TIDMIHR
RNS Number : 7010I
Impact Healthcare REIT PLC
09 August 2023
9 August 2023
Impact Healthcare REIT plc
("Impact" or the "Company" or, together with its subsidiaries,
the "Group")
Half year results for the six months ended 30 June 2023, and
dividend declaration
The Board of Directors of Impact Healthcare REIT plc (ticker:
IHR), the real estate investment trust which gives investors
exposure to a diversified portfolio of UK healthcare real estate
assets, in particular care homes, today announces the Company's
half year results for the six months ended 30 June 2023 and
declares the Company's second quarter interim dividend.
Simon Laffin, Chairman of Impact Healthcare REIT plc,
commented:
" We are continuing to deliver a resilient performance in a
challenging economic environment. In the first half of the year,
rent increases and a stable rental yield drove a 2.4% increase in
like-for-like investment property value. As a result, Net Asset
Value grew by 5.6% to GBP470.9 million. Our total accounting return
for the period was 6.2%.
We maintained a strong balance sheet, with GBP250 million of
committed debt facilities and a weighted average term of 6.8
years(1) . Our drawn debt was GBP190.8 million, giving us a gross
LTV of 28.5% and a net LTV of 27.6%.
The vast majority of our rent increases are capped at 4.0%. This
has provided much needed respite to tenants, suffering general
inflation of 9.3% and in many cases, even higher wage costs. Our
tenant operators generally managed to increase fees, improved
occupancy to 88.3%(2) and most benefited from low or zero leverage.
As a result, our annual adjusted rent cover improved slightly to
1.8 times(3) . The affordability of our rent to tenants, and indeed
the affordability of care home fees to residents, are crucial to
the continued successful provision of residential care. This in
turn enables us to provide quality premises to tenants and
long-term sustainable returns to shareholders."
Financial Highlights
-- Second quarter dividend declared of 1.6925p, in line with the
3.5% increase targeted for this year of 6.77 pence per share(4) .
This dividend is 122% covered by our EPRA EPS and 109% by adjusted
EPS.
-- Our total accounting return for the period to 30 June 2023 was 6.17% (six months only).
Good financial performance since 31 December 2022
-- 12.2% increase in property investments(5) independently
valued at GBP638.2 million as at 30 June 2023.
-- 2.4% increase in like-for-like portfolio value.
-- 5.6% increase in total NAV to GBP470.9 million.
-- 3.2% increase in NAV per share to 113.64 pence over the
six-month period, reflecting shares issued to part fund the
acquisition of six care homes.
Strong balance sheet at 30 June 2023
-- GBP250.0 million committed bank facilities of which GBP190.8 million was drawn.
-- 28.5% gross LTV (31 December 2022: 23.9%) and a net LTV of
27.6% (31 December 2022: 22.6%). Weighted average term of debt
facilities (excluding options to extend) was 6.8 years(1) .
-- 66% of our drawn debt facilities are fixed or hedged against interest rate rises.
-- 4.85% average cost of drawn debt at 30 June 2023.
-- GBP59.2 million of undrawn debt facilities and GBP22.1 million cash.
Driving the growth of our annual contracted rental income
-- Acquired six high quality care homes on attractive terms and
sold one, so that the Group now owns 140 properties with 7,725
beds(5) .
-- 4.0% increase in rent for 90 homes following rent reviews in the first half 2023.
-- 11.6% increase to GBP48.1 million in contracted rent roll(6)
, up from GBP43.1 million at 31 December 2022.
Six months Six months Change Change
ended ended to H1'22 Year ended to FY22
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Dividends declared
per share 3.39p 3.27p +3.5% 6.54
Profit before tax GBP27.59m GBP27.30m +1.1% GBP16.89m
Earnings per share
("EPS") 6.66p 7.26p -8.2% 4.33p
EPRA EPS 4.15p 4.22p -1.7% 8.37p
Adjusted earnings
per share 3.69p 3.66p +0.8% 7.11p
Adjusted earnings
dividend cover 109% 112% 109%
Contracted annual
rent roll(6) GBP48.1m GBP42.0m GBP43.1m +11.6%
Property Investments(5) GBP638.2m GBP568.9m GBP568.8m +12.2%
Net asset value
("NAV") per share 113.64p 116.18p 110.17p +3.2%
Gross Loan to value
("LTV") ratio 28.5% 23.1% 23.9% +467 bps
Net loan to value
(EPRA LTV) 27.6% 21.9% 22.6% +499 bps
Total accounting
return 6.17% 6.21% -4 bps 3.78%
Cash GBP22.1m GBP22.0m GBP22.5m -2.1%
Operational highlights
-- 1.8 times annual adjusted rent cover(3) to 30 June 2023,
similar to recent years and to before the pandemic.
-- 98% collected of the rent due in the period with no voids.
Firm action taken this year to replace our one tenant who got into
significant difficulties, with positive early signs of improvement
in these homes.
-- 88.3%(2) occupancy at the end of June 2023, up from 86.6% at the start of the period.
-- GBP9.8 million of asset management projects underway in first
half of 2023. 24 projects in the pipeline, with anticipated capital
funding of GBP35 million over the next two to three years.
Change
At 30 June At 30 June At 31 December to FY
2023 2022 2022 22
Topped-up net initial
yield 6.95% 6.69% 6.98% -3 bps
Average NIY on acquisitions
to date 7.33% 7.39% 7.37% -4 bps
Rents containing inflation-linked
uplifts 100% 100% 100% -
WAULT to first break 21.2 years 19.9 years 19.7 years +1.5 years
Portfolio let 100% 100% 100% -
Last 12 months' adjusted
rent cover(3) 1.82 1.85 1.80 +1.1%
Rent Collection 98% 100% 100% -2.0%
Properties(5) 140 131 135 +3.7%
Beds(5) 7,725 6,987 7,336 +5.3%
Tenants(7) 14 13 14 -
Developing plans to improve the social impact and environmental
sustainability of our portfolio
-- Target of net zero status by 2045 with an interim target to
reduce like-for-like carbon emissions by 50% by 2030.
-- Looking at refurbishing and recycling existing buildings to reduce carbon impact.
Dividend declaration
-- The Company declares its second quarter dividend of 1.6925
pence per ordinary share. This dividend is for the period from 1
April 2023 to 30 June 2023 and is payable on 20 September 2023 to
shareholders on the register on 18 August 2023. The ex-dividend
date will be 17 August 2023. This dividend will be a property
income distribution dividend ("PID"). This dividend is in line with
the aggregate total dividend target of 6.77 pence per share(4) for
the year ending 31 December 2023.
HALF YEAR RESULTS PRESENTATION
The Company presentation for investors and analysts will take
place at 10.00am (UK) today via a live webcast and conference
call.
To access the live webcast, please register in advance here:
https://brrmedia.news/IHR_HY23
The live conference call dial-in is available using the below
details:
Dial in numbers UK Toll Free: 0808 109 0700
+44 (0) 33 0551
UK & International: 0200
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Password to quote: Impact Healthcare Interim Results
Participants can type questions into the webcast question box or
ask questions verbally via the conference call.
The recording of the results presentation will be available
later in the day via the Company's website:
https://www.impactreit.uk/investors/reporting-centre/presentations/
FOR FURTHER INFORMATION, PLEASE CONTACT:
Impact Health Partners Via H/Advisors
LLP Maitland
Andrew Cowley
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Mahesh Patel
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David Yaldron
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Jefferies International
Limited 020 7029 8000
---------------
Tom Yeadon tyeadon@jefferies.com
----------------------------------------- ---------------
Ollie Nott onott@jefferies.com
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Winterflood Securities
Limited 020 3100 0000
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Neil Langford neil.langford@winterflood.com
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Joe Winkley joe.winkley@winterflood.com
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H/Advisors Maitland impacthealth-maitland@h-advisors.global
(Communications advisor)
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James Benjamin 07747 113 930
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Rachel Cohen 020 7379 5151
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The Company's LEI is 213800AX3FHPMJL4IJ53.
Further information on Impact Healthcare REIT plc is available
at www.impactreit.uk .
NOTES:
Impact Healthcare REIT plc is a specialist and responsible owner
of care homes and other healthcare properties across the UK.
Elderly care is an essential service and demand for it is high and
continues to grow as the UK's population gets older. We work with
our tenants so we can grow together and help them care for more
people, while continuing to improve our homes for their
residents.
We take a long-term view and look to generate secure and growing
income. This has allowed us to provide our shareholders with
attractive and rising dividends and the potential for capital
growth.
The target total dividend for the year ending 31 December 2023
is 6.77 pence per share(4) , a 3.5% increase over the 6.54 pence in
dividends paid per ordinary share for the year ended 31 December
2022.
The Group's Ordinary Shares were admitted to trading on the main
market of the London Stock Exchange, premium segment, on 8 February
2019. The Company is a constituent of the FTSE EPRA/NAREIT
index.
Notes
1 This assumes the extensions of the NatWest facility have not
been exercised, including these the weighted average term of debt
facilities would be 7.2 years .
2 Excludes one new home in build-up and three turn-around assets
which have not reached maturity.
3 Adjusted rent cover excludes seven turnaround homes which were
re-tenanted in May 2023 and one new home in build-up. These were
also excluded in the quoted comparative adjusted rent covers.
4 This is a target only and not a profit forecast. There can be
no assurance that the target will be met and it should not be taken
as an indicator of the Company's expected or actual results.
5 This relates to the property portfolio along with property
portfolios that have been invested in via loans to operators with
an option for the Group to acquire. Bed numbers do not include
those that are under construction.
6 Contracted rent includes all post-tax income from investment
in properties, whether generated from rental income or post-tax
interest income.
7 Including Croftwood and Minster, which are both part of the
Minster Care Group, and Melrose Holdings Limited which is an
affiliate of the Minister Care Group.
Our purpose
To deliver an attractive risk-adjusted return to shareholders by
working with tenants to provide quality, affordable and sustainable
care homes.
Our values
Our core values are to:
-- focus on the long-term sustainability of our business;
-- invest for lasting positive social impact;
-- act openly and transparently with all our stakeholders;
-- be a dependable partner who's trusted to deliver; and
-- combine the strengths of a listed company and entrepreneurship.
Our business model
Our business model is to own and invest in a high-quality,
resilient and diversi ed portfolio of care homes. We choose tenants
who seek to provide high-quality care and work in long-term
partnership with them to grow, create value and deliver lasting
social impact. In return, we receive predictable, sustainable and
in ation-linked rental income, which enables us to target a
progressive and covered dividend.
CHAIRMAN'S STATEMENT
I am delighted to have taken over as Chairman, succeeding Rupert
Barclay, who has so ably led the Company since its listing in
2017.
We are a real estate company, but one that is deeply immersed in
the social infrastructure of this country. Care for vulnerable
adults, especially older people, is a vital part of both the NHS
and social care. Our business model works by ensuring that our rent
levels are affordable to both care home operators and ultimately
the residents. Around 70% of residents in our homes are funded by
local authorities or the NHS, so rent must be affordable within
their constraints as well.
Responsibility for the quality of care and maintenance of homes
lies with the care home operators. However, we set standards and
monitor both carefully as responsible landlords in the care
sector.
Growth
The UK has a growing, ageing population. The demand for care
home beds is therefore rising. There is also a growing realisation
that a key way to take the strain off hospital beds would be to
provide more care home facilities and step down care. However, the
supply of care homes is fairly static. New build care homes are
expensive, usually in excess of GBP200,000 per bed, compared to
about GBP70,000 for older, early generation homes. Residents' fees
therefore have to be much higher for new build homes than for
existing homes. The number of residents prepared and able to pay
those higher fees is limited and so this puts a severe constraint
on new care homes being built. The state-funded sector, in
particular, is reluctant to raise fees to these levels.
The second constraint on the sector is the current high interest
rates. With 20-year gilt rates now around 4.5%, the gap has fallen
significantly against typical sector rental yields of 6%. This is a
key reason why healthcare REIT share prices have fallen below net
asset value, although healthcare has suffered less than other REIT
sectors.
This explains why Impact has been very careful in its investment
plans and focusses on purchasing existing homes. In the first half
of 2023, we completed the acquisition of six homes for GBP56
million on a net initial yield of 7%, 20% of the total cost was
funded by new shares issued to the vendors at 116.62 pence per
share (the 30 September 2022 NAV). Now managed by one of our
existing tenants, Welford Healthcare, these homes are already
proving successful.
At the beginning of the year, we also sold one non-core care
home for GBP1.25 million, in line with its latest valuation.
We now own 140 buildings(1) , independently valued at GBP638.2
million as at 30 June 2023, a 12.2% increase from GBP568.8 million
at last year-end. On a like-for-like basis the portfolio value
increased by 2.4% (GBP13.3 million) in the first half of this year,
driven mainly by inflation-linked rental uplifts. Our 140 buildings
offer 7,725 beds(1) , with an average size of 55 beds per home.
There are an estimated 465,000 beds for elderly care in the UK, so
we now own 1.7% of a highly fragmented market.
Affordability
We endeavour to ensure our rents are affordable by:
-- Careful selection of tenants who provide quality and efficient residential care; and
-- Initially setting rents at sustainable levels and then
increasing them only with inflation, generally with a minimum 2% pa
and maximum 4% pa increase.
The majority of our tenants have emerged successfully from the
pandemic and subsequent economic downturn, having shown great
resilience. Our annual average adjusted rent cover to 30 June 2023
is a healthy 1.8 times(2) , similar to recent years and to before
the pandemic. We have taken action this year to replace our one
tenant who got into significant difficulties. Despite this, we
collected 98% of the rent due in the period and had zero voids.
Quality
The quality of care, provided by our tenants to their residents,
is monitored by regulators including the Care Quality Commission
("CQC") in England and Care Inspectorate ("CI") in Scotland. We
monitor these inspections closely and, where appropriate, discuss
the outcomes with our tenants and their plans to respond to any
recommendations.
We benchmark the rating provided by the inspectors against the
industry average for care homes of a similar size and service and
we are performing in line with the industry average with 80% of our
homes good or outstanding against an industry average of 79%.
Sustainability
We published our first Impact Assessment prepared by The Good
Economy to assess and measure the positive social impact that we
have on both individual people and communities. The report is
available on the Company's website.
We continue to develop plans to improve the social impact and
environmental sustainability of our portfolio. Having reviewed the
environmental performance of all our homes, we set ourselves a
target of net zero status by 2045 with an interim target to reduce
like-for-like carbon emissions by 50% by 2030. We are now working
on our implementation plan to invest in sustainability measures to
meet these goals and position us well to meet any further update to
the Minimum Energy Efficiency Standards ("MEES").
Financial performance (unaudited to 30 June 2023)
Rent increases drove a 2.4% increase in like-for-like investment
property value, which together with stable rental yields, profit
and cash flow increased total NAV by 5.6% to GBP470.9 million. We
issued shares to part fund the acquisition of six care homes, so
the NAV per share rose more slowly, by 3.2% to 113.64 pence.
First half valuation growth was lower this year than last, which
meant that earnings per share ("EPS") fell by 8% to 6.66 pence per
share (basic and diluted). However, we think that it is more
helpful to look at adjusted EPS, which excludes non-cash items,
such as revaluations, and one-off costs. This was stable at 3.69
pence per share (H1 2022: 3.66 pence per share).
The Company has set a dividend target for this year of 6.77
pence per share(3) , up 3.5% on 2022. We have already declared two
dividends for the first two quarters of the year of 1.6925 pence
each, in line with that target. We aim to deliver a covered
dividend (i.e. not paying out more in dividends than the Company's
adjusted earnings). In the first half of 2023, dividends declared
were 122% covered by our EPRA EPS and 109% by adjusted EPS.
Our total accounting return for the six months to 30 June 2023
was 6.17% (not annualised).
Financial resources
The Group has GBP250 million of committed debt facilities with a
weighted average term of 6.8 years(4) , excluding extension
options. Our drawn debt as at 30 June 2023 was GBP190.8 million,
giving us a gross LTV of 28.5% and an EPRA LTV of 27.6%. As part of
repaying the Metro facility, a hedge which capped the interest rate
on GBP25 million expired, meaning that as at 30 June 2023 66% of
the Group's drawn debt was fixed or hedged. We are considering
various options to increase that level of hedging.
Governance
The Company has a strong and independent board, comprising the
Chairman, and four other non-executive directors, all of whom are
independent and 50% are female.
The Group is managed on behalf of the board by our Investment
manager, Impact Health Partners LLP ("the IM"). The board believes
that the IM delivers a high-quality service that benefits all
stakeholders. It is particularly important to us that the IM works
closely with tenants so that we understand their businesses and we
are assured that our homes deliver a quality outcome for
residents.
The UK care home sector is vital to the health and well-being of
the country
There should be more recognition of the importance of the care
home sector to the health and well-being of this country. There are
nearly 0.5 million vulnerable people in care homes in the UK today.
The government needs to review how elderly peoples' residential
care is funded and how it can contribute to meet rising demand from
an aging population, release hospital beds and provide
post-operative care. This however will need also to address local
authority fee rates, which are too low to provide incentives for
the sector to build new homes and increase capacity. The private
sector wants to play its role in providing more elderly care, both
in making available buildings and capital (through REITs and other
property investment company structures) and offering quality care
and accommodation (through care home operators). We would like to
work with government to deliver and expand this promise.
Outlook
We aim to deliver an attractive risk-adjusted return to
shareholders by working with tenants to provide quality, affordable
and sustainable care homes. We are a long-term business and the
Group's resilient and defensive healthcare portfolio continues to
provide vital care-based infrastructure supporting vulnerable
elderly people across the UK.
Both the Board and the Investment Manager continue to believe
that we are well positioned to continue to deliver long-term
sustainable returns to shareholders. As the economy settles down
post the current inflationary surge and interest rates stabilise,
and as government sees the role that this sector can play in both
health and the economy, we believe that we will see more
opportunities for growth in the future. Indeed, we believe that
this growth will become essential to meet the future demographic
needs of our country.
Simon Laffin
Chairman
9 August 2023
1 This relates to the property portfolio along with property
portfolios that have been invested in via loans to operators with
an option for the Group to acquire. Bed numbers do not include
those that are under construction.
2 Adjusted rent cover excludes seven turnaround homes which were
re-tenanted in May 2023 and one new home in build-up. These were
also excluded in the quoted comparative adjusted rent covers.
3 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.
4 This assumes the extensions of the NatWest facility have not
been exercised, including these the weighted average term of debt
facilities would be 7.2 years.
INVESTMENT MANAGER'S REPORT
The robust performance in the first half of this year has been
delivered against a challenging macroeconomic backdrop, which has
been particularly testing for real estate as an asset class. In our
business, it would be difficult to think of a downside scenario
which was worse than a pandemic that was especially virulent for
elderly people. That is what our tenants had to deal with for two
years. The spike in inflation and consequent rapid rise in interest
rates over the past 18 months, while less deadly, has presented its
own challenges.
One of our principal aims as the Company's Investment Manager is
to build and maintain effective partnerships with the Group's
tenants. At the heart of these relationships are information flows.
We receive detailed and timely information from all tenants about
what is happening in the Group's buildings. From all this
information, one of the most important KPIs to assess the
underlying financial sustainability of the business is our tenants'
level of adjusted rent cover - their home-level, pre-tax and
pre-rent profitability divided by the amount of rent they owe the
Group. In 2019, the last year before the pandemic and spike in
inflation, the Group's average level of adjusted rent cover was 1.8
times(1) . During the stresses and strains of 2020-2022 it averaged
1.8 times. From the reporting received so far in 2023, it was 1.8
times(1) .
This stability is not accidental. Since founding the business
six years ago, we have always applied two principles. First, the
Group's leases must be inflation-linked and today 100% of its
leases are inflation-linked. Second, rent needs to be sustainable
over the long-fixed term of the Group's leases. This requires
careful tenant selection, setting the initial rent at a prudent
level and putting in place floors and caps on rent increases in
most of our leases to give our tenants some level of protection
against a spike in inflation such as we are now experiencing, while
in periods of low inflation providing the Group with progressive
rental uplifts.
Beneath these averages, tenant performance does vary and one of
our smaller tenants did stop paying rent at the beginning of 2023.
This meant that, while we had collected 100% of the rent due from
our inception in 2017 to the end of 2022, in the first half of 2023
we only collected 98% of the rent due. Our wider tenant performance
and how the Investment Manager worked to replace this
non-performing tenant is discussed in more detail below.
Resilient tenant performance
There are three key drivers of care providers' financial
performance:
-- their level of occupancy;
-- the fees they charge for the care they provide; and
-- the availability and cost of staff to provide care.
During 2022, the first two drivers were positive, while the
third was negative. During the year average tenant occupancy rose
from 83.1% in January, to 86.6% in December(2) . Fee growth was
strong, with average weekly fees charged by our tenants for the
care they provide rising by 12.6% in the 12 months to 31 December
2022. Staff costs rose by less, at 9.5%, which was positive as it
meant care staff were being better paid, but the pay rises were
affordable as they were lower than fee growth. However, the
underlying problem most of our tenants were dealing with last year
was finding and retaining permanent staff. As a result, their use
of temporary staff increased. Our tenants' spending on agency staff
averaged 9% of their revenues during 2022.
In the first six months of 2023, these trends rebalanced.
Occupancy was broadly stable, rising from 86.6% at the start of the
year, to 88.3% at the end of June(2) . This means it still has
2%-3% to go before reaching normal, pre-COVID levels.
Occupancy remaining broadly stable in part reflects the fact
that tenants, rather than discounting fees to fill remaining empty
beds, were passing inflationary pressures through in the fees they
charge. Their fee growth accelerated in the first six months of
2023 with average weekly fees rising 14.8% in the 12 months to 30
June 2023.
Encouragingly, there were also clear signs that tenants were
getting their staffing issues under control as well, with their
spending on agency staff falling to an average of 6% of their
revenues during the first half of 2023. With our largest tenants,
we can track staff hours worked as well as staff cost, and can see
that during the past 18 months, during a challenging period to
attract and keep staff, tenants have not been cutting back on
staffing. Staff hours worked per occupied bed were stable at 35
hours a week.
There have been other inflationary pressures on the Group's
tenants. Food costs have risen, but have remained constant as a
percentage of tenant revenues at 4%. Utility costs rose from an
average of 2.5% of tenant revenues in 2021, to 3.7% in the fourth
quarter of 2022, and then rose further to 4.1% in the first half of
2023. However, those costs are now falling, and tenants expect them
to go back to more normal levels in the second half of 2023. The
majority of the Group's tenants have no bank debt, so are not
directly exposed to the rise in interest rates.
Against this generally resilient backdrop, one tenant,
Silverline Group, did get into difficulties and did not pay the
rent due in advance in January 2023. At the time, it rented seven
homes from the Group (four in Scotland and three in Yorkshire) and
owed GBP1.6 million of rent per annum. The Investment Manager did a
detailed review of what had caused under-performance at these homes
and came to the conclusion that to resolve the issues it would be
in the best interests of all stakeholders to replace Silverline as
their operator. We ran a competitive process to appoint a new
operator, which culminated in replacing Silverline with Minster
Care, an existing tenant of the Group, at the beginning of June
2023. Delivering a turnaround is rarely quick or easy. We will
report back later in the year on progress made at these homes. The
rental default from Silverline will temporarily reduce the level of
rent received by the Group. Whilst this reduction will be partly
mitigated by rental deposits, we anticipate the total reduction
versus the Company's original budget for 2023 to amount to around
GBP1 million.
Investing for accretive growth
Our acquisition of six high quality care homes on attractive
terms and sale of one, meant that the Group owned 140 properties
with 7,725 beds, up from 135 and 7,336 respectively at 31 December
2022(3) .
These investments, combined with rent increases received during
the period, helped to grow our contracted rent roll(4) by 11.6%
from GBP43.1 million on 31 December 2022, to GBP48.1 million on 30
June 2023. The annual rent review of 90 homes fell during the
period, with their contracted rent rising by GBP1.1 million, an
increase of 4.0%, contributing to the overall 11.6% increase.
Value-enhancing asset management
Well-delivered asset management has the potential to create
value for shareholders and tenants, while offering a higher quality
environment for the homes' residents and staff. In the first half
of the year, we made good progress towards completing significant
works at Fairview House and Court in Bristol, where we have
invested GBP3.2 million in linking the two buildings, adding new
bedrooms and enhancing the building's environmental
performance.
The expanded and modernised Fairview will offer a better
environment for its residents and our tenant's staff. When we
bought the home in 2018, the rent was GBP356,000. After five years
of inflation-linked rent increases and rentalising our capex in the
home, we have grown the annual rent to GBP690,000.
During the first half of 2023 we have committed GBP9.8 million
to asset management projects at four homes in Wiltshire, North
Yorkshire, Cornwall and Cheshire. At Mavern House in Wiltshire, we
have committed GBP2.0 million which will add eight bedrooms to what
is now a 47-bed home and will lift its EPC performance from C to B.
At Elm House in Cheshire we have identified a GBP3.0 million
extension for 21 high specification new bedrooms with en-suite wet
rooms, upgrade the bathrooms of five bedrooms in the existing
building and improve its EPC performance from C to B. We have
committed to a similar project at Amberley in Cornwall, to invest
GBP2.5 million to deliver 16 new bedrooms with wet room bathrooms,
upgrade 10 existing bedrooms and bathrooms and improve the EPC
rating from C to B. Finally, at Yew Tree in North Yorkshire we have
committed GBP2.3 million to deliver a new 25-bed development in a
standalone building on land we already own, which will take the
total number of beds available at Yew Tree to 101.
The Group currently has 24 such projects at various stages in
its pipeline with anticipated capital funding of up to GBP35
million over the next two to three years. The capital committed to
them will be rentalised at an average yield of 8%. Despite the rise
in the cost of capital, we are confident that asset management
opportunities will deliver projects, which are accretive to
earnings and also help us to deliver on our sustainability
objectives by making our buildings more energy efficient and
improving their social impact credentials. Looking forward, we are
also actively considering how best to refurbish and recycle
existing buildings, thus producing less embedded carbon than would
be the case with new build development opportunities, as part of
our net zero strategy.
In addition to these capital investment projects, under the
terms of the leases, tenants are responsible for maintaining the
Group's buildings in a good state of repair through regular repair
and maintenance programmes. We monitor each tenant's expenditure on
repair and maintenance and support our tenants in its
implementation through regular physical inspections and on-site
progress meetings.
Further increasing our portfolio valuation
The portfolio is independently valued by Cushman & Wakefield
each quarter in accordance with the RICS Valuation - Professional
Standard (the "Red Book").
As at 30 June 2023, the portfolio investments was valued at
GBP638.2 million, a 12.2% increase of GBP69.4 million from the
valuation of GBP568.8 million at 31 December 2022. Our investments
by way of a loan were converted to direct investments in the period
through the exercise of the call options. The components of this
valuation increase were as follows:
-- Acquisitions: GBP56.0 million (81% of valuation increase in the period);
-- Acquisition costs capitalised: GBP1.1 million (2% of valuation increase in the period);
-- Capital improvements: GBP0.9 million (1% of valuation increase in the period);
-- Valuation uplift: GBP12.6 million (18% of valuation increase in the period); and
-- Disposals: GBP(1.2) million (2% of valuation decrease in the period).
Responsible and sustainable business
The homes in our portfolio provide a vital service for some of
the UK's most vulnerable people who are unable to live
independently. As a long-term investor in the sector, we are
committed to investing responsibly and in 2023 the Investment
Manager obtained signatory status to the UN Principles of
Responsible Investment and is preparing its initial transparency
report.
Following a review of EPCs and energy consumption data, we have
produced our strategy for reducing the carbon emissions from the
homes in our portfolio and continue to work collaboratively with
our tenants to achieve this. We have set ourselves a target of 2045
for net zero status and will review our progress against our
interim milestones at 2025 and 2030. We will ensure our investment
programme is delivered in a planned and controlled manner. An
example of this programme in action is the asset management project
at Mavern House in Wiltshire mentioned above. In addition to
building a new eight-bedroom extension, we are installing air
source heat pumps and LED lighting throughout the home. In addition
to improving the environmental sustainability of the building,
these measures will, over the long term, be economically beneficial
to our tenants. We are also continuing work on improving the EPC
ratings across the portfolio and preparing asset level plans to
invest in sustainability measures.
Resilient financial results
Total net rental income recognised for the period increased 16%
to GBP22.7 million (H1 2022: GBP19.6 million). Under IFRS, the
Group must recognise some rent in advance of receipt, reflecting
the minimum uplift in rents over the term of the leases, on a
straight-line basis and the one-off write-off of rent in the period
prior to the re-tenanting of the Silverline portfolio. Cash rental
income received in the period increased 17% to GBP19.8 million (H1
2022: GBP16.9 million). This is expected to increase further in the
second half of the year with the conversion of our loan
investments, which currently generate interest income, to direct
investments with new 30 or 35-year leases signed with the
tenants.
Administrative and other expenses totalled GBP3.7 million (H1
2022: GBP3.2 million), contributing to a total expense ratio of
1.61% for the period (H1 2022: 1.51%), a decrease on the full year
average for 2022 of 1.67%. The EPRA cost ratio for the period was
16.0%, down from 16.2% in H1 2022 and 16.6% for the full year 2022.
Revenue used for this calculation, excludes the income received on
loans to operators for the purchase of property portfolios where
the Group has an option to acquire, including this additional
income and excluding the one-off write-off of rent in the period,
the adjusted cost ratio is 14.0% versus an adjusted cost ratio of
15.4% in 2022. Finance costs were GBP4.4 million (H1 2022: GBP2.2
million). Interest income was GBP3.7 million (H1 2022: GBP1.8
million), reflecting the property investments made via loans to two
operators discussed above. The change in fair value of investment
properties was GBP9.3 million (H1 2022: GBP10.6 million),
contributing to profit before tax increasing 1.1% to GBP27.6
million (H1 2022: GBP27.3 million).
Earnings per share ("EPS") for the period was 6.66 pence per
share (H1 2022: 7.26 pence per share) and EPRA EPS was 4.15 pence
per share (H1 2022: 4.22 pence per share). Adjusted EPS, which
strips out the non-cash items, was 3.69 pence per share (H1 2022:
3.66 pence per share).
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 7 to the financial statements.
Progressive dividend, fully covered
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.
The Company has declared two quarterly dividends of 1.6925 pence
each in respect of the period. Both dividends were Property Income
Distributions. The details of these dividends were as follows:
Quarter to Declared Paid Cash cost GBP'm
31 March 2023 25 April 2023 19 May 2023 7.0
--------------- -------------- ----------------
20 September
30 June 2023 9 August 2023 2023 7.0
--------------- -------------- ----------------
Total 14.0
----------------
Dividends declared for the period were 122% covered by EPRA EPS
and 109% covered by Adjusted EPS.
S trong balance sheet
We continue to take a conservative approach to managing the
Group's balance sheet. At 30 June 2023, the Group had four debt
facilities totalling GBP250.0 million, of which GBP190.8 million
was drawn (31 December 2022: GBP142.3 million), giving a gross LTV
of 28.5% (31 December 2022: 23.9%) and an EPRA LTV of 27.6% (31
December 2022: 22.6%). As at 30 June 2023, the weighted average
term of debt facilities (excluding options to extend) was 6.8
years(5) . 66% of our drawn debt is fixed or hedged against
interest rate rises (50% of total debt facilities as at 30 June
2023); 39% as a result of putting in place long-term fixed-rate
debt and 26% from an interest rate cap which expires in January
2025.
The average monthly interest cost of our drawn debt, after
hedging, was GBP680,000 in the first half, when SONIA rose from
2.8% on 3 January, to 4.9% on 30 June 2023. It had risen further to
5.4% by early August. At that level, the interest cost of our drawn
debt will rise to GBP820,000 a month. Our average cost of drawn
debt at 30 June 2023 was 4.85% and it increases by 17 bps for every
further 50 bps increase in SONIA with our current level of
hedging.
As part of the acquisition of a portfolio in January 2023, the
Group issued 9,603,841 new shares at a price of 116.62 pence per
share. In June, it repaid the final GBP15 million of a loan
provided by Metro Bank, which was the Group's most expensive debt
with a margin of 265 basis points. That debt was replaced through
increasing the NatWest Bank revolving credit facility by GBP24
million, making the total facility GBP50 million with a margin of
200 basis points above SONIA. We also extended the maturity of the
NatWest facility by four years, from 2024 to 2028 and agreed a
reduction in its interest rate covenant. At the same time, we
agreed to extend the maturity of the GBP75 million revolving credit
facility provided by HSBC by one year to 2026 and agreed a
reduction of its interest rate covenant.
As at 30 June 2023, we had GBP59.2 million of undrawn debt
facilities and GBP22.1 million cash, leaving headroom to finance
all committed contingent liabilities for deferred payments and
capital expenditure, as well as to pursue a selected number of
acquisition opportunities.
Impact Health Partners LLP
Investment Manager
9 August 2023
1 Adjusted rent cover excludes seven turnaround homes which were
re-tenanted in May 2023 and one new home in build-up. These were
also excluded in the quoted comparative adjusted rent covers.
2 Excludes one new home in build-up and three turn-around assets
which have not reached maturity.
3 This relates to the property portfolio along with property
portfolios that have been invested in via loans to operators with
an option for the Group to acquire. Bed numbers do not include
those that are under construction.
4 Contracted rent includes all post-tax income from investment
in properties, whether generated from rental income or post-tax
interest income.
5 This assumes the extensions of the NatWest facility have not
been exercised, including these the weighted average term of debt
facilities would be 7.2 years.
KEY PERFORMANCE INDICATORS
The Group uses the following measures to assess its strategic
progress.
1. Total Accounting Return ("TAR")
6.17% for the period to 30 June 2022 (-4 bps on H1 2022)
Definition : The change in the net asset value ("NAV") over the
period, plus dividends paid in the period, as a percentage of NAV
at the start of the period.
2. Dividends
3.39p per share for the period to 30 June 2023 (+3.5% on H1
2022)
Definition : Dividends declared in relation to the period.
3. EPRA earnings per share
4.15p per share for the period to 30 June 2023 (-1.7% on H1
2022)
Definition : Earnings from operational activities. The EPRA
calculation removes revaluation movements in the investment
portfolio and interest rate derivatives but includes rent
smoothing.
4. EPRA 'topped-up' Net Initial Yield ("NIY")
6.95% at 30 June 2023 (-3 bps on 2022)
Definition : Annualised rental income based on the cash rents
passing on the balance sheet date, less non-recoverable property
operating expenses, divided 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.
5. NAV per share
113.64p per share at 30 June 2023 (+3.2% on 2022)
Definition : Net asset value based on the properties and other
investment interests at fair value.
6. Gross Loan to Value ("LTV")
28.5% as at 30 June 2023 (+467 bps on 2022)
Definition : The proportion of our gross asset value that is
funded by borrowings.
7. Net Loan to Value ("EPRA LTV")
27.6% as at 30 June 2023 (+499 bps on 2022)
Definition: The proportion of our investment portfolio's value
that is funded by net debt.
8. Weighted Average Unexpired Lease Term ("WAULT")
21.2 years as at 30 June 2023 (+1.5 years on 2022)
Definition : The average unexpired lease term of the property
portfolio, weighted by annual passing rents.
9. Total Expense Ratio ("TER")
1.61% as at 30 June 2023 (-6 bps on 2022)
Definition : Total recurring administration costs as a
percentage of average net asset value throughout the period. EPRA
cost ratio was 16.0%, adjusted to include the income on loans to
operators for the purchase of property portfolios where the Group
has an option to acquire, including this additional income and
excluding one-off write off of rent in the period, gives an
adjusted cost ratio of 14.0%. (2022: 15.4%).
10. Last 12 months' adjusted rent cover
1.82 times as at 30 June 2023 (+1.1% on 2022
Definition : Rent cover is the measure of EBITDARM divided by
rent for the year. EBITDARM is a measure of care home level EBITDA
before rent and tenants' central management costs. Adjusted rent
cover excludes seven turnaround homes which were re-tenanted in May
2023 and one new home in build-up stage.
PRINCIPAL RISKS AND UNCERTAINTIES
The board has been regularly evaluating the performance of and
risks to the business arising from the current high inflation, and
consequential economic uncertainty. The principal risks and
uncertainties continue to be those outlined on pages 52-57 of our
2022 Annual report dated 27 March 2023 and the board considers that
these will remain valid for the remainder of the year.
The principal risks are summarised below and include updates
since the annual report from our evaluation in the period.
Changes to government social care policy - Our business provides
premises in which our tenant operators provide care for vulnerable
people. Government has a responsibility to ensure the delivery of
affordable care for all that need it. Changes in government
legislation and funding affect the market in which we operate, by
changing requirements that may affect revenue or costs. This could
reduce our tenants' ability to pay their rent and result in changes
to valuations of our properties.
Infectious diseases - Significant outbreaks of infectious
diseases, in particular pandemics such as COVID-19, can have
long-lasting and far-reaching effects across all businesses.
General economic conditions - The economy is in a period of high
inflation as a result of several factors including staffing
shortages, supply chain issues and heightened gas and electricity
prices. Interest rates have risen sharply and are not expected to
return to the levels experienced for the past 15 years. This
combination of factors is having a continued effect on global
economies and supply chains. Higher interest rates have hit
property valuations across all sectors in the UK including
healthcare. If they continue to rise, they could put further
pressure on valuations and bank funding financial covenants.
Interim update - There remains continued uncertainty surrounding
the level of inflation within the UK and further interest rate
rises are expected to help bring this towards target levels. Our
tenants' performance overall remains strong and the Group is
looking to manage the rising interest rates predicted by the use of
derivatives.
Weakening care market - Several factors may affect the market
for care for older people, including: adverse conditions in the
healthcare sector; local authority funders amending their payment
terms, affecting our tenants' revenues; increased regulatory
responsibility and associated costs for our tenants that are not
offset by an increase in fees; and competition or alternative forms
of care provision.
Significant tenant default - The default of tenants or failing
to act quickly and decisively when confronted with a failing
tenant, would affect the value of our homes and, if significant,
our ability to pay dividends to our shareholders and to meet our
financing obligations.
Interim update - We disclosed in our year-end report, one tenant
was in default with its rent payments from January 2023. We have
subsequently re tenanted this portfolio and 98% of rent due was
collected for the period. Rent cover across the Group remains
strong and we will continue to closely monitor tenant
performance.
Underinvestment in care homes - There is a risk that increased
investment is required to ensure the homes are compliant with
environmental regulations. This includes the expectation that
regulation will be put in place for all leased properties to be
English EPC C by 2027 and EPC B by 2030.
There is also a risk that insufficient investment is made and
homes become unattractive to residents.
Environmental regulation and impact of climate change -
Tightening environmental regulations increase the need for
investment or redevelopment of our portfolio and could 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.
Ability to meet our financing obligations - If we are unable to
operate within our debt covenants (primarily interest cover and LTV
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 SONIA and bank base rates. Any adverse movements
in these rates could significantly impair our profitability and
ability to pay dividends to shareholders.
Interim update - The Group has successfully increased the size
and term of its facility with NatWest and increased the term of its
facility with HSBC. It has also reduced the ICR covenant on both
facilities from 2.5x to 2.0x to ensure it can remain fully
compliant if the facility were fully drawn. 66% of the Group's
current drawn debt is hedged and the Group is exploring additional
hedging opportunities to increase this level.
Reliance on the Investment Manager - Our performance depends on
the Investment Manager's capabilities, the retention of its key
staff and its ability to deliver business continuity.
There is a risk of potential conflict of interest with the
Investment Manager and its initial tenant for the Seed
Portfolio
The approach to risk taken by the board is rigorous and
thorough. It ensures that the assessment of risk remains
appropriate and relevant.
DIRECTORS' RESPONSIBILITIES
The directors confirm that to the best of their knowledge, this
condensed set of financial statements has been prepared in
accordance with IAS 34 in conformity with the requirements of the
Companies Act 2006 and that the operating and financial review
contained within the Investment Manager's report includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8 of
the Disclosure Guidance and Transparency rules of the United
Kingdom's Financial Conduct Authority, namely:
-- an indication of important events that have occurred during
the first period of the financial year and their impact on the
condensed financial statements and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the first period of
the financial year and any material changes in the related party
transactions disclosed in the 2022 annual report as disclosed in
note 22.
During the half-year, Rupert Barclay was succeeded by Simon
Laffin as Chair of the board on 31 March 2023 and Paul Craig
stepped down from the Board at the AGM on 17 May 2023. Biographies
of each of the current directors are shown on page 75-77 in the
2022 annual report.
Shareholder information is as disclosed on the Impact Healthcare
REIT plc website.
For and on behalf of the board
Simon Laffin
Chairman
9 August 2023
Condensed consolidated statement of comprehensive income
Six months Six months
ended ended Year ended
31 December
30 June 2023 30 June 2022 2022
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
---------------------------- ------ -------------- -------------- --------------
Gross rental income 5 23,063 19,648 42,242
Bad debts written off 5 (350) - -
Insurance/service charge
income 5 421 387 704
Insurance/service charge
expense 5 (421) (387) (704)
Net rental Income 22,713 19,648 42,242
Administrative and other
expenses (3,681) (3,181) (7,009)
Profit/ (Loss) on disposal
of investment properties (16) - 130
---------------------------- ------ -------------- -------------- --------------
Operating profit before
changes in fair value 19,016 16,467 35,363
Changes in fair value
of put/call option - 527 (1,811)
Changes in fair value
of investment properties 9 9,340 10,646 (14,456)
---------------------------- ------ -------------- -------------- --------------
Operating profit 28,356 27,640 19,096
Finance income 3,656 1,831 3,200
Finance expense (4,423) (2,176) (5,408)
---------------------------- ------ -------------- -------------- --------------
Profit before tax 27,589 27,295 16,888
Tax charge on profit
for the period/year 6 - - -
---------------------------- ------ -------------- -------------- --------------
27,589 27,295 16,888
Earnings per share
- basic and diluted
(pence) 7 6.66p 7.26p 4.33p
The results are derived from continuing operations during the
period/year.
Condensed consolidated statement of financial position
As at As at As at
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
----------------------------- ------ -------------- ------------- -------------
Non-current assets
Investment property 9 606,719 505,667 504,318
Interest rate derivatives 11 2,304 - -
Call option 12 - 527 -
Trade and other receivables 12 34,810 64,594 68,131
----------------------------- ------ -------------- ------------- -------------
Total non-current
assets 643,833 570,788 572,449
Current assets
Trade and other receivables 2,350 1,817 1,181
Cash and cash equivalents 22,053 22,050 22,531
Interest rate derivatives 11 - 342 363
Total current assets 24,403 24,209 24,075
Total assets 668,236 594,997 596,524
----------------------------- ------ -------------- ------------- -------------
Current liabilities
Borrowings 10 - (14,970) (14,814)
Trade and other payables (9,616) (10,074) (9,126)
Total current liabilities (9,616) (25,044) (23,940)
Non-current liabilities
Borrowings 10 (185,329) (119,253) (122,382)
Put option - - (1,811)
Trade and other payables (2,400) (2,570) (2,471)
----------------------------- ------ -------------- ------------- -------------
Total non-current
liabilities (187,729) (121,823) (126,664)
Total liabilities (197,345) (146,867) (150,604)
----------------------------- ------ -------------- ------------- -------------
Total net assets 470,891 448,130 445,920
----------------------------- ------ -------------- ------------- -------------
Equity
Share capital 13 4,144 3,857 4,048
Share premium reserve 14 376,716 344,400 365,642
Capital reduction reserve 24,077 24,077 24,077
Retained earnings 65,954 75,796 52,153
----------------------------- ------ -------------- ------------- -------------
Total equity 470,891 448,130 445,920
----------------------------- ------ -------------- ------------- -------------
Net Asset Value per
ordinary share (pence) 16 113.64p 116.18p 110.17p
Condensed consolidated statement of cash flows
Six months Six months
ended ended Year ended
30 June 31 December
2023 30 June 2022 2022
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
-------------------------------- ------ ------------- -------------- -------------
Cash flows from operating
activities
Profit for the period/year
(attributable to equity
shareholders) 27,589 27,295 16,888
Finance income (3,656) (1,831) (3,200)
Finance expense 4,423 2,176 5,408
Profit/ Loss on disposal
of investment properties 16 - (130)
Change in fair value
of call option - (527) 1,811
Changes in fair value
of investment properties 9 (9,340) (10,646) 14,456
-------------------------------- ------ ------------- -------------- -------------
Net cash flow before
working capital changes 19,032 16,467 35,233
-------------------------------- ------ ------------- -------------- -------------
Working capital changes
Increase in trade and
other receivables (3,086) (2,830) (5,952)
(Decrease)/increase in
trade and other payables 927 (948) 207
-------------------------------- ------ ------------- -------------- -------------
Net cash flow from operating
activities 16,873 12,689 29,488
-------------------------------- ------ ------------- -------------- -------------
Investing activities
Purchase of investment
properties 9 (44,800) (47,367) (69,217)
Proceeds on sale of investment
property 9 1,234 - 2,625
Acquisition costs paid
in period (1,555) (431) (2,661)
Capital improvements
paid in period 9 (857) (4,702) (11,195)
Loan advanced to operator (971) - -
Loan associated costs
paid in period - (466) (478)
Interest received 1,872 1,715 3,270
-------------------------------- ------ ------------- -------------- -------------
Net cash flow from investing
activities (45,077) (51,251) (77,656)
-------------------------------- ------ ------------- -------------- -------------
Financing activities
Proceeds from issue of
ordinary share capital 13,14 - 40,000 62,269
Issue costs of ordinary
Share capital 14 (30) (921) (1,757)
Bank borrowings drawn 10 68,500 68,070 85,074
Bank borrowings repaid 10 (20,000) (45,000) (57,362)
Loan arrangement fees
paid (1,596) (736) (1,265)
Loan commitment fees
paid (220) (290) (628)
Interest paid on bank
borrowings (4,108) (1,284) (3,281)
Interest payments received
on interest rate derivatives 449 - 112
Interest rate derivative
purchased 11 (1,481) - -
Dividends paid to equity
holders 8 (13,788) (12,488) (25,724)
-------------------------------- ------ ------------- -------------- -------------
Net cash flow from financing
activities 27,726 47,351 57,438
-------------------------------- ------ ------------- -------------- -------------
Net increase/(decrease)
in cash and cash equivalents
for the period (478) 8,789 9,270
Cash and cash equivalents
at the start of the period 22,531 13,261 13,261
-------------------------------- ------ ------------- -------------- -------------
Cash and cash equivalents
at the end of the period 22,053 22,050 22,531
-------------------------------- ------ ------------- -------------- -------------
Condensed consolidated statement of changes in equity
Six months ended 30 June 2023 (unaudited)
Share Share Capital Retained Total
capital premium reduction earnings (unaudited)
(unaudited) (unaudited) reserve (unaudited)
(unaudited)
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ ------------- ------------- ------------- ------------- -------------
1 January
2023 4,048 365,642 24,077 52,153 445,920
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Total comprehensive
income - - - 27,589 27,589
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Transactions
with owners
Dividends paid 8 - - - (13,788) (13,788)
Share issues 13,14 96 11,104 - - 11,200
Share issue
costs 14 - (30) - - (30)
--------------------- ------ ------------- ------------- ------------- ------------- -------------
30 June 2023 4,144 376,716 24,077 65,954 470,891
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Six months ended 30 June 2022 (unaudited)
Share Share Capital Retained Total
capital premium reduction earnings (unaudited)
(unaudited) (unaudited) reserve (unaudited)
(unaudited)
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ ------------- ------------- ------------- ------------- -------------
1 January
2022 3,506 305,672 24,077 60,989 394,244
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Total comprehensive
income - - - 27,295 27,295
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Transactions
with owners
Dividends paid 8 - - - (12,488) (12,488)
Share issues 13,14 351 39,649 - - 40,000
Share issue
costs 14 - (921) - - (921)
--------------------- ------ ------------- ------------- ------------- ------------- -------------
30 June 2022 3,857 344,400 24,077 75,796 448,130
--------------------- ------ ------------- ------------- ------------- ------------- -------------
For the year ended 31 December 2022 (audited)
Capital
Share Share reduction Retained
capital premium reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ --------- --------- ----------- ---------- ---------
1 January
2022 3,506 305,672 24,077 60,989 394,244
--------------------- ------ --------- --------- ----------- ---------- ---------
Total comprehensive
income - - - 16,888 16,888
--------------------- ------ --------- --------- ----------- ---------- ---------
Transactions
with owners
Dividends paid 8 - - - (25,724) (25,724)
Share issue 13,14 542 61,727 - - 62,269
Share issue
costs 14 - (1,757) - - (1,757)
--------------------- ------ --------- --------- ----------- ---------- ---------
31 December
2022 4,048 365,642 24,077 52,153 445,920
--------------------- ------ --------- --------- ----------- ---------- ---------
Notes to the condensed consolidated financial statements
1. Basis of preparation
General information
These unaudited condensed consolidated financial statements for
the six-month period ended 30 June 2023, are prepared in accordance
with UK adopted International accounting standards and IAS 34
"Interim Financial Reporting", including the comparative
information for the six-month period ended 30 June 2022 and for the
year ended 31 December 2022. They do not include all of the
information required for full annual financial statements and
should be read in conjunction with the 2022 annual report and
accounts, which were prepared in accordance with UK adopted
International accounting standards.
The condensed consolidated financial statements have been
prepared on a historical cost basis, except for investment
properties and derivative financial instruments which have been
measured at fair value.
The Group has chosen to adopt EPRA best practice 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.
The condensed consolidated financial statements presented herein
for the six months to 30 June 2023 do not constitute full statutory
accounts within the meaning of section 434 of the Companies Act
2006. The Group's annual report and accounts for the year to 31
December 2022 have been delivered to the Registrar of Companies.
The Group's Independent Auditor's report on those accounts was
unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report and did not contain a statement under section 498(2) or
498(3) of the Companies Act 2016.
Convention
The condensed 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
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 ongoing effect of the high inflationary environment and
rising interest rates have been considered by the directors. The
directors have reviewed the forecasts for the Group taking into
account the impact of increasing interest rates and rising costs,
as a result of inflation, on trading over the 12 months from the
date of signing this report. The forecasts have been assessed
against a range of possible downside outcomes incorporating
significantly lower levels of income and higher costs, 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 interim statements. The board is,
therefore, of the opinion that the going concern basis adopted in
the preparation of the interim 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 35 years with a
tenant-only option to extend for one or two periods of ten years.
At the inception of the lease, the directors 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 9.
Gains or losses arising from changes in the fair values are
included in the Condensed 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.
Put and call options
The fair value of the assets underlying the put and call
options, being the property portfolio to which they relate, are
measured in line with investment property, the fair value movement
is shown on the Consolidated statement of comprehensive income as
Changes in fair value of put/call option. During June 2023 the
put/call option was exercised and thus derecognised.
3. Summary of significant accounting policies
The accounting policies adopted in this report are consistent
with those applied in the Group's statutory accounts for the year
ended 31 December 2022 and are expected to be consistently applied
during the year ending 31 December 2023.
4. New standards issued
4.1 New standards issued with effect from 1 January 2023
No new standards have been applied that have had a material
effect on the financial position or performance of the Group.
4.2 New standards issued but not yet effective
There are no new standards issued but not yet effective that are
expected to have a material effect on the Group.
5. Property income
Six months Six months
ended ended Year ended
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------------- --- -------------- ------------- --------------
Rental income cash received
in the period/year 19,785 16,931 35,889
Rent received in advance
of recognition(1) 70 71 170
Rent recognised in advance
of receipt(2) 3,278 2,716 6,324
Rental lease incentive amortisation(3) (70) (70) (141)
--------------------------------------------- -------------- ------------- --------------
Gross rental income 23,063 19,648 42,242
--------------------------------------------- -------------- ------------- --------------
Bad debts written off(4) (350) - -
Insurance/service charge
income 421 387 704
Insurance/service charge
expense (421) (387) (704)
--------------------------------------------- -------------- ------------- --------------
Net rental income 22,713 19,648 42,242
1 This relates to movement in rent premiums received in prior
periods as well as any rent premiums received during the period/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 uplifts in rents over the term
of the lease on a straight-line basis.
3 Lease incentives relate to the amortisation of payments made
to tenants that are not part of any acquisition contractual
obligations. These payments are made in return for an increase
in rent.
4 Bad debts written off relates to rental arrears due from one
tenant who leased seven of the Group's properties, in the period
these properties were re-tenanted, see note 15 for further detail.
6. 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 period ended 30 June 2023 and year ended 31 December 2022,
the Group did not have any non-qualifying profits except interest
income.
7. 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.
Six months Six months
ended ended
Year ended
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------------------- --- -------------- ------------- -------------
Total comprehensive income
(attributable to shareholders) 27,589 27,295 16,888
Adjusted for:
- Revaluation movement (12,618) (13,363) 8,103
- Movement in lease incentive
debtor (70) (70) (141)
* Rental income arising from recognising rental
premiums and future guaranteed rent uplifts 3,348 2,787 6,494
------------------------------------------------------------ -------------- ------------- -------------
Change in fair value of investment
properties (9,340) (10,646) 14,456
Change in fair value of put
option - - 1,811
(Profit) / Loss on disposal
of investment property 16 - (130)
Change in fair value of interest
rate derivative (1,088) (248) (381)
Change in fair value of call
option - (527) -
------------------------------------------------------- --- -------------- ------------- -------------
EPRA earnings 17,177 15,874 32,644
Adjusted for:
Rental income arising from
recognising rental premiums
and future guaranteed rent
uplifts (3,348) (2,787) (6,494)
Profit / (Loss) on disposal
of investment property (16) - 130
Interest received on interest
rate cap 628 - 112
Amortisation of lease incentive(1) 70 70 141
Amortisation of loan arrangement
fees 757 593 1,205
Adjusted earnings 15,268 13,750 27,738
------------------------------------------------------------ -------------- ------------- -------------
Average number of ordinary
shares 413,943,690 375,845,314 390,058,661
------------------------------------------------------------ -------------- ------------- -------------
Earnings per share (pence)(2) 6.66p 7.26p 4.33p
EPRA basic and diluted earnings
per share (pence)(2) 4.15p 4.22p 8.37p
Adjusted basic and diluted
earnings per share (pence)(2) 3.69p 3.66p 7.11p
------------------------------------------------------------ -------------- ------------- -------------
1 Lease incentives relate to the amortisation of payments made
to tenants that are not part of any acquisition contractual obligations.
These payments are made in return for an increase in rent.
2 There is no difference between basic and diluted earnings per
share.
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, options to acquire
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 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 lease
incentives and loan arrangement fees. The metric also adjusts for
any one -- off items 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.
The board uses the adjusted earnings alongside the available
distributable reserves in its consideration and approval of
dividends.
8. Dividends
Dividend Six months Six months
rate ended ended
30 June 30 June 31 December
per share 2023 2022 2022
pence (unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ------------- ------------- ------------
Fourth interim dividend
for the period ended
31 December 2021 (ex
--dividend - 24 February
2022) 1.6025p - 6,181 6,181
First interim dividend
for the period ended
31 December 2022 (ex--dividend
- 5 May 2022) 1.6350p - 6,307 6,307
Second interim dividend
for the period ended
31 December 2022 (ex--dividend
- 25 August 2022) 1.6350p - - 6,618
Third interim dividend
for the period ended
31 December 2022 (ex--dividend
- 3 November 2022) 1.6350p - - 6,618
Fourth interim dividend
for the period ended
31 December 2022 (ex-dividend
- 24 February 2023) 1.6350p 6,775 - -
First interim dividend
for the period ended
31 December 2023 (ex-dividend
- 4 May 2023) 1.6925p 7,013 - -
Total dividends paid 13,788 12,488 25,724
--------------------------------- ----------- ------------- ------------- ------------
Total dividends paid
in respect of the period/year 1.6925p 1.6350p 4.9050p
Total dividends unpaid
but declared in respect
of the period/year 1.6925p 1.6350p 1.6350p
--------------------------------- ----------- ------------- ------------- ------------
Total dividends declared
in respect of the period/year
- per share 3.385p 3.270p 6.54p
--------------------------------- ----------- ------------- ------------- ------------
On 31 January 2023 the Company declared an interim dividend of
1.6350 pence per share for the period from 1 October 2022 to 31
December 2022 and was paid in February 2023.
On 25 April 2023 the Company declared an interim dividend of
1.6925 pence per ordinary share for the period from 1 January 2023
to 31 March 2023 and was paid in May 2023.
On 9 August 2023, the Company declared an interim dividend of
1.6925 pence per share for the period from 1 April 2023 to 30 June
2023 payable in September 2023.
9. 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 period, 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/period 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 As at
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------- --- ------------- ------------- --------------
Opening value 532,479 459,442 459,442
Property additions(2) 91,688 47,367 69,217
Property disposals(1) (1,250) - (2,495)
Acquisition costs capitalised 1,765 1,177 2,591
Capital improvements 857 8,842 11,826
Revaluation movement 12,618 13,363 (8,102)
--------------------------------------- ------------- ------------- --------------
Closing value per independent
valuation report 638,157 530,191 532,479
Lease incentive debtor (2,449) (2,590) (2,519)
Guaranteed rent reviews
debtor (31,390) (24,504) (28,112)
Rent premium creditor 2,401 2,570 2,470
--------------------------------------- ------------- ------------- --------------
Closing fair value per
Condensed consolidation
statement of financial position 606,719 505,667 504,318
--------------------------------------- ------------- ------------- --------------
1 In period 30 June 2023 the carrying value of disposals was
GBP1,250,000 (2022: GBP2,495,000), this combined with the loss
(2022: profit) on disposal of GBP16,000 (2022: GBP130,000) makes
up the total net proceeds shown in the Condensed consolidated
statement of cash flows.
2 Includes carrying value of the loan receivable of GBP37.5
million and associated put option, which was valued at GBP1.8
million and exercised in June 2023 when the properties were
acquired and hence the put option and loan were derecognised.
Along with GBP56.0 million for an acquisition made in January
2023 of which GBP11.2 million was paid via the issuance of shares
and the remaining GBP44.8 million funded in cash.
Change in fair value of investment properties
The following elements are included in the change in fair value
of investment properties reported in the condensed consolidated
statements:
Six months Six months
ended ended
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------ --- -------------- ------------- ------------
Revaluation movement 12,618 13,363 (8,102)
Movement in lease incentive
debtor(1) 70 70 141
Rental income arising from
recognising rental premiums
and future guaranteed rent
uplifts (3,348) (2,787) (6,495)
----------------------------------- -------------- ------------- ------------
Change in fair value of
investment properties 9,340 10,646 (14,456)
----------------------------------- -------------- ------------- ------------
1 Lease incentives relate to the amortisation of payments made
to tenants that are not part of any acquisition contractual
obligations. These payments are made in return for an increase
in rent.
10. Borrowings
A summary of the borrowings drawn in the period are shown
below:
As at As at As at
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------- --- ------------- ------------- --------------
At the beginning of the
period/year 142,260 114,548 114,548
Borrowings drawn in the
period/year 68,500 68,070 85,074
Borrowings repaid in the
period/year (20,000) (45,000) (57,362)
Total borrowings drawn
(1) 190,760 137,618 142,260
--------------------------------- ------------- ------------- --------------
Total borrowings undrawn 59,240 68,382 98,740
--------------------------------- ------------- ------------- --------------
Total borrowings available 250,000 206,000 241,000
--------------------------------- ------------- ------------- --------------
1 Total borrowings drawn are equal to its fair value
The Group drew down GBP69 million and repaid GBP20 million under
its existing loan facilities with Metro Bank PLC ("Metro"), HSBC UK
Bank Plc, Clydesdale Bank Plc and National Westminster Bank Plc
("NatWest").
On 28 June 2023, the Group extended and restated its revolving
credit facility with NatWest, increasing the facility size to GBP50
million and maturity to June 2028, replacing the GBP26 million
facility which was due to expire in June 2024.
On 15 June 2023, the Group repaid the term loan with Metro in
full and this facility is now expired.
Any fees associated with arranging the borrowings unamortised as
at the period end are offset against amounts drawn on the
facilities as shown in the table below:
As at As at As at
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------- --- ------------- ------------- --------------
Borrowings drawn: 190,760 137,618 142,260
--------------------------------------- ------------- ------------- --------------
Arrangements fees - brought
forward (5,064) (3,641) (3,641)
Arrangement fees incurred
during the period/year (1,124) (347) (2,628)
Amortisation of loan arrangement
fees 757 593 1,205
Borrowings at amortised
cost 185,329 134,223 137,196
--------------------------------------- ------------- ------------- --------------
Borrowings at amortised
cost due within one year - 14,970 14,814
Borrowings at amortised
cost due after one year 185,329 119,253 122,382
11. Interest rate derivatives
As at As at As at
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------- --- ------------- ------------- --------------
At the beginning of the
year/period 363 94 94
------------------------------------ ------------- ------------- --------------
Change in fair value of
interest rate derivative 1,088 248 381
Payments received on interest
rate derivative (628) - (112)
Purchase of derivatives 1,481 - -
2,304 342 363
----------------------------------- ------------- ------------- --------------
To mitigate the interest rate risk that arises as a result of
entering into variable rate linked loans in June 2018, the Group
entered into a five-year interest rate cap with a notional value of
GBP25 million which caps SONIA at 1%, this expired during the
period to 30 June 2023.
In January 2023, the Group purchased a two-year interest rate
cap for GBP1.5 million, which caps SONIA at 3% for a notional
amount of GBP50 million.
12. Other non-current assets
As at As at As at
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
----------------------------- --- ------------- ------------- --------------
Rent recognised in advance
of receipt 31,390 24,504 28,112
Rental lease incentive(1) 2,449 2,590 2,519
Loan receivable 971 37,500 37,500
---------------------------------- ------------- ------------- --------------
Trade and other receivables 34,810 64,594 68,131
Call option - 527 -
Interest rate derivative 2,304 - -
----------------------------- --- ------------- ------------- --------------
37,114 65,121 68,131
--------------------------------- ------------- ------------- --------------
1 Lease incentives relate to the amortisation of payments made
to tenants that are not part of any acquisition contractual
obligations. These payments are made in return for an increase in
rent.
Loan receivable in the comparative periods, relates to term loan
facilities which have been provided to operators to acquire a
portfolio of properties. These loan facilities accrue interest at a
rate such that the post tax interest income is equivalent to the
rent the Group would otherwise earn if it had purchased the
properties directly. On the same date the Group will enter put and
call options over the portfolio of properties which, upon certain
conditions being met, allow the Group to purchase the properties
for consideration of GBP1. During the period to June 2023 a
portfolio of properties was acquired and the receivable was
derecognised.
The remaining loan receivable relates to a GBP1.6 million loan
facility that the Group agreed to provide to Melrose Holdings
Limited, of which GBP971k was drawn at June 2023. The facility is
for up to three years with an interest rate of 8.0% per annum on
drawn funds, see note 15 for further detail.
No impairment losses have been recognised during the
period/year.
13. Share capital
Six months Six months
ended ended
Year ended
Six months 30 June 31 December
ended 30 June 2023 2022 2022
30 June
2023 (unaudited) (unaudited) (audited)
Number of
shares GBP'000 GBP'000 GBP'000
--------------------- --- ------------ -------------- ------------- -------------
At the beginning
of the period/year 404,764,328 4,048 3,506 3,506
Shares issued 9,603,841 96 351 542
414,368,169 4,144 3,857 4,048
------------------------- ------------ -------------- ------------- -------------
On 13 January 2023, the Company issued 9,603,841 ordinary shares
priced at 116.62 pence per share as part consideration for an
acquisition, see note 9 for further detail. The Company had
414,368,169 shares of nominal value of 1 pence each in issue at the
end of the period.
14. Share premium
Share premium comprises share capital subscribed for in excess
of nominal value less costs directly attributed to share
issuances.
Six months Six months
ended ended Year ended
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------- --- -------------- ------------- --------------
At the beginning of the
year/period 365,642 305,672 305,672
Surplus of net proceeds
on shares issued above
their par value 11,104 39,649 61,727
Share issue costs (30) (921) (1,757)
376,716 344,400 365,642
----------------------------- -------------- ------------- --------------
15. Transactions with related parties
Investment Manager
The fees calculated and paid for the period to the Investment
Manager were as follows:
Six months Six months
ended ended Year ended
30 June 31 December
30 June 2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------ --- -------------- ------------- --------------
Impact Health Partners
LLP 2,381 2,233 4,581
----------------------------- -------------- ------------- --------------
For the six-month period ended 30 June 2023 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 3.14%, 0.35% and 0.02%
respectively (either directly or through a wholly-owned company) of
the total issued ordinary share capital of Impact Healthcare REIT
plc. In addition, 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. 38% of the Group's rental
income was received from MCGL or its subsidiaries during the
period. There were no trade receivables or payables outstanding at
the period end.
During the period the key management of Impact Health Partners
LLP received the following dividends from Impact Healthcare REIT
plc: Mahesh Patel GBP350,995; Andrew Cowley GBP35,096 and David
Yaldron GBP3,504.
Directors' interests
Paul Craig was a director of the Company, who resigned on 17 May
2023, was also the portfolio manager at Quilter Investors, which
has an interest in 66,923,191 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 period the directors, who are considered key
management personnel, received the following dividends from the
Company: Rupert Barclay GBP5,934; Rosemary Boot GBP971; Philip Hall
GBP971; and Christopher Santer GBP227. In addition, funds which
were managed by Paul Craig received dividends from the Company of
GBP2,068,712.
These transactions were fully compliant with the Company's
related party policy.
Minster Care Group Limited ("MCGL")
MCGL, a tenant of the Group, is considered a related party as it
is majority owned by the principals of the Investment Manager. As
at 30 June 2023, the Group leased 58 properties to MCGL, all
properties owned for over one year underwent an inflation-linked
rent review in line with their lease provisions. In the period to
30 June 2023, the Group entered into no new leases with MGCL and
disposed of one property let to MCGL to a third party in line with
latest valuation.
In June 2023, the Group negotiated the solvent transfer of the
operations of all seven of the Group's homes operated by Silverline
Group on to an affiliate of MCGL. Silverline Group had not paid its
contractual rent (GBP1.6 million p.a. or 3.4% of the Group's total
annual contracted income) for the first two quarters of 2023,
although the Group has received GBP0.4 million from Silverline's
rent deposits. A new company, Melrose Holdings Limited ("MHL"), an
entity wholly owned by connected parties of Mahesh Patel, agreed to
a solvent purchase of Silverline Group's tenant companies and to
take over their responsibilities for operating these homes
immediately, benefiting from a service agreement with MCGL.
To assist in funding Silverline's overdue liabilities to third
parties, other than the Group, along with remedial capital
expenditure the Group has agreed to provide a GBP1.6 million loan
facility to MHL for up to three years with an interest rate of 8.0%
per annum on drawn funds. This loan will be repaid in advance of
any rent from surplus funds in MHL. As at 30 June 2023 GBP971,000
of this loan facility was drawn (see note 12).
These transactions were fully compliant with the Company's
related party policy.
16. 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 period. As there are no
dilutive instruments outstanding, basic and diluted NAV per share
are identical.
The Group has chosen to adopt EPRA net tangible assets ("EPRA
NTA") as its primary EPRA NAV measure as it most closely aligns
with the business practices of the Group. The adjustments between
NAV and EPRA NTA are reflected in the following table:
As at As at
30 June 30 June As at
31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------- --- ------------- ------------- -------------
Net assets per Condensed
consolidated statement of
financial position 470,891 448,130 445,920
Fair value of derivatives (2,304) (342) (363)
EPRA NTA 468,587 447,788 445,557
------------------------------------ ------------- ------------- -------------
Issued share capital (number) 414,368,169 385,731,908 404,764,328
------------------------------------ ------------- ------------- -------------
Basic NAV per share 113.64p 116.18p 110.17p
------------------------------------ ------------- ------------- -------------
EPRA NTA per share 113.08p 116.09p 110.08p
------------------------------------ ------------- ------------- -------------
17. Capital commitments
At 30 June 2023 the Group had committed capital expenditure on
one forward-funded development of a new property and on capital
improvements to existing properties, this amounted to GBP18.0
million. The Group has committed to deferred payment agreements on
two acquisitions in return for increased rent based on trading
performance. As at 30 June 2023 the total capital commitment for
these deferred payments is estimated at GBP4.6 million.
18. 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.
19. Subsequent events
No other significant events have occurred between the statement
of financial position date and the date at which these financial
statements were authorised by the directors, which require
adjustments to, or disclosure in the financial statements.
Corporate information
Directors Amanda Aldridge - Non -- executive Director
Rupert Barclay - Non-executive Chairman (resigned
31 March 2023)
Rosemary Boot - Senior Independent Non-executive Director
Paul Craig - Non-executive Director (resigned
17 May 2023)
Philip Hall - Non-executive Director
Simon Laffin - Non-executive Chairman (Appointed 1 January
2023)
Christopher Santer - Non-executive Director
Registered office The Scalpel
18(th) Floor
52 Lime Street
London
EC3M 7AF
Telephone: +44 (0)207 409 0181
Investment Manager Impact Health Partners LLP
149-151 Regent Street
London
W1B 4JD
Independent Auditor BDO LLP
55 Baker Street
London
W1U 7EU
Administrator & Secretary JTC (UK) Limited
The Scalpel
18(th) Floor
52 Lime Street
London
EC3M 7AF
Depositary Indos Financial Limited
54 Fenchurch Street
London
EC3M 3JY
Registrar Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Legal Advisers Travers Smith LLP
10 Snow Hill
London EC1A 2AL
Joint Financial Adviser and Corporate Broker Jefferies International Limited
100 Bishopsgate
London
EC2N 4JL
Joint Financial Adviser and Corporate Broker Winterflood Securities Limited
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
Communications Adviser H/Advisors Maitland
3 Pancras Square
London N1C 4AG
Company Registration Number 10464966
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