
Ltd** company Wales 100
Cholwell Care (Nailsea) Property holding England and
Limited* company Wales 100
Property holding England and
Barham Care Centre Limited** company Wales 100
Property holding England and
Baylham Care Centre Limited* company Wales 100
Butterfly Cumbria Properties Property holding England and
Limited* company Wales 100
The Holmes Care Holdings Property holding England and
Limited* company Wales 100
Hollyblue Healthcare Property holding England and
(Countrywide) Limited* company Wales 100
Hollyblue Healthcare Property holding England and
(Ulster) Limited* company Wales 100
Tower Bridge Homes Care Property holding England and
Limited* company Wales 100
The Holmes Care Group Property holding England and
GB Limited* company Wales 100
Property holding England and
Lakewood Limited** company Wales 100
The Holmes Care (Greenock) Property holding England and
Limited** company Wales 100
The Holmes Care (Bathgate) Property holding England and
Limited** company Wales 100
Tower Bridge Homes Care Property holding
(Central Care) Limited** company Scotland 100
Property holding
Aviemore Homes Limited** company Scotland 100
Flagship Tower (Greenock) Property holding England and
Limited** company Wales 100
Heatherfield Community Property holding
Care Limited** company Scotland 100
Property holding
Central Care Limited** company Scotland 100
------------------------------ --------------------- ----------------- ----------
*As at 31 December 2020 these entities were held indirectly
by the Company.
** As at 31 December 2020 these entities are in the process
of winding up.
The registered address for the above subsidiaries incorporated
in England and Wales is:
The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF,
England
The registered address for the above subsidiaries incorporated
in Scotland is:
Atria One, 144 Morrison Street, Edinburgh EH3 8EX, Scotland
7. Trade and other receivables
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Loan to Group companies 7,513 43,829
Interest on loans to Group companies - 805
Loan receivable(1) - 69
Prepayments 74 126
--------------------------------------- ------------- -------------
7,587 44,829
-------------------------------------- ------------- -------------
(1) During the year ended 31 December 2019, the Group entered
into a revolving loan agreement with Careport which includes a
facility up to GBP250,000, this was repaid in 2020. The loan
facility bears interest at 7.5%.
As at 31 December 2020, there were no trade receivables past due
or impaired (2019: none).
Loans to Group companies are unsecured and are repayable on
demand.
8. Cash and cash equivalents
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
--------------------------- ------------- -------------
Cash and cash equivalents 6,806 46,702
---------------------------- ------------- -------------
Included as part of cash and cash equivalents are funds held on
overnight deposit of GBPnil (2019: GBP39,090,000).
None of the Company's cash balances are held in restricted
accounts.
9. Trade and other payables
As at As at
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Loan from Group companies 46,792 26,358
Trade and other payables 926 857
Interest on loans to Group companies 145 -
-------------------------------------- ------------- -------------
47,863 27,215
-------------------------------------- ------------- -------------
Loans from Group companies are unsecured and are repayable on
demand.
10. Share capital, share premium and capital reduction reserve
Details on movements in share capital, share premium and capital
reduction reserve of the Company are the same as that of the Group
and are included in note 20 to the consolidated financial
statements.
11. Transactions with related parties
The Company has taken advantage of the exemption provided by FRS
102 not to disclose transactions with other members of the Group as
the Company's own financial statements are presented together with
its consolidated financial statements.
See note 21 of the consolidated financial statements for
disclosure of related party transactions of the Group.
12. Capital commitments
There were no capital commitments held by the Company (2019:
nil).
13. Subsequent events
Significant events after the reporting period are the same as
those of the Group. See note 28 to the consolidated financial
statements.
No other significant events have occurred between the Statement
of financial position date and the date when the financial
statements have been authorised by the directors, which would
require adjustments to, or disclosure in, the financial
statements.
EPRA PERFORMANCE MEASURES (UNAUDITED)
The table below shows additional performance measures,
calculated in accordance with the Best Practices Recommendations of
the European Public Real Estate Association (EPRA). We provide
these measures to aid comparison with other European real estate
businesses.
1. EPRA earnings per share
GBP23.1m
7.25p per share
for the year to 31 December 2020
(for the year to 31 December 2019: GBP17.6m / 6.95p)
Definition
Earnings from operational activities.
Purpose
A key measure of a company's underlying operating results are an
indication of the extent to which current dividend payments are
supported by earnings.
2. EPRA net reinstatement value ("NRV " )
GBP376.5m
118.04p per share
for the year to 31 December 2020
(for the year to 31 December 2019: GBP361.2m / 113.25p per
share)
Definition
Net asset value adjusted for fair value of derivatives and
transaction costs under the assumption they will not crystallise if
the company never sells assets.
Purpose
The aim of this measure is to represent the value required to
rebuild the entity.
2.2 EPRA net tangible assets ( " NTA " )
GBP349.5m
109.58p per share
for the year to 31 December 2020
(for the year to 31 December 2019: GBP340.6m / 106.78p per
share)
Definition
Net asset value adjusted for fair value of derivatives as these
will not crystallise if held to maturity.
Purpose
This represents the value of the company assuming assets are
bought and sold.
2.3 EPRA net disposal value ( " NDV " )
GBP347.4m
108.91p per share
for the year to 31 December 2020
(for the year to 31 December 2019: GBP339.0m / 106.29p per
share)
Definition
Net asset value adjusted to align borrowings to their drawn
amount. If the company was in an immediate disposal scenario
certain assets and liabilities are adjusted to show the full value
if not held to maturity.
Purpose
This measure aims to show the shareholders' value under a
disposal scenario.
3.1 EPRA Net Initial Yield ( " NIY " )
6.57%
for the year 31 December 2020
(for the year to 31 December 2019: 6.66%)
Definition
Annualised rental income based on the cash rents passing at the
balance sheet date, less non-recoverable property operating
expenses, divided by the market value of the property, increased
with (estimated) purchasers' costs.
Purpose
This measure should make it easier for investors to judge for
themselves how the valuation of one portfolio compares with another
portfolio.
3.2 EPRA " topped-up " NIY
6.71%
for the year to 31 December 2020
(for the year to 31 December 2019: 6.66%)
Definition
This measure adjusts the EPRA NIY in respect of the expiration
of rent-free periods (or other unexpired lease incentives, such as
discounted rent periods and step rents).
Purpose
This measure should make it easier for investors to judge for
themselves how the valuation of one portfolio compares with another
portfolio.
4. EPRA vacancy rate
0.00%
for the year to 31 December 2020
(for the year to 31 December 2019: 0.00%)
Definition
Estimated market rental value (ERV) of vacant space divided by
the ERV of the whole portfolio.
Purpose
A "pure" (%) measure of investment property space that is
vacant, based on ERV.
5. EPRA cost ratio
17.09%
for the year to 31 December 2020
(for the year to 31 December 2019: 19.15%)
Definition
Administrative and operating costs (including, and excluding,
direct vacancy costs) divided by gross rental income.
Purpose
A key measure, to enable meaningful measurement of the changes
in a company's operating costs.
6.0 Like-for-like rental growth
3.47%
for the year to 31 December 2020
(for the year to 31 December 2019: 2.48%)
Definition
Rental growth on the portfolio of properties that have been
owned and operational for two full reporting cycles.
Purpose
Growth of rental income excluding acquisitions and disposals
allows stakeholders to estimate the organic income growth.
NOTES TO THE EPRA PERFORMANCE MEASURES (UNAUDITED)
FOR THE YEARED 31 DECEMBER 2020
1. EPRA earnings per share
31 Dec
31 Dec 20 19
GBP'000 GBP'000
Total comprehensive income (attributable to shareholders) 28,783 26,333
Adjusted for:
Profit on disposal of investment property (154) -
Change in fair value of investment properties (10,467) (13,937)
Rental income arising from recognising guaranteed
rent uplifts and rental premiums 4,882 4,867
----------------------------------------------------------- ------------------------ ------------------------
(5,739) (9,070)
Change in fair value of interest rate derivatives 87 383
----------------------------------------------------------- ------------------------ ------------------------
Profits to calculate EPRA earnings per share 23,131 17,646
----------------------------------------------------------- ------------------------ ------------------------
Weighted average number of Ordinary shares (basic
and diluted) 318,953,861 253,954,292
EPRA earnings per share - basic and diluted 7.25p 6.95p
2. EPRA NAV measures
The updated EPRA best practice recommendations, released in
October 2019, give three new NAV metrics: EPRA net reinstatement
value (NRV), EPRA net tangible assets (NTA) and EPRA net disposal
value (NDV) to replace the previously reported EPRA NAV and EPRA
NNNAV. NRV aims to show the value of assets on a long-term basis,
adjusting for items that would not be expected to crystallise under
normal circumstances, NTA is calculated on the basis that assets
are bought and sold whilst NDV intends to show shareholders the
value of assets and liabilities in the event they cannot be held
until maturity. The Group has adopted NTA as its primary EPRA NAV
measure as it most closely aligns with the Group's business
practices.
As at 31 December 2020: Old measures New measures
EPRA NAV EPRA NNAV EPRA NRV EPRA NTA EPRA NDV
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net assets at end of year 349,521 349,521 349,521 349,521 349,521
Exclude:
Fair value of derivatives (7) - (7) (7) -
-------------------------------- ------------ ------------ ------------ ------------ ------------
Include:
-------------------------------- ------------ ------------ ------------ ------------ ------------
Fair value of debt(1) - (2,156) - - (2,156)
-------------------------------- ------------ ------------ ------------ ------------ ------------
Transaction costs(2) - - 26,964 - -
-------------------------------- ------------ ------------ ------------ ------------ ------------
Net assets (per EPRA NAV
measure) 349,514 347,365 376,478 349,514 347,365
-------------------------------- ------------ ------------ ------------ ------------ ------------
Shares in issue at 31 December
(Basic and diluted) 318,953,861 318,953,861 318,953,861 318,953,861 318,953,861
Net assets (per EPRA NAV
measure) 109.58p 108.91p 118.04p 109.58p 108.91p
As at 31 December 2019: Old measures New measures
EPRA NAV EPRA NNAV EPRA NRV EPRA NTA EPRA NDV
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net assets at end of year 340,682 340,682 340,682 340,682 340,682
Exclude:
Fair value of derivatives (95) - (95) (95) -
-------------------------------- ------------ ------------ ------------ ------------ ------------
Include:
-------------------------------- ------------ ------------ ------------ ------------ ------------
Fair value of debt(1) - (1,665) - - (1,665)
-------------------------------- ------------ ------------ ------------ ------------ ------------
Transaction costs(2) - - 20,641 - -
-------------------------------- ------------ ------------ ------------ ------------ ------------
Net assets (per EPRA NAV
measure) 340,587 339,017 361,229 340,587 339,017
-------------------------------- ------------ ------------ ------------ ------------ ------------
Shares in issue at 31 December
(Basic and diluted) 318,953,861 318,953,861 318,953,861 318,953,861 318,953,861
Net assets (per EPRA NAV
measure) 106.78p 106.29p 113.25p 106.78p 106.29p
1 Difference between interest-bearing loans and borrowings included
in the balance sheet at amortised cost, and fair value of interest-bearing
loans and borrowings at drawn amount.
2 NTA and NDV are calculated using property values in line with IFRS,
where values are net of real estate transfer tax and other purchasers'
costs. These transaction costs are added back for NRV.
3. EPRA net initial yield (NIY) and EPRA "topped-up" NIY
31 Dec 31 Dec
20 19
GBP'000 GBP'000
---------------------------------------------------- ---------------------------- --------------------------
Investment property - wholly owned 418,787 318,791
Less capital improvements under construction (1,907) (6,954)
---------------------------------------------------- ---------------------------- --------------------------
Completed property portfolio 416,880 311,837
Allowance for estimated purchasers" costs(1) 26,263 19,765
Gross up completed property portfolio valuation
(B) 443,143 331,602
---------------------------------------------------- ---------------------------- --------------------------
Annualised cash passing rental income 29,111 22,081
property outgoings (non recoverable insurance) (2) (2)
---------------------------------------------------- ---------------------------- --------------------------
Annualised net rents (A) 29,109 22,079
Add
Contractual uplifts on rent free periods of funded
capital improvements 634 -
---------------------------------------------------- ---------------------------- --------------------------
Topped-up net annualised rent (C) 29,743 22,079
---------------------------------------------------- ---------------------------- --------------------------
EPRA Net Initial Yield (A/B) 6.57% 6.66%
EPRA Topped-Up Net Initial Yield (C/B) 6.71% 6.66%
1 Assumes a purchaser of the Company's portfolio would pay SDLT
and transaction costs equal to 6.3% of the portfolio's value
4. EPRA vacancy rate
31 Dec 31 Dec
20 19
GBP'000 GBP'000
----------------------------------------------- -------------------------- -------------------------
Estimated rental value of vacant space - -
Estimated rental value of the whole portfolio 28,922 22,512
----------------------------------------------- -------------------------- -------------------------
EPRA Vacancy rate 0.00% 0.00%
5. EPRA cost ratio
31 Dec
31 Dec 20 19
GBP'000 GBP'000
Administrative and other expenses 5,264 4,589
Net service charge cost 2 2
Total costs including and excluding vacant property
costs 5,266 4,591
----------------------------------------------------- --------------------------- ---------------------------
Gross rental income 30,818 23,980
----------------------------------------------------- --------------------------- ---------------------------
Total EPRA cost ratio (including, and excluding,
direct vacancy costs) 17.09% 19.15%
----------------------------------------------------- --------------------------- ---------------------------
None of the costs in this note have been capitalised. Only costs
directly associated with the purchase of properties as well as
subsequent value-enhancing capital expenditure qualify as acquisition
costs and are capitalised.
6. Like-for-like rental growth
This note shows the rental income and market value for property
assets that have been owned and operational for two full reporting
periods, hence all below information relates to the property
portfolio that has been owned and operational since 31 December
2018:
Rent Market value
GBP'000 GBP'000
Property portfolio as at 31 December 2018 16,452 223,179
Inflation-linked rental uplifts 400
Rental uplifts in return for capital improvements
or deferred payments 8
Increase/(decrease) due to vacancy rates -
Property portfolio as at 31 December 2019 16,860 242,084
--------------------------------------------------- -------------------------- --------------------
Inflation-linked rental uplifts 429
Rental uplifts in return for capital improvements
or deferred payments 156
Increase/(decrease) due to vacancy rates -
Property portfolio as at 31 December 2020 17,445 248,068
=================================================== ========================== ====================
All properties operate within the same sector,
UK healthcare.
OUR PORTFOLIO
At 31 December 2020, the Group owned the homes listed in the
table below:
Acquisition Capital
Tenant and home Region date(1) Beds(2) projects(3)
Minster Care*
-------------------- ------------- -------- -------------
Abbeywell West Midlands 45
----------------------------------- -------- -------------
Amberley South West 30
----------------------------------- -------- -------------
Yorkshire and The
Ashgrove Humber 56
----------------------------------- -------- -------------
Yorkshire and The
Attlee Humber 68
----------------------------------- -------- -------------
Broadgate East Midlands 40
----------------------------------- -------- -------------
Carnbroe Scotland May 2018 74
-------------------- ------------- -------- -------------
Craigend Scotland 48
----------------------------------- -------- -------------
Diamond House East Midlands 74
----------------------------------- -------- -------------
Duncote Hall East Midlands 40
----------------------------------- -------- -------------
Duncote, The Lakes East Midlands 47
----------------------------------- -------- -------------
Yorkshire and The
Emmanuel Humber 44
----------------------------------- -------- -------------
Eryl Fryn Wales 31
----------------------------------- -------- -------------
Falcon House East Midlands 46
----------------------------------- -------- -------------
Freeland House South East 111
----------------------------------- -------- -------------
Gray's Court East of England 87
----------------------------------- -------- -------------
Grenville East of England May 2018 64
-------------------- ------------- -------- -------------
Yorkshire and The
Hamshaw Court Humber 45
----------------------------------- -------- -------------
Ideal West Midlands 50
----------------------------------- -------- -------------
Karam Court West Midlands 47
----------------------------------- -------- -------------
Littleport Grange East of England 80
----------------------------------- -------- -------------
Meadows & Haywain East of England 65
----------------------------------- -------- -------------
Mowbray West Midlands 39
----------------------------------- -------- -------------
Yorkshire and The
Mulberry Manor Humber 49
----------------------------------- -------- -------------
Red Hill West Midlands Jan 2020 90
-------------------- ------------- -------- -------------
Rydal North East 60
----------------------------------- -------- -------------
Saffron East Midlands Jun 2017 48
-------------------- ------------- -------- -------------
Sovereign House West Midlands 60
----------------------------------- -------- -------------
Stansty House Wales 74
----------------------------------- -------- -------------
Three Elms North West 60
----------------------------------- -------- -------------
Waterside West Midlands 47
----------------------------------- -------- -------------
Woodlands Court North West 40
----------------------------------- -------- -------------
Wordsley West Midlands 41
----------------------------------- -------- -------------
Value as at 31 December 2020: GBP130.04m
------------- -------- -------------
Croftwood Care*
-------------------- ------------- -------- -------------
Ancliffe North West 40
----------------------------------- -------- -------------
Astbury Lodge North West 41
----------------------------------- -------- -------------
Croftwood North West 47
----------------------------------- -------- -------------
Crossways North West 39
----------------------------------- -------- -------------
Elm House North West 40
----------------------------------- -------- -------------
Florence Grogan North West 40
----------------------------------- -------- -------------
Garswood North West 53
----------------------------------- -------- -------------
Gleavewood North West 32
----------------------------------- -------- -------------
Golborne House North West 40
----------------------------------- -------- -------------
Greenacres North West 40
----------------------------------- -------- -------------
Hourigan North West 40
----------------------------------- -------- -------------
Ingersley Court North West 46
----------------------------------- -------- -------------
Lakelands North West 40
----------------------------------- -------- -------------
Leycester House North West 40
----------------------------------- -------- -------------
Loxley Hall North West 40 +5
----------------------------------- -------- -------------
Lyndhurst North West 40
----------------------------------- -------- -------------
New Milton House North West 39
----------------------------------- -------- -------------
Parklands North West 40
----------------------------------- -------- -------------
The Cedars North West 27
----------------------------------- -------- -------------
The Elms North West 41
----------------------------------- -------- -------------
The Hawthorns North West 39
----------------------------------- -------- -------------
The Laurels North West 40
----------------------------------- -------- -------------
Thorley House North West 40
----------------------------------- -------- -------------
Turnpike Court North West 53
----------------------------------- -------- -------------
Wealstone North West 42
----------------------------------- -------- -------------
Westhaven North West 52
----------------------------------- -------- -------------
Whetstone Hey North West 42
----------------------------------- -------- -------------
Value as at 31 December 2020: GBP67.07m
------------- -------- -------------
Prestige Group
-------------------- ------------- -------- -------------
Hartlepool North East Mar 2020 - +94
-------------------- ------------- -------- -------------
Parkville North East Mar 2018 94
-------------------- ------------- -------- -------------
Roseville North East Mar 2018 103
-------------------- ------------- -------- -------------
Sandbanks North East Oct 2018 77
-------------------- ------------- -------- -------------
Yew Tree North East Jan 2019 76
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP21.76m
------------- -------- -------------
Welford
-------------------- ------------- -------- -------------
Argentum Lodge South West Sep 2019 56
-------------------- ------------- -------- -------------
Yorkshire and The
Birchlands Humber Jun 2019 54
-------------------- ------------- -------- -------------
Fairview House
and Court(4) South West Mar 2018 73
-------------------- ------------- -------- -------------
St Peter's House East of England Dec 2020 66
-------------------- ------------- -------- -------------
Holmesley South West Jun 2019 55
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP33.11m
------------- -------- -------------
Careport
-------------------- ------------- -------- -------------
Blackwell Vale North West Dec 2020 60
-------------------- ------------- -------- -------------
Briardene North East Aug 2018 60
-------------------- ------------- -------- -------------
Derwent North East Aug 2018 45
-------------------- ------------- -------- -------------
Holly Lodge North East Nov 2018 41
-------------------- ------------- -------- -------------
Kingston Court North West Jun 2019 75
-------------------- ------------- -------- -------------
Old Prebendal House
and Court South East Jun 2019 39
-------------------- ------------- -------- -------------
Sovereign Court
and Lodge(4) North East Aug 2018 60
-------------------- ------------- -------- -------------
The Grove North East Sep 2018 57
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP32.79m
------------- -------- -------------
Renaissance Care
-------------------- ------------- -------- -------------
Croftbank Scotland Nov 2018 68
-------------------- ------------- -------- -------------
Rosepark Scotland Nov 2018 60
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP13.07m
------------- -------- -------------
Maria Mallaband and Countrywide Group (MMCG)
-------- -------------
Yorkshire and The
Belmont House Humber May 2019 106
-------------------- ------------- -------- -------------
Yorkshire and The
Croft House Humber Mar 2020 68
-------------------- ------------- -------- -------------
Yorkshire and The
Heeley Bank Humber Mar 2020 67
-------------------- ------------- -------- -------------
Yorkshire and The
Howgate House Humber Mar 2020 63
-------------------- ------------- -------- -------------
Yorkshire and The
Manor Park Humber Mar 2020 75
-------------------- ------------- -------- -------------
Park Springs Scotland May 2019 96
-------------------- ------------- -------- -------------
Thorntree Mews Scotland May 2019 40
-------------------- ------------- -------- -------------
Wallace View Scotland May 2019 60
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP35.75m
------------- -------- -------------
NCUH NHS Trust
-------------------- ------------- -------- -------------
Reiver House North West Jun 2019 -
-------------------- ------------- -------- -------------
Surgical Unit North West Jun 2019 -
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP4.41m
------------- -------- -------------
Optima
-------------------- ------------- -------- -------------
Barham East of England Aug 2019 44
-------------------- ------------- -------- -------------
Baylham East of England Aug 2019 55
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP14.25m
------------- -------- -------------
Silverline
-------------------- ------------- -------- -------------
Yorkshire and The
Laurel Bank Humber Mar 2020 63
-------------------- ------------- -------- -------------
Yorkshire and The
The Beeches Humber Mar 2020 60
-------------------- ------------- -------- -------------
Yorkshire and The
Willow Bank Humber Mar 2020 59
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP8.10m
------------- -------- -------------
Holmes Care Group
-------------------- ------------- -------- -------------
Almond Court Scotland Aug 2020 42
-------------------- ------------- -------- -------------
Almond View Scotland Aug 2020 78
-------------------- ------------- -------- -------------
Bankview (&BVDC) Scotland Aug 2020 65
-------------------- ------------- -------- -------------
Beechwood Scotland Aug 2020 90
-------------------- ------------- -------- -------------
Cragielea Scotland Aug 2020 85
-------------------- ------------- -------- -------------
Grandholm Scotland Aug 2020 79
-------------------- ------------- -------- -------------
Heatherfield Scotland Aug 2020 60
-------------------- ------------- -------- -------------
Larkfield Scotland Aug 2020 90
-------------------- ------------- -------- -------------
Three Towns Scotland Aug 2020 60
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP50.30m
------------- -------- -------------
Electus Care
-------------------- ------------- -------- -------------
Edgewater Lodge Northern Ireland Dec 2020 75
-------------------- ------------- -------- -------------
Cedarhurst Lodge Northern Ireland Dec 2020 67
-------------------- ------------- -------- -------------
Saintfield Lodge Northern Ireland Dec 2020 51
-------------------- ------------- -------- -------------
Value as at 31 December 2020: GBP8.14m
------------- -------- -------------
1 May 2017 unless stated
2 Number of registered beds
3 Capital improvement bed additions under development
4 Treated as two properties
* Minster and Croftwood are both part of Minster Care Group
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END
FR KZGZFMVKGMZZ
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